On a Need-to-Know Basis: How the Distribution of Responsibility Between Couples Shapes Financial Literacy and Financial Outcomes

Abstract

Many consumers suffer from low levels of financial literacy, and attempts to increase this dimension of consumer expertise via educational interventions are typically unsuccessful. We argue that many of these apparent deficits are caused by the distribution of responsibility for information and decision-making between relationship partners. Early in relationships, responsibility for financial matters is often determined not by differences in financial knowledge, but by differences in relative contributions to other domains (study 3). Although responsibility may be initially unrelated to ability, responsibility predicts learning of new financial information (study 4). Cross-sectional data from consumers in long-term relationships show that as relationships lengthen, high levels of financial responsibility are associated with increases in financial literacy, whereas low levels of financial responsibility are not (study 1). These diverging trajectories of expertise cannot be explained by switching roles or changes in the sample over time (study 2). The resulting gap in financial literacy is linked to corresponding differences in both financial decision-making and financial information search (studies 5, 5a). Consumers develop expertise on a “need to know” basis. Offloading responsibility to a relationship partner may eliminate this need in the present, while simultaneously creating barriers to developing expertise when needed in the future.

Keywords: Financial Literacy, Financial Decision-Making, Information Search, Learning, Attention, Expertise, Education, Couples, Relationships, Transactive Memory, Cognitive Interdependence