The ripple effect of financial education

A financial literacy course for university students in Cyprus also improved the financial knowledge of their parents.

Publishing date
23 March 2023
A student

Financial literacy helps citizens make informed choices about their personal finances in terms of savings, investments, borrowing and retirement planning. In contrast, financial ignorance leaves citizens exposed to scams and risks that could have dire consequences, given that increasingly complex financial products are becoming accessible online. Financial education should be mainstreamed in curricula. We use a case study from Cyprus to show that financial education in the university classroom can have widespread, and positive, ripple effects.

An example where financial ignorance can cause harm is the trend towards defined contribution pension schemes, which shifts decision-making responsibility for financial security after retirement away from governments and employers to pension savers. A striking example of this happened in March 2023, when thousands of Australian do-it-yourself (DIY) pension fund participants, representing about one third of the AUS$800 billion prudentially regulated sector, faced losses in the hundreds of millions of dollars from cryptocurrency investments 1 See Lewis Jackson, ‘Analysis: Australia's DIY pension funds lose millions on crypto bets, investors not sweating it’, Reuters, 2 March 2023,…. . Since self-managed funds fall outside the remit of the regulator that oversees professionally managed funds, participants could invest with fewer restrictions, but lacked sufficient knowledge of the financial risks of cryptocurrencies. The DIY scheme, set up to ensure adequate retirement income, jeopardised the life savings of participants with insufficient financial knowledge.

The S&P Global Financial Literacy Survey report (Klapper et al, 2015) provides financial literacy scores across countries. It evaluates the benefits of financial literacy and the costs of financial ignorance. It showed that consumers with low financial literacy scores run up bigger debts, incur higher interest rates on loans and save less, while consumers with high scores save more for retirement and diversify risks.

Financial literacy worldwide is quite low, in both developing and developed countries (Klapper et al, 2015). The concept of household financial fragility became particularly pressing after COVID-19. Demertzis et al (2020) questioned whether European households were well-prepared for unexpected expenses. Even before the pandemic, one in three EU households could not manage a shock equivalent to one month’s income of those at the poverty threshold.

Financial education programmes have been identified as one initiative to combat financial fragility, since financial literacy correlates strongly with financial resilience (Klapper and Lusardi, 2020). The importance of financial education for young people was recognised by the G20 Leaders in their June 2012 summit (OECD/INFE, 2013) and Anna Maria Lusardi, a leading international scholar on financial literacy, has been calling for financial education to become obligatory. Many governments have developed national strategies to enhance financial literacy (OECD/G20, 2013), with Cyprus being one such case.

Cyprus is typical of the low-financial literacy EU countries, with only 35% of its population considered financially literate (2014 data; see Klapper et al, 2015). Cyprus’s peers include Croatia (44% financial literacy rate), Italy (37%), Malta (44%), Serbia (38%) and Slovenia (44%). Portugal, North Macedonia, and Romania have lower scores (25%-34%). Internationally, Cyprus is in the same group as Japan (43%) and Ukraine (40%). Hence, lessons from the Cyprus experience may be relevant for other countries, although caveats apply.

Cyprus initiative on financial literacy education

The Central Bank of Cyprus has taken a leading role in promoting financial literacy in Cyprus and a National Strategy for Financial Literacy and Education was formulated by an ad-hoc committee chaired by the bank. Cyprus’s Council of Ministers adopted the National Strategy in June 2022.

The strategy was heavily informed by the introduction of a financial literacy course at the University of Cyprus in 2020. This full-semester course covers topics including interest rate compounding, inflation, risk and return and consumer biases. It delves into real-life problems such as money management, saving, consumer borrowing, mortgages, insurance, investments, and retirement.

Accounting and finance students are required to take the course, and it is offered as an elective course for students from other departments. Students are assessed on a major project and two exams. The course has been popular, attracting students from engineering, mathematics, law, psychology, physics, history, archaeology, languages, computer science, sociology, education, business administration and economics. It is offered in English and Greek and is taught by full-time faculty and visitors. 

Spillover effects from a university course

The new course provided a unique opportunity to test the financial literacy spillover effects from students to their immediate networks, in a controlled environment. A significant ‘soft’ spillover should be highlighted before the findings from this controlled experiment are discussed.

