In what seems a little counterintuitive, a new study finds there’s no clear evidence that financial education in high school improves the likelihood of saving for retirement.
The newly released study from TIAA Institute examines whether financial education in high school affects retirement savings in adulthood.
“Among an overall population, we find no evidence that the education improves the likelihood of having a retirement account, having a non-retirement savings account, or owning a home,” conclude study authors Melody Harvey of the University of Wisconsin and Carly Urban of Montana State University and IZA. “We further see no clear evidence that financial education decreases stress around retirement savings, increases the likelihood of planning for retirement, or reduces the likelihood of borrowing from one’s retirement account.”
Research suggests financial literacy levels, particularly among the young, are extremely low and those with higher levels of financial literacy are more likely to participate in the stock market, plan for retirement, and possess the financial sophistication that leads to higher interest in savings accounts.
Since starting to save for retirement earlier has the potential to generate long-term gains, the study sought to determine whether financial literacy education during formative teenage years would increase long-run retirement savings for adults ages 25-40.
The findings intend to inform which policy levers in the consumer education space may ideally increase individuals’ retirement planning and saving, especially as they are gradually required to steward their own retirement portfolios.
With the study finding that required financial education increases the likelihood of having an account by just 1%, the authors suggest that priority high school financial education topics should include budgeting, credit, debt and saving for emergencies before addressing retirement savings—as prior research suggests high school financial education improves credit and debt outcomes.
The authors also site previous research that workplace financial education increases the likelihood of participating in a retirement program among a more affluent population. “These findings, taken together with the present study, suggest that the workplace may have more success in affecting retirement planning than the classroom.”
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