Working Paper: NBER ID: w5655
Authors: Patrick J. Bayer; B. Douglas Bernheim; John Karl Scholz
Abstract: We examine the effects of education on financial decision-making skills by identifying an interesting source of variation in pertinent training. During the 1990s, an increasing number of individuals were exposed to programs of financial education provided by their employers. If, as some have argued, low saving frequently results from a failure to appreciate economic vulnerabilities, then education of this form could prove to have a powerful effect on rates of behavior. The current paper undertakes an analysis of these programs using a previously unexploited survey of employers. We find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars. The effect is typically much stronger for non-highly compensated employees than for highly compensated employees. The frequency of seminars emerges as a particularly important correlate of behavior. We are unable to detect any effects of written materials, such as newsletters and summary plan descriptions, regardless of frequency. We also present evidence on other determinants of plan activity.
Keywords: financial education; workplace; savings behavior; retirement planning
JEL Codes: A22; D14; D91; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Employer-provided financial education (G53) | Employees' financial decision-making (G53) |
| Employer-provided financial education (G53) | Employees' saving behaviors (D14) |
| Participation in retirement seminars (J26) | Likelihood of employees participating in savings plans (D14) |
| Participation in retirement seminars (J26) | Contributions to voluntary savings plans (D14) |
| Frequency of retirement seminars (J26) | Employee behavior (L20) |
| Educational interventions (I24) | Improved saving behaviors (D14) |
| Written materials (Y20) | Saving behaviors (D14) |