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.

This paper addresses the retirement income planning problem from the perspective of the four main building blocks of retirement income: state pension, mortality credits, investment strategies, and drawdown schedules. We detail how these building blocks interact to form a retiree's overall retirement income portfolio, and what trade-offs and interactions must be considered. We find that while access to each building block increases the retiree's certainty equivalent consumption, the most substantial contributor to this increase is from utilization of the mortality credit building block (i.e., annuities).

This paper investigates the relationship between growth and quality of pension funds. It measures growth in terms of changes in the number of participants and cash flow transfers and appreciates the quality of the funds through the set of information on past results and costs published in the official prospectuses. The results show that growth rewards the best performing funds in the long term, while annual performance and costs have no relevance. Nevertheless, other factors, such as market power and commercial pressure, appear to be more powerful. The existence of conditions of market power capable of attracting investors beyond the actual quality of pension products is undesirable as it harms future pensioners. These results have implications for the Authority, as mandatory information should be suitable to induce investors to identify the best products and direct individual choices toward the public objective of a more efficient market.

We are the first to study how the resources freed up when a child, child-in-law, or grandchild moves out of a household are reallocated, taking into account the age of the leaver. Using the 2011 and 2013 waves of the China Health and Retirement Longitudinal Study, we document that, on average, the remaining household members save part of the resources freed up by the leaver and consume another part. Differentiating the leavers by age, we find that after the departure of a member of the younger generation aged 0–24, the remaining household members save the resources freed up by the leaver. However, if the leaver is above 24, they spend the freed-up resources. Our results are robust to the use of different specifications, estimation methods, and consumption aggregates. Finally, we observe that remittances directed toward non-resident offspring do not increase after the departure of a member of the younger generation.

We test the effectiveness of an online interactive pension dashboard in improving pension funds participants' ability to make adequate pension decisions in terms of pension preparation, knowledge, self-efficacy, expectations, and intention-to-act. In a randomized survey experiment, treated participants of two pension funds receive an encouragement to visit an online pension dashboard. Treated individuals have more pension knowledge and an increased self-efficacy in the pension domain, especially so for females. The dashboard does not have a significant impact on the pension preparation or the errors in forecasts of pension income nor does it impact the willingness to act if there is a need to do so.

We measure crypto and financial literacy using microdata from the Bank of Canada’s Bitcoin Omnibus Survey. Our crypto literacy measure is based on three questions covering basic aspects of Bitcoin. The financial literacy measure we use is based on three questions covering basic aspects of conventional finance (the “Big Three”). We find that a significant share of Canadian Bitcoin owners have low crypto knowledge and low financial literacy. We also find gender differences in crypto literacy among Bitcoin owners, with female owners scoring lower in Bitcoin knowledge than male owners. We do not, however, find significant gender differences in financial literacy amongst Bitcoin owners. In contrast, non-owners show gender differences in both crypto and financial literacy.

This paper examines financial literacy in Canada using a dataset from early 2023 that measures the knowledge of middle-aged Canadians regarding their retirement income system. We first document important financial literacy differences across gender, age, education, and labor market status. Using detailed questions on the four main aspects of the retirement income system, we then show a strong correlation between financial literacy and the knowledge of the retirement system in Canada. Finally, we provide evidence that general financial literacy and knowledge of the retirement system matter for retirement preparation, by showing that Canadians with higher financial literacy scores and better knowledge of the retirement system are more likely to have a plan for retirement.

