Refine
Document Type
- Working Paper (3)
Language
- English (3)
Has Fulltext
- yes (3)
Is part of the Bibliography
- no (3)
Keywords
- Financial Knowledge (3) (remove)
Institute
We examined financial literacy among the young using the most recent wave of the 1997 National Longitudinal Survey of Youth. We showed that financial literacy is low; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy was strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings was about 45 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy. These findings have implications for consumer policy. JEL Classification: D91
How ordinary consumers make complex economic decisions: financial literacy and retirement readiness
(2010)
This paper explores who is financially literate, whether people accurately perceive their own economic decision-making skills, and where these skills come from. Self-assessed and objective measures of financial literacy can be linked to consumers’ efforts to plan for retirement in the American Life Panel, and causal relationships with retirement planning examined by exploiting information about respondent financial knowledge acquired in school. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready.
This paper examines data on financial sophistication among the U.S. older population, using a special-purpose module implemented in the Health and Retirement Study. We show that financial sophistication is deficient for older respondents (aged 55+). Specifically, many in this group lack a basic grasp of asset pricing, risk diversification, portfolio choice, and investment fees. Subpopulations with particular deficits include women, the least educated, persons over the age of 75, and non-Whites. In view of the fact that people are increasingly being asked to take on responsibility for their own retirement security, such lack of knowledge can have serious implications.