How Financial Literacy Affects Household Wealth Accumulation

“ment are often about 10 percent, producing a bias towards zero of almost that magnitude (Behrman, Rosenzweig, and Taubman 1994). 6 Detailed descriptions of each of these variables are provided in Behrman et al. (2010). 7 For example, family background variables such as”

“Others report positive correlations between financial literacy and asset accumulation, but questions have been raised about whether these associations reflect causality (Lusardi and Mitchell 2008, 2010).”

“A final set of questions touches on key aspects of the Chilean retirement system, including the mandatory contribution rate, minimum male and female retirement ages, how pension benefits are computed, whether people know about the welfare program for the elderly, and whether people know they can contribute to a Volunt…”

“A second, more “sophisticated,” set of three questions was devised for a special HRS module (Lusardi and Mitchell, 2007c) to measure more complex concepts such as compound interest, inflation, and risk diversification.”

“Brockett, Patrick, Richard A. Derrig, Linda L. Golden, Arnold Levine, Mark Alpert.”

“A final set of questions touches on key aspects of the Chilean retirement system, including the mandatory contribution rate, minimum male and female retirement ages, how pension benefits are computed, whether people know about the welfare program for the elderly, and whether people know they can contribute to a Volunt…”

“These questions have also been fielded in Mexico and Chile (Hastings and Tejeda-Ashton 2008; Hastings and Mitchell 2011; Behrman, Mitchell, Soo and Bravo 2012), India and Indonesia (Cole, Sampson, and Zia 2011 Note: * indicates questions that have slightly different wording than the baseline financial literacy questio…”

“A positive association is found between financial literacy and wealth management, including portfolio choice, over the lifecycle (Behrman, Mitchell, Soo, & Bravo, 2012; Jappelli & Padula, 2013; Van Rooij, Lusardi, & Alessie, 2012).”

“…of literature has also documented a positive relation between financial literacy and savings behavior (e.g., Lusardi and Mitchell 2011c; Chan and Stevens 2008; Behrman et al. 2012), i.e. providing additional evidence that financially literate individuals exhibit a greater tendency to plan ahead.”

“Studies have shown that financial knowledge is linked to higher levels of retirement planning and savings (Behrman et al. 2012; Alessie et al. 2011; Bucher-Koenen and Lusardi 2011; Lusardi and Mitchell 2012; 2007); investment decisions such as diversification (Abreu and Mendes 2010) and investments…”

“Indeed, several studies either look at the impact of some childhood experiences on financial behavior (e.g., Webley and Nyhus, 2013, Bucciol and Veronesi, 2014), or use a specific childhood variable as instrument for financial literacy (Behrman et al., 2010, 2012, van Rooij et al., 2011b).”

“Studies like Stango and Zinman (2009), Behrman et al. (2012), van Rooij et al. (2012), Chu et al. (2017) have demonstrated that higher wealth accumulation is a result of higher financial literacy, which in turn results in the financial well-being of an individual.”

“The ability of individuals to assess financial risk and make optimal financial decisions entails vast implications for the portfolio allocation, wealth accumulation (Behrman, et al., 2012), and ultimately financial well-being. of Greek university students who lived through the financial crisis.”

“Along with that, Behrman and Mitchell [59] identified the prominent role of financial literacy in organizational wealth accumulation.”

“For example, Calvet et al. (2009) find a relationship between demographic variables related to financial sophistication and investment mistakes.”

“37 In a related literature, Behrman et al. (2012) show that greater financial literacy leads to higher wealth accumulation in Chile.”

“This is important, since education and financial literacy measure somewhat different things (Behrman et al., 2012).”

“People who have better knowledge tend to have greater wealth accumulation (Behrman et al., 2012) and a better perception of financial well-being (Falahati & Sabri, 2015).”

“This may be relevant in our scenario: for example, the choice of taking 14 Christiansen et al. (2008), Lusardi & Mitchell (2007a, 2007b) and Behrman et al. (2012) show that models that do not control for correlated errors typically underestimate the effect of financial literacy on wealth…”

“Some studies address these important econometric concerns using an instrumental variables approach; see Christiansen et al. (2008), Lusardi and Mitchell (2008), Behrman et al. (2012), and van Rooij et al. (2012).”

“Behrman et al. (2012) make also use of the schooling attainment of the mother to isolate the causal effect of financial literacy on wealth accumulation.”

“…the short questionnaire right away (‘Now’), he would immediately receive a 5,000 peso gift card (about US$8); alternatively, he could elect to do 3 Behrman et al. (2012) explore alternative ways to construct a financial literacy index and report that more sophisticated measures perform about as…”

“Income and wealth are positively associated with financial literacy (Behrman et al., 2012; Mauldin et al., 2016).”

“Financial literacy questions similar to the ones used in the NFCS have been used in Mexico and Chile (Hastings and Tejeda-Ashton 2008; Hastings and Mitchell 2011; Behrman et al. 2012), and similar results have been reported in India and Indonesia (Cole et al.”

