Is financial literacy necessary for greater savings? Evidence from Uganda


Published 04.08.21

Financial literacy training increases short-term knowledge and savings, but does not determine long-term financial success

Audio file

Read “Does lasting behavior change require knowledge change? Evidence from savings interventions for young adults” by Samantha Horn, Julian Jamison, Dean Karlan and Jonathan Zinman here.

Although greater financial literacy is correlated with higher incomes and better financial trajectories, is financial education a prerequisite for improving individual financial decision making? In this VoxDevTalk, Dean Karlan discusses his recent work with co-authors Samantha Horn, Julian Jamison, and Jonathan Zinman in which they explore the long-term effects of a savings intervention in Uganda. By providing financial literacy training, the opening of a bank account, or both, they examine the impacts on participants’ knowledge and savings practices after one and five years.

The authors find that while textbook knowledge gains last one year after the intervention, they dissipate after five years. Fascinatingly, improved savings and earnings persisted for all treatment groups. Their results imply that bank account access alone is enough to increase savings and incomes, and that while financial education is useful in the short run, it is not necessary for long-run behavioural change. Once the initial behaviour changes were initiated, textbook knowledge was no longer essential for individuals to make productive financial decisions.