IDEAS home Printed from https://ideas.repec.org/p/dnb/dnbwpp/231.html
   My bibliography  Save this paper

Financial Literacy and Retirement Planning in the Netherlands

Author

Listed:
  • Maarten van Rooij
  • Annamaria Lusardi
  • Rob Alessie

Abstract

The complexity of financial decisions households are faced with has increased tounprecedented levels. At the same time, recent research documents large differences ineconomic knowledge among households and indicates that household financial skills may beinadequate to cope with the increasing responsibility for making retirement decisions. In thispaper, we examine the relationship between financial knowledge and retirement planning inthe Netherlands. For this purpose, we have designed a customized module for the DNB (DeNederlandsche Bank) Household Survey. We identify a strong and positive associationbetween financial knowledge and retirement planning. Using information on economicseducation when young, we show that the nexus of causality goes from literacy to planningrather than the other way around.ÂÂ

Suggested Citation

  • Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2009. "Financial Literacy and Retirement Planning in the Netherlands," DNB Working Papers 231, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:231
    as

    Download full text from publisher

    File URL: https://www.dnb.nl/binaries/231%20Financial%20Literacy%20and%20Retirement%20Planning%20in%20the%20Netherlands_tcm46-225547.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Binswanger, Johannes & Schunk, Daniel, 2012. "What is an adequate standard of living during Retirement?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(02), pages 203-222, April.
    2. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, vol. 100(3), pages 1238-1260, June.
    3. Meier, Stephan & Sprenger, Charles D., 2013. "Discounting financial literacy: Time preferences and participation in financial education programs," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 159-174.
    4. Sumit Agarwal & John C. Driscoll & Xavier Gabaix & David Laibson, 2007. "The Age of Reason: Financial Decisions Over the Lifecycle," NBER Working Papers 13191, National Bureau of Economic Research, Inc.
    5. John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2007. "Measuring Self-Control Problems," American Economic Review, American Economic Association, vol. 97(3), pages 966-972, June.
    6. Annamaria Lusardi & Jason Beeler, 2006. "Savings Between Cohorts: The Role of Planning," Working Papers wp122, University of Michigan, Michigan Retirement Research Center.
    7. Oecd, 2006. "Improving Financial Literacy: Analysis of Issues and Policies," Financial Market Trends, OECD Publishing, vol. 2005(2), pages 111-123.
    8. Annamaria Lusardi & Olivia S. Mitchell, 2008. "Planning and Financial Literacy: How Do Women Fare?," American Economic Review, American Economic Association, vol. 98(2), pages 413-417, May.
    9. Bernheim, B. Douglas & Garrett, Daniel M. & Maki, Dean M., 2001. "Education and saving:: The long-term effects of high school financial curriculum mandates," Journal of Public Economics, Elsevier, vol. 80(3), pages 435-465, June.
    10. P.J.A. van Els & W.A. van den End & M.C.J. van Rooij, 2003. "Pensions and public opinion: a survey among dutch households," WO Research Memoranda (discontinued) 752, Netherlands Central Bank, Research Department.
    11. Kapteyn, Arie & Teppa, Federica, 2011. "Subjective measures of risk aversion, fixed costs, and portfolio choice," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 564-580, August.
    12. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
    13. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation and the Propensity to Plan," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1007-1047.
    14. Maarten C.J. van Rooij & Annamaria Lusardi & Rob J.M. Alessie, 2012. "Financial Literacy, Retirement Planning and Household Wealth," Economic Journal, Royal Economic Society, vol. 122(560), pages 449-478, May.
    15. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    16. Webley, Paul & Nyhus, Ellen K., 2006. "Parents' influence on children's future orientation and saving," Journal of Economic Psychology, Elsevier, vol. 27(1), pages 140-164, February.
    17. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2010. "Cognitive abilities and portfolio choice," European Economic Review, Elsevier, vol. 54(1), pages 18-38, January.
    18. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    19. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2009. "Measuring the Financial Sophistication of Households," American Economic Review, American Economic Association, vol. 99(2), pages 393-398, May.
    20. Annamaria Lusardi & Olivia S. Mitchell, 2017. "How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-31, September.
    21. Annette Vissing-Jorgensen, 2004. "Perspectives on Behavioral Finance: Does "Irrationality" Disappear with Wealth? Evidence from Expectations and Actions," NBER Chapters,in: NBER Macroeconomics Annual 2003, Volume 18, pages 139-208 National Bureau of Economic Research, Inc.
    22. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(1), pages 35-44, January.
    23. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    24. 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.
    25. van Rooij, Maarten C.J. & Lusardi, Annamaria & Alessie, Rob J.M., 2011. "Financial literacy and retirement planning in the Netherlands," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 593-608, August.
    26. Mark van Duijn & Maarten Lindeboom & Mauro Mastrogiacomo & M. Lundborg, 2009. "Pension plans and the retirement replacement rates in the Netherlands," CPB Discussion Paper 118, CPB Netherlands Bureau for Economic Policy Analysis.
    27. Adele Atkinson & Stephen McKay & Sharon Collard & Elaine Kempson, 2007. "Levels of Financial Capability in the UK," Public Money & Management, Taylor & Francis Journals, vol. 27(1), pages 29-36, February.
