Schwab gift will transform personal finance education

Even today, the most basic concepts of money management elude millions of people: They pay more than they should to borrow money, have little provision to protect themselves against financial shocks, and plan poorly – if at all – for their financial futures.

A new multidisciplinary initiative aims to change that: first, by providing the resources and tools that are essential for making sound financial decisions and building a safe financial future; then, by expanding the learnings and best practices from Stanford to colleges and universities throughout the United States; and ultimately, by using technology to extend the program’s reach across the globe.

The Initiative for Financial Decision-Making – a collaboration among Stanford Graduate School of Business (GSB), the Stanford Institute for Economic Policy Research (SIEPR), and the Stanford Department of Economics in the School of Humanities and Sciences – is made possible by a generous gift from Helen and Charles R. “Chuck” Schwab, ’59, MBA ’61, and the Charles R. Schwab Foundation for Financial Freedom.

“Through research and teaching, this cross-Stanford collaboration will guide individuals and communities on a path toward sound financial decision-making,” said Stanford President Jonathan Levin, who was dean of Stanford GSB when the gift was made. “We’re incredibly grateful for the vision and generosity of Chuck Schwab, who is making this powerful new initiative possible.”

This gift continues the Schwabs’ decades-long tradition of philanthropy to Stanford that has touched myriad areas of campus, from the GSB to Athletics, the Cantor Arts Center, the Hoover Institution, SIEPR, and Stanford Medicine, as well as significant support for undergraduate financial aid, including student-athletes.

“It is high time that we put a greater emphasis in our country on financial education,” Schwab said. “It is one of the most important things we can do to help people navigate their financial lives with competence and confidence, and we have left it on the back burner for too long. I know that the Initiative for Financial Decision-Making is going to kick-start that process in a big way, starting here at Stanford and rippling out across the country, and I am proud to be able to play a part.”

Annamaria Lusardi, who is a senior fellow at SIEPR and professor of finance, by courtesy, at Stanford GSB, will serve as faculty director of the initiative.

“Why are we, as a society, largely financially illiterate? The answer lies in the rapid changes in society, the proliferation of complex financial products, and our inability to keep pace,” said Lusardi, who has devoted her career to helping people make better financial decisions.

Lusardi says there is an urgent need to democratize access to financial education. In her research over the past two decades, she has designed a set of questions that is now the global standard for assessing an individual’s financial knowledge. Her pioneering work has brought awareness about the widespread lack of financial knowledge among people in the United States and around the world and has influenced policy and programs aimed at improving financial education.

The Initiative for Financial Decision-Making is built around four strategic pillars:

• Designing and delivering state-of-the-art personal finance education programs, starting with Stanford students and then gradually expanding nationally and internationally

• Using technology to expand access to financial education resources

• Harnessing strategic partnerships, communication campaigns, and engagement with decision-makers to influence programs and policy

• Building the field of personal finance education by reinforcing a rigorous theoretical and empirical foundation and nurturing the next generation of researchers

“From crafting a best-in-class curriculum to leveraging technology to impacting policy, we are seamlessly weaving personal finance into the very fabric of society,” Lusardi said.

Drawing from a history of financial decision-making education

Stanford began offering Economics 43: Introduction to Financial Decision-Making to all undergraduate majors in 2020. Michael Boskin, the Tully Friedman Professor in Economics in the School of Humanities and Sciences, taught the course in its first few years along with John Shoven, the Charles R. Schwab Professor in Economics, Emeritus, who came out of retirement to be part of the project. The course has proven very popular with students, who give it rave reviews.

“It’s been heartwarming to see students who have taken Econ 43 come to my office saying they have become the financial advisor to their family,” said Boskin, who is the author of more than 150 publications and is internationally recognized for his research on world economic growth, tax and budget theory and policy, Social Security, and U.S. saving and consumption patterns.

Lusardi, who taught Econ 43 this spring with Boskin, says the impact of financial decision-making courses is far-reaching.

“I’ve been teaching for a long time, but when I started a personal finance course at the George Washington University more than 10 years ago, the experience became entirely different,” Lusardi said. “I received – and still receive, years later – countless thank you notes from students. They share their success stories, telling me how they were able to pay off their student loans, save, and contribute to retirement accounts. It’s overwhelming how transformative the course is and how it changes students’ lives.”

As the Initiative for Financial Decision-Making rolls out, it will mobilize multiple teaching tools and delivery methods aimed at scaling financial education. Currently in development is a personal finance app featuring bite-sized lessons that combine evidence-based content with real-world applications. The initiative also complements Mind Over Money, Stanford’s student services program that provides financial wellness resources.

More than ever, we need people to be financially secure and resilient. The new initiative will be transformative, democratizing access to financial education. A safe financial future should be within reach of everyone, everywhere.”

Annamaria Lusardi

An annual conference on teaching personal finance, the first of its kind when it launched two years ago, is also part of the initiative. The conference has attracted professors from Ivy League and private universities as well as state schools and community colleges.

This story originally appeared in Stanford Report.