From Classroom to Portfolio: Examining the Link Between Financial Education, Financial Literacy, and Risk-taking

Abstract

This paper examines a panel dataset spanning the years 2010 to 2020 across ten countries, investigating the intricate relationship between financial assets and financial literacy. Two prominent trends surface:First, an intriguing inverse association is observed between higher rates of tertiary education attainment within a nation's population and individual financial assets. Second, an upsurge in the employment rate among individuals aged 25-64 corresponds with a decline in individual financial assets. These findings defy conventional research and call for comprehensive exploration within the framework of economic principles and broader economic awareness. As educational attainment and employment rates rise, heightened labor market competition, especially among individuals holding undergraduate or advanced degrees, leads to relatively reduced wages for those with similar qualifications, impacting their financial assets. Furthermore, this study corroborates that while increased income aligns with greater risk aversion, risk preferences display dynamic fluctuations over time and in response to personal experiences, contradicting neoclassical economic theory's concept of perfect stability. These findings underscore the necessity for a nuanced understanding of financial behavior. In summary, this research challenges established assumptions concerning the determinants of individual financial assets, highlighting the significance of multifaceted socio-economic variables and evolving risk perceptions in comprehending contemporary financial behaviors.