Financial Literacy, Pension Planning, and Investment Behavior - A Comparative Study between Austria and Switzerland

Abstract

This paper analyzes the impacts of financial literacy on the investment and pension planning behavior in Austria and Switzerland. Based on survey data of 449 individuals from Austria and Switzerland, we first analyze which socio-demographic and country-specific factors determine financial literacy. In a second step, we explain the investment and pension planning behavior by the level of financial literacy as well as other relevant person- and country-specific characteristics. In particular, we investigate differences between the Austrian and the Swiss with respect to financial literacy and the respective pension system and derive potential impacts on the pension planning and investment behavior of the population. Our results show a higher level of financial literacy in Switzerland compared to Austria, and the difference is even larger for the factual compared to the self-assessed financial literacy. Also women are less financially literate than men. A higher financial literacy has a clear positive impact on the level of pension planning, whereas the effect of the self-assessed financial literacy is stronger than the impact of the factual one. Swiss people seem to care more about pension planning compared to Austrians, and the same holds for elder people compared to the younger persons in our sample. Overall, our results provide some potentially interesting insights on the impacts of institutional differences on pension planning, investment and information behavior.

Keywords: Financial Literacy, Pension planning, Investment Behavior

JEL Classification: I22, J26, D14, P46, P52, C25