What financial literacy research suggests about teaching kids about subscriptions

The empirical case for financial literacy education is robust; the case for including subscriptions in it is recent but follows directly.

Lusardi & Mitchell's Journal of Economic Literature synthesis is the most cited modern review of financial literacy research. Their key finding: financial literacy is consistently and causally associated with better long-run financial outcomes, but typical curricula focus narrowly on saving and investing rather than on the recurring-spending patterns that dominate modern household budgets.

Lusardi & Mitchell: "Around the world, financial illiteracy is widespread, but those who are more knowledgeable about financial matters are better able to plan for retirement, accumulate wealth, and make more informed financial decisions." — Lusardi, A., & Mitchell, O. S. (2014). "The Economic Importance of Financial Literacy: Theory and Evidence." Journal of Economic Literature, 52(1), 5–44.

The case for including subscriptions specifically rests on the same behavioral economics that explains why adults overspend on them: payment friction (Soman, 2001) and present-bias (O'Donoghue & Rabin, 1999) operate the same way for adolescents as for adults, but financial literacy curricula rarely teach them in the context most likely to arise in a young person's life.

A five-minute lesson on the lifetime cost of a small recurring charge (covered in Lifetime cost) using the framing Thaler proposed in his 1985 Marketing Science paper — aggregating many small charges into a single mental account — gives a young person a tool they will use repeatedly.

What the research supports including

Lusardi & Mitchell's review identifies three competencies as most consequential: understanding compound interest, understanding inflation, and understanding risk diversification. To this list, a modern updating would add: understanding how recurring charges accumulate, and understanding the structural difference between one-time and ongoing decisions.

References

• Lusardi, A., & Mitchell, O. S. (2014). J. Econ. Lit., 52(1), 5–44.
• O'Donoghue, T., & Rabin, M. (1999). Am. Econ. Rev., 89(1), 103–124.
• Thaler, R. H. (1985). Marketing Sci., 4(3), 199–214.

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