How Financial Literacy Affects Household Wealth Accumulation

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Date Published 2012
Primary Author Jere R. Behrman, Olivia S. Mitchell, Cindy K. Soo, and David Bravo
Other Authors
Theme Financial Inclusion


Traditional economic theory posits that forward-looking individuals maximize expected lifetime utility using economic information to build retirement assets over their work lives. Yet fewer than half of Americans have even attempted to estimate how much money they might need in retirement, and many older adults face significant retirement saving shortfalls (Lusardi and Mitchell 2007a, b). Economic explanations for these shortfalls include dispersion in discount rates, risk aversion, and credit constraints, but the empirical literature thus far has been unable to account for much of observed wealth differentials (Bernheim, Skinner, and Weinberg 2001).

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