Financial Literacy’s Return on Investment

With the kick-off of this November’s Financial Literacy Month in Canada, new research has been released measuring the impact of improved financial literacy proficiencies among adults.  SiMPACT Strategy Group, a consulting, advisory and capacity building firm focused on measuring social impact, announced the results of its research on the social return on investment (SROI) of financial education based on its analysis of Money Matters, a financial education program rolled out by ABC Life Literacy Canada.  SiMPACT’s study found the return on every dollar invested in Money Matters financial literacy programs for adults yields a $2.21 SROI.

Money Matters is a free program designed to educate adults on a broad range of financial, economic and investment topics, such as saving, debt management, budgeting, investing, and retirement planning.  The initiative is supported by TD Bank Group and has received widespread acclaim for success as a financial literacy solution. In Money Matters workshops, adults are able to hone their financial-related skills, while lowering their personal finance stress that often leads to emotional and psychological problems stemming from their financial situations.

The study comes at a very important time in Canada and, indeed, the world, as local and global efforts to address low levels of financial literacy are building at a skyrocketing pace.  The recent financial crisis and continued economic woes in both developed and developing countries have put financial literacy and consumer education at the top of national political and legislative agendas.  The growing support for financial literacy solutions is based in large part on the recognition that individuals exhibiting poor skills and acumen in financial education are particularly vulnerable in today’s economic climate given the challenges they experience with budgeting, saving and understanding the potential issues associated with consumer debt, payday loans, complicated mortgage structures, and a range of risky financial products they may pursue, which could cripple their personal finance futures.

The results of the SiMPACT study set an important new bar in the area of social impact measurement in that they demonstrate the significance and value of understanding a social service impact.  To the extent financial literacy programs and organizations focus on their social impact, they could place a more objective value on their initiatives, improve their solutions and articulate their value propositions in a more effective manner.  Put another way, SROI changes the analysis of program effectiveness from expense to value.

Financial literacy professionals are buzzing over the SiMPACT results given their importance in changing the dialogue in today’s heightened awareness of and focus on improved financial literacy.  Many contend that further efforts to quantify the value of financial education programs will lead to even more support for local, regional and national efforts to invest in financial literacy programs and organizations that, in turn, will foster new levels of success in education and financial capability in the months and years ahead.