Backgrounder: Sustained behaviour change through financial education: A budgeting longitudinal study using mobile technology

This backgrounder presents the findings of a longitudinal study conducted by the Financial Consumer Agency of Canada (FCAC) using the Carrot Rewards mobile applicationFootnote 1. Specifically, this backgrounder describes the long-term effects of financial education interventions in influencing budgeting behaviours, evaluates the impact of budgeting, and identifies barriers to budgeting.

FCAC budgeting pilot study

In 2016, FCAC conducted a budgeting pilot study in British Columbia and Newfoundland and Labrador. In the pilot study, individuals participated in targeted financial education interventions that aimed to empower non-budgeters to make and follow a budgetFootnote 2. The pilot study was successful in increasing the use of budgeting behaviours among non-budgeters by 14 percent.

In 2018, approximately one and a half years after the pilot study was conducted, FCAC invited pilot participants to complete a follow up study. Participants of the follow up study include people who began budgeting as a result of the pilot interventions, those who had planned to budget by the end of the pilot interventions as well as those who had a budget at the start of the pilot.

The goal of the follow up study was to evaluate the effectiveness of the pilot’s financial education interventions in encouraging non-budgeters to adopt sustained budgeting behaviours. The follow up study additionally assessed the impact these budgeting behaviours have on financial outcomes and attitudes, and identified the top barriers to budgeting among non-budgeters.

Key findings

People who budget have better financial outcomes

Almost all individuals (99%) who have a budget report that a budget helps them manage their money. For example, 31% report a budget helps them to be aware of where their money is going and 21% report their budget helps them set financial goals and build savings. Diving deeper, over half of budgeters have used their budgets to help pay down their existing debts (55%), to increase their savings for the future (50%), or to save for emergencies (57%).

The follow up study links budgeting behaviours with improved financial attitudes and outcomes. People who had a budget one and a half years after receiving FCAC’s financial education interventions markedly outperformed those who did not adopt budgeting behaviours. For instance, 70% of initial non-budgeters who had a budget in the follow up study were keeping up with their financial commitments well or very well as compared to just 45% of these initial non-budgeters who do not have a budget in the follow up study.

People who follow a budget are more likely to reduce their spending and are less likely to rely on credit when they are struggling to make ends meet than are non-budgeters. Furthermore, budgets help individuals avoid spending regret. When asked “how often do you buy things you later regret,” 56% of budgeters report rarely or never buying something they later regretted as compared to 46% of non-budgeters.

New budgeting behaviours persist

The pilot financial education interventions had overwhelmingly positive long-term effects in improving the budgeting behaviours and confidence of non-budgeters. Individuals demonstrated sustained improvements in their budgeting behaviours after receiving FCAC’s budgeting financial education interventions. Over half (54%) of those who began budgeting during the pilot were still budgeting one and a half years later.

Opportunities and barriers

In the follow up study, non-budgeters were asked to identify one thing they would change about their money management if they could. The top area these non-budgeters wished to improve upon was to set financial goals and build savings (31%), followed by prioritizing spending (19%) and having a higher awareness of where their money is going (18%). Budgets are a money management tool which can help non-budgeters achieve these goals.

People may decide not to budget or may discontinue their budgeting behaviours because they face barriers to budgeting. The two most common barriers to budgeting among non-budgeters in the follow up study were: (1) feeling overwhelmed managing money (35%); and (2) not needing a budget to manage money (32%). These non-budgeters were found to differ from one another in their financial situations, attitudes and outcomes.

For instance, “overwhelmed” non-budgeters have lower incomes, a higher tendency to focus on the present day rather than saving for the future, and lower confidence to make and follow a budget than non-budgeters who “don’t need a budget”. Furthermore, only 36% report they have kept up with their financial commitments well or very well within the last 12 months. It is particularly important to provide targeted financial education messaging to these “overwhelmed” non-budgeters in order to improve their day-to-day money management and financial outcomes.


Significance of the findings

Budgeting and improved financial outcomes

The follow up study provides important evidence of the relationship between budgeting behaviours and improved financial attitudes and outcomes. Financial attitudes and outcomes both help to enhance an individual’s overall financial situation. In order to enable non-budgeters to budget, practitioners might invite these individuals to identify their barriers to budgeting in order to provide targeted messaging aimed to improve their confidence in these domains. For example, practitioners might aim to improve the budgeting confidence of people feeling overwhelmed by their finances to enable them to adopt a budget and help them achieve their financial goals.

Financial education and mobile technology

The results of the pilot and follow up studies provide evidence that consumer education initiates sustained positive budgeting behaviours which led to improve financial outcomes. These studies also demonstrate that mobile technology is a powerful tool for financial literacy practitioners to identify and reach target audiences. In the future, mobile platforms could be used to enhance other money management behaviours and improve the financial outcomes of Canadians.

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