Why Financial Education Fails (And How to Fix It)

Written By Kristin Messerli

I have spent years blaming myself for how poorly I pay attention to financial education. A toddler seems to sit inside my body, thrashing when I try to read financial books or sit through seminars.

As a financial educator, this inability to consume the very information I create has resulted in a deep and persistent internal conflict. While I continue to pursue what I know to be a noble cause, I have tried to ignore the glaring fear that I have devoted my career to something I potentially care nothing about. Or worse, that after creating two companies with financial education and speaking from over 500 stages on the topic, I am in fact a fraud.

The weight of it all creates an endless loop driving me further from the financial books and deeper into the shame of avoidance. 

However, a turning point came this year when I published a survey measuring, not just financial literacy, but how they learn and feel about money. In this year’s NextGen Homebuyer Report, we saw that over half of millennial and gen z consumers said they were overwhelmed by financial information and over half were delaying major financial decisions as a result of the complexity. Women reported lower confidence in themselves and lower trust in financial professionals. And over a third identified as neurodivergent (ADHD, autism, dyslexia), making it even harder for them to engage in financial education. 

So, it’s not (completely) my issue! My own tantrums and avoidance may be representative of a larger population, stuck in their own money shame loops and wondering why they can’t keep up. In doing research on this topic over the years, I have come to believe that financial education is designed for a small portion of the population—the analytical, the confident, the neurotypical. Yet I have often fallen into the trap of believing we need to squeeze ourselves into their box. 

However, if I, as someone who literally creates financial education for a living, cannot sit through a seminar or take the online courses, we need to rethink the model. So I dug into the research, looked at every credible study I could find, and what I found really surprised me. 


What's Broken: The Aspirin-for-Pneumonia Problem

Most financial education is fundamentally inadequate. Dr. Annamaria Lusardi, a leading economist in this field, uses a striking metaphor: it's like giving aspirin to someone with pneumonia. The failure doesn't mean education is ineffective, but it means the medicine wasn't adequate to alleviate the disease.

Four Common Failures

After reviewing dozens of studies, here’s what the research shows is not working:

  1. Education disconnected from decision-making. Teaching compound interest or debt-to-income ratios through lectures when students aren't actually creating a retirement plan or applying for a home loan just doesn’t work for most people. There’s no context or stakes at play for the information to stick with them. However, research shows you can create those "teachable moments" artificially through simulations, games, and hands-on experiences. 

  2. Lecture-style curricula that overemphasize knowledge acquisition. Memorization of financial terms and concepts rather than developing practical skills or real-world application. This is the lecture model: standing at the front of a room, talking at people about debt-to-income ratios. 

  3. Financial education interventions that are very limited or of low intensity. Giving a one-hour seminar is insufficient to generate meaningful effects, especially given the depth of financial illiteracy and the psychological complexity of money decisions. (In one ear, out the other kind of situation). I still believe that a little is better than nothing, and you’re building trust by leading with education, which is meaningful. However, a series is much more impactful than a one-off seminar. 

  4. Focusing narrowly on specific behaviors. Programs that target only debt management or only budgeting are more difficult to make effective at creating a meaningful impact on money habits. Financial literacy requires a more holistic approach. 

What Actually Works: The Evidence Is Clear

Great news. Financial education does matter and it CAN be quite effective. 

A comprehensive meta-analysis of 76 randomized controlled trials provides clear evidence that when designed and implemented according to best practices, financial education can have positive and even causal effects on both financial knowledge and actual behaviors like saving and budgeting. 

Another study showed that differences in financial literacy itself can account for 30% to 40% of retirement wealth inequality. Financially literate people make smarter financial decisions that yield higher returns over time. 

Five Evidence-Based Strategies

Ok so how do we create and deliver better financial education? Here are a few strategies from the research. 

Start Early

Before we move into best practices for today’s adult education, the research says to start early. But maybe a little differently than you might think. 

I have read repeatedly about how our financial habits are engrained at a really early age. A PBS study shows by the age of 7 and I’ve seen others even earlier. Some of this comes from what we absorb from our parents, but some of this is purely our temperament. 

