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Planning and Financial Literacy: How Do Women Fare?
Abstract
This study uses data from the module on planning and financial literacy devised for the Health and Retirement Study in 2004. It finds that women display much lower levels of literacy than respondents in the total sample. Lack of literacy has implications for planning: women who are less financially literate are less likely to plan for retirement and be successful planners. These findings have important implications for policy and for programs aimed at fostering financial security. Because financial illiteracy is widespread among women, a one-time financial education seminar is unlikely to sufficiently influence planning and saving decisions. Similarly, education programs targeted specifically at women may be better suited to addressing large differences in preferences, savings needs, and financial knowledge.
... Studying the impact of financial literacy on household over indebtedness, Nkundabanyanga et al. (2014) reveals that households with higher financial literacy are likely to make effective financial choices. Narrowing the investigation to debt, Lusardi and Mitchell (2008) indicates that individuals with low-financial literacy are more likely to have problems with debt. Similarly, Seane et al., (2016) reports that lack of financial literacy contributes to the risk of being indebted, and suggests that households need to have the necessary financial knowledge to avoid misusing credit. ...
... Despite the concerns on the causes of households escalating over indebtedness, to the best of our knowledge, no study has been conducted on Nigeria. Globally, only few studies have been conducted and the findings are mixed and ambiguous (Dumitrescu, Enciu, Hândoreanu, Obreja, and Blaga, 2022;Adam, 2020;Wamalwa, Rugiri & Lauler, 2019) on the effects of digital credit and (Chotewattanakul, Sharpe and Chand, 2019;Seane et al., 2016;Lusardi and Tufano, 2015;Nkundabanyanga et al., 2014;Lusardi and Mitchell, 2008) on financial literacy impacts on household over indebtedness. ...
... The study's second finding that poor financial and credit literacy of the digital credit borrowers stimulated households over indebted corroborates Lusardi and Mitchell (2008)'s finding that individuals with low-financial literacy are more likely to have problems with debt; Seane et. al (2016) finding that lack of financial literacy contributes to the risk of being indebted, and suggests that households need to have the necessary financial knowledge to avoid misusing credit; and Nkundabanyanga et al. (2014) finding that households with higher financial literacy are likely to make effective financial choices. ...
loan provided through digital channels with little or no knowledge of the conditionality of the credit by the up takers) in recent times has been accompanied with mounting household over indebtedness. This study investigated the impact of digital micro-credit and financial literacy on households’ over-indebtedness in Niger state Nigeria. Using multi-stage sampling technique three (3) Local Government Areas were selected from each of the cluster of the three senatorial districts of the state, a purposive sample size of 462 respondents was used for the analysis. Finding reveals that easy access, no collateral demanded on taking the loan, and poor financial/credit knowledge were the major causes of their over indebtedness. The study hence recommends that digital credit providers should provide financial/credit education before advancing credit to them, and that stringent conditions including provision of collaterals should form parts of digital loan agreement so that only financial/credit knowledgeable and serious deserving applicants that can repay loan have access to it.
... The term gender gap is defined by the World Economic Forum as "the difference in women and men as reflected in social, political, intellectual, cultural, or economic attainments or attitudes" (World Economic Forum, n.d.). Evidence of gender gap in financial literacy are shown in the studies of Lusardi and Mitchell, (2008) (2002) and Falahati & Paim (2011) cite that a gender gap in financial literacy exists among college students. Goncalves et al. (2017) discuss that gender gaps occur not only in financial well-being but in antecedents and outcomes as well (Ali, 2021). ...
... Male college students are more financially literate compared to female college students. This finding supports the results of financial literacy studies conducted by Lusardi and Mitchell, (2008);Bucher-Koenen et al. (2016); Kim et al. (2021); Okamoto and Komamura (2021); Happ et al. (2022); and Chen and Volpe (2002) discussed above. Hasler and Lusardi (2017) of the George Washington University of Business Global Financial Literacy Excellence Center also discuss the observation that a gender gap exists in financial literacy worldwide, with 35% of men being financially literate, as compared to 30% of women. ...
... Furthermore, their influence might increase as their education and labor participation increase (Kim et al., 2017). Lusardi and Mitchell (2008) discuss that women who have higher financial literacy are likely to plan and be successful planners (Lusardi & Mitchell, 2008). Women underestimate their ability to plan. ...
Financial literacy is important in today’s fast-paced environment. Financially literate individuals understand basic finance concepts, prioritize their expenses, have enough savings, and invest in the right portfolio. These lead to financial security and better decision-making of individuals and groups, vital to economic development. Related to financial literacy are financial attitude and behavior, which can be described as the motivation and the action after knowledge. Youth and women must be given attention in inclusive finance policies. According to the Organisation for Economic Co-operation and Development (OECD), young adults exhibit low financial literacy, and that a gender gap exists. In this study, financial management is discussed in the context of assigned social roles and socialization factors. To assess the level of financial literacy, attitude and behavior of University of the Philippines Visayas (Iloilo City and Miagao) students and to determine if there is a gender gap, 271 respondents were surveyed, with 188 female respondents and 83 male respondents. Results show that males score higher than females in financial literacy, and the difference is statistically significant. For financial attitude, there is no significant difference in key areas, but female college students have become more aware of the importance of financial literacy during the pandemic. For financial behavior, while there is no significant difference between females and males, females perform better financial planning, and males tend to save regularly. The results of this study have implications on the crafting of gender-responsive financial literacy courses, and on a larger scale, on national financial inclusion policies.
... Additionally, several studies also state that uncertainty within financial markets is not the only reason behind the emergence of the irrational behaviour of decision-makers, but the presence of financial illiteracy influences an individual's financial decision-making as well (Furrebøe & Nyhus, 2022;Goyal & Kumar, 2021;Lučić et al., 2023;Mireku et al., 2023). Moreover, in comparison to men, women are reported to be facing several unique challenges when they deal with financial products, even if their financial situation is wellplanned (Hira & Loibl, 2008;Lusardi & Mitchell, 2008;Sharma et al., 2023). Furthermore, one out of seven women tends to show higher impulsivity while making a financial decision. ...
... More specifically, studies do showcase that women are laggards within the financial decision-making domains, and they are often perceived to struggle to make effective financial decisions and are thus prone to behavioural biases (Furrebøe & Nyhus, 2022;Gudjonsson et al., 2022;West et al., 2023). While 30% of the worldwide population of women are considered to be financially literate, recent industry reports within Australia highlight that about twice the population (i.e., 34%) of Australian Moreover, in comparison to men, women are reported to be facing several unique challenges when they deal with financial products, even if their financial situation is wellplanned (Hira & Loibl, 2008;Lusardi & Mitchell, 2008;Sharma et al., 2023). Furthermore, one out of seven women tends to show higher impulsivity while making a financial decision. ...
... Additionally, it was found that women aged between 28 and 59 years of age have low levels of financial aspirations. They appear to be more interested in keeping an eye on their household and personal expenses (Hilgert et al., 2003;Loibl et al., 2007;Lusardi, 2008;Lusardi & Mitchell, 2008). Harrison (2016) also finds that Australian women who are aged between 18 and 24 and over 65 years working in blue-collar professions earning less than $20,000 per annum have very minimal levels of financial literacy. ...
The paper aims to examine the relationships between behavioural biases (such as overconfidence and herding) and the rational behaviour of Australian female consumers when making financial decisions. In doing so, the paper showcases the financial illiteracy of Australian female consumers when confronted with irregularities within the Australian financial markets. From a theoretical standpoint, the study adopts the notions of the adaptive market hypothesis (AMH) to understand the reasoning behind the relationships between behavioural biases (such as overconfidence and herding) and the rational behaviour of Australian female consumers when making decisions rationally. Using a quantitative approach, a structural equation modelling (SEM) was conducted on the proposed theoretical framework with a cleaned dataset of 357 Australian female consumers, which revealed that behavioural biases significantly influence each stage of rational decision-making when making financial decisions. More precisely, the structural equation modelling (SEM) showcases that herding behaviour has a significant positive relationship with the information search and evaluation of alternative stages when making financial decisions. However, overconfidence behaviour has a significant negative relationship with demand identification and evaluation of alternative stages when making financial decisions. Moreover, the findings also showcase that the proposed theoretical model closely fits with the data utilised, indicating that Australian female consumers do follow rational decision-making when making financial decisions. Additionally, the findings revealed that the education and income levels of Australian female consumers positively influence the stages of rational decision-making. The findings also contend that Australian female consumers have a risk-averse attitude (i.e., within three key hypothetical scenarios) towards financial decisions due to the presence of financial illiteracy. Hence, it is strongly suggested that financial institutions highlight the calculative benefits and returns from financial product purchases in advertising and promotions in a way that appeals to female consumer segments.
... This allows us to analyze whether the information treatment has a direct effect on respondentsŠ task performance when answering a standard set of Ąnancial literacy questions and their conĄdence in answering them. We measure Ąnancial literacy using the ŞBig ThreeŤ Ąnancial literacy questions established by Lusardi and Mitchell (2008) and ...
... SpeciĄcally, we Ąrst focus on their Ąnancial literacy score (Column 1), which is measured as the sum of correct answers to the ŞBig ThreeŤ Ąnancial literacy questions established by Lusardi and Mitchell (2008). The results to our conĄdence measures are presented in Columns 2 to 6. ...
... The exchange theory suggests that financial literacy is not just about having access to information, but also about the process of exchanging and interacting with that information (Robson & Ladner, 2006). Further findings by Lusardi and Mitchell (2008) support the theory and show financial literacy is greater amongst the working class and in several countries financial literacy is greater for those who are independent contractors in comparison to the unemployed. The result of the difference in literacy levels is because of the financial education programmes offered in places of employment, dissemination of information by colleagues or skills acquired on the job. ...
... The current study revealed a low level of financial literacy knowledge with 46% of the respondents scoring less than 55%. These findings are in line with the assertion of Lusardi and Mitchell (2008) and Wentzel (2016), that low levels of financial literacy are prevalent in developing countries. In addition, Chimucheka and Mandipaka (2015) report that SMEs consider themselves to be financially illiterate, noting that major areas of weaknesses identified were related to the knowledge and understanding of finances. ...
