Financial Literacy, Risk and Time Preferences – Results from a Randomized Educational Intervention

96 Pages Posted: 3 Aug 2020

See all articles by Matthias Sutter

Matthias Sutter

Max Planck Institute for Research on Collective Goods

Michael Weyland

Pädagogische Hochschule (PH) Ludwigsburg University of Education

Anna Untertrifaller

University of Cologne

Manuel Froitzheim

University of Siegen

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Date Written: August 3, 2020

Abstract

We present the results of a randomized intervention in schools to study how teaching financial literacy affects risk and time preferences of adolescents. Following more than 600 adolescents, aged 16 years on average, over about half a year, we provide causal evidence that teaching financial literacy has significant short-term and longer-term effects on risk and time preferences. Compared to two different control treatments, we find that teaching financial literacy makes subjects more patient, less present-biased, and slightly more risk-averse. Our finding that the intervention changes economic preferences contributes to a better understanding of why financial literacy has been shown to correlate systematically with financial behavior in previous studies. We argue that the link between financial literacy and field behavior works through economic preferences. In our study, the latter are also related in a meaningful way to students’ field behavior.

Keywords: Financial literacy, randomized intervention, risk preferences, time preferences, field experiment

JEL Classification: C93, D14, I21

Suggested Citation

Sutter, Matthias and Weyland, Michael and Untertrifaller, Anna and Froitzheim, Manuel, Financial Literacy, Risk and Time Preferences – Results from a Randomized Educational Intervention (August 3, 2020). MPI Collective Goods Discussion Paper, No. 2020/17, Available at SSRN: https://ssrn.com/abstract=3666088

Matthias Sutter (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Michael Weyland

Pädagogische Hochschule (PH) Ludwigsburg University of Education ( email )

Reuteallee 46
Ludwigsburg, D-71634
Germany

Anna Untertrifaller

University of Cologne

Manuel Froitzheim

University of Siegen

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