Empowering Wealth: Assessing the Impact of Financial Literacy Education Legislation on Investment Level and Participation

Abstract

This study investigates the impact of high school financial literacy/personal finance policies on investment outcomes across three asset classes: stocks, interest-bearing assets, and real estate. It adds to current research by examining how different types of financial literacy laws (embedded versus standalone) affect each asset class separately. The study draws on three different econometric models to produce final results: a staggered differences-in-differences (DiD) model, an event study model, and a synthetic control model. The DiD model produces the most promising results and determines that standalone financial literacy courses correspond to a significant increase in stock market participation, interest income, rent income, real estate investment participation, and overall investment income. Across all DiD regressions, standalone courses correspond to larger and more significant results as compared to embedded policies. The event study results indicate that rent income and overall investment income increase significantly after the implementation of standalone policies. Finally, the synthetic control model produces no significant results, but statistical power may be an issue that contributes to such insignificance.