How Financial Literacy Affects Household Wealth Accumulation

2012/05/01 by Jere R. Behrman, Jere R Behrman, Olivia S. Mitchell +5 · 583 citations
Business, Management and Accounting · Health Professions · Social Sciences · #Demographic economics #Econometrics #Economic growth #Economics #Educational attainment #Finance #Financial Literacy, Pension, Retirement Analysis #Financial literacy #Global Health Care Issues #Instrumental variable #Insurance, Mortality, Demography, Risk Management #Labour economics #Literacy

paper · open access · doi:10.1257/aer.102.3.300

published in American Economic Review 102(3), 300-304 (American Economic Association)

openalex publication_date 2012/05/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01

Abstract

This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs.

Citations

• Planning and Financial Literacy: How Do Women Fare?

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