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Financial literacy and financial decision-making at older ages

Author

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  • Fong, Joelle H.
  • Koh, Benedict S.K.
  • Mitchell, Olivia S.
  • Rohwedder, Susann

Abstract

How well older households manage their wealth holdings is an important determinant of their financial security during retirement, yet little is known about their financial decision-making and how this relates to their financial literacy. Our paper fills this gap by measuring financial literacy among older persons in the Singapore Life Panel and examining its association with timely credit card debt repayment, stock market participation, and age-based investment risk diversification. Most older respondents understand interest compounding and inflation, but fewer than half know about risk diversification. Almost all older credit card holders pay off their balances in a timely manner, but only 40% hold stocks; fewer than 18% with $1000+ in assets hold portfolios consistent with age-appropriate investment glide paths. We further show that a one-unit higher financial literacy score is associated with a greater propensity to timely pay off credit card balances (1.5 ppts), to hold stock (8.3 ppts), and to follow an age-appropriate investment glide path (1.7 ppts).

Suggested Citation

  • Fong, Joelle H. & Koh, Benedict S.K. & Mitchell, Olivia S. & Rohwedder, Susann, 2021. "Financial literacy and financial decision-making at older ages," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:pacfin:v:65:y:2021:i:c:s0927538x20306934
    DOI: 10.1016/j.pacfin.2020.101481
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    References listed on IDEAS

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    Cited by:

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    7. Huidan Xu & Kun Song & Yichao Li & Martinson Ankrah Twumasi, 2023. "The Relationship between Financial Literacy and Income Structure of Rural Farm Households: Evidence from Jiangsu, China," Agriculture, MDPI, vol. 13(3), pages 1-15, March.
    8. Paladino, Giovanna, 2022. "Ask a question, get an answer. A study of the framing effect on financial literacy in Italy," MPRA Paper 112168, University Library of Munich, Germany.
    9. Meng, Zhaojun & Wu, Yanghui, 2025. "Attention to medical care and maintenance, household income, and financial pension security level," Finance Research Letters, Elsevier, vol. 85(PD).
    10. Joseph Sedila Malepe, 2023. "Government interventions in the financial literacy of the law-enforcers: A case study of Emalahleni’s South African Police Services (SAPS)," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 12(10), pages 217-227, December.
    11. Li, Degang & Bo, Lili, 2025. "The impact of health concerns on household financial asset allocation in the context of population aging," Finance Research Letters, Elsevier, vol. 85(PB).
    12. Krishna Reddy & Damien Wallace & Nirosha Hewa Wellalage, 2025. "The impact of financial literacy on financial inclusion," Australian Journal of Management, Australian School of Business, vol. 50(4), pages 1187-1214, November.
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    14. Vieira, Kelmara Mendes & Rosenblum, Tamara Otilia Amaral & Matheis, Taiane Keila, 2022. "And tomorrow, how will it be? Developing a Financial Preparation for Retirement Scale (FPRS)," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G5 - Financial Economics - - Household Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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