Numerous studies have found a positive relationship between financial literacy and
financial experience. Typically, this relationship is interpreted as being a causal relationship,
i.e. an increase in financial literacy leads to better financial decision making. However, a
simple relationship cannot be interpreted in a causal way. In this paper, we show evidence
for a causal relationship running ... [Show full abstract] the opposite way, i.e. people with more financial experience
seem to acquire more financial knowledge and become more financially literate. This
finding has important implications as it suggests that programmes targeted at improving
financial literacy could be more effective if they incorporate experiential components.