Financial Literacy and Retirement Planning in Switzerland

Abstract

We use a representative survey covering 1,500 households to document the level of financial literacy in Switzerland and to examine how financial literacy is related to retirement planning. We measure financial literacy with standardized questions that capture knowledge about three basic financial concepts: Compound interest, inflation, and risk diversification. We measure retirement planning by the incidence of a voluntary retirement savings account. Our results show that financial literacy in Switzerland is high by international standards--a result which is compatible with the high ranking of Switzerland on the PISA mathematical scales. Financial literacy is lower among low-income, less-educated, and immigrant, non-native-speaking households as well as among women. We find that financial literacy is strongly correlated with voluntary retirement saving. Our results also show that financial literacy is correlated with financial market participation and mortgage borrowing.

How financially literate are women? An overview and new insights

“…9 In all three countries, women were disproportionately more likely than men to state that they do not know the answer to a financial literacy question, in particular when considering the risk diversification question. Very similar differences in financial literacy between men and women have been found in Sweden (Almenberg and Säve-Söderbergh, 2011), New Zealand (Crossan, Feslier, and Hurnard, 2011), Italy (Fornero and Monticone, 2011), Japan (Sekita, 2011), Australia (Agnew, Bateman, and Thorp, 2013), France (Arrondel, Debbich, and Savignac, 2013), and Switzerland (Brown and Graf, 2013). In all of these countries, women are not only less likely to correctly answer the three financial literacy questions but they are more likely to indicate 8 In the German case, it is not possible to differentiate between "do not know" and "refuse to answer" responses, but in comparable surveys where it is possible to differentiate, the proportion refusing to answer is very low.…”

Is there Swissness in Investment Competence?

“…Regarding the question who is in most need of help, we find that education improves investment knowledge, which is in line with the results of Brown & Graf (2013) who study financial literacy of Swiss.…”

“…In the case of Switzerland, Brown & Graf (2013) find that the financial literacy in Switzerland is high and comparable to that in Germany.…”

Financial literacy, financial advice, and financial behavior

“…According to 50.0% of women in the U.S. indicate that they do not know the answer to at least one of the Big Three questions, while the respective fraction for men is 34.3%. A number of studies try to explain this finding arguing with traditional role models (Hsu 2011) suggesting that women only have an incentive to invest in financial literacy late in their lives (Fonseca et al 2012), differing levels of confidence (Bucher-Koenen et al 2016), and diverging interests in financial matters (Brown and Graf 2013). However, none of the approaches can entirely explain the gender gap, thus making the issue a promising avenue for further research.…”