Financial Counseling, Financial Literacy, and Household Decision Making

44 Pages Posted: 24 Jun 2010 Last revised: 17 Nov 2010

Sumit Agarwal

Georgetown University - Department of Finance

Gene Amromin

Federal Reserve Bank of Chicago

Itzhak Ben-David

Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Douglas D. Evanoff

Federal Reserve Bank of Chicago

Date Written: November 11, 2010

Abstract

In this chapter we review the literature on financial counseling, financial literacy, and consumer decision making and look at a financial counseling/planning program in India where consumers revealed their risk appetite, future financial goals, and current assets and liabilities. The results from India suggest that a vast majority of the respondents appear to be financially literate – they answer the numeracy, inflation, and diversification questions correctly. The Indian financial literacy level is the same as in Netherlands but 20% higher compared to the USA. Indians use about 38% of monthly income to cover monthly expenses – they save or invest 62% of their salary on average. However, we find that most consumers are ill prepared to meet their goals based on their asset, liabilities and risk profiles. The survey of the literature suggests that financial counseling is an important tool in educating consumers in their decision making.

Keywords: Financial literacy, Household finance, Financial Literacy, Consumer Behavior

JEL Classification: D14, D18, L85, R21

Suggested Citation

Agarwal, Sumit and Amromin, Gene and Ben-David, Itzhak and Chomsisengphet, Souphala and Evanoff, Douglas D., Financial Counseling, Financial Literacy, and Household Decision Making (November 11, 2010). Pension Research Council WP 2010-34 . Available at SSRN: https://ssrn.com/abstract=1628975 or http://dx.doi.org/10.2139/ssrn.1628975

Sumit Agarwal (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)

HOME PAGE: http://www.ushakrisna.com

Gene Amromin

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
230 S. LaSalle
Chicago, IL 60604
United States
3123225368 (Phone)
3123226011 (Fax)

Itzhak Ben-David

Ohio State University - Fisher College of Business, Finance Department ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Douglas D. Evanoff

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-5814 (Phone)

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