According to a new study reported in The Atlantic by Michigan state and Notre Dame researchers, having more knowledge about finance doesn’t lead to better financial decisions than not having it. as a matter of fact, some of the most financially knowledgeable people, mutual fund managers, hedge fund managers etc., don’t make better financial decisions than other people.
This study is the latest evidence that shows the ineffectiveness and misguided nature of a years long campaign to help normal Americans achieve financial literacy. Which according to a lot of evidence is lacking among ordinary people. The goal of making people financially literate seems to imply that it's the individual’s responsibility to safely navigate what is often intentionally inscrutable financial language.
Ironically, it is the same companies which create the problem of financial products that an average person can’t comprehend that are providing financial literacy as the solution. Bank of America’s course on Khan Academy is an example to this and the financial industry’s self-regulatory organization has an entire foundation devoted to investor education.
But financial literacy in this gauzy, generalized form simply doesn’t work. The Cleveland Fed found no “conclusive support that any benefit at all exists” from financial education as it is currently taught. Shocking no one who has been to high school, one study showed that taking a financial literacy class in high school does nothing to improve financial literacy.
The new study bursts this myth, that providing financial education increases better decision making. though this is not the first of its kind. The Cleveland Fed and a study by Brookings institution researchers found that there is no strong evidence that financial literacy efforts have or had positive and substantial impact on both literacy and better decision making. at least, not in the current generalized and gauzy form.
And a study by researchers at the Brookings Institution could not find “strong evidence that financial literacy efforts have had positive and substantial impacts."
When mutual-fund managers are making dumb decisions, it’s time to admit that making average citizens generally more financially literate is not a useful goal. Starting with clear-cut consumer protections and unbiased information about specific financial products is far more helpful.
Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc
CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to email@example.com and we will rectify it.
2015 © Edupristine. ALL Rights Reserved.