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John Lynch University of Colorado - Boulder

John Lynch University of Colorado - Boulder. My Perspective. Center for Research on Consumer Financial Decision Making & Boulder Summer Conference

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John Lynch University of Colorado - Boulder

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  1. John LynchUniversity of Colorado - Boulder

  2. My Perspective • Center for Research on Consumer Financial Decision Making & Boulder Summer Conference • We academics can best do research that creates a better world if we are scientists and not advocates; apropos of the conference theme, advocates are not trusted • Let’s understand how the world works: Understand interplay of consumers, marketers, regulators, consumer advocates • We can help by doing broadly accessible research that provides facts + concepts to interpret

  3. Center for Research on Consumer Financial Decision Making • Saving • Prize linked savings (Cookson) • Retirement plan design and “leakage” (Wang, Zhai, Lynch) • Investing • Lay understanding of diversification (Reinholtz, Fernbach, de Langhe) • Lay understanding of risk (Long, Fernbach, de Langhe) • Investing in coastal real estate and climate science denial (Bernstein & Lewis) • Household debt • Underwater mortgage and labor mobility (Bernstein) • Mortgage vs. rent (Fernandes) • Financial planning and coping with constraint • Efficiency and priority planning (Fernbach, Kan, Lynch) • Budgeting (Kan, Fernbach, Lynch) • Expense neglect (Berman, Tran, Lynch, Zauberman) • Health insurance (Gallagher) • Financial literacy • Effects on financial behavior (Fernandes, Lynch Netemeyer) • Couples financial literacy (Ward and Lynch)

  4. Example: Financial Literacy, Financial Education, & Downstream Financial Behavior • 2008 – Token consumer researcher at FTC conference on mortgage crisis • June 2009– Moved to CU, visited National Endowment for Financial Education in Denver • June 2010. First Boulder Summer Conference on Consumer Financial Decision Making. Invited NEFE folks. • August 2010. NEFE invited me as interloper to “Quarter Century Conference” – Ignorance as an asset

  5. Heretic in Cathedral • NEFE Quarter Century conference (2010) • John Gannon of FINRA “Given mixed evidence of effects of financial education on financial behavior and and cost considerations, maybe now is not the time to continue to press for state mandates to require high school financial education courses courses” • John: Makes sense • Audience: Gasp!! • Implicit model: Education  Gains in Financial Knowledge  Delayed Retrieval and Application of Knowledge at time of financial decisions months and years later… cf. Thompson, Gentner, Loewenstein • Let’s see who is right…meta-analysis and follow up research, funded by NEFE – Fernandes, Netemeyer

  6. From Fernandes, Lynch, & Netemeyer (2014, Management Science) Meta-Analysis:Coded 201 Studies For • Effect size of financial literacy on financial behavior: r(financial literacy, financial behavior) • Financial Behavior type: saving; planning for retirement; absence of debt; stock ownership and investment decisions; cash flow management; activity in retirement plans; and financial inertia such as choice of default options and payment of unnecessary fees.

  7. From Fernandes, Lynch, & Netemeyer (2014, Management Science) EffectsMuchLargerforMeasuredthanManipulated Financial Literacy Effect-size r

  8. From Fernandes, Lynch, & Netemeyer (2014, Management Science) InterventionsDecay: The Case for “Just-in-time” Financial Education Number of hours at the intervention Effect-size r Number of monthsafter the intervention After a delay, even long interventions have no significant influence on behavior

  9. From Fernandes, Lynch, & Netemeyer (2014, Management Science) Chronology • Beyond presenting in typical academic talks, circulated to key players in NEFE orbit, including in government • Oct 2011 – CFPB talk, share manuscript • May 2012 – Daniel & Rick present at Boulder Summer Conference • Thaler: “I hope people from CFPB are listening before they spend another dollar on financial education.” Irene Skricki’s response • June 2012 – Wisconsin Conference • July 2012 – Speak at President’s Advisory Council on Financial Capability, Private dinner with Treasury with Lusardi and Thaler • Oct. 2013 Thaler NYT column • After publication: Our view broadly adopted by CFPB

  10. Larger Lessons on Enablers • Deep relationships with practitioners via NEFE • Conferences like Boulder Summer that bring together academics and practitioners to face their critiques • Hang around with other academics who actually care about knowledgeable practitioners in industry, government, & consumer advocacy • Look for further ways to apply the insight

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