    28. Donkers, Bas & van Soest, Arthur, 1999. "Subjective measures of household preferences and financial decisions," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 613-642, December.
    29. van Rooij, Maarten C.J. & Kool, Clemens J.M. & Prast, Henriette M., 2007. "Risk-return preferences in the pension domain: Are people able to choose?," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 701-722, April.
    30. Kapteyn, A. & Teppa, F., 2002. "Subjective Measures of Risk Aversion and Portfolio Choice," Discussion Paper 2002-11, Tilburg University, Center for Economic Research.
    31. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1487-1519, August.
    32. Annamaria Lusardi & Olivia Mitchell, 2007. "Financial Literacy and Retirement Planning: New Evidence from the Rand American Life Panel," Working Papers wp157, University of Michigan, Michigan Retirement Research Center.
    33. repec:use:tkiwps:2323 is not listed on IDEAS
    34. Kapteyn, Arie & Smith, James P. & van Soest, Arthur, 2009. "Life Satisfaction," IZA Discussion Papers 4015, Institute for the Study of Labor (IZA).
    35. Kapteyn, A. & Teppa, F., 2002. "Subjective Measures of Risk Aversion and Portfolio Choice," Discussion Paper 2002-11, Tilburg University, Center for Economic Research.
    36. Kristopher S. Gerardi & Lorenz Goette & Stephan Meier, 2010. "Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data," FRB Atlanta Working Paper 2010-10, Federal Reserve Bank of Atlanta.
    37. Marianne A. Hilgert & Jeanne M. Hogarth & Sondra G. Beverly, 2003. "Household financial management: the connection between knowledge and behavior," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 309-322.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bateman, Hazel & Eckert, Christine & Geweke, John & Louviere, Jordan & Satchell, Stephen & Thorp, Susan, 2014. "Financial competence, risk presentation and retirement portfolio preferences," Journal of Pension Economics and Finance, Cambridge University Press, vol. 13(01), pages 27-61, January.
    2. Gathergood, John & Weber, Jörg, 2017. "Financial literacy, present bias and alternative mortgage products," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 58-83.
    3. Disney, Richard & Gathergood, John, 2013. "Financial literacy and consumer credit portfolios," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2246-2254.
    4. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    5. van Schie, Ron J.G. & Donkers, Bas & Dellaert, Benedict G.C., 2012. "Savings adequacy uncertainty: Driver or obstacle to increased pension contributions?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 882-896.
    6. Bernd Hayo & Matthias Uhl, 2017. "Taxation and consumption: evidence from a representative survey of the German population," Applied Economics, Taylor & Francis Journals, vol. 49(53), pages 5477-5490, November.
    7. Stephens, Thomas A & Tyran, Jean-Robert, 2012. "“At least I didn’t lose money” Nominal Loss Aversion Shapes Evaluations of Housing Transactions," CEPR Discussion Papers 9198, C.E.P.R. Discussion Papers.
    8. Gathergood, John, 2012. "Self-control, financial literacy and consumer over-indebtedness," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 590-602.
    9. van der Cruijsen, Carin & de Haan, Jakob & Jansen, David-Jan & Mosch, Robert, 2013. "Knowledge and opinions about banking supervision: Evidence from a survey of Dutch households," Journal of Financial Stability, Elsevier, vol. 9(2), pages 219-229.
    10. Fatih B. GUMUS & Yusuf DAYIOGLU, 2015. "An Analysis on The Socio-Economic and Demographic Factors That Have an Effect on The Risk Taking Preferences of Personal Investors," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 136-147.
    11. Jappelli, Tullio & Padula, Mario, 2013. "Investment in financial literacy and saving decisions," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2779-2792.
    12. van Rooij, Maarten C.J. & Lusardi, Annamaria & Alessie, Rob J.M., 2011. "Financial literacy and retirement planning in the Netherlands," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 593-608, August.
    13. Bucher-Koenen, Tabea, 2011. "Financial Literacy, Riester Pensions, and Other Private Old Age Provision in Germany," MEA discussion paper series 11250, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    14. John Gathergood & Joerg Weber, 2012. "Self-Control, Financial Literacy and Co-Holding Puzzle," Discussion Papers 2012-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    15. Richard Disney & John Gathergood, "undated". "Financial literacy and consumer credit use," Discussion Papers 12/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    16. Carin van der Cruijsen & Jakob de Haan & David-Jan Jansen & Robert Mosch, 2011. "Household savings behaviour in crisis times," DNB Working Papers 315, Netherlands Central Bank, Research Department.
    17. Frank van Erp & Niels Vermeer & Daniël van Vuuren, 2013. "Non-financial determinants of retirement," CPB Discussion Paper 243, CPB Netherlands Bureau for Economic Policy Analysis.
    18. J. François Outreville, 2015. "The Relationship Between Relative Risk Aversion And The Level Of Education: A Survey And Implications For The Demand For Life Insurance," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 97-111, February.
    19. Vanessa Mak & Jurgen Braspenning, 2012. "Errare humanum est: Financial Literacy in European Consumer Credit Law," Journal of Consumer Policy, Springer, vol. 35(3), pages 307-332, September.
    20. Topa, Gabriela & Moriano, Juan A. & Moreno, Ana, 2012. "Psychosocial determinants of financial planning for retirement among immigrants in Europe," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 527-537.

    More about this item

    Keywords

    Thinking about Retirement; Knowledge of Finance and Economics; FinancialSophistication; Economics Schooling.;

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:231. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet). General contact details of provider: http://edirc.repec.org/data/dnbgvnl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.