Knowledge is power; we’ve all heard this before. However, educational efforts to change financial behaviour are not enough. We need more than a basic understanding; we need experiences and programs which increase the likelihood of us acting differently. If we are to improve our relationship with money, we can’t keep repeating the same financial literacy efforts, and expect better results.

A meta-analysis of over 200 studies on the impact of financial literacy found that only a 0.1% change in behaviour was attributed to interventions to improve financial literacy. Although it’s one of the most significant challenges, the timing of education matters a lot because financial literacy isn't retained very long. Too many literacy efforts aren't focusing on improving real behaviour. Instead, they measure their success by the results of a short quiz soon after the material has been reviewed.

The problem we are trying to solve cannot stop at literacy. We need to teach people in a way that encourages real action. For a process to work, our efforts need to explicitly incorporate methods that promote real behavioural change. Otherwise, our FinLit efforts are little more than a futile lip service that lets us check a box to say, “we’re doing our part.”

What is financial capability, and how do we get there?

The ideal path to financial capability: 

Ideal path to financial capability


Accessible knowledge is the first phase of changing someone’s financial situation, and educational materials lay the foundation.The basics are essential, but without clear steps laid out to initiate action, this phase has a short shelf-life. There must be a quick path to the next phase that is relevant to the learner's financial life. While we're doing a much better job in this area, the timing of most educational prompts could use a significant tune-up.


Financial literacy efforts gain power when the learner is able to use it in the context of their own financial situation. An individual must be able to compare the concepts to their financial situation to understand their current state as well as be able to weigh their options. Unfortunately, there are massive gaps here. In most cases, even education programs that have cool games or interactions do not give the learner an easy way to apply immediate context to their situation.


Financial literacy programs need to introduce feasible behavioural changes to have a positive impact on the learner. By helping the people apply the concepts, techniques and insights they’ve learned to their financial situation, we help create and support the desired change in behaviour. Concepts should outline and address three key questions, so they can take action themselves: what to do, how to do it, and where to go if they get stuck.


Approximately 60% of Canadians are retiring in debt, and 78% of Americans are living paycheck to paycheck.  We conclude that they do this because they don’t know any better, and we assume articles filled with financial factoids fix the problem. Unfortunately, literacy efforts focused around financial facts alone can promote the opposite effect. These pieces can trigger feelings of guilt as they show the individual that they are doing poorly, but not how to fix it. People who feel bad won't make better decisions. The purpose of financial literacy is to not only improve people’s knowledge about their finances but also to encourage new skills to improve their financial situation.

The state of the current path to financial capability:

What can we do about this?


Research shows that the retention of financial literacy quickly erodes if we don’t use it, which is why timing is critical.

Example: Students should be taught about credit cards near the end of high school. Any time later and credit cards are being thrown at them during a critical transition period (e.g. post-secondary education, travel, first job, etc.). Consider providing parents with children who are 17-18 years old with strategies and tips on how to help their child set up their first credit card. Having general information about credit cards on your website is less likely to have a significant impact if there aren’t some timing strategies included.


Regularly taking on financial activities such as paying bills has been known to increase financial literacy. Money management activities should be included in the efforts to help people change their financial behaviour. It's also a good idea to encourage couples with shared expenses to share the responsibility for these types of financial activities

Give learners a way to calculate their debt-to-income ratio to compare it to the average, and others in a similar life stage to them.


A learner's environment is an important one. Often when an individual interacts with financial education, the only thing that changes is their knowledge, at least until its shelf-life ends. We need to provide instructions on how to set up their financial environment to maintain their newfound knowledge and promote behavioural change. Though it may take some nudging, usually these can be one-time efforts that create a big payoff over time.

Example: Link a piece of educational material directly to a system with instructions as to how to set a savings goal, open a savings account and automate transfers.


We’ve got to be much more critical about how we measure the impact of financial literacy. This isn't very easy, but it is worth solving. Make an effort to ensure that education can lead to measurable financial capability. Until we’re doing that consistently, it’s challenging to know where we stand, let alone how to improve it.

Example: Test efficacy by creating an exclusive savings account offer with a premium rate only for those who interact with a specific piece of educational material. Measure the activity of that product and survey to weed out bias and other motives, learn from it then modify your experiment.

Overall, there is no quick fix to improve financial literacy, and box-checking efforts will not do the trick. We’ve got to do more, and the good news is that technology can help us do this much better today than ever before. It’s not going to be easy, but as we all know,  a more financially capable society is good for everyone.


Fernandes, D., Lynch, J.G., Netemeyer, R.G. (2014). Financial Literacy, Financial Education, and Downstream Financial Behaviors. Management Science. 60(8), 1-103. URL

Ward, A.F., Lynch, J.G, Jr. (2018). On a Need-to-Know Basis: How the Distribution of Responsibility Between Couples Shapes Financial Literacy and Financial Outcomes. Journal of Consumer Research. 45(5), 1013-1036. URL

CIBC (n.d.). More Than Half of Retired Canadians are Carrying Debt. CIBC. URL

Friedman, Z. (2019, January 11). 78% Of Workers Live Paycheck To Paycheck. Forbes. URL