Consumer-finance myths and other obstacles to financial literacy
AbstractThe consumer-finance market for middle and upper-income households in the United States is characterized by a wide range of choices, both in terms of financial-services providers and the specific products and services available.1 Prices generally are determined in competitive markets. Consumer-protection regulation is extensive. Why then is there so much dissatisfaction with the U.S. consumer-finance market, even for prime-quality customers? ; This paper focuses not on inadequate choices, inadequate competition or regulation, but on the difficulty many middle and upper-income households encounter in making good financial decisions—that is, a low average level of financial literacy. Millions of households are unable to make wise financial decisions even when adequate information is available. Low levels of financial skills provide a fertile environment for consumer-finance myths to arise and gain widespread acceptance.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Supervisory Policy Analysis Working Papers with number 2005-03.
Date of creation: 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-CBE-2006-08-12 (Cognitive & Behavioural Economics)
- NEP-EDU-2006-08-12 (Education)
- NEP-FMK-2006-08-12 (Financial Markets)
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- Berg, Nathan & Kim, Jeong-Yoo, 2010. "Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption," MPRA Paper 26593, University Library of Munich, Germany.
- Bernadette Kamleitner & Bianca Hornung & Erich Kirchler, 2010. "Over-indebtedness and the interplay of factual and mental money management: An interview study," Working Papers 34, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
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