Initiating budgeting behaviour among non-budgeters

• Description of the programme
• The study
• Key findings
• Points to consider

Description of the programme

Recent research has shown that nearly a third of Canadian consumers struggle to cover their living expenses, and almost half rely on some form of credit to make ends meet. Existing financial literacy programmes have been criticised because they tend to focus on disseminating knowledge without developing people’s financial skills and confidence. The Financial Consumer Agency of Canada (FCAC) identified this, and in 2016 launched a tool which delivered financial literacy messages directly to consumers who do not budget. The aim of the tool was to help people build their knowledge, confidence and skills relating to budgeting, with the ultimate objective of changing their budgeting behaviour. FCAC directed the tool towards 10,716 people, of whom 54% (5,767) had a budget and 46% (4,949) did not. Individuals without a budget were targeted for two subsequent interventions.

The study

Researchers in the Education, Research and Policy Division of the FCAC conducted the research. The study employed a pre- and post- design over the course of a month, which gathered evidence regarding changes in knowledge, confidence and behaviour after using the tool. It compared changes of a treatment group (the 4,949 people who did not have a budget) before and after using three different interventions, with a control group (a new group of people, chosen randomly) who received a fourth intervention. The researchers also conducted analyses on indicators of knowledge, confidence and behaviour related to budgeting, which was analysed by age, gender, province and household income.

Key findings

Changes in budgeting behaviour

The study found that through the introduction of knowledge and confidence-building content and resources, non-budgeters increased their intentions to budget, as well as their actual budgeting behaviour.

• 44% of non-budgeters indicated that they did not know where to start in creating a budget, suggesting that targeting financial education messages about budgeting to these individuals would assist them in creating a budget for themselves.
• There was an increase in the percentage of non-budgeters who intended to make a budget in the next 30 days or in the next six months. However, 23% of those who began budgeting at intervention 2 indicated that they were no longer budgeting in intervention 3.
• The researchers did not find any significant differences between those who continued and those who discontinued their budget at the beginning of the pilot, but by the end of the pilot, those who discontinued their budget were statistically less confident than those who continued their budget.

Knowledge of budgeting

The study found that non-budgeters’ knowledge increased as a result of exposure to the financial education messaging.

• After the second and the third intervention, there was a statistically significant increase of 10 percentage points in non-budgeters’ knowledge about budgeting. In particular, after the second intervention, 57% of non-budgeters answered a question about expenses and income correctly. This increased to 67% of non-budgeters following the third intervention.
• In comparison to a control group of individuals who did not have a budget, those who received the consumer messaging through the pilot demonstrated greater knowledge about budgeting behaviours.

Confidence in ability to budget

The study’s results indicate that the confidence of non-budgeters increased regarding budgeting over the course of the pilot.

• The percentage of non-budgeters who were ‘confident’ in their ability to make and follow a budget increased from 32% to 37% by the end of the pilot. The percentage of those who were ‘very confident’ doubled to 22%.
• Confidence about budgeting was still higher for budgeters, than non-budgeters. 44% of budgeters were ‘confident’, and 36% were ‘very confident’ in budgeting.
• The researchers observed increases in non-budgeters’ confidence to engage in budgeting activities. Non-budgeters in the treatment group had higher levels of self-reported confidence after participating in the interventions than non-budgeters in the control group did.

Points to consider

Methodological limitations:

• The pilot relied on self-reported data collected through a mobile app, which could have introduced self-report bias. For example, the app did not verify if participants used FCAC’s budgeting tool to create a budget, and instead relied on their own report on whether they keep a budget.
• The pilot took place over one month, which is too short to examinemedium to long-term changes.

Generalisability/ transferability:

• The app was only available in two Canadian provinces (British Columbia and Newfoundland and Labrador) and three-quarters of pilot participants lived in British Columbia.Further research is needed for the findings to be generalisable to the Canadian population.