Selection into Financial Education and Effets on Portfolio Choice

Irina Gemmo, Pierre-Carl Michaud and Olivia S. Mitchell
Working paper #16
Retirement and Savings Institute – September 2023

To understand how financial education impacts financial outcomes, it’s crucial to consider how the selection of participants in education programs might skew conclusions about a program’s impact. Incentivized experiments reveal how this selection can influence the perceived effects of financial education. People who are more financially literate or anticipate higher gains are willing to invest more in their education, while those who consider themselves very financially literate tend to spend less. Analyzing tasks related to portfolio allocation, this research finds that financial education significantly improves portfolio efficiency and welfare, increasing them by almost 20 and 3 percentage points, respectively. Interestingly, the selection of participants does not significantly distort the estimated program effects when comparing those who participate to those who do not.