High School and Financial Outcomes: The Impact of Mandated Personal Finance and Mathematics Courses

Financial literacy and cognitive capabilities are convincingly linked to the quality of financial decision-making, influencing savings, stock-picking, and avoidance of outright financial mistakes. Yet, there is little evidence that education intended to improve financial decision-making is successful. Using plausibly exogenous variation in exposure to state-mandated personal finance and mathematics training in high school, affecting millions of students, this paper answers the question “Can good financial behavior be taught in high school?”It can, though not via personal finance courses, which we find have no effect on financial outcomes. Instead, we find additional training in mathematics leads to greater financial market participation, more investment income, and better credit management, including less bankruptcy and fewer foreclosures. ∗Harvard Business School ([email protected]; Harvard Business School, Baker Library 271, Soldiers Field Road, Boston, MA 02163, USA; (617) 495-6525), Federal Reserve Bank of Chicago ([email protected]; 230 South LaSalle Street, Chicago, Illinois 60604, USA; (312) 322-5322; and Wellesley College ([email protected]; Department of Economics, Wellesley College, 106 Central Street, Wellesley, MA 02481, USA; (781) 283-2382), respectively. Corresponding Author: [email protected]. This paper was motivated by a conversation with Annamaria Lusardi, whom we thank for advice and guidance. We also thank Josh Angrist, Malcolm Baker, Daniel Bergstresser, Carol Bertaut, David Cutler, Robin Greenwood, Caroline Hoxby, Michael Kremer, Erik Stafford, Jeremy Tobacman, Petia Topalova, Peter Tufano, and workshop participants at Harvard, Wellesley College, the Federal Reserve Board of Governors, the University of Virginia, the University of Connecticut, the American Economics Association, the Atlanta Federal Reserve, and the Boston Federal Reserve for comments and suggestions. We are grateful to Josh Goodman for providing us with data used in his paper. Caitlin Kearns provided excellent research assistance. The views presented in this paper are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Chicago. All errors are our own.