Assessing Financial Education: Evidence from Boot Camp

This study estimates the effects of Personal Financial Management Course attendance and enrollment assistance using a natural experiment in the U.S. Army. New enlistees’ course attendance reduces the probability of having credit account balances, average balances, delinquencies, and adverse legal actions in the first year after the course, but it has no effects on accounts in the second year or credit scores in either year. The course and its enrollment assistance substantially increase retirement savings rates and average monthly contributions, with effects that persist through at least two years. The course has no significant effects on military labor market outcomes. Financial literacy and education remain popular topics among the media, policy-makers and academics. In the U.S., increasing personal responsibility for retirement planning and concerns over savings rates have generated calls for more financial education. Federal government responses have included President George W. Bush’s 2008 Financial Literacy Advisory Council, President Obama’s 2009 *William Skimmyhorn. Office of Economic and Manpower Analysis, Department of Social Sciences, United States Military Academy, 607 Cullum Road, West Point, NY 10996 ([email protected]) I thank Brigitte Madrian, John Friedman, David Laibson, John Smith, David Lyle, James Lee, Luke Gallagher, Susan Carter, Antoinette Schoar, Francis Murphy, Hilary Hoynes, seminar participants at Harvard, the NBER Summer Household Finance Session, the Boston FRB, West Point, the GFLEC Financial Literacy Seminar and three anonymous referees for their comments and assistance in developing this research. The opinions expressed herein reflect the personal views of the author and not those of the U.S. Army or the Department of Defense.