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

Christina Bannier and Milena Neubert

No 528, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This study examines the role of actual and perceived financial sophistication (i.e., financial literacy and confidence) for individuals' wealth accumulation. Using survey data from the German SAVE initiative, we find strong gender- and education-related differences in the distribution of the two variables and their effects on wealth: As financial literacy rises in formal education, whereas confidence increases in education for men but decreases for women, we observe that women become strongly underconfident with higher education, while men remain overconfident. Regarding wealth accumulation, we show that financial literacy has a positive effect that is stronger for women than for men and that is increasing (decreasing) in education for women (men). Confidence, however, supports only highly-educated men's wealth. When considering different channels for wealth accumulation, we observe that financial literacy is more important for current financial market participation, whereas confidence is more strongly associated with future-oriented financial planning. Overall, we demonstrate that highly-educated men's wealth levels benefit from their overconfidence via all financial decisions considered, but highly-educated women's financial planning suffers from their underconfidence. This may impair their wealth levels in old age.

Keywords: financial literacy; financial sophistication; confidence; wealth; household finance; behavioral finance; gender; formal education (search for similar items in EconPapers)
JEL-codes: D83 D91 G11 J26 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-dem, nep-edu and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/126584/1/846715252.pdf (application/pdf)

Related works:
Working Paper: Actual and perceived financial sophistication and wealth accumulation: The role of education and gender (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:528

Access Statistics for this paper

More papers in CFS Working Paper Series from Center for Financial Studies (CFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().