Risk Literacy

Annamaria Lusardi ()

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2015, vol. 1, issue 1, 5-23

Abstract: I examine financial literacy—specifically knowledge of risk—using data from surveys in the United States and other countries. I show that risk literacy is very low; the majority of individuals lack knowledge of concepts such as risk diversification and do not understand the relationship between risk and return. Findings are strikingly similar across countries; a third of survey respondents in most countries report that they do not know the answer to risk literacy questions. I also show that risk literacy matters for financial decisions; those who are more knowledgeable about risk are more likely to have precautionary savings and to plan for retirement. Given that individuals have much greater responsibility for their financial well-being before and after retirement than in the past, addressing lack of financial literacy, including risk literacy, may provide new ways to promote saving and financial security. Copyright Società Italiana degli Economisti (Italian Economic Association) 2015

Keywords: Financial literacy; Risk diversification; Retirement planning; precautionary saving; D91; G11; D80 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s40797-015-0011-x

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