Report
Financial Education Affects Financial Decision-Making: Evidence from the COVID-19 Pandemic Response
Abstract: Using cohort-by-state exposure to high school financial education mandates linked to credit bureau data, we study whether financial education raises the propensity to act when macroeconomic conditions and policy create favorable opportunities. We take advantage of the COVID-19 pandemic setting since many financial decisions households routinely face were particularly salient and because the decision windows are cleanly identified. We focus on several consequential financial decisions facing households: reducing revolving credit card balances, purchasing a home, and refinancing a mortgage. We find that those with more financial education reduced revolving credit card balances following stimulus checks by about six percent more than non-mandated peers; were roughly four percent more likely to complete rate-only mortgage refinances when rates were at historic lows; and were about ten percent more likely to buy a first-time home with a mortgage. Mediation analysis shows that most results are driven by a higher propensity to act rather than by pre-existing credit standing. Since the financial decisions studied are commonplace, the findings likely generalize beyond the pandemic, implying that financial education can increase policy pass-through to household balance sheets.
JEL Classification: D14; G51; G53;
https://doi.org/10.59576/sr.1131
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2024-10-01
Number: 1131
Note: Revised September 2026. Previous title: “Financial Education and Household Financial Decisions During the Pandemic.”