“Common Cents”: The Impact of Personal Finance Education Mandates on Adult Financial Behavior

Abstract

Due to growing financial illiteracy in American youth, there has been a marked increase in states mandating personal finance education in high schools. As policymakers generate educational standards that aim to prepare young adults for a lifetime of financial decisions, it is critical to understand the long-run impact of personal finance mandates. In this paper, I explore how personal finance mandates affect a suite of adult financial behaviors using data from the 2019 wave of the Panel Study of Income Dynamics. Adding to an underexplored area of existing literature, I also investigate if the mode of implementation (i.e., if the mandate is implemented as a standalone course or embedded into another subject) influences the efficacy of such mandates and if the effect of mandates vary with age. I employ a staggered difference-in-differences model, alongside robustness checks, to estimate the effect of personal finance mandates on savings account possession, credit card debt, student loans, home ownership, retirement account contributions, and overall financial well-being in adults ages 18 to 35 years old. The findings demonstrate a significant positive effect of personal finance mandates on possession of a checking or savings account. The results also indicate that standalone mandates had mixed effects on retirement planning, decreasing the likelihood of an individual possessing an Individual Retirement Account while increasing the likelihood of contributing to an employer-sponsored retirement account in the last year. When reducing the sample to young adults ages 18 to 25, additional positive effects of mandates emerge and the magnitude of the existing effect on savings accounts increases. I find that the impact of mandates diminishes with age and that mandates produce disproportionately positive effects on individuals who did not have at least one parent graduate college. As policymakers enact and update education standards, these findings suggest that personal finance mandates, particularly those implemented as a standalone course, are an effective tool in increasing savings and financial well-being in young adults and in leveling the playing field of financial literacy.