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Actual and perceived financial sophistication and wealth accumulation: The role of education and gender

Christina Bannier and Milena Neubert ()
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Milena Neubert: Department of Corporate Finance, Johannes Gutenberg-Universitaet Mainz

No 1605, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: This study examines the role of actual and perceived ?nancial sophistication (i.e., ?nancial literacy and con?dence) for individuals’ wealth accumulation. Using survey data from the German SAVE initiative, we ?nd strong gender- and education-related di?erences in the distribution of the two variables and their e?ects on wealth: As ?nancial literacy rises in formal education, whereas con?dence increases in education for men but decreases for women, we observe that women become strongly undercon?dent with higher education, while men remain overcon?dent. Regarding wealth accumulation, we show that ?nancial literacy has a positive e?ect that is stronger for women than for men and is increasing (decreasing) in education for women (men). Con?dence, however, supports only highly-educated men’s wealth. When considering di?erent channels for wealth accumulation, we observe that ?nancial literacy is more important for current ?nancial market participation, whereas con?dence is more strongly associated with future-oriented ?nancial planning. Overall, we demonstrate that highly-educated men’s wealth levels bene?t from their overcon?dence via all ?nancial decisions considered, but highly-educated women’s ?nancial planning suffers from their undercon?dence. This may impair their wealth levels in old age.

Keywords: Financial literacy; ?nancial sophistication; con?dence; wealth; household ?nance; behavioral ?nance; gender; formal education (search for similar items in EconPapers)
JEL-codes: D91 G11 D83 J26 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2016-01-13
New Economics Papers: this item is included in nep-age, nep-dem, nep-edu and nep-eur
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https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1605.pdf First version, 2016 (application/pdf)

Related works:
Working Paper: Actual and perceived financial sophistication and wealth accumulation: The role of education and gender (2016) Downloads
Working Paper: Actual and perceived financial sophistication and wealth accumulation: The role of education and gender (2016) Downloads
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