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Financial Literacy and Savings Account Returns

  • Deuflhard, Florian
  • Georgarakos, Dimitris
  • Inderst, Roman

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 considerable 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 13% 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9882.

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Date of creation: Mar 2014
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Handle: RePEc:cpr:ceprdp:9882
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