Financial Counseling, Financial Literacy, and Household Decision-Making

The recent financial crisis has brought renewed attention to household financial decision-making and highlighted the need for improving financial literacy. In this chapter, we survey the current literature on financial literacy. We evaluate the evidence on the effectiveness of education programs in improving participants' financial choices and outcomes. We pay particular attention to whether the impact of educational programs results from increases in literacy or from auxiliary influences. Overall, it appears that some education programs are associated with improved financial outcomes; however, it is difficult to differentiate the factors contributing to this improvement.