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Veronica Frisancho, Chief Economist at CAF (Development Bank of Latin America and the Caribbean) answers our questions about her award winning article “Spillover effects of financial education: The impact of school-based programs on parents” published in the inaugural issue of Journal of Financial Literacy and Wellbeing.

What is the focus of your article?

Extensive literature shows that parental human capital has a crucial impact on children’s outcomes. However, less is known about the reverse think. That is, how can human capital accumulated by children have an impact on parental outcomes. In particular, my paper focuses on how financial skills acquired by children can have an impact on financial choices that parents make. I leveraged data from an experiment that I conducted in Peru in 2016 to measure the effect of a school-based financial education program delivered at the high-school level. The intervention that I evaluated was targeting children, but it was not focusing on parents in any direct way. Whatever happened within the household we couldn’t control, and whatever the results in this paper show is coming precisely from those interactions and not by any program action directly involving parents.

What was your key finding?

I find very modest effects of the treatment on parental behaviour in terms of their credit outcomes on average, but interesting patterns emerge when we start to cut the data by socio-economic status. In particular, poorer households in the sample are the ones who benefit considerably from having their children exposed to financial education content in the school. These poorer households are going to improve their credit scores, reduce their default levels and increase the level of debt that they hold.

Please expand on the difference you found between households with sons and those with daughters.

If we look at the effects by sex of the students, we find that girls are the ones driving this result. The parents who have daughters exposed to the content are the ones who experience most of the gains in terms of credit outcomes. This is very interesting, particularly in the case of Peru, where girls and boys are basically tied in terms of their performance in the financial literacy exam covered by PISA. And even in the case of math, girls lag behind boys – so it’s not that they have a particular advantage in terms of financial baseline knowledge or math baseline knowledge. Girls seem to have a stronger voice in terms of financial matters within the household and that is something that we need to look deeper into.

Do you have any suggestions for future research in this area?

Future research should focus on this intergenerational link more deeply, for two particular reasons. We need to understand better how it happens, how it is appearing in our results, to leverage it and multiply the gains from investment in financial education. And second, we need to include in our calculations of the cost-effectiveness of these programs the indirect gains or the spillovers that they generate on other adults around them – teachers or parents are two important examples.

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