The Role of Financial Literacy and Money Education on Wealth Decisions
We investigate the impact of financial education on a wide range of wealth decisions using Dutch data from the DNB Household Survey. We consider two indexes representative of basic and advanced financial literacy acquired when adults, and money education received from the family during adolescence. Advanced financial literacy is a significant determinant of all the wealth outcomes under examination, while basic financial literacy affects only the propensity to plan for retirement and the likelihood of holding debt. Studying the individual components of financial literacy, the most relevant effects are associated with the understanding of numeracy and inflation, together with the correct knowledge of market mechanisms. Interestingly, money education received from the family during adolescence is as important as advanced financial literacy to foster individuals' wealth decisions. We also find evidence of a gender gap, with males' wealth decisions more affected by higher levels of financial education. Our results highlight the importance of improving financial knowledge not only through proper educational programs when adults, but also in the family environment during adolescence, where teens can learn positive attitudes towards money that are maintained throughout their life.