People face complicated financial decisions starting from a young age. Financial mistakes made early in life can be costly. Thus, Financial literacy could play an important role in sound financial decision-making. Financial illiteracy has implications for many household behaviors. People with a lack of financial literacy participate less in the stock market (van Rooij et al. 2011), choose mutual funds with higher fees (Hastings and Tejeda- Ashton, 2008), and accumulate less retirement wealth (Behrman et al. 2010). There is also evidence that the less literate people are more likely to have costly mortgages (Moore, 2003) and more likely to engage in high-cost borrowing.
Understanding financial literacy among young people is thus of critical importance for policymakers in several areas; it can be beneficial for those who are working on financial education programs as well as those who set the rules to protect younger consumers. The National Bank of Georgia (NBG), with the involvement of different stakeholders from public entities, the private financial sector, and civil society, and with the support from the Savings Banks Foundation for International Cooperation (SBFIC), developed and approved the National Strategy for Financial Education in 2016. The mission of the strategy is to develop guiding principles and strategic directions for enhancing the financial literacy level in Georgia. According to the strategy of the following target groups are highlighted: pupils and students, unemployed population, people employed in large companies, rural population, people in front of special life events, such as going to college, buying a home, getting married and etc. Thus, different methods and tools, like formal financial education courses for school children, on job training for employed people, are used to deliver financial literacy to the mentioned target groups.
This paper is mostly concentrated on the importance of financial literacy for school children. As it is emphasized in national strategy, the foundation of financial education should be built in at young ages. At an early age, it is easier to develop the habit of personal finance management and turn it into a culture. In the long run, by investing in the youth’s financial education, it is possible for the youth to form the right attitudes and skills, which they will need to make better financial decisions. The positive effect of the financial literacy programs at Japanese schools is summarized by Sekita (2011). He finds that if people save regularly when they are children, they are more likely to develop a plan for retirement when they become adults.
In this paper, we estimate the determinants of financial literacy for school children and also evaluate the effectiveness of the SchoolBank project. SchoolBank is a standard educational module developed by the National Bank of Georgia (NBG) in collaboration with Child and Youth Finance International (CYFI). The educational module contains about 60 minutes of classes on 15 different topics related to personal finance, banking products, consumer rights, and responsibilities. The project was piloted in 11 schools in Georgia. Participants are asked to fill out the pre and post questionnaire which checks all three components of financial literacy: knowledge, attitudes, and behavior. The data from this questionnaire is used in the main analysis.