Association for Public Policy Analysis & Management

Rules of thumb–based education techniques have been proposed as a way to simplify financial education and make it more effective by providing simple, easily implemented decision guidelines. Presumably, rules of thumb are easier, cheaper, and more effective at engaging consumers than many other types of financial education. They can be delivered closer in time to the desired behavior change than classroom or counseling based education.

Although the term “rules of thumb” was initially derived from the fact that carpenters and farmers took approximate and quick measurements by using their thumbs as a measurement device, the term has evolved to include all types of simple heuristics that are useful for decisionmaking but are not intended to be strictly accurate or reliable in every situation. There is some evidence (e.g. Drexler, Fischer, and Schoar 2014; Skimmyhorn et al. 2015) that they can be at least as effective as traditional financial education approaches.

In this study, we performed the first rigorous test of rules of thumb–based financial education on consumer financial behavior using a randomized controlled trial. We delivered two rules of thumb to 13,957 credit card revolvers from Arizona Federal Credit Union over the span of six months (mid-December 2014 to mid-June 2015). The two rules were: “Don’t swipe the small stuff. Use cash when it’s under $20” and “Credit keeps charging. It adds approximately 20% to the total.” We delivered the rules via email, online banner, and/or physical mailer to different treatment groups. Arizona Federal sent participants the rules via e-mail twice each month, with half receiving the rules on a random date in the first and second half of each month, and the other half always on a Friday, once early in the month and once late in the month. Arizona Federal placed the online portal messages on the home page of the participants’ online banking site in either a moving banner or a static ad, with variations in type and style throughout the intervention period. The physical mailer incorporated the rules into a magnetic calendar.

Data are drawn from monthly, individual level financial data from the credit union (including both credit card and checking/savings account behaviors), and from individual-level credit bureau records before and after the intervention. We estimated the intent to treat using a fixed effects model and we estimate heterogeneous treatment effects based on age, average number of purchases preintervention, and baseline credit score.

We have already completed this draft research study and submitted it to the research sponsor, CFPB. The results are embargoed and cannot, by the point of submitting this abstract, be described in detail. But the findings will be released well in advance of the APPAM conference, and we see no constraints in presenting results at APPAM, which in terms of timing for this study, is opportune. We are happy to discuss further if more clarification is needed. The implications of this study’s results are important for the broad set of policymakers, practitioners, and researchers interested in improving financial education approaches.