We’ve become fans of talking about financial literacy here at the Financial Access Initiative, so I was excited to see the May issue of the American Economic Review with selected papers from the American Economic Association’s Annual Meeting. There are four papers that address financial-literacy questions. I’ll offer some big-picture thoughts further down, but first, the punch lines of the four papers . . . 

It’s been 21 years since the publication of Michael Sherraden’s Assets and the Poor,the book that put asset poverty on the U.S. policymaking map. That was cause for celebration last week in Washington D.C., where the New American Foundation hosted a symposium to talk about what more might be done to help Americans—particularly low-income and minority ones—build savings and other assets. The researchers, advocates, funders, and government officials in the room covered a large variety of topics, including child savings accounts, the “teachable moment” of tax time, behaviorally informed product design, asset limits in public benefits programs, universal individual retirement accounts, mortgage lending practices, and the puzzling persistence of the racial wealth gap.

It was a rich and multi-faceted conversation, but what may have struck me the most was the work being done by the state of Delaware, which is quickly expanding its program of free financial coaching to low- and moderate-income residents. This is very much in the tradition of cities such as New York and San Francisco, which have gotten well-deserved attention over the past few years for steps they are taking to bolster the financial stability of their populations. Efforts range from expanding the use of low-cost bank accounts to counseling people about how to budget and avoid taking on unnecessary debt. A number of municipalities have come together to form Cities for Financial Empowerment, and the ones at the head of the movement, like New York, are now pushing to integrate financial counseling into other government services, such as workforce development, homeless prevention, and community courts . . . 

Expanding financial access can be a beautiful thing, but how people understand and make use of financial tools deeply matters, too. Acknowledging the importance of financial literacy has become quite the trend in microfinance circles, even if folks aren’t entirely sure of how best to approach the subject.

Jonathan Morduch and I recently wrote a white paper for the McGraw-Hill Research Foundation about the state of financial literacy—and attempts to improve it—in the U.S. While the consumer finance landscape is, of course, quite different in the U.S. than it is in the developing world, many of the lessons we draw are applicable to other pockets of the world. After all, if people in a country where high-quality, low-cost financial products tend to be plentiful so often make foolish decisions about money management and financial planning, there clearly must be more complicated dynamics at play . . .