How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors
Justine Hastings and
No 16740, NBER Working Papers from National Bureau of Economic Research, Inc
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 wellbeing would do well to consider the importance of these factors.
JEL-codes: E21 G11 G23 H31 J26 (search for similar items in EconPapers)
Note: AG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39) Track citations by RSS feed
Published as JUSTINE HASTINGS & OLIVIA S. MITCHELL, 2020. "How financial literacy and impatience shape retirement wealth and investment behaviors," Journal of Pension Economics and Finance, vol 19(1), pages 1-20.
Downloads: (external link)
Journal Article: How financial literacy and impatience shape retirement wealth and investment behaviors (2020)
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)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:16740
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().