Does Financial Education Work? Clinton Global Initiative and PwC Bet $160 Million That It Does

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The financial literacy movement is getting a valuable boost. At the second gathering of the Clinton Global Initiative America, which runs today and Friday in Chicago, the accounting giant PwC will unveil a $160 million campaign to promote financial education in classrooms.

This is an important development for two reasons: The PwC campaign is one of the largest private investments in this space, and CGI’s backing assures that this is not just a PR opportunity. PwC says its program will reach 2.5 million students over five years.

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That this subject is on the CGI agenda testifies to the growing recognition that many students leave high school with little or no knowledge of things like how to manage credit or save for retirement. “Financial Inclusion: building a path to financial security,” which incorporates financial education, is one of a dozen working groups at the CGI conference.

Personal finance is not widely taught in schools—or at home—and this plays a role in the generational cycle of credit problems and poor savings, which plague many families. Governments have embraced financial education as one strategy for breaking the cycle and in the process hopefully forestall any future financial crisis.

Yet progress has been slowed by a lack of hard evidence showing that financial education works. Skeptics argue that we’re better off funding regulators, who can then monitor financial products and ensure that ordinary people do not get ripped off. This thinking is part of what stops states from adopting financial education mandates and, indeed, has led to slippage in the number of states that require class work in this area. It also is part of what led to the formation of the Consumer Financial Protection Bureau.

Still, PwC Chairman Bob Moritz, who will unveil the firm’s investment on Friday, says he prefers an approach that empowers individuals to look out for themselves. “I’m more into behavioral change,” Moritz says. “Governments have done a lot in this space; corporations should be doing more.”

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Among other things, the PwC investment will tackle the critical issue of teacher training. A University of Wisconsin-Madison study found that fewer than 20% of teachers feel prepared to teach kids about money. The PwC investment will include $60 million in cash and $100 million in services. Both will be employed in the effort to train teachers. PwC encourages employees to spend 10 paid hours a year as volunteers. The company expects to commit a million volunteer hours over five years to financial education.

The firm has also designed an 18-module course in personal finance. The materials will be made available to schools at no charge. The modules teach things like how to start a business or apply for a mortgage; how to budget and protect your online identity. The general subject headings fall under income and career, planning and money management, financial responsibility and decision making, credit and debt, risk management and insurance, saving and investing, home buying, and the stock market.

Similar learning material is available through other companies, chiefly banks. PwC believes it has something special because its financial experts will volunteer to help out in the classroom setting or behind the scenes with teachers who lack confidence in this subject area.