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Precautionary Savings, Retirement Planning and Misperceptions of Financial Literacy

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  • Anders Anderson
  • Forest Baker
  • David T. Robinson

Abstract

We measure financial literacy among LinkedIn members, complementing standard questions with additional questions that allow us to gauge self-perceptions of financial literacy. Average financial literacy is surprisingly low given the demographics of our sample: fewer than two-thirds of CFOs, CEOs, and COOs complete the test correctly. Financial literacy, precautionary savings and retirement planning are positively correlated, but this is mostly driven by perceived, not actual, literacy: controlling for self-perceptions, actual literacy has low predictive power. Perceptions drive decision-making among low-literacy respondents and are associated with mistaken beliefs about financial products and less willingness to accept financial advice.

Suggested Citation

  • Anders Anderson & Forest Baker & David T. Robinson, 2015. "Precautionary Savings, Retirement Planning and Misperceptions of Financial Literacy," NBER Working Papers 21356, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21356
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    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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