Keeping it Simple: Financial Literacy and Rules of Thumb

Individuals and business owners engage in an increasingly complex array of financialdecisions that are critical for their success and well-being. Yet a growing literature documentsthat in both developed and developing countries, a large fraction of the population is unpreparedto make these decisions. Evidence on potential remedies is limited and mixed. Two randomizedtrials test the impact of financial training on firm-level and individual outcomes formicroentrepreneurs in the Dominican Republic. We find no significant effect from a standard,fundamentals-based accounting training. However, a simplified, rule-of-thumb trainingproduced significant and economically meaningful improvements in business practices andoutcomes.[...]