“Behrman et al. (2012) use the same dataset we used in this paper, with an instrumental variable approach to show a very large effect of financial literacy on wealth accumulation.”

“Prior works show that an individual ’ s human capital is closely correlated with education (Lusardi and Mitchell (2008), Behrman, Mitchell, Soo, and Bravo (2012)) and that borrowers with low human capital tend to have high financial constraints.”

“Extensive research confirms the importance of financial knowledge in determining financial behaviour and the accumulation of wealth (Behrman et al., 2012; Jappelli & Padula, 2013; van Rooij et al., 2012).”

“For example, in the field of wealth management, Bernheim et al. (2001) and Bernheim and Garrett (2003) maintain that high school students with financial curriculum mandates and employers with financial education in the workplace enjoy higher savings.”

“To engage with financial markets and to evaluate alternatives, financial literacy, and financial knowledge are required (Behrman et al., 2012).”

“The second group of empirical studies has examined whether financial literacy leads to financial decision-making in terms of wealth management (Behrman et al. , 2012), saving and spending (Lusardi, 2009), borrowing and credit management (Mottola, 2013; Agarwal et al. , 2009; Stango and Zinman,…”

“A direct relationship was empirically demonstrated between better financial literacy and decision making that led to greater accumulation of wealth in households [53], among other things.”

“For example, it was revealed that there is a statistically meaningful relationship between; the level of financial literacy and creation of wealth according to Behrman et al. (2012), financial knowledge and financial planning according to Lusardi and Mitchell (2006), financial information and household wealth accordin…”

“Low level of financial literacy is associated to lower saving and wealth accumulation before retirement (Lusardi and Mitchell, 2006; Behrman et al., 2012; Clark et al., 2012) and influences funding decisions.”

“Possessing financial knowledge has been positively associated with financial well-being (Behrman et al. 2012; Sabri et al. 2012 Mokhtar et al. 2020; Purniawati and Lutfi 2017).”

“Studies that have considered both financial and durable assets have, for the most part, used data from developed or European countries; for example, Chile (Behrman et al., 2012), the United States (Bernheim & Garrett, 2003; Letkiewicz & Fox, 2014), the Netherlands (Van Rooij et al.”

“Similarly, Behrman et al. (2012) fi nd that fi nancial literacy and schooling have a signi fi cant effect on wealth accumulation and pension contribution patterns in Chile.”

“Accordingly, an increasing number of analyses employ instrumental variable estimations (e.g. van Rooij et al, 2011, Behrman et al., 2012, Klapper et al., 2013) or resort to field experiments.”

“…shown that financial literacy is important for savings behavior (Bernheim, 1995, 1998; Lusardi and Mitchell, 2007, 2011; Chan and Stevens, 2008; Behrman et al., 2012), investment and portfolio decisions (Christelis et al., 2010; van Rooij et al., 2011; Yoong, 2011) and choices in the credit…”

“A growing literature finds that financial literacy is correlated with household well-being, including participation in savings and investments (Van Rooij, Lusardi, and Alessie 2011; Behrman et al. 2012) and planning for retirement”

“Getting older has been linked to wealth accumulation (Behrman et al. 2012; Binswanger and Carman 2012); however, it also relates to a loss of skills in managing finances, vulnerability to fraud, and making mistakes in economic decision-making (Agarwal et al.”

“(3) According to Behrman’s theoretical analysis of educational returns, financial literacy can influence the “Learning by doing” process of household participation in financial markets (Behrman et al., 2012; Lusardi et al., 2017), assisting households in understanding”

“Overall, the findings of this study are in the spirit of other recent papers, such as that of Behrman et al. (2012) who find that improved financial literacy can make a significant difference for financial behaviour, above and beyond regular schooling.”

“Given that previous empirical evidence suggests a strong positive relationship between not only financial literacy and financial behaviours (Behrman et al. 2012; Disney and Gathergood 2013; Hastings and Mitchell 2011; Van Rooij, Lusardi, and Alessie 2011; Yoong 2010), but also between financial…”

“2 A very large number of papers study these issues, including Lusardi and Mitchell (2007), Behrman et al. (2012), Banks and Obstfield (2007), Christelis et al.”

“A growing body of research indicates that financial literacy relates to household well-being, including in savings and investments (Van Rooij et al. 2011; Behrman et al. 2012) and retirement planning (Lusardi and Mitchell 2007a, b).”

“Over the last years potential endogeneity of explanatory (right-hand-side) variables has been addressed by relying on instrumental variables which are often derived from childhood experiences of today’s adults (Behrman et al. 2012).”

“This approach has recently been used to measure financial literacy in Chile (see Behrman et al., 2012).”

“For instance, Behrman et al. (2012) studied the causal effect of financial literacy on wealth accumulation using many instruments, including individual education environment variables, macroeconomic condition variables, and family background variables, among others.”