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Numeracy, financial literacy, and financial decision-making

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  • Annamaria Lusardi

Abstract

Financial decisions, be they related to asset building or debt management, require the capacity to do calculations, including some complex ones. But how numerate are individuals, in particular when it comes to calculations related to financial decisions? Studies and surveys implemented in both the United States and in other countries that are described in this paper show the level of numeracy among the population to be very low. Moreover, lack of numeracy is not only widespread but is particularly severe among some demographic groups, such as women, the elderly, and those with low educational attainment. This has potential consequences for individuals and for society as a whole because numeracy is found to be linked to many financial decisions. Now more than ever, numeracy and financial literacy are lifetime skills necessary to succeed in today's complex economic environment.

Suggested Citation

  • Annamaria Lusardi, 2012. "Numeracy, financial literacy, and financial decision-making," NBER Working Papers 17821, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17821
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    13. 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.
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    Cited by:

    1. Almenberg, Johan & Dreber, Anna, 2015. "Gender, stock market participation and financial literacy," Economics Letters, Elsevier, vol. 137(C), pages 140-142.
    2. Luigi Guiso & Eliana Viviano, 2015. "How Much Can Financial Literacy Help?," Review of Finance, European Finance Association, vol. 19(4), pages 1347-1382.
    3. Ryan M. Goodstein, 2014. "Refinancing Trends among Lower Income and Minority Homeowners during the Housing Boom and Bust," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(3), pages 690-723, September.
    4. repec:cup:jpenef:v:16:y:2017:i:03:p:297-323_00 is not listed on IDEAS
    5. repec:eee:soceco:v:74:y:2018:i:c:p:18-25 is not listed on IDEAS
    6. Lusardi, Annamaria & Samek, Anya & Kapteyn, Arie & Glinert, Lewis & Hung, Angela & Heinberg, Aileen, 2017. "Visual tools and narratives: new ways to improve financial literacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(03), pages 297-323, July.
    7. repec:eee:jbrese:v:79:y:2017:i:c:p:228-237 is not listed on IDEAS
    8. repec:eee:pacfin:v:43:y:2017:i:c:p:218-237 is not listed on IDEAS
    9. Shen, Chung-Hua & Lin, Shih-Jie & Tang, De-Piao & Hsiao, Yu-Jen, 2016. "The relationship between financial disputes and financial literacy," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 46-65.
    10. repec:spr:jbecon:v:87:y:2017:i:5:d:10.1007_s11573-017-0853-9 is not listed on IDEAS
    11. Roberto Casarin & Niccolò Casnici & Pierpaolo Dondio & Flaminio Squazzoni, 2015. "Back to Basics! The Educational Gap of Online Investors and the Conundrum of Virtual Communities," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 51-69, June.
    12. Mikhed, Vyacheslav & Scholnick, Barry, 2014. "Financial benefits, travel costs, and bankruptcy," Working Papers 14-18, Federal Reserve Bank of Philadelphia.
    13. Sundar, B. & Virmani, Vineet, 2013. "Numeracy and Financial Literacy of Forest Dependent Communities Evidence from Andhra Pradesh," IIMA Working Papers WP2013-09-02, Indian Institute of Management Ahmedabad, Research and Publication Department.

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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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