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Financial Literacy and Savings Account Returns

Author

Listed:
  • Florian Deuflhard
  • Dimitris Georgarakos
  • Roman Inderst

Abstract

Savings accounts are owned by most households, but little is known about the performance of households’ investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 12% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.

Suggested Citation

  • Florian Deuflhard & Dimitris Georgarakos & Roman Inderst, 2019. "Financial Literacy and Savings Account Returns," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 131-164.
    • Handle: RePEc:oup:jeurec:v:17:y:2019:i:1:p:131-164.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvy003
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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