This paper considers variable annuity (VA) contracts embedded with guaranteed minimum accumulation benefit (GMAB) riders when policyholder’s proceeds are taxed upon early surrender or maturity. These contracts promise the return of the premium paid by the policyholder, or a higher rolled-up value, at the end of the investment period. A partial differential equation valuation framework which exploits the numerical method of lines is used to determine fair fees that render the policyholder and insurer breakeven. Two taxation regimes are considered: one where capital gains are allowed to offset losses and a second where gains do not offset losses. Most insurance providers highlight the tax-deferred features of VA contracts. We show that the regime under which the insured is taxed significantly impacts prices. If losses are allowed to offset gains then this enhances the market, increasing the policyholder’s willingness to participate in the market compared to the case when losses are not allowed to offset gains. With fair fees from the policyholder’s perspective, we show that the net profit is generally positive for insurance companies offering the contract as a naked option without any hedge. We also show how investment policy, as reflected in the Sharpe ratio, impacts and interacts with policyholder persistency.

We analyze financial literacy regarding interest rates, inflation, and risk diversification in nine Eastern European countries based on survey data collected in the fall 2022. The percentage of individuals with an understanding of all three concepts is generally low but varies strongly among countries, from 13 percent in Romania to 47 percent in the Czech Republic. Financial illiteracy is particularly acute among those with primary or lower secondary education. Among the three concepts, inflation is what people know best in eight out of nine countries – a pattern which has emerged recently and is in contrast to other countries, where interest rate literacy is highest. Differences in lifetime inflation experience, in particular experience of high or hyperinflation, affect inflation literacy. Higher financial literacy is associated with a higher propensity to save and a lower propensity to be financially vulnerable in six out of nine countries.

This study examines the interest in different pension payout schemes when full annuitization is the default. We focus on three possible pension payout schemes: a flat-rate annuity, a high/low annuity-based profile, and a partial lump sum at retirement with a lower flat-rate annuity after that. We make use of a vignette study and find substantial interest in each of the three payout schemes. Interest in the lump sum scheme increases when a higher percentage can be taken out as a lump sum or when interest rates or replacement rates are lower. Interest in a high/low annuity-based profile increases when the high annuity is valid for a shorter period.

Pension systems increasingly require active involvement from their participants for retirement planning. This leads to the need for a proper level of financial literacy to foster decision-making. Based on the Chilean Social Protection Survey and the Regional Development Index data, specific characteristics related to the region of residence, such as the quality of life, access to job opportunities, and available connectivity tools, are seen to have a positive impact on pension knowledge. Hence, these regional level results provide inputs to policymakers for developing appropriate policies regarding pension knowledge.

A comparison of the performances of pension products that ignores long-term trends might significantly overestimate the long-term impact of volatility risks while underestimating the impact of persistent, low-frequency trends. This paper proposes a comparison making use of projection models based on the long-term risk–return tradeoff proposed by Campbell and Viceira (2005) to explicitly take into account slow-moving economic trends. In order to illustrate the approach and its implications, we discuss the capital protection provided by life-cycle target-date fund strategies and minimum guarantee strategies.

We study a retirement savings plan with a default contribution rate of 12 percent of income, which is much higher than previously studied defaults. Twenty-five percent of employees had not opted out of this default 12 months after hire; a literature review finds that the corresponding fraction in plans with lower defaults is approximately one-half. Because only contributions above 12 percent were matched by the employer, 12 percent was likely to be a suboptimal contribution rate for employees. Employees who remained at the 12 percent default contribution rate had average income that was approximately one-third lower than would be predicted from the relationship between salaries and contribution rates among employees who were not at 12 percent. Defaults may influence low-income employees more strongly in part because these employees face higher psychological barriers to active decision making.

In this paper, we examine financial literacy and financial resilience in Italy. We show that financial literacy is particularly low among the young, women, and the less educated. We also highlight regional differences in financial knowledge, with individuals in Southern Italy performing worse. We find that the lack of financial literacy increases the probability of being unable to face financial shocks and leads to an overaccumulation of debt. Hence, our results support the hypothesis that financial literacy can be considered an enabling factor for financial resilience.

