Self-Control, Financial Literacy and Co-Holding Puzzle

John Gathergood and Jörg Weber ()

No 2012-02, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: We use UK household survey data incorporating measures of financial literacy and behavioural characteristics to analyse the puzzling co-existence of high cost revolving consumer credit alongside low yield liquid savings in household balance sheets, which we term the ‘co-holding puzzle’. Approximately 20% of households in our sample co-hold, on average, £6,500 of revolving consumer credit alongside £8,000 of liquid savings. Co-holders are typically more financially literate, with above average income and education. However, we show co-holding is also associated with impulsive spending behaviour on the part of the household. Our results lend empirical support to theoretical models in which sophisticated households co-hold as a means of managing a self-control problem.

Keywords: consumer credit; self-control; financial literacy (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-cba and nep-cbe
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Working Paper: Self-control, Financial Literacy and the Co-holding Puzzle (2012)
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