The Effect of Financial Literacy on Emergency Fund Adequacy

30 Pages Posted: 1 Oct 2018

See all articles by Sunwoo T. Lee

Sunwoo T. Lee

York University

Sherman D. Hanna

Ohio State University (OSU)

Date Written: September 30, 2018


Analyses of the 2016 Survey of Consumer Finances (SCF) dataset found that 33% of households had comprehensive financial assets (excluding retirement funds) sufficient to cover 3 months of spending. We conducted a hierarchical model and found that objective literacy (score on a financial knowledge test) was positively related to the likelihood of meeting an emergency fund guideline, but subjective literacy did not have a significant effect. Tests of the effects of financial overconfidence showed that even though overconfident respondents were less likely to meet the guideline than those with high objective financial literacy, subjective financial literacy had no separate effect in terms of a definition of overconfidence. The influence of objective financial literacy predominated that of subjective financial literacy. In addition, many household characteristics were related to meeting guidelines in ways similar to effects found by previous researchers.

Keywords: Financial literacy, Emergency funds, Survey of Consumer Finances

JEL Classification: D12, D14, D83, E21

Suggested Citation

Lee, Sunwoo and Hanna, Sherman D., The Effect of Financial Literacy on Emergency Fund Adequacy (September 30, 2018). 2019 Academic Research Colloquium for Financial Planning and Related Disciplines, Available at SSRN: or

Sunwoo Lee (Contact Author)

York University ( email )

4700 Keele Street
252 Atkinson Building
Toronto, Ontario M3J 1P3

Sherman D. Hanna

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

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