New research finds that online video may be a particularly effective way of bolstering financial literacy.
According to a new paper (Visual Tools and Narratives: New Ways to Improve Financial Literacy) published by the U.S. National Bureau of Economic Research (NBER), video appears to be better at improving basic financial literacy than text-based approaches. The conclusion is based on an experiment financed by a grant from the U.S. Social Security Administration (SSA), and funded as part of the Financial Literacy Research Consortium.
Researchers developed four different online approaches to explaining the concept of risk diversification — a brochure, an interactive visual tool, a written narrative, and a video — and then tested them with a sample of 900 people. Overall, they found that video performed the best at both improving financial literacy scores and increasing people’s levels of confidence in their financial knowledge.
“Our video and interactive tools are innovative in that they engage the viewer and provide an easy and enhanced way of communicating information that cannot be achieved by other methods,” the paper says. “We find that the video was most effective at increasing financial literacy (by increasing the proportion of correct responses to financial literacy questions and decreasing “don’t know” responses) and improving confidence. The video almost always outperformed the written narrative, while there were generally no significant differences between the visual tool and the brochure.”
The researchers also found that: the visual tool increased confidence in financial knowledge, but did not appear to actually boost financial literacy scores; people that viewed the video had significantly higher financial literacy scores than those exposed to a written narrative; and, that all of the approaches were effective at increasing confidence.
“Our results suggest that educational programs that engage the user emotionally or physically, involving vicarious experience and mastery experience (such as watching a video or using a visual tool), rather than text-based or passive educational programs (such as reading a narrative), are key for making gains in both financial literacy and confidence in financial knowledge,” it concludes.
The paper also notes that the research provide “new evidence for the value of online programs as new ways to improve financial literacy.” Indeed, it notes that the study shows that even these sorts of brief efforts can help improve financial literacy and confidence. The fact that these approaches proved effective, despite being relatively short, and delivered via the Internet, also suggests that they can be easily scaled to reach large numbers of people the paper says.
“More research is needed to develop interactive visual tools that are easy to access.” the paper notes; adding, “Since take-up is a major problem with existing educational programs, future work should also investigate whether the same selection bias is present in the take-up of online programs. In addition, future work should consider further exploring the link between knowledge, confidence, self-efficacy, and actionable behavior in practice.”