Financial literacy is a critical factor that significantly impacts the success and achievement of small and medium enterprises' (SMEs) objectives. Unfortunately, many SMEs struggle with inadequate financial literacy, which hinders their ability to make informed decisions, manage resources effectively and drive growth. This knowledge gap can lead to poor financial planning, inefficient resource allocation and a lack of resilience, ultimately threatening the long-term sustainability of these businesses. By prioritising financial literacy, SMEs can enhance their capacity to develop realistic financial projections and budgets. This study investigated the level of financial literacy among small and medium enterprises (SMEs), examining both their knowledge and practical applications of financial concepts. Additionally, the research explored the correlation between SMEs' financial literacy and their socio-demographic characteristics, such as business size, industry, owner's age, education, and experience. A quantitative research approach was employed to achieve the study's objectives and primary data was collected through a questionnaire survey administered to a sample of 105 small and medium enterprises (SMEs) located in the uMgungundlovu District of KwaZulu-Natal, South Africa. The data analysis was conducted using SPSS version 23, leveraging both descriptive and inferential statistics to extract insights and meaning from the data. The findings of this study indicate that small and medium enterprises (SMEs) in the uMgungundlovu District exhibit low levels of financial knowledge and practice. Notably, the research revealed significant positive correlations between financial knowledge and various factors, including: age, qualifications, number of employees and annual turnover. A positive relationship was also established between financial practice and annual turnover. This study recommends that stakeholders, for instance, government agencies and banks should organise financial education programmes that invest in improving financial practices of small and medium enterprises. It is also recommended that small and medium enterprises pursue short courses in basic accounting to improve their knowledge base.
... Financial literacy is a major stigma that restricts female counterparts from making effective financial decisions. According to Lusardi and Mitchell (2008), financial literacy is termed the blend of financial understanding and expertise required to make an efficient financial decision. More precisely, research reports conducted by ANZ argue that financial literacy allows an individual to become a confident decision-maker in terms of spending, budgeting, and savings. ...
... With these lower levels of financial literacy in the respondents, even a proper evaluation of financial products does not allow them to resist the influence of financial advisors. Hence, consistent with findings from previous studies (Al-Tamimi, 2009;Hackethal et al., 2012;Lusardi & Mitchell, 2008), this result suggests that even with a proper evaluation of the alternatives, these low levels of financial literacy do not permit a consumer to exert greater resistance power against financial advisors. Lastly, demand identification had an insignificant effect on an individual's consumer influence or consumer resistance power in making financial investment decisions. ...
With an avalanche of market manipulations and unethical tactics in the Australian financial industry, the empowerment levels of female Australian consumers when making financial investment decisions are highly questionable. Through the theoretical lens of a utilitarian perspective, financial investment decisions are often built on the pillars of trust, security, and assurance, which allow consumers to make decisions rationally and gain empowerment when making these decisions. However, due to the widespread manipulations prevailing in Australian financial markets, the role of rationality and its influence on consumer empowerment remain understudied. Based on this context, this paper uncovers the association between how each stage of rational decision-making (RDM) (i.e., demand identification, information search, and the evaluation of alternatives) influences the consumer power (i.e., consumer resistance and consumer influence) of female Australian consumers when making financial investment decisions. In doing so, this study employs a quantitative approach, whereby the proposed conceptual framework is tested among 357 female Australian consumers to understand their decision-making power in the presence of heightened situations of market manipulation in the financial industry. The results show that information search has a significant positive relationship with consumer influence and consumer resistance when making financial investment decisions. Additionally, the findings suggest that female Australian consumers should not only rely on individual-based sources of power but also have exposure to network-based sources of power to gain empowerment when making financial investment decisions. Lastly, it is suggested that government bodies, financial institutions, and regulatory authorities should not only implement financial literacy programs but also promote gender diversity across organisations to encourage women’s empowerment (i.e., Goal 5 (SDGs)—Achieve Gender Equality and Empower all Women and Girls).
... Sebaliknya, perempuan lebih berhati-hati dan sering memprioritaskan pengeluaran harian. Perempuan juga cenderung memiliki kepercayaan diri yang lebih rendah dalam membuat keputusan keuangan terkait pensiun, yang dapat membatasi kemampuan mereka untuk menabung secara optimal (Lusardi & Mitchell, 2008). ...
... Hal ini mungkin terjadi karena individu yang memiliki rumah sendiri menunjukkan stabilitas finansial yang lebih baik dan lebih matang dalam perencanaan keuangan mereka (Baker et al., 2013) Berdasarkan gender, laki-laki lebih cenderung menabung untuk mempersiapkan masa pensiun dibandingkan perempuan. Hal ini sejalan dengan penelitian sebelumnya, di mana laki-laki cenderung untuk lebih menabung dalam mempersiapkan pensiun (Barber et al., 2001;Blau & Kahn, 2017;Lusardi & Mitchell, 2008). Laki-laki juga cenderung lebih siap mempersiapkan masa pensiun melalui berbagai jenis tabungan pensiun. ...
Financial literacy plays a crucial role in preparing retirement planning. Without a good understanding of financial management, individuals will face financial challenges when retirement. This study examines the effect of financial literacy and demographics on individual retirement planning in Surabaya. This type of research is a comparative analysis with a sample of individuals already working and domiciled in Surabaya, selected using a purposive sampling technique and obtained 141 respondents. The data collection technique used a questionnaire distributed online via Google Forms on WhatsApp and Line media. The data analysis technique used was a Chi-square and one-way ANOVA test. The study results showed that financial literacy is essential in saving decisions but does not affect the savings chosen. Demographic factors such as age, education, income, gender, and marital status significantly influence saving decisions with a sign level, while only gender and marital status affect the choice of savings categories. This study implies that pension policies and programs should be designed by considering demographic characteristics, such as education level and income, to be more effective in encouraging retirement-saving behavior.
... Recent trends, such as rapid changes in the financial system, the shift from defined benefit plans to defined contribution plans, and the proliferation of financial products, require individuals and households to have adequate financial knowledge to manage their day-to-1 Faculty of International Economics, Ho Chi Minh University of Banking, Vietnam 2 Hanoi University of Science and Technology, Vietnam day financial matters and financial planning to ensure their future financial well-being (Comerton-Forde et al., 2022;Sehrawat et al., 2021). Numerous studies have found that financial knowledge has a significant impact on financial behavior, such as improved savings rates, stock market participation, wealth accumulation, or retirement planning (Bernheim et al., 2001;Lusardi & Mitchell, 2008Van Rooij et al., 2011) However, some others find that financial knowledge does not have any or weak effects on different financial behavior. ...
... Many studies have found that financial knowledge has a statistically significant effect on more responsible financial behaviors regarding saving, investment, wealth accumulation, and retirement planning (Bernheim et al., 2001;Lusardi & Mitchell, 2008Van Rooij et al., 2011). However, some others find that financial knowledge does not have any or weak effects on different types of financial behavior (Wagner & Walstad, 2019;Xiao et al., 2014). ...
Plain language summary
Financial knowledge and short- and long-term financial behavior across gender and generations: evidence from Japan
This study investigates how financial knowledge influences short- and long-term financial behaviors across gender and age groups in Japan. Using a comprehensive survey conducted by the Bank of Japan, we developed indicators for financial knowledge and short- and long-term financial behaviors. Our results indicate that financial knowledge has a positive impact on both short- and long-term financial behaviors. We also find that women generally exhibit more responsible financial behaviors than men, although they are less likely to invest in financial assets. Additionally, older individuals are more likely to engage in more prudent financial behaviors than younger individuals. As age increases, however, the influence of financial knowledge on most financial behaviors tends to diminish. Moreover, we find that the gender gap in financial behaviors narrows among those with higher levels of financial knowledge. These findings highlight the importance of financial education programs in shaping individuals’ financial behaviors and carry important implications for policy development.
... Investors with a high level of sophistication also possess a deeper understanding of market trends and may be more adept at timing investments, potentially impacting returns (Barber & Odean, 2000). Financial literacy as a component of sophistication is positively associated with better financial decisions (Lusardi & Mitchell, 2008). Financial education has also been shown to improve both financial decisions and investment performance (Von Gaudecker, 2015; Zhang et al., 2023). ...
... Additionally, these investors are better equipped to manage risks, contributing to a balanced and diversified portfolio, reducing the chances of significant losses and enhancing satisfaction. According toLusardi and Mitchell (2008), financial literacy enables investors to make better decisions which positively affects the returns.Keswani et al. (2020) also found that returns have a significant impact on the level of satisfaction.The seventh hypothesis, "Perceived Investment Return significantly mediated the impact of Social Media Influence on Perceived Investment Satisfaction," underscores the role of social media in providing fast and widespread access to financial information. Investors can use these platforms to obtain real-time news, analysis, and market trends, potentially leading to more informed decisions that improve returns and satisfaction. ...
Indonesian stock market is dominated by young and relatively inexperienced traders who often depend on the recommendations of influencers or bloggers in social media. This will then make them dependent and conduct frequent trading, which also means higher transaction costs that diminish their profits and increase their risks, thus decreasing investor satisfaction. Therefore, this study aimed to examine the impact of perceived investor sophistication and social media influence on investment satisfaction mediated with perceived investment return as a mediating element. The analysis focused on young investors aged 18 to 30 who have invested in shares on the Indonesian Stock Exchange for at least one year. A quantitative method was adopted using questionnaires to collect data from 344 respondents. Furthermore, data were analyzed using Structural Equation Modeling – Partial Least Square (SEM-PLS) with SMART PLS 4.0 software. The results showed that both perceived investor sophistication and investment return significantly affected investment satisfaction with beta coefficients of 0.416 and 0.358, respectively. Perceived investor sophistication also significantly influenced perceived investment return with a beta coefficient of 0.557. Additionally, social media influence significantly affected perceived investment return with a beta coefficient of 0.103. This social media influence did not directly impact investment satisfaction but through the perceived investment return, which was further found to fully mediate the impact of social media influence on investment satisfaction. Perceived investment return also partially mediated the effect of investor sophistication on Investment Satisfaction.
... A financially literate SME owner can effectively interpret financial statements, assess profitability, manage cash flow, and plan for both short-term and long-term financial needs [15] . Lusardi and Mitchell (2008) describe financial literacy as comprising three primary components [16] : ...
