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Financial literacy and voluntary savings for retirement in Slovakia

Zuzana Brokesova (), Andrej Cupak () and Gueorgui Kolev
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Gueorgui Kolev: Middlesex University London

No WP 10/2017, Working and Discussion Papers from Research Department, National Bank of Slovakia

Abstract: We utilise recent Household Finance and Consumption Survey microdata to report first causal effects of financial literacy on voluntary private pension schemes participation for Slovakia. Savings for retirement in the supplementary pension schemes are positively associated with financial literacy after controlling for a set of relevant socio-economic variables. One additional correctly answered financial literacy question leads to a 6 percentage points increase in the probability of having a voluntary pension savings plan in our ordinary least squares estimates. The causal impact of financial literacy increases to 16 percentage points when we address potential endogeneity problem by novel to the literature instrumental variables. Interestingly, we find less significant effects of financial literacy on the probability of individuals having employer-supported private pension savings plans. Our findings inform policy and suggest how policymakers can promote the voluntary retirement savings behaviour of individuals in Slovakia and in other Central and Eastern European countries in times of decreasing benefits of state pensions.

Keywords: Financial literacy; Retirement savings; Survey data; Endogeneity; Instrumental variables; Slovakia (search for similar items in EconPapers)
JEL-codes: D14 D91 I2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-eur, nep-fle and nep-tra
Date: 2017-12
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Persistent link: https://EconPapers.repec.org/RePEc:svk:wpaper:1051

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