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Financial Decision Making and Cognition in a Family Context

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  • James P. Smith
  • John J. McArdle
  • Robert Willis

Abstract

In this article, we study the association of cognitive traits and, in particular, numeracy of both spouses on financial outcomes of the family. We find significant effects, particularly for numeracy for financial and non-financial respondents alike, but much larger effects for the financial decision maker in the family. We also examine who makes these financial decisions in the family and why. Once again, cognitive traits such as numeracy are an important component of that decision with larger effects of numeracy for husbands compared to wives. Copyright © 2010 TheAuthor(s). The Economic Journal © 2010 Royal Economic Society.

Suggested Citation

  • James P. Smith & John J. McArdle & Robert Willis, 2010. "Financial Decision Making and Cognition in a Family Context," Economic Journal, Royal Economic Society, vol. 120(548), pages 363-380, November.
  • Handle: RePEc:ecj:econjl:v:120:y:2010:i:548:p:f363-f380
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    References listed on IDEAS

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    1. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2012. "Financial Knowledge and Financial Literacy at the Household Level," American Economic Review, American Economic Association, vol. 102(3), pages 309-313, May.
    2. Tullio Jappelli, 2010. "Economic Literacy: An International Comparison," Economic Journal, Royal Economic Society, vol. 120(548), pages 429-451, November.
    3. Gerard J. vandenBerg & Dorly J.H. Deeg & Maarten Lindeboom & France Portrait, 2010. "The Role of Early-Life Conditions in the Cognitive Decline due to Adverse Events Later in Life," Economic Journal, Royal Economic Society, vol. 120(548), pages 411-428, November.
    4. James Banks & Cormac O'Dea & Zoë Oldfield, 2010. "Cognitive Function, Numeracy and Retirement Saving Trajectories," Economic Journal, Royal Economic Society, vol. 120(548), pages 381-410, November.
    5. Daniel J. Benjamin & Sebastian A. Brown & Jesse M. Shapiro, 2013. "Who Is ‘Behavioral’? Cognitive Ability And Anomalous Preferences," Journal of the European Economic Association, European Economic Association, vol. 11(6), pages 1231-1255, December.
    6. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
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