Financial Literacy and Savings Account Returns

45 Pages Posted: 2 Jun 2014

See all articles by Florian Deuflhard

Florian Deuflhard

Goethe University Frankfurt

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Roman Inderst

Goethe University Frankfurt

Multiple version iconThere are 5 versions of this paper

Date Written: March 2014

Abstract

Savings accounts are owned by most households, but little is known about the performance of households’ investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document considerable heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 13% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.

Keywords: Financial literacy, Household finance, Interest rates, Savings accounts

JEL Classification: D12, E21, G11, G21

Suggested Citation

Deuflhard, Florian and Georgarakos, Dimitris and Inderst, Roman, Financial Literacy and Savings Account Returns (March 2014). CEPR Discussion Paper No. DP9882. Available at SSRN: https://ssrn.com/abstract=2444903

Florian Deuflhard (Contact Author)

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessia 60323
Germany

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Roman Inderst

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60629
Germany
+49 (69) 798-34601 (Phone)
+49 (69) 798-35000 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/en/departments/finance/lehrstuhl/prof-dr-roman-inderst/team

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