Financial Education and Behavior Formation: Large Scale Experimental Evidence from Brazil

1. Financial Education and Behavior Formation:Large Scale Experimental Evidence from Brazil Miriam Bruhn Luciana de souzaleao Arianna Legovini Rogelio Marchetti Bilal Zia World Bank Moscow, May 2013

2. Agenda Background Characteristics Key success factors Impact Evaluation methodology Results Conclusion Next steps

3. Background (1) • Brazil’s financial literacy status was grim • A survey had found that • 82% of Brazilian consumers were unaware of the interest rate when borrowing money, • overdue installments were mostly caused by poor financial management, • 87% of families did not save for the future, • 40% did not make any sort of investments with excess income. • The government decided to tackle the subject at different levels, one of them was at high school

4. Background (2) Why high school students • Experience showed changing adult behavior is hard with limited success stories. • Students are prone to learning and incorporating new attitudes • Students could be exposed to financial literacy material for longer time periods. • With clever design students could become the agent of change at home.

5. Background (3) In 2007, to develop the program the government created a working group (Grupo de Apoio Pedagógico - GAP) to interact with different stakeholders, lead a pilot implementation and subsequently role out the program. GAP included representatives from Government financial regulators / supervisors and Financial trade associations (private sector), a broad base of stakeholders. The goal was to develop a financial education curriculum that would reach all Brazilian public high schools.

6. Characteristics (1) The Teaching Material: • developed three books to be used in three consecutive school semesters / years; • created to inform and guideyoung people developing an independent and sound financial behavior; • assembled teaching situations aligned to the reality of the studentand granted autonomy for the teacherson how to present the material; • to be used within any subject in the school (math, geography, science, etc.): cross-curricular approach

7. Characteristics (2) Book 1 - Short-term situations related to the student’s everyday family, social life, and personal property, for example keeping track of expenses

8. Characteristics (3) Book 2 - Medium term situations: work, entrepreneurship, large projects, for example Which career do I want to follow?

9. Characteristics (4) Book 3 - Social Context, the country’s economy; What is corruption? Do I want more than minimum salary?

10. Characteristics (5) Teacher’s training and involvement Key: convince teachers of financial education’s importance ; “win their hearts and minds”; Training workshops in each of the 6 states supplemented by virtual training (DVDs distributed to facilitate replication); Teacher guidebook provided instructions on how to use the material and assessment methods, as well as examples of how to integrate the financial education in the curriculum.

11. Key success factors (1) Presentation approach, many educations programs fail to make financial knowledge tangible • How did the project address this problem? • Quality: material developed by top education experts in Brazil and rigorously tested • Use: training and materials provided to all teachers • Incentives: opportunity for teachers to meet leaders in the financial and international institutions, and awards to best performing schools • Result: rethink high school education • Fun, relevant, interactive, proactive

12. Key success factors (2) Not just knowledge but changebehavior and attitudes • How did the project address this problem? • interactive material with practical exercises • relevant to young people’s lives • actionable information • cutting across all relevant spheres of life • reinforce intervention • getting the family involved • teaching financial literacy to parents • Result: the material motivated student try out the new behavior and helped them put it into practice

13. Key success factors (3) Incorporate the student’s environment & household • How was this addressed? • Teachers were guided for constant parent interaction through homework assignments and exercises • Parental workshop • Result: the workshop reinforced changes in student behavior and improved parental behavior

14. Impact Evaluation methodology (1) Lead by the World Bank in coordination with stakeholders in all the stages of the pilot project; The study spanned three academic semesters, from August 2010 to December 2011, Data collected in three rounds baseline (August 2010), follow-up 1 (December 2010), and follow-up 2 (December 2011); Impact evaluation team participated in all teacher’s training, workshops and monitoring events throughout the pilot.

15. Impact Evaluation methodology (2) • Evaluation done in all of the 868 schools participating in the program (in 6 states in Brazil, covering 26 thousand students. • Schools that were interested in participating in the pilot were randomly assigned to • Treatment group receives financial education text books for free AND receives teacher training for how to implement the material • Control group will receive the same two school years later • Half of the parents in treatment schools were also randomly assigned to parent financial education workshop in schools

16. Results • All measured effects are • statistically significant • in most cases at the 1 percent level--the likelihood that the differences in outcomes are not cause by the program is less than 1 percent • economically significant • They compare favorably to other financial literacy programs • They compare favorably to other education programs • If the effects held at national level, they could have macroeconomic effects

17. Results: Knowledge More knowledge Distribution shift

18. Results: Knowledge;Positive Impact on Financial Proficiency

19. Results: Knowledge; Distribution Shift 28% more treated students do very well 26% fewer treated students do very poorly

20. Results: Behavior More savers More savings (1.4 percentage point increase) More careful spending

21. Results: Behavior;Percentage of Students who Save

22. Results: Behavior;Percentage of Income Saved

23. Results: Behavior;Students’ Spending Behavior More treated students make a list of expenses every month More treated students negotiate the price and/or payment method

24. Results: Behavior;Percentage of Student who Make a List of Expenses

25. Results: Behavior; Percentage of Students who Negotiate Prices and/or Payment Methods

26. Results: Attitudes towards future behavior More financial autonomy Greater intention to save

27. Results:Financial Autonomy Index

28. ResultsIntention to Save Index

29. Results:Spill-over Effects of School Program on Parents • Students’ financial education material includes exercises to be completed with parents (e.g. make a household budget) • Positive impacts on parental financial knowledge and behavior • increase in parental financial knowledge • increase in discussing financial matters with their children • increase in making a household budget

30. Conclusion • Pedagogical material • It was adherent to the educational system • Appealing for students and teachers • Catalyzing effect of different subjects in the schools • Appreciation of teachers as a mediator of the learning process – 2.000 teachers trained for the pilot • Training of trainers • Training of teachers • Distance Education for teachers and trainers • Evaluation as a strategy for scalability • Results to assure the quality in dissemination • Impact for referral to the educational and financial segments

31. Next StepsActions The Ministry of Education is now scaling up the program to 5,000 Brazilian high schools Financial education programs for primary schools Virtual platform for national dissemination Development of guidance to disseminate in public and private schools Educational community of practice for the engagement and exchange of experiences between teachers

32. Thank you! Rogelio Marchetti: rmarchetti@worldbank.org Luciana de Souza Leão: ldl2112@columbia.edu More information about the Brazilian Financial Education Program: Silvia Moraissilvia.morais@aefbrasil.org.br