Financial Knowledge and Household Saving: Evidence From the Survey of Consumer Finances

Abstract

This study analyzed the relation between financial knowledge and household saving behavior using the 2016 Survey of Consumer Finances (SCF) dataset. The results from a hierarchical model showed that both objective and perceived financial knowledge were related positively to the likelihood of being a saver, and the explanatory power of the regression models increased significantly when financial knowledge variables were added. Further, the results were robust across different measurements of household savings and additional analyses of the 2015 National Financial Capability Study (NFCS) dataset. Policymakers and financial institutions may benefit from this study as they develop policies and products to promote or motivate savings.

Keywords: Financial Knowledge, Household Savings, Hierarchical Model, Survey of Consumer Finances

JEL Classification: D12, D14