How financial literacy and impatience shape retirement wealth and investment behaviors

Justine Hastings and Olivia Mitchell

Journal of Pension Economics and Finance, 2020, vol. 19, issue 1, 1-20

Abstract: Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs. We use experimental evidence from Chile to explore how these factors appear related to poor financial decisions. Our results show that our measure of impatience is a strong predictor of wealth and investment in health. Financial literacy is also correlated with wealth though it appears to be a weaker predictor of sensitivity to framing in investment decisions. Policymakers interested in enhancing retirement well-being would do well to consider the importance of both factors.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors (2011)
Working Paper: How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jpenef:v:19:y:2020:i:1:p:1-20_1

Access Statistics for this article

More articles in Journal of Pension Economics and Finance from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().