Is Financial Literacy Dangerous? Financial Literacy, Behavioral Factors, and Financial Choices of Households

42 Pages Posted: 1 Jul 2020

See all articles by Tetsuya Kawamura

Tetsuya Kawamura

Kansai University - Center for Experimental Economics

Tomoharu Mori

College of Comprehensive Psychology, Ritsumeikan University; Research Institute for Socionetwork Strategies, Kansai University

Taizo Motonishi

Kansai University - Faculty of Economics

Kazuhito Ogawa

Kansai University; Centre for Experimental Economics, Kansai University

Date Written: June 8, 2020

Abstract

Using purpose-built original 2018 Japanese survey data, we estimate the financial behaviors and attitudes of households. We find that financial literacy plays an important and consistent role in financial decision-making. However, the actual behaviors are counter-intuitive: People with high financial literacy tend to take too many risks, overborrow, and hold naive financial attitudes; that is, financial literacy makes people daring and reckless in some financial aspects. By contrast, financially literate people are good at retirement planning and are indifferent to gambling. Preferences such as risk and loss aversions and discount factors, also have a role in financial choices.

Keywords: behavioral factor, consumer protection, financial education, financial literacy, household financial behavior, overconfidence

JEL Classification: C83, D14, G41

Suggested Citation

Kawamura, Tetsuya and Mori, Tomoharu and Motonishi, Taizo and Ogawa, Kazuhito, Is Financial Literacy Dangerous? Financial Literacy, Behavioral Factors, and Financial Choices of Households (June 8, 2020). Available at SSRN: https://ssrn.com/abstract=3621890 or http://dx.doi.org/10.2139/ssrn.3621890

Tetsuya Kawamura

Kansai University - Center for Experimental Economics ( email )

Osaka, Suita
Japan

Tomoharu Mori

College of Comprehensive Psychology, Ritsumeikan University ( email )

2-150, Iwakuracho
Ibaraki, Osaka 5678570
Japan

Research Institute for Socionetwork Strategies, Kansai University ( email )

3-3-35 Yamatecho
Osaka, 564-8680
Japan

Taizo Motonishi (Contact Author)

Kansai University - Faculty of Economics ( email )

3-3-35 Yamatecho
Suita, Osaka, 564-8680
Japan

Kazuhito Ogawa

Kansai University ( email )

3-3-35 Yamatecho
Osaka, 564-8680
Japan

Centre for Experimental Economics, Kansai University ( email )

3-3-35 Yamatecho
Osaka, 564-8680
Japan

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