The evolution of financial literacy over time and its predictive power for financial outcomes: evidence from longitudinal data

Abstract We administered the FINRA Foundation's National Financial Capability Study questionnaire to members of the RAND American Life Panel in 2012 and 2018. Using this unique, longitudinal data set, we investigate the evolution of financial literacy over time and shed light on the effect of f...

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Bibliographic Details
Published inJournal of pension economics & finance Vol. 22; no. 4; pp. 640 - 657
Main Authors Angrisani, Marco, Burke, Jeremy, Lusardi, Annamaria, Mottola, Gary
Format Journal Article
LanguageEnglish
Published Cambridge Cambridge University Press 01.10.2023
Subjects
Behavior
Causality
Decision making
Financial literacy
Households
Knowledge
Literacy
Longitudinal studies
Panel data
Planning
Polls & surveys
Population
Power
Questionnaires
United States > US
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Summary:Abstract We administered the FINRA Foundation's National Financial Capability Study questionnaire to members of the RAND American Life Panel in 2012 and 2018. Using this unique, longitudinal data set, we investigate the evolution of financial literacy over time and shed light on the effect of financial knowledge on financial outcomes. Over a six-year observation period, financial literacy appears to be rather stable, with a slight tendency to decline at older ages. Importantly, financial literacy has significant predictive power for future financial outcomes, even after controlling for baseline outcomes and a wide set of demographics and individual characteristics that influence financial decision making.
ISSN:1474-7472
1475-3022
DOI:10.1017/S1474747222000154