WASHINGTON (Reuters) - Financial literacy has become a huge catchphrase the one idea upon which consumer advocates and bankers, borrowers and lenders, even Republicans and Democrats all agree.

Everyone supports the notion that we need more financial literacy. Myriad organisations are putting money behind creating finance management classes and even mandating them on a state-by-state basis.

Elizabeth Warren, who is setting up the new consumer financial protection agency for President Barack Obama, is all about financial literacy. Her recent talks have all dealt with minimizing rule-makings and maximizing disclosures, and making sure consumers have the skills to decode those disclosures.

But financial literacy has its limits.

“I don’t think financial literacy programs are really going to solve any of our problems,” said Ira Rheingold, of the National Association of Consumer Advocates.

While it’s important that consumers know the ground rules in an increasingly technical and competitive marketplace, literacy can’t take care of everything. Here’s why.

l Human nature rules. Raise your hand if you know you shouldn’t carry a credit card balance, but you do anyway. I thought so. There isn’t a straight line between knowledge and behaviour, and teaching financial literacy doesn’t guarantee that people will make smart financial moves.

“Consumers are pushed into a buy mentality,” says Rheingold. “All the teaching you do cannot compare with the incredible marketing and advertising that is out there.”

l It’s not a substitute for regulation or enforcement. It’s good to be knowledgeable about money, but in a market where most of the choices may be bad replete with hidden fees and dangerous products even smarts won’t take you all the way to solvency. “The banks think they can do anything they want, as long as people take a class,” Ed Mierzwinski.

Of course, not all banking or financial products are bad. But there have been plenty of cases of Madoff-style fraud, mutual fund improprieties, and mortgage malfeasance that would not be detectable even to well-informed consumers without additional protections.

l A lot of the material is written by folks with skin in the game. A group of researchers organized by The National Endowment for Financial Education found that literacy programs fall short when the target consumers don’t have confidence in the program’s backers.

“It is easy, for instance, to doubt the credibility of government-sponsored financial literacy initiatives when the financial behavior of government policymakers themselves can be construed as reckless,” said the report, titled “A Review of Financial Behavior Research.” (http://www.nefe.org/quartercenturyproject/tabid/934/default.aspx)

That skepticism can be even stronger when the coursework is created by the financial services industry itself.

“There may be some that aren’t entirely in it for educating consumers” but may be marketing focused, said Laura Levine, executive director of the JumpStart Coalition for Personal Financial Literacy, a Washington-based nonprofit that created standards for school-based financial education. “We do try to weed out those that aren’t purely educational and informative.”

l It doesn’t always work. “The evidence of the efficacy of financial education is still quite thin,” reported a second paper from the NEFE. The authors, led by John Gannon of the FINRA Investor Education Foundation, called for more research into what kinds of educational programs can be proven effective and noted that behavioral economics (such as automatic enrollment in 401(k) plans) did have proven efficacy and should be embraced by educators as a complement to literacy programs.

That point brings us back to where we started: Financial education is nice, but it’s not going to make up for the money-losing impulses too many of us have.

The Personal Finance column appears weekly. Linda Stern can be reached at linda.stern@thomsonreuters.com">linda.stern@thomsonreuters.com and tweets at http://www.twitter.com/lindastern