Using Behavioral Science in Financial Education

CUs benefit from improving members’ financial health.

Most people wouldn’t describe themselves as savvy money managers. Yet we all face the challenge of stretching our paychecks to cover seemingly unpredictable expenses, sometimes with little room for error. For years, the standard way of tackling this problem has been with financial education programs. The thinking was that the main problem was an information gap, and arming people with the knowledge to navigate money matters would close the gap. But while these well-intentioned programs do appear to increase knowledge, they haven’t been shown to change behavior – or improve financial outcomes.

The financial health space, made up of people and organizations promoting financial inclusion, has stepped up to this challenge, incorporating a new focus on action into educational programs and prompting people to set goals for the future during their sessions. This is a major step in the right direction. However, setting a goal is not the same thing as achieving it. Many people don’t know where to begin, or they drop off somewhere along the way. Behavioral science – the study of how we as humans make decisions and take action in the real world – accounts for this. Using such insights from our predictable human tendencies can inform financial management programs to help members create concrete goals and follow through on them, improving financial health.