Financial Literacy and Financial Well-being

27 Pages Posted: 18 Sep 2024

See all articles by David Puelz

David Puelz

University of Texas at Austin - McCombs School of Business; University of Chicago - Booth School of Business

Robert Puelz

Southern Methodist University (SMU) - SMU Cox School of Business

Myeongrok Doh

New York University (NYU) - Department of Finance

Date Written: August 05, 2024

Abstract

We investigate the effect of financial literacy on a widely used measure of financial well-being while controlling for socioeconomic and behavioral factors. We analyze the survey data from the 2018 and 2021 National Financial Capability Study (NFCS) by the Financial Industry Regulatory Authority (FINRA). Our analysis employs three models to estimate the causal effect of financial literacy on financial well-being: a multiple linear regression model, a two-stage model using regularized Bayesian linear regression, and a two-stage model using Bayesian Causal Forests to study treatment effect heterogeneity. We find a surprising result: the treatment effect of financial literacy on well-being is negative, significant, and robust across all three models. This finding holds implications for financial education policymakers and consumer scientists whose work focuses on financial literacy, financial well-being, and overall well-being. By revealing diverse treatment effects across various subgroups, our study identifies demographic groups more susceptible to the adverse impact of financial literacy on financial well-being. Consequently, tailored strategies will better allocate financial education away from those penalized by good intentions.

Keywords: Financial literacy, Financial well-being, Regularization, Bayesian, Causal inference, Regression trees

Suggested Citation

Puelz, David and Puelz, Robert and Doh, Myeongrok, Financial Literacy and Financial Well-being (August 05, 2024). Available at SSRN: https://ssrn.com/abstract=4929341 or http://dx.doi.org/10.2139/ssrn.4929341

David Puelz (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Robert Puelz

Southern Methodist University (SMU) - SMU Cox School of Business ( email )

Myeongrok Doh

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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