Financial Literacy and Economic Outcomes: Evidence and Policy Implications

17 Pages Posted: 24 Feb 2015

See all articles by Olivia S. Mitchell

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Date Written: January 7, 2015

Abstract

This paper reviews what we have learned about financial literacy and its relationship to financial decision-making around the world. Using three simple questions, we have surveyed people in many countries to determine whether they have the fundamental knowledge of finance needed to function as effective economic decision makers. We show that levels of financial literacy are low not only in the United States but also in many other countries, including those with well-developed financial markets. Moreover, financial illiteracy is particularly acute for some demographic groups, especially women and the less-educated. These findings are important since financial literacy is linked to borrowing, saving, and spending patterns. We also offer new evidence on financial literacy among high school students drawing on the newly-released Programme for International Student Assessment implemented in 18 countries. Last, we discuss the implications of this research for policy.

Keywords: Financial literacy, financial decision-making, financial education

JEL Classification: D91

Suggested Citation

Mitchell, Olivia S. and Lusardi, Annamaria, Financial Literacy and Economic Outcomes: Evidence and Policy Implications (January 7, 2015). Available at SSRN: https://ssrn.com/abstract=2568732 or http://dx.doi.org/10.2139/ssrn.2568732

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Annamaria Lusardi (Contact Author)

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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