The TIAA Institute teamed with the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business to report that financial decision-making tools that offer more substance, as opposed to those that “are brief and filled with rhetoric,” lead to higher performance.
The study also found that rhetoric actually does the opposite, and has the unintended effect of “distracting from substance and lead individuals to potentially make poorer financial choices.”
“Previous research has shown that employers try to provide their employees with advice to handle bad behavior in financial decision-making by offering educational material that is often brief and includes strong rhetorical elements to make the material more engaging and actionable,” according to TIAA and GFLEC.
In “Financial Education, Financial Competence, and Consumer Welfare,” they took a different approach, not just on whether an intervention can change behavior, but on whether it does so in a way that is beneficial to people.
Three main points emerged:
- Conventional criteria for evaluating financial education interventions can yield misleading conclusions about the intervention’s effects on decision making.
- The substance of financial education, as opposed to the rhetoric used, accounts for performance improvements on literacy tests.
- Motivational rhetoric drives behavior change, but rhetoric can have the unintended effect of distracting from substance and promoting an indiscriminate one-size-fits-all response.
“This report provides valuable information to employers, so they understand that providing the right, well-targeted information directly impacts an employee’s financial decisions,” Stephanie Bell-Rose, head of the TIAA Institute, said in a statement. “The findings in this report show that both employers and employees stand to benefit from more substantive financial decision-making tools.”
“Employers want to provide their employees with the right educational interventions to deal with financial decisions; however, the information offered replaces substance with brief interventions that can have unintended consequences on employees’ financial decision-making process and distract from the substantive content of the education,” added report co-author Annamaria Lusardi, founder and academic director of GFLEC.