Financial Literacy and Savings Account Returns
50 Pages Posted: 30 Sep 2015
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Financial Literacy and Savings Account Returns
Financial Literacy and Savings Account Returns
Financial Literacy and Savings Account Returns
Financial Literacy and Savings Account Returns
Financial Literacy and Savings Account Returns
Date Written: September 29, 2015
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 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 12% 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; savings accounts; interest rates; household finance
JEL Classification: D12, E21, G11, G21
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