Precautionary savings, retirement planning and misperceptions of financial literacy

We measure financial literacy among LinkedIn members, complementing standard questions with additional questions that allow us to gauge self-perceptions of financial literacy. Average financial literacy is surprisingly low given the demographics of our sample: fewer than two-thirds of chief financia...

Full description

Saved in:
Bibliographic Details
Published inJournal of financial economics Vol. 126; no. 2; pp. 383 - 398
Main Authors Anderson, Anders, Baker, Forest, Robinson, David T.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.11.2017
Elsevier Sequoia S.A
Subjects
Decision making
Financial literacy
Literacy
Mistaken beliefs
Optimism
Overconfidence
Perceptions
Power
Retirement planning
Savings
Social networks
Financial literacy
D18
Overconfidence
Optimism
G18
Online AccessGet full text

Cover

More Information
Summary:We measure financial literacy among LinkedIn members, complementing standard questions with additional questions that allow us to gauge self-perceptions of financial literacy. Average financial literacy is surprisingly low given the demographics of our sample: fewer than two-thirds of chief financial officers, chief executive officers, and chief operating officers complete the test correctly. Financial literacy, precautionary savings and retirement planning are positively correlated, but this is mostly driven by perceived, not actual, literacy: controlling for self-perceptions, actual literacy has low predictive power. Perceptions drive decision-making among low-literacy respondents and are associated with mistaken beliefs about financial products and less willingness to accept financial advice.
ISSN:0304-405X
1879-2774
1879-2774
DOI:10.1016/j.jfineco.2017.07.008