Annamaria Lusardi

Women are less financially literate than men, and it has been difficult to determine whether this gap reflects a lack of knowledge or, rather, a lack of confidence. To address this important research question, we designed two survey modules that enable us to calculate the extent to which confidence matters for both financial literacy and behavior. We developed and estimated a model that provides a new measure of financial literacy and disentangles confidence from knowledge. We find that confidence accounts for about 30% of the gender difference in financial literacy. Moreover, both financial knowledge and confidence are linked to stock market participation. We also provide researchers with a method to account for confidence in regressions. This paper was accepted by Bo Becker, finance. Funding: This work was supported by the European Investment Bank Institute (n/a), which is gratefully acknowledged. The findings and views presented in this article are entirely those of the authors and should not be attributed in any manner to the European Investment Bank or its Institute or to the European Central Bank, the Eurosystem, or De Nederlandsche Bank. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00425 .

We explore debt and debt management among older Americans (ages 51–61 years) using the 2018 National Financial Capability Study. Though these individuals should have been at the peak of their retirement savings, we show that many were heavily indebted, often due to unpaid medical bills and student loans. Additionally, fewer than half (43%) could correctly answer three basic financial literacy questions; importantly, less financially literate people were more likely to hold excessive debt, be contacted by debt collectors, and carry medical debt or student loans. Our findings show that, even before the pandemic, a sizable proportion of older Americans was financially distressed, underscoring the need for researchers and policymakers to devote attention to specific types of debt that burden the older population. Particularly vulnerable groups include African-Americans, women, and the least-educated.

This paper surveys what we have learned on financial literacy and its relation to financial behavior from data collected in the Dutch Central Bank (DNB) Household Survey, a project done in collaboration with academics. A pioneering survey fielded in 2005 included an extensive set of financial literacy questions and questions that can serve as instruments for financial literacy in regression analyses to assess the causal effect of financial literacy on behavior. We describe how this survey spurred a series of research papers demonstrating the crucial role of financial literacy in stock market participation, retirement planning, and wealth accumulation. This inspired various follow-up studies and experiments based on new data collections in the DNB Household Survey. Researchers worldwide have used these data for innovative studies, and other surveys have included similar questions. This case study exemplifies the essential role of data in empirical research, showing how innovative data collections can inspire new research initiatives and significantly contribute to our understanding of household financial decision-making.

Some Americans prepare for unanticipated adverse economic events, plan for the future, and keep their debt at manageable levels, but others do not. Using four waves of the Understanding America Study during the pandemic period, we compare middle-aged and older Black, Hispanic, and White Americans’ financial resilience from 2020 to 2024. After uncovering significant initial differences in their financial preparedness at the outset of the pandemic, we confirm that greater financial resilience enhanced peoples’ chances of realizing better economic outcomes when confronting adverse economic shocks. The 2024 wave shows systematic differences in financial resilience across the demographic groups and indicates how greater resilience affects financial satisfaction.

Since 2012, the Programme for International Student Assessment (PISA), an initiative of the Organisation for Economic Co-operation and Development (OECD), has been collecting data to evaluate the financial literacy of 15-year-old students in various countries. The triennial assessments provide an opportunity to study the determinants of financial literacy among the young and how it evolves over time. This article looks back at a decade of PISA financial literacy data and examines the four waves of student-level data collected so far (2012, 2015, 2018, and 2022). We document stylized facts across waves and provide guidance on using the test scores estimated from psychometric models.

This paper examines financial literacy in the United States, using the 2021 National Financial Capability Study data. A large volume of papers have demonstrated the importance of financial knowledge and documented the low level of financial literacy in America. Using recent data collected during an unusual time when inflation was rising and the country was in the midst of the COVID-19 pandemic, we show that the knowledge of fundamental financial concepts continues to be low in the US, especially among people who are young, less educated, female, or not employed. Our analysis also highlights people’s lack of inflation knowledge and identifies the subgroups that are particularly vulnerable. Finally, we examine how financial literacy affects financial well-being and behaviors. Responses to the Big Three financial literacy questions are linked to important financial behaviors and outcomes, including planning for retirement, financial resilience, and not carrying too much debt.

In this editorial, we provided an overview of the papers in the inaugural issue of the Journal of Financial Literacy and Wellbeing. They cover topics that are at the center of academic research, from the effects of financial education in school and the workplace to the importance of financial literacy for the macro-economy. They also cover financial inclusion and how financial literacy can promote the use of basic financial instruments, such as bank accounts. Moreover, they cover financial decision making in the context of complex instruments, such as mortgages, reverse mortgages, and crypto assets. The papers all share similar findings: financial literacy is low and often inadequate for making the types of financial decisions that are required today. Moreover, financial literacy is particularly low among already vulnerable groups. Importantly, financial literacy matters: it helps people make savvy financial decisions, including being less influenced by framing, better understand information that is provided to them, better understand the workings of insurance, and being more comfortable using basic financial instruments. In a nutshell, financial literacy improves financial wellbeing.

We administered the FINRA Foundation's National Financial Capability Study questionnaire to members of the RAND American Life Panel in 2012 and 2018. Using this unique, longitudinal data set, we investigate the evolution of financial literacy over time and shed light on the effect of financial knowledge on financial outcomes. Over a six-year observation period, financial literacy appears to be rather stable, with a slight tendency to decline at older ages. Importantly, financial literacy has significant predictive power for future financial outcomes, even after controlling for baseline outcomes and a wide set of demographics and individual characteristics that influence financial decision making.

This article examines individuals’ balance sheets, financial situations, and retirement planning steps to understand the barriers to annuity ownership and identifies the financial and sociodemographic factors that contribute to annuity ownership. Using data from the 2018 National Financial Capability Study, we conduct an empirical analysis of individuals in the retirement-planning phase of the life cycle (ages 40–61) and individuals of retirement age (age 62 and over). We find that debt obligations, lack of access to liquidity, and low financial literacy are all likely barriers to annuity ownership; the annuity owners in our sample are more likely than the non-owners to have access to liquidity and to report higher levels of financial satisfaction. Results indicate that access to liquidity and to professional investment management are positively associated with annuity ownership. Furthermore, financial literacy could lead to increased take-up rates through improved access to liquidity and ultimately enhanced retirement outcomes.

In Factors Contributing to Financial Well-Being among Black and Hispanic Women, from the Summer 2021 issue of The Journal of Retirement, authors Robert Clark (of North Carolina State University), Annamaria Lusardi (of George Washington University), Olivia S. Mitchell (of the University of Pennsylvania), and Hallie Davis (of George Washington University) analyze data on women’s self-reported financial well-being (FWB), plus objective data on their financial circumstances. They find that Black and Hispanic women are more likely to have lower income, to be single, and to have dependent children. Researchers associate these factors with lower FWB—but surprisingly, Black and Hispanic women report slightly higher average FWB than White women. This may stem from factors like culture and family structure. Black and Hispanic women may have a greater sense of financial well-being because they expect their extended family or grown children to support them after a job loss or during retirement. White women, however, experience greater FWB when they become financially literate. The authors conclude that a one-size-fits-all approach to financial education does not work for women. Financial advisors can help their female clients with targeted education tailored to their identified needs.