... A financially literate SME owner can effectively interpret financial statements, assess profitability, manage cash flow, and plan for both short-term and long-term financial needs [15] . Lusardi and Mitchell (2008) describe financial literacy as comprising three primary components [16] : ...
SMEs are vital to the Lebanese economy, contributing significantly to employment, innovation, and regional development [1]. However, the persistent challenges posed by Lebanon's ongoing political instability, economic crisis, and financial volatility have disproportionately affected SMEs [2]. In this context, financial literacy emerges as a key factor that can empower SME owners to make informed decisions, access critical financing, manage risks, and ensure long-term growth and sustainability [3]. This study investigates the critical role of financial literacy in helping Lebanese SMEs navigate these challenges. Using a quantitative approach, data were collected from a sample of 260 SME owners and managers. The research explores how financial literacy influences key business outcomes, such as access to finance, risk management, and strategic decision-making. The findings reveal that higher levels of financial literacy significantly enhance SMEs' ability to secure funding, implement effective risk management strategies, and sustain growth despite external economic pressures. Financially literate SMEs are better equipped to engage with financial institutions, diversify their financial portfolios, and mitigate the adverse effects of currency fluctuations and inflation. The study concludes that promoting financial literacy among SME owners and managers should be a priority in Lebanon's economic recovery efforts. Targeted financial education programs, supported by government and financial institutions, could enhance SME resilience, reduce failure rates, and contribute to a more stable economic environment. This research highlights the need for comprehensive financial literacy initiatives that address the specific challenges faced by SMEs in Lebanon, ultimately enabling them to thrive in a complex and uncertain economic landscape.
... En cuanto al diseño de las preguntas que evalúan el conocimiento financiero, una forma común son aquellas que muestran respuestas binarias de sí o no (Borden et al., 2008) , pero la mayoría de las pruebas cuentan con cuatro opciones de respuesta (Lusardi & Mitchell, 2008;Volpe et al., 1996;Worthington, 2006). Asimismo, cabe destacar que existe inconsistencia en la forma de analizar las respuestas de las preguntas en la evaluación de la competencia financiera de las personas (Kimiyaghalam & Safari, 2015). ...
Los conocimientos financieros favorecen la toma de decisiones financieras informadas de los individuos y, por extensión, contribuye a la adquisición de comportamientos financieros saludables que impulsan el bienestar financiero de la sociedad en su conjunto. Hasta la actualidad no se han encontrado unos indicadores generalizados mensurables que permitan valorar los niveles de competencias financieras. Esta investigación tiene como propósito analizar las producciones académicas que aportan datos empíricos y teóricos en la medición de los niveles de conocimientos financieros de la población, proporcionando una síntesis de los estudios, desarrollados desde 1940 que se basan, principalmente, en cuestionarios. Se lleva a cabo una simplificación de la declaración PRISMA que permite examinar a través de su evolución temporal las fuentes, los objetivos perseguidos, así como los hallazgos, conclusiones y recomendaciones para elevar los conocimientos financieros y para mantener hábitos que permitan alcanzar mejores cotas de bienestar material .Los resultados obtenidos coinciden en constatar las escasas competencias financieras de los evaluados desde el siglo pasado, principalmente de las mujeres, los jóvenes y aquellos que cuentan con menos recursos y menos formación, por lo que son necesarias iniciativas que permitan mejorar la formación de esta clase de capital humano.
... We expect those with a high level of perceived knowledge to be less confused about the education requirements of the investment industry relative to those with a low level of perceived knowledge. Lusardi & Mitchell (2008) and Almenberg & Dreber (2015) observe a tendency for women to be less financially literate than men. Given the inverse link between financial literacy and demand for financial advice documented by Hackethal et al. (2012), it is reasonable to assume females are more likely than males to seek advice. ...
The United States recently increased the standard of care for brokers but still requires no formal education for investment professionals. This study investigates the public expectation of the educational requirements of investment professionals. While no formal education is required to become a broker or investment adviser, a majority of the survey respondents in this study believed investment professionals must have a college or graduate degree. This finding is noteworthy as research has indicated that consumers are likely to curtail a search if they believe all available alternatives are relatively homogeneous. Furthermore, a majority of respondents indicated brokers and investment advisers should have a college or graduate degree. Female participants, younger participants, and those with low perceived knowledge most frequently overestimated the required education of brokers and/or investment advisers. Respondents demonstrated an increased preference for investment advisers relative to brokers after being educated on the difference between the groups.
... This is because financial literacy facilitates the effective use of products and helps business actors develop the best financial skills and products according to their needs, this condition is a condition in increasing financial inclusion. Financial inclusion is a person's ability to gain access to various affordable and need-based financial products and services (Riwayati, 2017) Financial inclusion is able to change the mindset of economic actors in looking at money and profits (Agarwal, 2016) Financial literacy is an interesting issue in both developed and developing countries and has given rise to rapid changes in the financial industry (Wachira & Kihiu, 2012) Financial literacy is the ability for a person to read, analyze, manage and communicate financial conditions that affect their well-being (Lusardi, 2008) An understanding of the basic concepts of good finance, so when making decisions about finance does not experience problems in the future, so that it is able to show healthy financial behavior to determine the priority of needs, not just desires. This shows that financial literacy is not able to follow financial inclusion that there are still many Indonesians who access and are able to use financial services, but do not have experience and knowledge of these services. ...
This study examines the level of understanding and use of financial institution products in MSME actors in the city of Bandung which is a solution to the problem of making decisions in order to achieve success in financial performance, namely company profits. The aim is to determine the influence of financial literacy and financial inclusion on financial performance in MSMEs in the city of Bandung. Using the purposive sampling method with a survey approach. Data collection uses a questionnaire distributed through a google form to MSMEs in the city of Bandung. The analysis tool used is multiple Linear Regression.
... All the questions are in a multiple-choice format, with only one correct answer, and offer the "Don't Know" option. These financial knowledge questions are largely comparable to the Big Three and the Big Five questions proposed by Lusardi and Mitchell (Lusardi and Mitchell 2008;Lusardi 2011) and to those proposed in the harmonised For each financial knowledge question, we define a dummy variable that indicates whether the respondent provided the correct answer. Then, following van Rooij et al. ...
This paper analyses the role of financial knowledge on individuals’ financial fragility during the COVID-19 pandemic. Using novel longitudinal data on Italian adults for the period 2020–2023 and addressing potential endogeneity issues, we find that more financially knowledgeable individuals are less likely to face difficulties in coping with unexpected expenses. Furthermore, we show that higher levels of pre-pandemic financial resilience are associated with lower financial fragility during the COVID-19 crisis. These results are robust to estimation approaches, sample composition, and measures of financial knowledge. The effect of financial knowledge on financial fragility is found to be heterogeneous across different subgroups of the population and is more beneficial for women and individuals more severely hit by the pandemic, with lower incomes and lower pre-pandemic resilience. Finally, we uncover the existence of true state dependence in the probability of being financially fragile and provide evidence that financial knowledge might also play a significant role in reducing the trapping effect of financial fragility.
... Such gender differences may hamper the effectiveness of monetary policy communication and could have important economic implications given that women tend to control the lion's share of consumer spending; Silverstein and Sayre (2009) estimate that about two-thirds of all spending decisions in the United Kingdom are made by women. Differential understanding and attitudes to inflation may also have consequences for women on a micro-level by impacting investment and savings behaviour (Lusardi and Mitchell, 2008). ...
This study examines gender differences in inflation expectations, attitudes and responses using the UK Inflation Attitudes Survey. It finds minimal gender disparity in inflation perceptions and expectations but highlights greater uncertainty and inflation aversion among women. During inflationary periods, women are more likely to increase savings, whereas men typically push for higher wages. Gender gaps in financial knowledge and trust in the Bank of England (BoE) suggest tailored communication strategies may enhance engagement. While BoE policies effectively anchor expectations, improved outreach and diverse messaging could address women’s lower satisfaction and financial understanding. The findings underscore the role of inclusivity in effective monetary communication.
... This is worrisome because financial literacy matters for financial decision-making. To illustrate, women with higher levels of financial literacy are more likely to plan for retirement and do so more successfully (Lusardi & Mitchell, 2008). Retirement planning, in turn, is a strong predictor of wealth accumulation (Lusardi & Mitchell, 2007). ...
Gender gaps are widespread. The world of payments is no exception as our research using novel survey data from Dutch households, collected from 24 November to 31 December 2023, demonstrates. Specifically, we study the division of payment tasks within households and the associated factors. Men are more involved in paying housing-related costs, whereas women tend to be in charge of grocery payments. Differences in experience with digital payment methods, self-assessed fraud knowledge, and digital and financial literacy lie at the heart of these payment tasks gender gaps. This division of tasks in turn explains the greater financial decision-making power of men within households. To differentiate between gender and task specialization effects we show that payment tasks are divided more equally in same-sex households than in opposite-sex households. Our research underscores the importance of policies aimed at improving fraud knowledge, digital literacy, and financial literacy, especially among women. Additionally, people can be made more aware of the impact of traditional gender roles.
... Literatürde yapılan bazı araştırmalarda bu çalışma ile benzer olarak, kişilerin finansal okuryazarlık seviyeleri ile cinsiyet değişkeni arasında istatistiksel açıdan anlamlı farklılık görülmediği sonucuna ulaşılmıştır (Erdoğan, 2020;İslah, 2018;Yıldız & Bozkurt, 2020). Ayrıca bazı araştırmalarda ise bu çalışmadan farklı olarak, kişilerin genel anlamda finansal bilgi düzeyi veya İslami finansal okuryazarlık düzeyinin cinsiyet değişkenine göre anlamlı farklılık gösterdiği görülmektedir (Chen & Volpe, 2002;Çömlekçi, 2017;Er vd., 2015;Karakuş, 2019;Lusardi & Mitchell, 2008;Potrich vd., 2015;Saray & Güngör, 2023;Şamiloğlu vd., 2016;Yıldırım, 2020;Yıldız, 2020). ...