Studies of health care expenditure often exclude explanatory variables measuring wealth, despite the intuitive importance and policy relevance. We use the Household, Income and Labour Dynamics in Australia Survey to assess impacts of income and wealth on health expenditure. We investigate four different dependent variables related to health expenditure and use three main methodological approaches. These approaches include a first difference model and introduction of a lagged dependent variable into a cross-sectional context. The key findings include that wealth tends to be more important than income in identifying variation in health expenditure. This applies for health variables which are not directly linked to means testing, such as spending on health practitioners and for being unable to afford required medical treatment. In contrast, the paper includes no evidence of different impacts of income and wealth on spending on medicines, prescriptions or pharmaceuticals. The results motivate two novel policy innovations. One is the introduction of an asset test for determining rebate eligibility for private health insurance. The second is greater focus on asset testing, rather than income tests, for a wide range of general welfare payments that can be used for health expenditure. Australia's world-leading use of means testing can provide a test case for many countries.

We examine whether an individual's inability to save in the last 12 months affects the extent to which they are concerned about their future financial security and their propensity to plan for retirement. We use an original survey based upon representative samples of working individuals in 16 countries. We show that individuals who were unable to save over the 12-month period prior to the survey are less likely to consider well-being in retirement as their major financial concern. They are also less likely to invest in supplementary pension funds than those who were able to accumulate savings. We provide evidence that these findings are robust under several specifications and are mediated by respondents' perceived income prospects and assessment of their current financial situations.

The “Fear of Missing Out” or FoMO has become an accepted motivator of behaviours extending from the purchase of limited-edition sneaker brands to social media use and cryptocurrency investment. As a motivator of individual financial behaviours, such as cryptocurrency and stock investment, it is unclear how FoMO relates to consumer financial literacy and other consumer traits, including risk tolerance and personality. We propose, and assess, a model of reported investment behaviour and investment behaviour intention. We find a larger association between FoMO and crypto ownership, both current and intended, compared with stocks. FoMO has a small association with current stock ownership, relative to the association of financial literacy and risk tolerance. Context matters when measuring FoMO with the more context-specific measures having the largest associations with investment behaviour and investment intentions. Finally, our results suggest financial literacy is an antecedent of FoMO, more so for stocks.

This paper studies whether school-based financial education has spillover effects from children to parents. Leveraging data from a large-scale experiment with public high schools in Peru and credit bureau records on the parents of the youth targeted, this study measures the impact of providing personal finance lessons during secondary school on parental financial behavior. Financial education lessons in the school yield limited average spillover effects, but lead to sizable effects on parental financial behavior within disadvantaged households. Among parents from poorer households, the treatment reduces default probability by 26%, increases credit scores by 5%, and increases current debt levels by 40%. The treatment has stronger effects among the parents of daughters, who experience a significant 6.7% increase in their credit score and a 28% reduction in their loan portfolio in arrears. Among the parents of boys, most of the spillover effects are muted.

In the last decade, the increased complexity of, and levels of access to, financial products and services, together with rising household debt and the funding of an ageing population, have prompted the State to place increased focus on financial education, with the dual objectives of regulating to enhance market efficiency and mitigating social welfare issues attributed to poor financial decisions. Financial literacy is crucial for young adults as they embark on life events involving major expenditure and debt, particularly for university students who have already accrued a debt based on Higher Education contribution scheme liability and who are making labour market decisions. This paper investigates the determining factors of personal financial literacy levels among a sample of university students at different stages of study and across diverse study areas including business, education, arts, humanities and the sciences; with some interesting findings for policy makers. It also provides indicative evidence of students’ preferred method of learning more about personal finance to facilitate the effective design of personal financial literacy programs.

This study documents the credit outcomes of older adults immediately before and after the onset of the COVID-19 pandemic in the United States. On average, older adults experienced larger reductions in total household debt relative to younger adults. However, there is significant heterogeneity, where older adults with higher incomes experienced the largest declines, and lower-income older adults experienced an increase in total debt. Overall, these data highlight important trends in the credit experiences of older adults that may affect their future financial security.