This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy.
Women contribute more to the US economy than ever before. Women now outpace men at every level of educational attainment and currently make up 47 percent of the workforce according to the U.S. Department of Labor (2012). As working women’s earning power increases, so does their responsibility to make critical financial decisions for themselves and their household.
This study has used new data from the NFCS to analyze salient issues related to college-educated Millennials’ financial capability, practices and status, and in the process identify key financial challenges they face. The study examines perceived versus demonstrated readiness to manage personal finances and builds an innovative and comprehensive financial profile of college-educated members of Gen Y.
On September 20, 2013, the TIAA-CREF Institute convened an expert symposium to examine Gen Y financial engagement. Generation Y is the largest generation in U.S. history. Financial decisionmaking by Gen Y and the state of their personal finances have significant implications for the individuals themselves and for the U.S. economy overall. It’s therefore important to understand Gen Y’s personal finances This can then help identify strategies to better engage Gen Y in managing their personal finances to ensure financial well-being.
New analysis reveals a stronger and larger effect of financial literacy on wealth than previously estimated. Prior studies have associated financial literacy and schooling with positive financial outcomes, but typically do not account for unobserved factors that might shape financial literacy and schooling, as well as wealth outcomes. The estimates presented here indicate that financial literacy is at least as important as schooling, if not more so, in affecting household wealth and pension contributions.
The findings discussed here suggest that people with lower levels of education, income, and financial literacy rely far more heavily on employers, coworkers, and friends, than they do on cost fundamentals, when choosing pension funds. These same types of individuals are also more responsive to the framing of fee information when identifying the relative attractiveness of pension fund managers. Moreover, the impact of viewing information in terms of gains as opposed to losses is sizable.
Financial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. Here we use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation.
Are individuals are well equipped to make financial decisions, i.e., do they possess enough financial literacy to function effectively in today’s complex marketplace? This report shows that financial literacy cannot be taken for granted in the United States, nor in many other developed nations around the globe. New evidence finds that financial illiteracy in the population is widespread, particularly among vulnerable demographic groups such as the least educated, women, and minorities.