The University of Cyprus financial literacy curriculum has been adapted to the needs of high school students, and a private high school introduced it in its programme in 2021. Fifteen more private high schools introduced the financial literacy course in 2022, with about two thirds of private school students in Cyprus now being catered for as a result. We expect Lusardi’s call for obligatory financial education to be heeded by the education minister, with public high schools then integrating financial literacy into the curriculum.

To track the spillover of financial knowledge from the students who took the course to their immediate networks, we followed a treatment and a control group (for details see Kallenos et al, 2022). The former consisted of all students who took the course and their parents. The latter consisted of students and parents who did not take the course. Both groups were assessed for their financial literacy before (September 2020) and after (December 2020) the course was offered.

We used the OECD/INFE Toolkit for measuring financial literacy. We asked seven questions to measure financial knowledge, with additional demographic questions on student gender and family education and income level. We also asked two questions to measure the frequency of students’ interaction with their parents:

    1. Do you live with your parents?   
    2. If ‘No’, then: How many times per week do you personally interact (face-to-face) with your parents? (Everyday/ 5-6 times per week/ 3-4 times/ 1-2 times /Less than 4 times a month).

The annex gives descriptive statistics of our sample.  

Figure 1 shows the financial knowledge scores of the treatment and control groups before and after the course was offered. The change in the score of the control group is statistically insignificant. However, the treated group averages a score increase by an economically and statistically significant 1.4 units (p-value< 0.01). It exceeds the OECD threshold of 5 to be considered financially literate.



This test established the effectiveness of the financial literacy course in improving the treated students’ financial knowledge. This increase in financial knowledge was expected given that students were exposed to the financial education material and the new course was effective.

In terms of spillover effects, Figure 2 shows the financial literacy scores of parents measured before and after the course. Average scores did not change significantly for either the treatment or the control group. Among the parents of the treated group, those with low initial financial literacy scores benefitted significantly. Scores increased from 2.52 to 3.91 (p-value 0.08), suggesting a spillover effect from the students to their parents.


To firmly establish the spillover effect, we ran a regression of the changes in the financial knowledge score before and after the course. We used as independent variables an indicator (P_Treat) with a value 1 for the treatment parents and 0 otherwise, and an indicator (Home) with a value 1 if the student lives at home with parents or has frequent, interaction with parents (at least five times a week). We also used the parents’ initial financial knowledge scores as an independent variable. Table 1 shows the results with three model specifications:



  1. The course improves the financial knowledge score for parents of the treated group who interact frequently with their children.
  2. There are no significant improvements in the scores of the treated group for the cases of infrequent interactions with their children.

The positive effects persist when we control for gender and level of education.

Conclusions and a caveat

Our findings may have important policy implications: financial education of young adults can improve the financial knowledge of those in their immediate networks. This suggests a potential multiplier effect associated with financial education. Given the demographics of the student and parent populations, the main beneficiaries of the multiplier effects are those in their late 40s and early 50s.

Spillovers are stronger for those with lower initial financial literacy scores. This suggests that other countries among Cyprus’s peers could experience similar benefits. However, cultural differences in different countries may influence the interaction of students with their parents.

Cyprus is about average in the EU in the age of young people leaving home, according to Eurostat data 2 See…. . Our findings will likely transfer to countries with similar average ages of young people leaving home, such as Croatia, Italy, Malta, Slovenia, Portugal and Romania. These are also low financial literacy countries. It is less clear if our findings would transfer to Sweden, Finland or Germany. Our study was also conducted during the COVID-19 lockdowns. While this meant the treated and the control group really were separate, it also raises the question of whether the spillovers would have been observed if students were not locked at home with their parents. This would be the topic of the second wave of our study. 

We acknowledge the work of our colleague George Nishiotis at University of Cyprus, who contributed to the study that underlies this analysis, but who sadly passed away in August 2021.


