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Financial literacy and savings account returns

Author

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

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 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.

Suggested Citation

  • Deuflhard, Florian & Georgarakos, Dimitris & Inderst, Roman, 2015. "Financial literacy and savings account returns," IMFS Working Paper Series 88, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
  • Handle: RePEc:zbw:imfswp:88
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    Cited by:

    1. repec:spr:jbecon:v:87:y:2017:i:5:d:10.1007_s11573-017-0853-9 is not listed on IDEAS
    2. Maarten van Rooij & Jakob de Haan, 2016. "Will helicopter money be spent? New evidence," DNB Working Papers 538, Netherlands Central Bank, Research Department.
    3. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2017. "Culture and Financial Literacy," Working Papers on Finance 1703, University of St. Gallen, School of Finance.

    More about this item

    Keywords

    financial literacy; savings accounts; interest rates; household finance;

    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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