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The benefits of financial literacy persist over time, according to new research published by the FINRA Investor Education Foundation.

The study, which was conducted by FINRA’s investor education unit along with the University of Southern California’s Center for Economic and Social Research (CESR) and the George Washington University’s Global Financial Literacy Excellence Center (GFLEC), sought to use longitudinal data — a panel of 1,500 respondents who were surveyed in 2012 and again in 2018 — to assess the impact of financial literacy over time.

It found that greater financial knowledge was associated with greater financial capability in the future.

For instance, the study found that one additional correct answer on a financial literacy quiz in 2012 increased the likelihood of a respondent being able to meet an unexpected $2,000 expense in 2018 by 8%.

Two correct answers increased the likelihood by 16%; three right answers, by 24%.

“This study represents one of the nation’s first efforts to collect and analyze longitudinal data linking financial literacy to the financial outcomes of individual Americans over a multi-year period,” said Gerri Walsh, president of the FINRA Foundation.

“These findings reinforce the importance of financial literacy and suggest that differing levels of financial knowledge may contribute to increasing disparities over the life course.”

The study also found that greater financial knowledge in 2012 wasn’t statistically related to negative behaviours in 2018, such as using payday loans, pawn shops or rent-to-own arrangements.

“This suggested that poor financial decision-making may not be driven primarily by differences in financial knowledge, but instead may be attributed mainly to other factors like negative financial shocks and resource scarcity,” the researchers said.

“We hope that our study findings will be incorporated into the policies and programs developed to help individuals and families navigate the current economic crisis and rebuild resilience,” said Annamaria Lusardi, academic director of GFLEC and professor at George Washington University.