Financial Education Affects Financial Decision-Making: Evidence from the COVID-19 Pandemic Response

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Staff Reports

Financial Education Affects Financial Decision-Making: Evidence from the COVID-19 Pandemic Response

Previous title: “Financial Education and Household Financial Decisions During the Pandemic”

Number 1131
October 2024 Revised September 2026

JEL classification: D14, G51, G53

Authors: Donghoon Lee, Daniel Mangrum, Wilbert van der Klaauw, and Crystal Wang

Using cohort-by-state exposure to high school financial education mandates linked to credit bureau data, we study whether financial education raises the propensity to act when macroeconomic conditions and policy create favorable opportunities. We take advantage of the COVID-19 pandemic setting since many financial decisions households routinely face were particularly salient and because the decision windows are cleanly identified. We focus on several consequential financial decisions facing households: reducing revolving credit card balances, purchasing a home, and refinancing a mortgage. We find that those with more financial education reduced revolving credit card balances following stimulus checks by about six percent more than non-mandated peers; were roughly four percent more likely to complete rate-only mortgage refinances when rates were at historic lows; and were about ten percent more likely to buy a first-time home with a mortgage. Mediation analysis shows that most results are driven by a higher propensity to act rather than by pre-existing credit standing. Since the financial decisions studied are commonplace, the findings likely generalize beyond the pandemic, implying that financial education can increase policy pass-through to household balance sheets.

Full Article

Author Disclosure Statement(s)

Donghoon Lee
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Daniel Mangrum
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Wilbert van der Klaauw
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Crystal Wang
The author declares that they have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Suggested Citation:
Lee, Donghoon, Daniel Mangrum, Wilbert van der Klaauw, and Crystal Wang. 2024. “Financial Education Affects Financial Decision-Making: Evidence from the COVID-19 Pandemic Response.” Federal Reserve Bank of New York Staff Reports, no. 1131, revised September 2026. https://doi.org/10.59576/sr.1131

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