Kişiler veya kurumların birikimlerini enflasyon karşısında koruyabilmesi ve artmasını sağlayabilmeleri için çeşitli yatırım araçları arasından en uygun olanını tercih edebilmesi finansal okuryazarlık ile mümkündür. İslami kuralların bilincinde ve faiz hassasiyetine sahip olan kişiler geleneksel finansın sunduğu ürün ve hizmetlerin dışında İslami esaslara uygun yatırım araçlarını tercih etmektedir. Bu kişilerin tasarruflarının âtıl kalmaması ve ekonomiye kazandırılması için İslami finansal bilgiye sahip olması ve bu bilgileri alacakları finansal kararlarda kullanabilmesi gerekmektedir. Bu çalışma ile TR72 Bölgesinde hizmet veren kamu personellerinin İslami finansal okuryazarlık düzeylerinin bazı değişkenlere (cinsiyet, gelir, medeni durum, yaş, eğitim, çalışma süresi, tasarruf yapma, istihdam durumu) göre incelenmesi amaçlanmıştır. Çalışmada, betimsel araştırma yöntemi tercih edilmiştir. Veri toplama safhasında, kişisel bilgi formu ve “Kamu Personellerinin İslami Finansal Okuryazarlık Düzeylerinin İncelenmesi Ölçeği” kullanılmıştır. TR72 Bölgesindeki kamu çalışanları araştırma evreni içerisinde olup kolayda örnekleme yöntemi ile 386 kişiye yüz yüze ulaşılarak anketler uygulanmıştır. Elde edilen veriler SPSS 27.0 programı ile analiz edilmiştir. Kolmogorov-Smirnov Normallik Testi sonucunda verilerin normal dağılım göstermediği belirlenerek Nonparametrik istatistiksel yöntemlerden faydalanılmıştır. Araştırma sonucunda kamu personellerinin büyük çoğunluğunun her ay gelirlerinden bir kısmını tasarruf için ayırdıkları belirlenmiştir. Kamu personellerinin İslami finansal okuryazarlık düzeylerinde; medeni durum, tasarruf yapma, eğitim durumu, kamu kurumlarında çalışma süresi, istihdam durumu ve aylık gelir değişkenleri açısından anlamlı farklılıklar olduğu; cinsiyet ve yaş değişkenleri açısından ise anlamlı farklılıklar olmadığı sonucuna ulaşılmıştır.
... Key variables include lifestyle, saving habits, investment knowledge, income, health, and generational differences. Lifestyle choices and disciplined saving patterns directly enhance financial preparedness(Kimiyagahlam et al. 2019;Lusardi & Mitchell 2014), while investment knowledge leads to informed decisions(Nguyen et al. 2019). Higher incomes allow for professional financial guidance(Joo & Grable 2004), and employee health and generational shifts affect retirement strategies (Burton et al. 2021; Vital Planning Group 2023). ...
... many women also have break in their career due to issues related to family. this gets reflected in low risk tolerance displayed by women in selecting their investment avenues (Fisher, 2010;lusardi & mitchell, 2008). due to all these factors naturally there is difference in the approach taken towards financial planning by men is different from women. ...
Life expectancy, in India, was 41 years in 1960, which stands at 69.4 years in the year 2018, as per world Bank (2020). This improvement in life expectancy is due to enhanced standard of living and improved healthcare system in India. Generally, the age for retirement is 60 years, which means individuals would lead life after retirement with no regular income unless individual has appropriate investments to ensure adequate income. Hence it is important for individuals to make meticulous financial plan for retirement. Most of the government and all of private sector do not provide for regular income, in the form of pension after retirement. Hence, is the responsibility of the individual to make appropriate investments during the period of employment. Financial security can ensure and enable individuals to enjoy the life after retirement. The financial stress reduces to a large extent if individual starts investing at an early age. Primarily, demographic factors and saving behavior has relevance in understanding the individual’s financial planning for retirement. The present study has considered predictor variables, namely age, gender, education, profession, size of the family, total earning members in the family, frequency of saving and advice for saving. The study is conducted in the Quilon City, Kerala. For the study primary data is collected using structured questionnaire. Google form was the medium to collect the data. Binary logistic regression is used to analyse influence of afore mentioned variables on individual’s act to take decision to make financial plan for retirement. The study revealed that age, profession, number of earning members in the family, frequency of saving and advice for saving has significant impact on individual’s initiative to plan for retirement.
... Our data suggest that older adults, males, highly educated people, and the rich are more financially literate. This is consistent with past literature on education (Lusardi and Mitchell, 2014), income levels (Lusardi and Mitchell, 2011), and the gender gap, which is persistent and widespread across countries (e.g., Lusardi and Mitchell, 2008;Bucher-Koenen et al., 2017;Cupák et al., 2018;Potrich et al., 2018;Preston and Wright, 2019). However, we note that inconsistent results have been reported in past studies on the relationship between age and financial literacy, with some studies reporting a positive relationship (Fisch and Seligman, 2022), others a quadratic relationship (in a belled shape; Lusardi and Mitchell, 2014), while other studies report no relationship (Baker et al., 2019). ...
Dark patterns that manipulate consumer behaviour are now a pervasive feature of digital markets. Depending on the choice architecture utilised, they can affect the perception, behaviour and purchasing patterns of online consumers. Using a novel empirical design, we find strong evidence that individuals across all groups are susceptible to dark patterns, and only weak evidence that user susceptibility is materially affected by commonly used general proxies for consumer vulnerability (such as income, educational attainment or age). Our conclusions provide empirical support for broad restrictions on the use of dark patterns, such as those contained in the EU’s Digital Services Act, that protect all consumer groups. Our study also finds that added friction, in the form of required payment action following successful deployment of dark patterns, reduces their effectiveness. This insight highlights the instances in which dark patterns would be most effective – when no further action is required by the user. Consumer vulnerability is therefore more pronounced when dealing with online providers who store users’ payment details and can rely on a ‘single click’ to complete the purchase.
... Studies on how families affect socialisation are widely available in the literature, but research on how families influence and how children learn about money is still in its infancy. In fact, the majority of earlier studies on financial literacy looked at how people's socio-demographic traits affected their financial literacy and behaviour (Lusardi & Mitchell, 2008, 2014 [8,10] . Consumers with higher levels of financial literacy showed higher savings and wealth planning. ...
... Financial knowledge has been defined as the combination of money management and banking, financial concept and numeracy knowledge (Lusardi and Mitchell, 2008;D'Silva et al., 2012;Hasler and Lusardi, 2017;Rai et al., 2019). Table 3 shows that the knowledge regarding investment schemes and saving schemes ranked above the median value whereas in the questions asked on risk return trade off, inflation, inheritance, compound interest calculation, time value of money and risk diversification were ranked below the median value. ...
The present study seeks to determine the financial literacy level of
Indian higher education students on the components of financial knowledge,
attitude and behaviour. The paper also makes an attempt to study the
interdependencies in financial literacy component: financial knowledge,
attitude and behaviour and to assess the impact of financial awareness on
financial literacy. This study considers primary source of data. A total sample
of 600 Indian higher education students from different governmental and
private institutions of Kanpur, Prayagraj and Aligarh was chosen to determine
the financial literacy level. The findings of the study showed that more than
half of the students were found to be low financial literate. There is a strong
interrelationship found between the financial literacy components: financial
knowledge, attitude and behaviour. In the linear regression analysis significant
relationship found between the independent variable financial awareness and
dependent variable financial literacy. The empirical findings of the study helps
to explain how the financial literacy components: financial knowledge, attitude
and behaviour influence the financial literacy level among the Indian higher
education students. The result clearly showed that there is a need of serious
policy measures to be taken in the field of financial literacy/education.
... Both objective and perceived aspects of financial knowledge were included. The Big Three financial knowledge scale developed by Lusardi and Mitchell (2008) was used to assess objective financial knowledge. Correct responses were coded as 1 and otherwise 0. A summative score was then created for the 3 items as an ordinal variable, on a scale of 0-3. ...
This study investigated generational differences in financial knowledge, skill, behavior, and consumers' financial well‐being (FWB) among Millennials, Gen‐Xers, and Boomers. It examined generational differences as a moderating factor in the associations between financial knowledge, skill, and behavior and FWB. Using a national dataset and a series of hierarchical multiple regressions, the findings demonstrated that financial knowledge, skill, and responsible behavior were positively connected to consumer FWB across all generations. Generational variations were found in FWB, financial knowledge, and responsible financial behavior. Furthermore, generational differences moderated the links between objective financial knowledge, financial goal commitment, and consumer FWB in distinct ways across generational cohorts. Implications for educators, researchers, policymakers, and practitioners are discussed.
... The measure for financial literacy could cover a wide scope of financial concepts, including borrowing, spending, budgeting, inflation, investments, interest rates, and retirement savings. Hence, the number of questions used to assess financial literacy levels could considerably differ, ranging from three (3) (Lusardi and Mitchell, 2008, 2011a, 2014 to 28 items (Yakoboski et al., 2022). A financial literacy index is often generated from these questionnaires by adding the scores of the respondents. ...
Our study looks at the effect of financial literacy on the short-term and long-term
financial decisions and behaviors of individuals who are of different ages and life
stages, i.e., 18 to 39 years old (Young adult); 40 to 59 years old (Middle-aged); and
60+ (Senior). Using the results from the 2018 Bangko Sentral ng Pilipinas Consumer
Finance Survey, we constructed a financial literacy index based on two (2) components - financial attitude and financial aptitude. We then used ordinary least
squares regression and logistic regression to determine the factors that affect
financial literacy and to assess its impact on the financial behaviors of individuals.
We find that, among the age groups, young adults display higher financial literacy
than the middle-aged and senior cohorts. Moreover, income and education as well
as having children and receiving domestic or foreign remittances are positively
related to financial literacy. Regarding financial behavior, those with higher
financial literacy, middle-aged and seniors are less likely to spend less than or equal
to their income. Middle-aged persons are also less likely to have a loan-to-income
ratio of less than one (1) while those with higher financial attitude scores are more
likely to pay their loans on time. Individuals with higher financial aptitude and who
are middle-aged and seniors tend to have retirement or pension plans. Additionally,
they are more likely to have insurance and other plans.