Demertzis, M., M. Domínguez-Jiménez and A. Lusardi (2020) ‘The financial fragility of European households in the time of COVID-19’, Policy Contribution 15/2020, Bruegel

Kallenos, T.L., A. Milidonis, G. Nishiotis and S.A. Zenios (2022) ‘Financial Education and Spillover Effects’, mimeo, available at

Klapper, L. and A. Lusardi (2020) ‘Financial literacy and financial resilience: Evidence from around the world’, Financial Management 49: 589-614

Klapper, L., A. Lusardi and P. van Oudheusden (2015) Financial Literacy Around the World: Insights from the Standard & Poor's Ratings Services Global Financial Literacy Survey, Global Financial Literacy Excellence Center, available at

OECD/G-20 (2013) Advancing National Strategies for Financial Education, Joint Publication by Russia’s G20 Presidency and the OECD, available at

OECD/INFE (2013) Criteria, principles, guidelines and policy guidance to improve financial education. Part 2: addressing youths’ and women’s needs for financial education, available at


Student sample description


Parent sample description



[1] See

[2] See Lewis Jackson, ‘Analysis: Australia's DIY pension funds lose millions on crypto bets, investors not sweating it’, Reuters, 2 March 2023,


About the authors

  • Theodosis Kallenos

    Theodosis Kallenos is a Financial Economist at the Economic Analysis and Research Department of the Central Bank of Cyprus. He is a member of the CBC Coordination and Management Team of the ad-hoc Committee for the promotion of financial literacy and education in Cyprus. He has previously worked as a post-doctoral researcher in Finance at the University of Cyprus and as a visiting researcher at Imperial College London.

    His primary research interests are in the areas of financial literacy, corporate finance and empirical asset pricing. He holds a Ph.D. in Finance from the University of Cyprus an M.Sc. degree in Economics for Policy from University College London and a B.Sc. in Economics from the University of Cyprus.

    Disclaimer: All views expressed by this author are strictly those of the author and do not necessarily reflect those of the Central Bank of Cyprus.

  • Andreas Milidonis

    Andreas is currently a Professor of Finance at the University of Cyprus. He has significant research, consulting and teaching experience in finance, insurance and banking and has worked in the US, UK, Singapore and Cyprus.


    Andreas has published over 20 academic articles in Finance, Risk and Insurance on topics such as risk assessment, risk management, managerial compensation risk-taking incentives and information transmission in financial markets. His research is published by journals such as the Journal of Financial Economics, the Journal of Financial & Quantitative Analysis, and the Journal of Risk & Insurance.

    His consulting experience includes projects with the European Central Bank, a global reinsurance company (big 5), a global asset management company (big 5), and other organizations. Areas of expertise include bank risk management, insurance pricing, and pension valuation, among others. Andreas has also contributed to the development of the National Strategy for Financial Literacy and Education in Cyprus.

    His curriculum includes academic appointments at the Insurance Risk and Finance Research Centre (Nanyang Business School, NTU, Singapore), and Manchester Business School (UK). Prior to moving to the UK, he completed his Ph.D. in Risk Management & Insurance (2007) at Georgia State University (USA), partly funded by the Society of Actuaries. His undergraduate degree was completed with honors in 2001 (First in class; Schreyer Honors College), in Actuarial Science (Minor in Mathematics) at the Pennsylvania State University (USA).


  • Stavros Zenios

    Stavros Zenios is a Cypriot citizen with a long career in the USA. His current research focuses on sovereign debt issues, especially in relation to the challenges posed by climate change and political risks. He is working on the development of stochastic dynamic models for debt sustainability analysis and risk management for sovereigns, on sovereign contingent debt, and on the asset pricing effects of political risks. He has published more than 150 articles in leading academic journals, encyclopedias, and handbooks, and edited numerous collected works. He regularly appears on national media discussing issues relating to the economy, transparency and corruption and is consulted by the international press on Eurozone crisis issues. He was Vice chairman of the Cyprus Council of Economic Advisors and served on the Board of the Central Bank of Cyprus.  He served two terms as President of UNICA-Universities of European Capitals and two terms as Rector of the University of Cyprus.

    He is a Professor of Operations Management and Finance at Durham University (UK), on sabbatical leave from the University of Cyprus, where he has been a Professor of Finance and Management Science since 1991. Prior to that, he was a tenured faculty member at the Wharton School, USA, where he remains a Senior fellow of the Financial Institutions Center.

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