How Does Financial Literacy Affect the Savings Decision?

28 Pages Posted: 1 Oct 2015

See all articles by Paul Brockman

Paul Brockman

Lehigh University - College of Business

David Michayluk

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Date Written: September 29, 2015

Abstract

Savings decisions are essential in reallocating income across periods but understanding this concept may be mired by low levels of financial literacy. We survey individuals to identify the role of financial literacy in savings rates. We note differences in financial literacy and savings rates between genders and across age groups and income levels. We show that in each income group, people with low financial literacy save significantly less than others. We examine specific components of financial literacy and show that understanding diversification is associated with increases in savings rates in several income groups.

Keywords: Financial literacy; Savings rates

JEL Classification: D14; D91; G11

Suggested Citation

Brockman, Paul and Michayluk, David, How Does Financial Literacy Affect the Savings Decision? (September 29, 2015). CIFR Paper No. 078/2015. Available at SSRN: https://ssrn.com/abstract=2667283 or http://dx.doi.org/10.2139/ssrn.2667283

Paul Brockman

Lehigh University - College of Business ( email )

Bethlehem, PA 18015
United States

David Michayluk (Contact Author)

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Finance Discipline Group
UTS Business
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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