... See the question in Appendix C.1page 3 Question 2 Risk preference Mutual Fund Dealers Association sample investor questionnaire The same question as the original; the answer choices have the same levels but are simplified to avoid complexity and understanding difficulties caused by financial jargon. See the question in Appendix C.1page 3 Question 1 Financial literacy Lusardi & Mitchell (2008) Same questions as the original. See the questions in Appendix C.2 -page 6 Questions 1-3 Sustainable finance literacy Filippini et al., (2024) The same questions as the original; additional two questions on sustainable finance knowledge relevant to this study, one on MiFID II and one on sustainability integration strategy, are added. ...
Achieving the low-carbon transition and the broader sustainable development goals requires a large amount of investment. Investors are decision-makers who play an important role in determining the direction and level of capital flows and are therefore key to mobilising the investment needed for the low-carbon transition and sustainable development. For instance, investors can predominately decide on whether their investment capital is used to achieve low-carbon and sustainable development goals or whether it is invested in coal-fired power plants or companies with sub-optimal Environmental, Social and Governance practices.
The three essays in this cumulative dissertation focus on investor behaviour towards sustainability in the energy market and the retail investment market. Together, they provide a timely examination of investor behaviour towards sustainable investments and contribute to the latest debates and challenges in sustainable finance.
The collected essays examine investment behaviour and decisions in a controlled environment with climate policy or information interventions. Chapter 2 contains the paper entitled Regulated Correlations - Climate Policy and Investment Risks, co-authored with Dr. Oliver Schenker. We examine the mechanisms of climate policy instruments that shape the regulated covariance structure between electricity generation assets and thus affect the investment decisions of risk-averse investors. Chapter 3 encloses the essay entitled Does an Ecolabel Suffice on its Own? Evidence from a Discrete Choice Experiment on Investor Preferences and the Effect of Informational Messages and Visual Framing, co-authored with Dr. Marco Nilgen. We examine how specific information content influences potential retail investors' preferences for funds with a standardised EU ecolabel. Chapter 4 contains my single-author essay entitled A Tale of Financial Advice with Sustainability Preferences and Fees: Do Retail Investors Take the Advice? This is a study on how financial advice incongruent with retail investors’ sustainability preferences affects their investment decisions.
... Next, respondents answered questions about their home conditions, including whether they own their homes and the estimated age of the building they live in, household and individual social demographic status (age, marriage status, whether there are minors or seniors in the household, level of education, political leaning, employment status, and income). Because findings from Blasch and colleagues [54] suggest that individuals with a higher level of energy and financial literacy are more likely to optimize over the costs and savings of energy efficiency, we include a financial literacy measure [55] as a control. We also asked respondents to rate their own physical health. ...
... The definition of financial literacy varies widely. Lusardi and Mitchell (2008) define financial literacy as the knowledge of finance and the ability to apply it in daily life. According to them, financial literacy is not only about knowledge but also the ability to make sound financial decisions (Lusardi & Mitchell, 2014 Theory and Evidence, they explain that financial literacy strategies should be tailored to specific groups based on education levels, social strata, and age groups. ...
This study examines the impact of financial literacy and attitudes toward money on the personal financial management of students in the Faculty of Economics at the University of Riau Islands, Batam. Utilizing Slovin's formula, a sample of 91 respondents was selected through random sampling, and primary data were collected via a questionnaire. The results indicate that financial literacy has a significant positive effect on students' personal financial management, while attitudes toward money do not significantly influence this aspect. However, when considered together, both financial literacy and attitudes toward money significantly affect students' financial management practices. The independent variables account for 13.7% of the variation in the dependent variable, suggesting that 86.3% of the variation is influenced by other factors not examined in this study. These findings highlight the importance of enhancing financial literacy among students to improve their personal financial management skills.
... There are two types of financial knowledge. The first type is objective financial knowledge, which is often assessed using the Big Three or Big Five questions testing one's knowledge on fundamental financial topics such as inflation, interest rates, stocks, bonds, and mutual funds (Lusardi & Mitchell, 2008). The other type is subjective financial knowledge, which measures one's overall confidence in their financial knowledge using a single item (see National Financial Capability Study [NFCS]). ...
This study examines the relationships of financial decision-making power, spousal relative resources, and personal financial characteristics with financial satisfaction. Using a sample of young American women with lower income who were married or cohabiting (N = 303), we found that women with higher financial decision-making power in savings and investments as well as in managing regular bills than their spouses were more likely to have higher financial satisfaction compared to women with spouses having higher financial decision-making power. These associations were derived from married women, rather than cohabiting women. Interestingly, women with higher incomes than their spouses reported a lower level of financial satisfaction compared to women with spouses having a higher income. The same pattern was observed for spousal relative education. Subjective financial knowledge had a positive association with financial satisfaction. We also examined potential moderating roles of education, which suggests that women with higher education had a more pronounced association between financial decision-making power in savings and investments and higher financial satisfaction. Our findings provide implications for policymakers, financial service providers, and family life practitioners to potentially reduce gender inequality in intrahousehold financial decision-making, which ultimately benefits financially vulnerable women’s financial satisfaction.
... Similar results have been obtained using other measures of retirement preparation. For instance, a study for the US has shown that financial literacy goes hand in hand with concrete actions by workers, for instance, whether they have tried to calculate how much they need to save for retirement and whether they actually developed a saving plan for retirement (Lusardi and Mitchell, 2008). Using a similar measure, Van Rooij et al. (2012) were also able to document that financial literacy has a causal impact on the likelihood of retirement preparation. ...
This paper surveys what we have learned on financial literacy and its relation to financial behavior from data collected in the Dutch Central Bank (DNB) Household Survey, a project done in collaboration with academics. A pioneering survey fielded in 2005 included an extensive set of financial literacy questions and questions that can serve as instruments for financial literacy in regression analyses to assess the causal effect of financial literacy on behavior. We describe how this survey spurred a series of research papers demonstrating the crucial role of financial literacy in stock market participation, retirement planning, and wealth accumulation. This inspired various follow-up studies and experiments based on new data collections in the DNB Household Survey. Researchers worldwide have used these data for innovative studies, and other surveys have included similar questions. This case study exemplifies the essential role of data in empirical research, showing how innovative data collections can inspire new research initiatives and significantly contribute to our understanding of household financial decision-making.
... Nevertheless, objective knowledge was still a key factor in the study. Lusardi and Mitchell (2008) observed notable gender disparities in financial knowledge, with men often demonstrating greater levels than women, using data from the Health and Retirement Study (HRS). Standard family studies theories from the mid-1900s, like Bulmer's symbolic interactionism, wherein gender roles were socially assigned specific duties, with the male role being that of economic supplier and distributor, may theoretically support these findings. ...
... The study revealed no significant gender differences in financial worry and risk-taking tendencies, challenging common stereotypes. Financial Worry -the stereotype that women worry more than men in monetary matters due to a constructive theory regarding the perception that women are more careful, allergic to risk, and sensitive to financial issues than men ever, and that is why they have a higher degree of monetary concern [Lus08]. Women are taken to be involved with issues such as debt, budgeting, and future financial status, while men are cast in a position of being confident to handle financial problems. ...
... One important argument advanced in the literature is that financial literacy (FL) matters in making all the above decisions. Being defined as consumer's knowledge of and ability to use fundamental financial concepts in their economic decision-making, those with a high level of FL tend to own the loan products with more favorable conditions (Disney and Gathergood, 2011;Gathergood and Weber, 2017;Lusadi and Tufano, 2015;Agarwal and Yao, 2017), to have better outcomes from investment portfolios (Calvet et al., 2009;Agnew and Szykman, 2005;Bianchi, 2018), and to be better prepared for retirement (Lusardi and Mitchell, 2008). In consequence, as the argument goes, they can enhance their financial wellbeing, i.e., the state of an individual's financial situation in which they feel secure, satisfied, and confident about their present and future financial circumstances. ...
The main objective of this study is twofold: first, deriving specific behavioral patterns to be tamed, in both demand-side and supply-side of the financing markets, in the viewpoint of protecting financial consumers in the era of BD•ML innovations; and, second, elaborating a set of policy remedies to nudge the consumers as well as the intermediaries to improve each behavioral pattern identified. To that end, two particular optimization frameworks are specified-(1) a two-period (working age vs. retirement) intertemporal utility maximization framework for financial consumers, and (2) a profit (or NOI per-period) maximization framework for financial intermediaries, out of which eight specific behavioral patterns are identified as those that should be targeted in designing and instituting a welfare-enhancing regime of consumer protection policies. Those behavioral patterns are further linked to real world cases of abusive and fraudulent intermediation practices as well as to policy remedies to deal each behavioral pattern included. In so doing, the study aims to offer a template with which one can formulate future research agenda and policy instruments to be collaborated in the global research community as to how to protect financial consumers in the current environment of rapidly-advancing technologies.
... Individuals who are less financially literate typically incur higher interest rates on their debt and have lower rates of accumulating wealth and planning for retirement. 27,[37][38][39][44][45][46][47] People with lower financial literacy are more likely to lack financial well-being, including feeling debt-constrained, having difficulty making ends meet, lacking emergency savings, and feeling more dissatisfaction with their financial situation. 24 While a recent financial knowledge assessment in the US population revealed lower overall scores than what was seen in these two cohorts, the findings of this pilot study should raise concerns. ...
... The disparity we observed where females exhibit stronger intentions for financial activities but lack corresponding confidence may be attributed to an interplay of societal, cultural, educational, and psychological factors (Agnew, 2018;Robson & Peetz, 2020). Literature on financial literacy consistently shows that men outperform women in this area (Chen & Volpe, 2002;Lusardi & Mitchell, 2008) and that financial preferences-particularly regarding risk-taking-differ between women and men (Charness & Gneezy, 2012;Fisher & Yao, 2017). From a family socialisation perspective, many societies have traditionally designated financial management roles predominantly to males, often relegating females to roles with limited emphasis on financial decision-making. ...
