How Financial Literacy Affects Household Wealth Accumulation.

This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs.

[1]  O. Mitchell,et al.  The Economic Importance of Financial Literacy: Theory and Evidence , 2013, Journal of economic literature.

[2]  O. Mitchell,et al.  Financial Literacy: Implications for Retirement Security and the Financial Marketplace , 2012 .

[3]  O. Mitchell,et al.  Financial Literacy, Schooling, and Wealth Accumulation. NBER Working Paper No. 16452. , 2010 .

[4]  O. Mitchell,et al.  Financial Literacy, Schooling, and Wealth Accumulation , 2010 .

[5]  Justine S. Hastings,et al.  Fees, Framing, and Financial Literacy in the Choice of Pension Manager , 2010 .

[6]  O. Mitchell,et al.  Financial Literacy Among the Young , 2009 .

[7]  O. Mitchell,et al.  Financial Literacy and Retirement Planning: New Evidence from the Rand American Life Panel , 2007 .

[8]  O. Mitchell,et al.  Planning and Financial Literacy: How Do Women Fare? , 2006 .

[9]  O. Mitchell,et al.  Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth , 2006 .

[10]  J. Behrman,et al.  Does Increasing Women's Schooling Raise the Schooling of the Next Generation? , 2005 .

[11]  Patrick L. Brockett,et al.  Fraud Classification Using Principal Component Analysis of Ridits , 2002 .

[12]  B. Bernheim,et al.  What Accounts for the Variation in Retirement Wealth Among U.S. Households? , 1997 .

[13]  Paul Taubman,et al.  Endowments and the Allocation of Schooling in the Family and in the Marriage Market: The Twins Experiment , 1994, Journal of Political Economy.

[14]  B. Bernanke.  Fostering financial literacy: a speech at the National Bankers Association Foundation Financial Literacy Summit Reception, Washington, D.C., April 13, 2010 , 2010 .

[15]  J. R. Behrman,et al.  ENCUESTA DE PROTECCIÓN SOCIAL 2006: PRESENTACIÓN GENERAL Y PRINCIPALES RESULTADOS , 2008 .

[16]  Annamaria Lusardi,et al.  Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education , 2007 .