The research shows that children with greater self-control were significantly more likely to grow up to own homes and have retirement funds as adults, independent of IQ or socioeconomic background. (Kind of throws some of you to the wolves if you didn’t have the right temperament). 

What this tells us is that we need to start early education around building behavioral skills as the foundation of financial education.

Make It Experiential

We’ve established that lectures don’t stick. Students build lasting financial capability when they can learn by doing. "Participatory learning" gives students the chance to engage in financial decision-making in controlled, real-world settings.

School banking programs, where students open real savings accounts and make regular deposits at school, provide tangible experience with financial institutions. Simulations like My Classroom Economy have students manage "classroom currency," paying bills, taxes, and insurance. The Junior Achievement Finance Park creates an entire simulated economy where students make real-world financial decisions.

At FirstHome IQ, we’ve built games where students can take on financial scenarios and “play out” these financial decisions. Lead with a few minutes of context and then teach, while they practice. 

Involve the Psychology of Money

This is the one I’m most passionate about. For me and many others, the disconnect isn’t about knowledge. It’s about confidence, overwhelm, and avoidance patterns that no amount of information alone can fix. Effective financial education addresses these psychological dimensions, helping people become aware of their own relationship to money and strategies to work with it. 

Sometimes even just bringing awareness to the psychological factors at play can be enough to have real impact. Talk about the “Present Bias” which is the tendency to prioritize immediate gratification. Or “Loss Aversion” meaning the pain of loss motivates us stronger than the pleasure of an equivalent gain. My favorite: the Confidence Gap. Research shows women tend to be significantly less confident than men (I’m a strong case in point here), while their knowledge is often on equal grounds. This was prevalent in our NextGen Homebuyer Report this year: women reported lower confidence with equal test results.  

Financial education is ineffective without conversations about understanding how our brain works with money. Your relationship with money matters as much as what you know about money.

Engage Parents and Reinforce at Home

Parents are children's primary and most preferred source of financial information. Effective programs recognize this and actively involve parents through workshops, take-home activities, and resources that parallel the classroom curriculum. For loan officers or industry professionals, this is a fantastic way to build leads, referrals, and have an impact on their children and the future generation. 

Teach a class on how to teach your kids about money, or consider hosting events or webinars for parents and their children at their local school. 

Support and Train Teachers

Twenty-six states now require financial literacy education in schools. But the vast majority of teachers are not equipped to deliver it effectively. Similarly with parents, teachers can be a great source of new clients, while also helping them have impact on their students by teaching them about financial literacy and how to teach it. 

If you're a loan officer, financial professional, or anyone who works with money, consider how you can support educators in your community. Volunteer as a guest speaker. Share curriculum resources. Offer to answer questions or co-teach a session. Whether it's in schools, churches, or community centers, get involved in supporting those who want to provide and receive this education.

What This Means for Financial Educators

We know financial education can be effective. However, if we want to educate the majority of overwhelmed, anxious consumers like myself, we have to change the way we deliver it. 

That’s why at FirstHome IQ, we have integrated exercises, activities, and psychology into every single presentation offering. And we will be encouraging all of our educators to move away from simply lecture-style presentations. 

At FirstHome IQ, this is core to our work: helping people become better financial educators. We provide high-quality training that goes beyond theory, offering modeling, hands-on practice, and peer support networks. The goal is to create real confidence and change, not just transfer information.

Designing for the People Who Need Us Most

As for me, I still can't sit through most financial seminars. The toddler in my chest still thrashes when I try to listen to Rich Dad, Poor Dad. But I've stopped seeing that as my failure and started seeing it as our opportunity. 

If someone like me, who has built a career in financial education, can't engage with traditional content, then we're not designing for the people who need us most. The most effective financial education meets people in their complexity: their ADHD, their money shame, their survival patterns. 

Financial literacy is much more than a test or a completion certificate. It is a relationship to build. And like all good relationships, it requires safety, trust, and a willingness to meet people exactly where they are. 


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Referenced in Cited Media:

"Fearless Woman: Financial Literacy and Stock Market Participation" —https://gflec.org/wp-content/uploads/2021/03/Fearless-Woman-Research-Final.pdf?x53868

Kristin Messerli