This study investigated the impact of family financial socialisation on the financial perceptions and behaviours of adolescents. Drawing from social learning theory, Gudmunson and Danes’ model of family financial socialisation, and the theory of planned behaviour, we examined the influence of family affluence and family financial openness on adolescents’ financial confidence, intentions, and behaviours. The research also explores gender differences and the distinct effects of family socialisation in banking and budgeting contexts. With a large sample of adolescents in New Zealand (n = 5,370), results using structural equation modelling reveal that family affluence corresponds with a higher perception of family financial openness, which influences their confidence in specific financial domains such as banking and budgeting. Our results also highlight a gap between confidence, intentions, and action in financial behaviours, with gender differences also impacting this dynamic. The findings offer insights for parents, policymakers, and financial institutions, emphasising the importance of family financial socialisation in fostering responsible financial practices among young people.
... An FL score calculated in this manner is consistent with the literature and common in recently published works (see, for instance, Fong et al., 2021;Hsu et al., 2021;Li et al., 2020). Some studies use a little as three questions to assess FL (see, for instance, Lusardi et al., 2010;Lusardi and Mitchell, 2008). 6. ...
... The original definition of financial literacy was focused on an individual's ability to allocate and manage their wealth rationally, with the goal of making effective decisions (Noctor & Stradling, 1992). Subsequent scholars have expanded on the definition of financial literacy to include knowledge, application, and awareness as well (Bayar et al., 2020;Hung et al., 2009;Huston, 2010;Lusardi & Mitchell, 2008. At the same time, there has been a lot of literature analyzing the financial literacy of rural households. ...
Digital finance plays a crucial role in enhancing financial inclusion and decreasing income inequality within developing countries. Given the digital and financial attributes that characterize digital finance, digital financial literacy (DFL) is a critical factor that influences the extent to which this function can be exploited. There is relatively little empirical evidence linking DFL to rural income inequality. Based on the 2017 and 2019 China Household Finance Survey data and two-way fixed effect panel model, this study focuses on rural China and examines the effect of DFL on income inequality. Meanwhile, this study also explores the mechanism of this effect from the perspectives of financial asset allocation and entrepreneurship. The empirical results show that (1) increasing DFL within rural households contributes to decreasing income inequality; (2) DFL can decrease income inequality by enriching the variety of household financial assets and enlarging the proportion of risky financial assets in rural households; and (3) improving DFL can ameliorate rural income inequality by increasing the probability of entrepreneurship. The study’s findings put forward fresh empirical evidence for understanding the relationship and mechanism that exist between DFL and income inequality, and more significantly, provide new suggestions for designing and enhancing financial policies that aim to decrease income inequality in developing countries.
... Female investors are also aware of their lower financial literacy level(Lusardi & Mitchell,2011a). Female investors with low financial literacy are less likely to plan for retirement and be successful planners(Lusardi & Mitchell, 2008). The financial literacy differences exist even after controlling for demographics, peer characteristics, and family background characteristics(Lusardi et al., 2010). ...
Decision-making in the complex equity market is a demanding task due to the vast amount of information available and the wide range of decision-making techniques to choose from. The financial literacy of the investors plays a prominent role in influencing their decision-making process. Though the Indian equity market is the third largest in Asia, only around 3% of Indian households invest in it. Therefore, the financial literacy level of Indian investor needs to be assessed to increase the stock market participation and earn higher returns. This study aims to determine the moderating effect of financial literacy on the relationship between the decision-making tools and equity returns in the Indian secondary equity market. The decision-making tools include fundamental analysis: (i) Economic analysis, (ii) industry analysis, (iii) company analysis, (iv) technical analysis, and (v) advocate recommendation. The data was gathered through a questionnaire survey method and via a valid sample of 436 questionnaires, the significance of the moderating effect was tested. Using the Process Macro plugin in SPSS, moderation analysis was conducted. The results reveal that financial literacy only moderated the relationship between economic analysis and equity returns. JEL Classification: G10, G11, I22
... Nevertheless, little is understood about why individuals struggle to prepare for retirement, and how pension planning and knowledge shape the cost of saving choices. For saving and portfolio selection, lack of preparation has major consequences and those that do not prepare appear to acquire much less capital than those who prepare, and non-planners are therefore less likely to invest in stocks and tax favored investments (Lusardi & Mitchell, 2008). ...
Retirement is an important phase of life, bringing with it many challenges in terms of adjustments and changes in lifestyle, self-esteem, friendships, and vocation. In the context of Bangladesh, most of the employees retire after working for many years, therefore their bonding with their work is strong and their life is meaningful once they were attached to work. Therefore, retirement impels to making changes in daily routine, bringing disengagement from work and the individual may enters into a state of devaluation. Retirement may offer an opportunity to establish a more preferable rhythm in life, but, on the other hand, retirement may also lead to some social and personal challenges. The focus of this study is to review and assess the literature towords various dimensions of retirement planning. The literature is reviewed from various articles on retirement planning from various sources which are further synethesised to derive the interpretations. The findings and outcome of the study emphasises on the significance of retirement planning, the importance of financial literacy to smoothen the retirement planning and elements that contributes towards the successful life after retirement.
This study uses a survey methodology to assess the financial literacy level among women employees. Self-administered questionnaires, adapted from Lusardi (2008), were employed to collect pertinent information from female employees. These results indicate that women employees generally have a limited grasp of financial literacy. The implications of these results extend to employers, agencies, government bodies, and policymakers. Recommendations derived from this study offer valuable insights for formulating strategies to enhance financial literacy across populations. Additionally, the study underscores the importance of providing reliable financial advice to empower women to make informed financial decisions.
Economic and financial literacy are crucial for both adults and adolescents due to their demonstrated impact on financial behavior, wealth accumulation, and retirement planning. However, studies indicate that financial literacy remains alarmingly low, especially among women. This disparity raises significant concerns about gender inequality in financial decision‐making and overall well‐being. This systematic literature review examines international research on the gender gap in economic and financial literacy and explores explanatory factors contributing to this gap. Applying the TCCM framework, we analyze 97 papers, including 185 individual studies. Findings confirm a gender gap favoring males across age groups and global contexts. Notably, the gap seems more pronounced in developed countries. Frequently reported explanatory factors are explored, including individuals' socialization, confidence, and computational skills, yet substantial parts of the gender gap remain unexplained by previous literature. Overall, this review contributes to the literature by providing a systematic overview of gender differences in economic and financial literacy and potential explanations.
This study aims to discover individual perceptions or views of future economic conditions at the global household, national, and economic levels during the COVID-19 pandemic. We also tested the relationship between variable financial ignorance, financial literacy, and financial well-being during the pandemic. Broadly speaking, the findings of this study show that individuals have an overview of future economic conditions during the pandemic. What makes this interesting is that it turns out that individual expectations of future economic conditions during the pandemic will be different at the household, national, and global levels. The test results concluded that individual optimism about future economic conditions is stronger if the talk is about the economy at the private or household level. In contrast, this optimism will fade if individuals are asked to assess the future economic prospects during the pandemic at the national and global levels, where they are relatively more pessimistic. This finding once again confirms the existence of better-than-average behavior in which individuals will evaluate themselves better than when they evaluate other entities. Better-than-average behavior is quite like optimism bias that, if not managed properly, can cause toxic positivity due to an irrational sense of optimism.
Una de las consecuencias de la pandemia de la COVID-19 ha supuesto la pérdida de la principal fuente de ingresos de muchos trabajadores generando graves consecuencias financieras en sus hogares. El objetivo de este trabajo consiste en analizar la importancia de la educación financiera y las experiencias personales con el sistema financiero sobre la vulnerabilidad financiera en los hogares del País Vasco y si existen diferencias con respecto al resto de España. Nuestra investigación muestra que, controlando por múltiples factores sociodemográficos, los hogares con menores conocimientos financieros y que han tenido algún desacuerdo con el sistema financiero tienen más probabilidad de ser muy vulnerables, y estos efectos son mayores en el País Vasco frente al resto de España.
Penelitian bertujuan untuk menguji dan mengetahui pengaruh Pengaruh Financial Knowledge, Financial Attitude, dan Perental Income Terhadap Financial Manajement Behavior Melalui Locus of control Sebagai Variabel Intervening (Studi Pada Mahasiswa Universitas Muhammadiyah Prof. DR. HAMKA). Jenis penelitiaan ini menggunakan penelitian kuantitatif yang bersifat deskriptif. Data yang dikumpulkan penelitian ini menggunakan kuesioner atau memberi beberapa lembar pernyataan untuk mengumpulkan data responden dengan jumlah responden sebanyak 375 orang. Responden diambil dari seluruh mahasiswa aktif Universitas Muhammadiyah Prof. DR. HAMKA. Data diolah dengan menggunakan Partial Least Square (PLS). Hasil penelitian ini menunjukkan bahwa Financial Knowledge berpengaruh signifikan positif terhadap Locus of Control, Financial Attitude berpengaruh signifikan positif terhadap Locus of Control, Parental Income berpengaruh tidak signifikan terhadap Locus of Cotnrol, Financial Knowledge berpengaruh signifikan positif terhadap Financial Management Behavior, Financial Attitude berpengaruh signifikan positif terhadap Financial Management Behavior, Parental Income berpengaruh tidak signifikan negatif terhadap Financial Management Behavior, Locus of Control berpengaruh signifikan positif terhadap Financial Management Behavior, Financial Knowledge berpengaruh signifikan positif terhadap Financial Management Behavior melalui Locus of Control, Financial Atittude berpengaruh signifikan positif terhadap Financial Management Behavior melalui Locus of Control, Parental Income tidakberpengaruh signifikan terhadap Financial Management Behavior melalui Locus of Control.
Financial literacy is crucial for informed financial decision-making, an importance amplified by the 2008 financial crisis in Zimbabwe, which stemmed from investors' low financial understanding. This study aimed to examine the impact of financial literacy on staff retirement planning at Harare Polytechnic. The conceptual framework was based on the Overlapping Generation Model (OLG), and the theoretical framework included the career construction theory, the theory of continuity, the life cycle theory, and Friedman's Permanent Income Hypothesis. The study employed a positivist research paradigm and a case study research design. The population consisted of 500 staff, and a sample of 218 was selected using stratified and simple random sampling. Data analysis involved Principal Component Analysis (PCA), factor analysis, and cross-tabulation. The study concluded that financial literacy had a positive impact on staff retirement planning, where increased financial literacy levels corresponded with higher levels of retirement planning. Additionally, demographic factors such as age, gender, income, marital status, and field of study influenced staff`s ability to plan for retirement. The study recommends that the institution should provide financial literacy training, short courses, or seminars to equip staff for retirement planning. The institution should involve employees in the planning of these seminars and develop policies to improve the benefits and income of pensioners. Staff are advised to participate in financial literacy programs to enhance their personal investment and financial literacy. Policymakers, such as the government, should ensure that financial literacy training is incorporated into the educational system at all levels, regardless of the program or subject area. Further research to explore the impact of factors other than financial literacy on staff retirement planning, extending the study beyond Harare Polytechnic and incorporating both secondary and primary data to validate the findings in this area.
