Investment in financial literacy and saving decisions

Jappelli, Tullio; Padula, Mario

doi:10.1016/j.jbankfin.2013.03.019

Cited by 477 publications

(409 citation statements)

References 36 publications

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“…The previous literature on financial literacy has used alternative instruments for current financial literacy, including parental background (van Rooij et al, 2011), mathematical ability (Jappelli and Padula, 2013) when young, and previous experience of education in economics and finance (Bernheim et al, 2001;Lusardi and Tufano, 2009).…”

Section: Empirical Strategy and Econometric Resultsmentioning

confidence: 99%

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Credit counseling: a substitute for consumer financial literacy?

Disney

Gathergood

Weber

2015

Journal of Pension Economics and Finance

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Is financial literacy a substitute or complement for financial advice? We analyze the decision by consumers to seek financial advice in the form of credit counseling. Credit counseling is an important component of the consumer credit sector for consumers facing debt problems. Our analysis accounts for the endogeneity of an individual's financial situation to financial literacy, and the endogeneity of financial literacy to exposure to credit counseling. Results show counseling substitutes for financial literacy. Individuals with better literacy are 60% less likely to use credit counseling. These results suggest that credit counseling provides a safety net for poor financial literacy.JEL CODES: D10, D12, I22

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Section: Empirical Strategy and Econometric Resultsmentioning

confidence: 99%

“…As Jappelli and Padula (2013) show, the ideal instrument for financial literacy is the pre-labor market entry endowment of literacy. This is determined before exposure to the financial environment which might cause literacy to form endogenously.…”

Section: Empirical Strategy and Econometric Resultsmentioning

confidence: 99%

Credit counseling: a substitute for consumer financial literacy?

Disney

Gathergood

Weber

2015

Journal of Pension Economics and Finance

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“…The negative effect causes the optimal level of financial literacy to decrease if b increases. The effect is also present in the model without uncertainty on asset returns (see Jappelli and Padula, 2013) and is due to the offsetting of social security with private wealth.…”

Section: Social Securitymentioning

confidence: 95%

“…Investment in literacy can directly raise the risk-free rate available to investors or the 3 In related work, we study the asset pricing implications of financial education, showing that investment in financial education does not necessarily reduce the volatility of risky assets markets (Padula and Pettinicchi, 2013). 4 We build on the no uncertainty single asset model proposed by Jappelli and Padula (2013).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…First, the incentive to accumulate wealth and to invest in financial literacy depends on age, because younger individuals hold less wealth and therefore have a lower incentive to invest in financial literacy, see Jappelli and Padula (2013). A second important element is that financial literacy is likely to be correlated with education attainment.…”

Section: Empirical Implicationsmentioning

confidence: 99%

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Investment in financial literacy, social security, and portfolio choice

Jappelli¹,

Padula²

2014

Journal of Pension Economics and Finance

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We present an intertemporal portfolio choice model where individuals invest in financial literacy, save, allocate their wealth between a safe and a risky asset, and receive a pension when they retire. Financial literacy affects the excess return from and cost of stock-market participation. Investors simultaneously choose how much to save, their portfolio allocation, and the optimal investment in financial literacy. The model implies that one should observe a positive correlation between stock-market participation (and risky asset share, conditional on participation) and financial literacy, and a negative correlation between the generosity of the social security system and financial literacy. The model also implies that financial literacy accumulated early in life is positively correlated with the individual's wealth and portfolio allocations in later life. Using microeconomic cross-country data, we find support for these predictions.

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The unsophisticated “sophisticated”: Old age and the accredited investors definition

2021

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Accredited investors are able to participate in unregistered securities offerings such as private equity, venture capital, and hedge funds if they meet income and wealth thresholds. This definition provides a simple screening mechanism intended to restrict the purchase of complex securities to investors who are sophisticated enough to "fend for themselves." We investigate whether older households, who are vulnerable to age-related cognitive decline and are more likely to meet the accredited investor threshold, possess greater financial sophistication than younger nonaccredited investors. We find strong evidence that older households are at risk of meeting the accredited investor definition without having the sophistication needed to avoid high agency costs in a largely unregulated securities market. Accredited households age 80 and older are more than 80% less likely than unaccredited investors age 60-64 to have high financial sophistication scores. This reduced financial capability in later life appears to mirror the rate of decline in measures of cognition.

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Investment in financial literacy and saving decisions

Cited by 477 publications

References 36 publications

Credit counseling: a substitute for consumer financial literacy?

Credit counseling: a substitute for consumer financial literacy?

Investment in financial literacy, social security, and portfolio choice

The unsophisticated “sophisticated”: Old age and the accredited investors definition

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