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Precautionary Savings, Retirement Planning and Misperceptions of Financial Literacy

43 Pages Posted: 9 Dec 2014 Last revised: 17 Jul 2016

Anders Anderson

Swedish House of Finance

Forest Baker

LinkedIn Corporation

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Multiple version iconThere are 2 versions of this paper

Date Written: April 28, 2016


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 CFOs, CEOs, and COOs 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.

Keywords: Financial literacy, optimism, overconfidence

JEL Classification: G18, D18

Suggested Citation

Anderson, Anders and Baker, Forest and Robinson, David T., Precautionary Savings, Retirement Planning and Misperceptions of Financial Literacy (April 28, 2016). Swedish House of Finance Research Paper No. 15-01; Duke I&E Research Paper No. 15-5. Available at SSRN: or

Anders Anderson (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Forest Baker

LinkedIn Corporation ( email )

2029 Stierlin Ct
Mountain View, CA
United States
+1-415-970 5166 (Phone)

David Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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