Pension policy in the UK and US is designed on the assumption that people make informed financial decisions, consistently invest in pensions and manage diverse portfolios. Deviating from this is often deemed irresponsible and irrational. However, this assumption overlooks uncontrollable factors like caring duties, employment breaks or income limitations. Even when individuals act as expected, unpredictable market shifts can hinder long-term planning. This book redefines deviations to “rational behaviour” as logical responses to a dysfunctional system. Challenging existing theoretical discussions and policy approaches, it proposes a fresh perspective on rationality when it comes to financial practices and policy.
The purpose of this study is to address the enduring multi-dimensional poverty faced by nearly 65 million Scheduled Tribes (STs) in India, with one prominent cause being their limited investments in productive financial assets. Financial literacy has been identified as a crucial factor in enhancing personal financial management skills. The focus is specifically on investigating the relationship between financial literacy, sociodemographic factors and stock market participation among STs in Himachal Pradesh, India. Using a structured questionnaire, data was collected from 300 ST households. The study employed multinomial logistic regression to analyze the impact of financial literacy and sociodemographic variables on stock market participation. The findings indicate that a significant majority of STs (over 80%) lack financial awareness and do not participate in the stock market. Notably, financial illiteracy, risk tolerance, age, education and income were identified as significant factors influencing SMP. The insights derived from this research offer valuable guidance for policymakers, financial institutions and educators, urging the development of targeted interventions. These interventions should empower tribal individuals to make informed financial decisions and encourage their engagement in stock market activities.
Financial literacy ensures that an individual is able to match his income with his expenditure, lives within his means and forestall going broke or bankrupt. Like general or health literacy, financial literacy could be conceptualized as having two dimensions: understanding (personal finance knowledge) and use (personal finance application). In this study, we reviewed how financial literacy is measured in the current literature and examine how well the existing studies addresses whether financial literacy improves employees savings culture and investment. We review the literature on alternative policies to improve financial outcomes and compare the evidence on whether financial literacy improves employees spending habits, savings, investments and standard of living. The sample size of this survey based study consists of 110 working men and women from non-financial public sector in Nigeria. Data was analyzed using simple percentage and frequency distribution. The Statistical Package for Social Sciences (SPSS) was used in the analysis of the data. The major challenge in financial education has been how to measure the impact of financial education on the recipient savings culture. Investment and standard of living. On the other hand what is the influence of financial literacy on employees’ savings and investment outcome. It can be observed that in some instances those who did not have formal financial education and those who are primary or secondary school dropout have risen to own successful business empire. However, some who have tertiary financial education are struggling to survive. A large proportion of the sampled employees are deficient in financial literacy notwithstanding their exposure to financial education. Contrary to popular perception this research shows that there is no significant relationship between financial literacy and education level, savings culture and investments, of Nigerian public sector employees. Finally, we discuss directions ........
There are vast differences in wealth holdings, even among households in similar age groups. In addition, a large percentage of U.S. households arrive close to retirement with little or no wealth. While many explanations can be found to rationalize these facts, approximately thirty percent of households whose head is close to retirement have done little or no planning for retirement. Planning is shaped by the experience of other individuals: individuals learn to plan for retirement from older siblings. They also learn from the experience of old parents. In particular, unpleasant events, such as financial difficulties and health shocks at the end of life, provide incentives toward planning. In addition, planning affects wealth levels as well as portfolio choice. Individuals who plan are more likely to hold large amounts of wealth and to invest their wealth holdings in high return assets, such as stocks. Thus, planning plays an important role in explaining the saving behavior of many households. JEL classification: D91, E21, C21.
Consumer financial literacy has become a growing concern to educators, community groups, businesses, government agencies, and policymakers. Correspondingly, there has been an increase in the number and types of financial education programs available to households. Many of these programs focus on providing information to consumers and operate under the implicit assumption that increases in information and knowledge will lead to changes in financial-management practices and behaviors. ; This article focuses on four financial-management activities--cash-flow management, credit management, saving, and investment. Data from the Surveys of Consumers are used to analyze some of the connections between knowledge and behavior--what consumers know and what they do. Overall, financial knowledge was statistically linked to financial practices: Those who knew more were more likely to engage in recommended financial practices. In addition, certain types of financial knowledge were statistically significant for particular financial practices--knowing about credit, saving, and investment was correlated with higher probabilities of engaging in recommended credit, saving, and investment practices respectively. Although the causality could flow in either direction, this finding indicates that increases in knowledge may lead to improvements in financial-management practices. Thus, financial education in combination with skill-building and audience-targeted motivational strategies may be one way to elicit the desired behavioral changes in financial-management practices.
The role of employer-provided pensions and Social Security in shaping employees' retirement and saving behavior has attracted an enormous amount of attention from both researchers and policymakers over the past twenty-five years.1 In the research literature, the almost universal assumption is that workers are fully informed about the rules governing their employer- and government-provided pensions. However, to the limited extent that researchers have been able to test that assumption, results suggest that workers are less than fully informed (Bernheim 1988, Mitchell 1988, Gustman and Steinmeier 1989) and that providing information can affect their behavior (Clark and Schieber 1998; Bayer, Bernheim, and Scholz 1996; Bernheim and Garrett 1996; Madrian and Shea 2000). Despite a general lack of research on the role of information in retirement planning, policymakers have made information a central issue. The Social Security Administration (SSA), for example, recently began to mail workers statements of their accrued and projected benefits to improve their ability to plan for retirement; the SSA also has made a retirement planner available on its website. The U.S. Department of Labor has initiated several programs to examine the extent of workers' lack of information and to improve their knowledge of pensions and of saving for retirement in general. Following the 1997 Savings Are Vital to Everyone's Retirement (SAVER) Act, the National Summit on Retirement Savings, held in 1998, emphasized the need to educate the public about retirement planning through media campaigns and other means. In 2000 the Department of Labor celebrated the fifth anniversary of its Retirement Savings Education Campaign. And recent legislative proposals by Representative John Boehner of Ohio (HR 4747, 4748, and 4749) would significantly expand the scope of investment advice that employers are permitted to offer their employees. This chapter provides a comprehensive analysis of what workers (don't) know about their pensions and Social Security. This analysis is based on information from the Health and Retirement Study, described below. Relative to previous findings and current policy issues, the paper provides five key sets of information. First, it uses more recent data than previous studies. This is important because of the significant changes in the pension universe and in Social Security that have occurred over the last fifteen years. Second, the paper focuses on the distribution of differences between respondents' reports of requested information and linked reports obtained from records provided by the Social Security Administration or from detailed pension plan descriptions obtained from firms, examining the patterns of discrepancies at the level of the individual respondent more than did previous studies. Third, the paper examines the effects of poor information on economic behavior in order to assess the potential benefits of providing better information. Fourth, to improve understanding of misreporting and to provide a foundation for imputing pension and Social Security outcomes when data are not available, the analysis explores whether the differences between the cases that have linked Social Security and pension records and those that do not are related to demographic or other measures. Fifth, the appendix provides information of use to researchers, including an analysis of the relation between respondent-reported earnings histories and linked earnings histories from Social Security records. It also includes a set of equations that researchers can use to impute pension characteristics and plan values for cases without employer-provided pension plan descriptions and for researchers who do not have access to linked pension data. Our findings suggest that workers approaching retirement possess a great deal of misinformation about their pensions. Half of respondents with linked pension data correctly identified their plan type, but fewer than half could identify, within one year, the dates of their eligibility for early and normal retirement benefits. According to the firm-provided data, two-thirds of respondents would be eligible to retire by the time they reached age 55; however, less than half of respondents were aware that they were eligible. Those who were within three years of retiring forecast somewhat more accurately but did not do a much better job of forecasting their age of eligibility for early retirement than the sample as a whole. Eighty percent of respondents with a defined benefit plan either did not think that they were eligible for early retirement or did not know the benefit reduction rate for their plan. Respondents did better in reporting the value of their pension than their age of eligibility, but the unexplained variation is still considerable. Only half of the respondents ventured to guess their expected Social Security benefits, and only half of those came within $1,500 of the actual annual amount. On the whole, respondents were somewhat pessimistic in evaluating their defined benefit pensions, in contrast to findings from earlier studies. Respondents' and firms' calculations of pension benefit amounts were in rough agreement in only 40 percent of the cases. A preliminary analysis of how knowledge of Social Security and pension benefits affects retirement expectations, realization of those expectations, and wealth accumulation reveals complex relationships. Because it is easier to adjust saving downward than upward as one approaches retirement, even symmetric errors in expectations should affect retirement and saving outcomes. Yet respondents' lack of knowledge about Social Security and pension wealth and their inability to identify their plan type had only modest effects on retirement plans, on whether those plans were met, and on saving outcomes. Although researchers would like to work with the true value of pensions and Social Security benefits, in many surveys only respondents' reports were available. Our findings show that respondents' reports and other information about the respondents accounted for 80 percent of the variation in linked employerreported pension values and that respondent-reported work histories and other explanatory variables accounted for 75 percent of the variation in earnings obtained from linked Social Security records. Thus prospects are good for imputing pension and Social Security values, although they are not good for imputing the timing or size of incentives for early retirement. Implications for policy depend to an important degree on two considerations: the precise behavioral channels through which misinformation affects retirement and saving and whether increased educational efforts affect behavior and planning in a timely manner. However, there is little information on which to base an answer to either question.
Traditional mechanisms that spread mortality and longevity risk across a population group are increasingly being replaced by saving vehicles that leave this obligation in the hands of individual households. We explore the question of whether households are adequately saving for their future retirement by reviewing recent literature that examines household behavior in preparing for retirement - both in the accumulation phase and the decumulation phase - and by exploring representative households on the verge of retirement. While the median married couple of approximately fifty-five years of age holds assets totaling nearly $400,000, they still must engage in substantial saving to retire comfortably at age sixty-two.
