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Household saving behavior: The role of literacy, information and financial education programs

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  • Lusardi, Annamaria
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    Abstract

    Individuals are increasingly in charge of their own financial security after retirement. But how well-equipped are individuals to make saving decisions; do they possess adequate financial literacy, are they informed about the most important components of saving plans, do they even plan for retirement? This paper shows that financial illiteracy is widespread among the US population and particularly acute among specific demographic groups, such as those with low education, women, African-Americans and Hispanics. Moreover, close to half of older workers do not know which type of pensions they have and the large majority of workers know little about the rules governing Social Security benefits. Lack of literacy and lack of information can affect the ability to save and to secure a comfortable retirement; few individuals rely on the help of financial advisors and ignorance about basic financial concepts can be linked to lack of retirement planning and lack of wealth. Financial education programs can help improve saving and financial decision-making, but much more can be done to improve the effectiveness of these programs. --

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    File URL: http://econstor.eu/bitstream/10419/25529/1/559752539.PDF
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    Bibliographic Info

    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2007/28.

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    Date of creation: 2007
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    Handle: RePEc:zbw:cfswop:200728

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    Related research

    Keywords: Financial Literacy; Financial Education Programs; Saving Behavior; Pensions;

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    1. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The age of reason: financial decisions over the lifecycle," Working Paper Series WP-07-05, Federal Reserve Bank of Chicago.
    2. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1487-1519, August.
    3. Esther Dufluo & Emmanuel Saez, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
    4. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
    5. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
    6. Esther Duflo & Emmanuel Saez, 2003. "The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 815-842, August.
    7. Giovanni Mastrobuoni, 2007. "Do better–informed workers make better retirement choices? A test based on the Social Security Statement," Carlo Alberto Notebooks 51, Collegio Carlo Alberto.
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