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Savings Decisions of American Households: The Roles of Financial Literacy and Financial Practice

Author

Listed:
  • Tae-young Pak

    (University of Alabama)

  • Swarnankur Chatterjee

    (University of Georgia)

Abstract

This paper finds that financial literacy, along with financial practice, play a role in the financial decision making process of households. Building upon earlier works, this paper examines whether basic financial literacy, in the absence of sufficient household financial management practice, is associated with suboptimal savings behavior. Using a nationally representative dataset, we find new evidence that households, with below average financial practice skills but with higher than average financial literacy scores, were less likely to have sufficient precautionary savings.

Suggested Citation

  • Tae-young Pak & Swarnankur Chatterjee, 2016. "Savings Decisions of American Households: The Roles of Financial Literacy and Financial Practice," Economics Bulletin, AccessEcon, vol. 36(3), pages 1486-1496.
    • Handle: RePEc:ebl:ecbull:eb-15-00579
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    References listed on IDEAS

    as
    1. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David I. Laibson, 2007. "The age of reason: financial decisions over the lifecycle," Working Paper Series WP-07-05, Federal Reserve Bank of Chicago.
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    4. Lusardi, Annamaria & Tufano, Peter, 2015. "Debt literacy, financial experiences, and overindebtedness," Journal of Pension Economics and Finance, Cambridge University Press, vol. 14(4), pages 332-368, October.
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    Cited by:

    1. Kwee Kim Peong, 2019. "Determinants of Personal Financial Literacy among Young Adults in Malaysian Accounting Firms," GATR Journals gjbssr524, Global Academy of Training and Research (GATR) Enterprise.

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    More about this item

    Keywords

    Financial Literacy; Financial Practice; Precautionary Savings;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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