Using the Surveys of Consumer Finance from 1989 to 2001, this study expolres households’ reasons for not having a checking account. Reasons havechanged over time, shifting away from account features and toward human capital and institutional reasons. We also find that reasons for not having an account are related to income, race/ethnicity, marital status/gender, planning horizon, education, previous account experience, and credit history. We suggest potential responses for community educators, firms, and policy makers.
We use a novel household survey to investigate the effects of employer-based financial education on personal saving. We explore cross-sectional relations between the availability of employer-based financial education and various measures of asset accumulation, and we interpret these patterns in light of various potentially confounding factors. Our findings favor the hypothesis that employer-based financial education stimulates saving, both in general and for retirement.
We compare wealth holdings across two cohorts of the Health and Retirement Study: the early Baby Boomers in 2004, and individuals in the same age group in 1992. Levels and patterns of total net worth have changed relatively little over time, though Boomers rely more on housing equity than their predecessors. Most important, planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non-planners. Instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth.
This article evaluates the quality of workers' information regarding pension offerings using both administrative records and worker repor ts of pension provisions. Missing and incorrect information is widesp read. Unionized employees, higher income workers, better educated wor kers, and those with seniority are better informed about their pensio ns. There are also demographic differences: minorities have less pens ion knowledge than whites, but women are better informed than men alo ng several pension dimensions. Myopia about pension incentive structu res is troubling since workers may save or consume suboptimally, chan ge jobs, or retire earlier than they would have if equipped with bett er pension information. Copyright 1988 by University of Chicago Press.
This paper provides an answer to an important empirical puzzle in the retirement literature: while most people know little about their own pension plans, retirement behavior is strongly affected by pension incentives. We combine administrative and self-reported pension data to measure the retirement response to actual and perceived financial incentives and document an important role for self-reported pension data in determining retirement behavior. Well-informed individuals are far more responsive to pension incentives than the average individual. Ill-informed individuals seem to respond systematically to their own misperceptions of pension incentives. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's "propensity to plan." We show that those with a higher such propensity spend more time developing financial plans, and that this shift in planning is associated with increased wealth. These findings are consistent with broad psychological evidence concerning the beneficial impacts of planning on goal pursuit. Those with a high propensity to plan may be better able to control their spending, and thereby achieve their goal of wealth accumulation. We find direct evidence supporting this effortful self-control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Assessing the price evolution of houses on the basis of average sales prices, as is current practice in Belgium, might be misleading due to changing characteristics of the houses sold in the periods observed. A hedonic index which takes into account changes in characteristics is more appropriate. We use the budget surveys of the Belgian Statistical Institute to illustrate how this also applies for Belgium. The estimated hedonic price index for house sales on the secondary market is practically always below the index based on average sales values for the period considered. This demonstrates the need to collect more extensive data on the characteristics of the dwellings sold in Belgium.
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
We compare the saving behavior of two cohorts: the Early Baby Boomers (EBB, age 51-56 in 2004) and the HRS cohort (age 51-56 in 1992). We find that EBB have accumulated more wealth than the previous cohort but they benefited from a large increase in house prices, which lifted the wealth of many home-owners. In fact, there are many families among EBB, particularly those headed by respondents with low education, low income, and minorities, which have less wealth than the previous cohort. Lack of wealth can be traced to lack of retirement planning. Notwithstanding the many initiatives aimed at fostering planning in the 1990s, a large portion of EBB still do not plan for retirement even though most respondents are close to it. The effect of planning is remarkably similar between the two cohorts; those who do not plan accumulate much lower amounts of wealth - from 20 to 45 percent depending on the location in the wealth distribution- than those who do plan. Thus, for both the EBB and the HRS cohort, lack of planning is tantamount to lack of saving irrespective of the many changes in the economy between 1992 and 2004.
We present a model in which individuals' preferences are defined over their consumption, transfers to offspring, and social status associated with income. We show that a separating equilibrium exists where individuals' expenditure on conspicuous consumption is a signal for their unobserved income. In this equilibrium, poor families that climb up the social ladder by the accumulation of wealth engage in conspicuous consumption that prevents them from escaping poverty. Our model may explain why the poor make some choices that do not appear to help them escape poverty. (JEL: D91, O11, O12, O15) (c) 2010 by the European Economic Association.
Evidence suggests only a minority of American households feels "confident" about retirement saving adequacy. Little is known about why people fail to plan for retirement, and whether planning and information costs might affect retirement saving patterns. To better understand these issues, we devised and fielded a purpose-built module on planning and financial literacy for the 2004 Health and Retirement Study (HRS). This module measures how workers make their saving decisions, how they collect the information for making these decisions, and whether they possess the financial literacy needed to make these decisions. Our analysis shows that financial illiteracy is widespread among older Americans: only half of the age 50+ respondents could correctly answer two simple questions regarding interest compounding and inflation, and only one-third understood these as well as stock market risk. Women, minorities, and those without a college degree were particularly at risk of displaying low financial knowledge. We also evaluate whether people tried to figure out how much they need to save for retirement, whether they devised a plan, and whether they succeeded at the plan. In fact, these calculations prove to be difficult: fewer than one-third of our age 50+ respondents ever tried to devise a retirement plan, and only two-thirds of those who tried, actually claim to have succeeded. Overall, fewer than one - fifth of the respondents believed that they engaged in successful retirement planning. We also find that financial knowledge and planning are clearly interrelated: those who displayed financial knowledge were more likely to plan and to succeed in their planning. Moreover, those who did plan were more likely to rely on formal planning methods such as retirement calculators, retirement seminars, and financial experts, and less likely to rely on family/relatives or co-workers.
This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.
In 1995, the Social Security Administration started sending out the annual Social Security Statement. It contains information about the worker’s estimated benefits at the ages 62, 65, and 70. We use this unique natural experiment to analyze the retirement and claiming decision making. First, we find that, despite the previ- ous availability of information, the Statement has a significant impact on workers’ knowledge about their benefits. These findings are consistent with a model where workers need to gather costly information in order to improve their retirement deci- sion. Second, we use this exogenous variation in knowledge to analyze the optimality of workers’ decisions. We do not find an overall improvement in workers’ retirement behavior, but there are some changes among particular groups. Workers aged 62 and 65 become less sensitive to Social Security Incentives. Age 62 and 65 are the two ages at which the retirement benefits are reported in the Statement, which suggests that some workers may use them as focal points. Additionally, we find evidence that before the Statement was introduced uninformed workers, who are more likely to be low–educated and black, made, on average, worse retirement decisions, and that workers with a dependent spouse usually disregarded their own spouse’s benefits in their calculations. The information contained in the Statement appears to have helped both groups, though with the important exception of black workers.
Savings and the Effectiveness of Financial Education In Pension Design and Structure: New Lessons from Behavioral Finance
- Annamaria Lusardi
Lusardi, Annamaria. 2004. " Savings and the Effectiveness of Financial Education. " In Pension
Design and Structure: New Lessons from Behavioral Finance, edited by Olivia Mitchell
and Stephen Utkus. Oxford: Oxford University Press: 157-184.
What American Teens and Adults Know About Economics
National Council on Economic Education. 2005. " What American Teens and Adults Know
About Economics. "
Increased Saving but Little Planning. Results of the 1997 Retirement Confidence Survey
- Paul Yakoboski
- Jennifer Dickemper
Yakoboski, Paul and Jennifer Dickemper. 1997. " Increased Saving but Little Planning. Results
of the 1997 Retirement Confidence Survey. " EBRI Issue Brief 191.
.057*
(.030)
.038
(.030)
.072***
(.024)
.062**
(.027)
.043
(.027)
Employee Benefits Research Institute (EBRI) Retirement Confidence Survey (RCS), Minority RCS, and Small Employer Retirement Survey
Employee Benefits Research Institute (EBRI). 2001. " Retirement Confidence Survey (RCS),
Minority RCS, and Small Employer Retirement Survey. " Issue Brief 234.
Health Risk, Financial Information and Social Interaction: the Portfolio Choice of European Elderly Households Working paper
- Dimitris Christelis
- Tullio Jappelli
- Mario Padula
Christelis, Dimitris, Tullio Jappelli, and Mario Padula. 2005. " Health Risk, Financial
Information and Social Interaction: the Portfolio Choice of European Elderly
Households. " Working paper. University of Salerno.
Employee Benefits Research Institute (EBRI) Participant Education: Actions and Outcomes
Employee Benefits Research Institute (EBRI). 1996. " Participant Education: Actions and
Outcomes. " Issue Brief 169.
Explaining Retirement Saving Shortfalls " . In Forecasting Retirement Needs and Retirement Wealth edited by
- Olivia S Mitchell
- James Moore
- John Phillips
Mitchell, Olivia S., James Moore, and John Phillips. 2000. " Explaining Retirement Saving
Shortfalls ". In Forecasting Retirement Needs and Retirement Wealth edited by O. S.
Mitchell, B. Hammond, & A. Rappaport. Philadelphia, PA: Univ. of Pennsylvania Press:
139-166.
Financial Knowledge, Experience and Learning Preferences: Preliminary Results from a New Survey on Financial Literacy
- Jeanne Hogarth
- Marianne Hilgert
Hogarth, Jeanne and Marianne Hilgert. 2002. "Financial Knowledge, Experience and Learning
Preferences: Preliminary Results from a New Survey on Financial Literacy." Consumer
Interest Annual, 48.
Financial Literacy: Are We Improving
- Lewis Mandell
Mandell, Lewis. 2004. " Financial Literacy: Are We Improving? " Washington, D.C.: Jump$tart
Coalition for Personal Financial Literacy.
Prospect for Widow Poverty In Forecasting Retirement Needs and Retirement Wealth
- David Weir
- Robert Willis
Weir, David and Robert Willis. 2000. " Prospect for Widow Poverty. " In Forecasting Retirement
Needs and Retirement Wealth, edited by Olivia Mitchell, Peter Hammond and Anna
Rappaport, Philadelphia, University of Pennsylvania Press, 208-234.