Financial knowledge and portfolio complexity in Singapore

Abstract

Financial literacy in Singapore has not been analyzed in much detail, despite the fact that this is one of the world's most rapidly aging nations. Using the Singapore Life Panel®, we explore older Singaporeans' levels of financial knowledge and compare them to those observed in the United States. We assess portfolio complexity for these older households, to examine how financial literacy is related to outcomes of interest. We show that older Singaporeans' levels of financial literacy are comparable overall to those in the United States, even though older Singaporeans score slightly lower on some dimensions (knowledge of interest and inflation), and slightly higher on their knowledge of risk diversification. We document that women are less informed than men about stock diversification, and educated people tend to be more financially knowledgeable than their less educated counterparts. We also find that financial literacy is positively associated with respondents having both more wealth and more diversified and complex portfolios.

Financial Literacy and Suboptimal Financial Decisions at Older Ages

“…A different market survey reported that around 60% of all adult Singaporeans were financially literate, compared to 18% in Nepal and Cambodia (Karekar, 2015). Koh et al (2018) using SLP data documented that financial literacy among older adults in Singapore was comparable to, but slightly lower than, levels of similar-aged persons in the United…”

“…analysis.12 Breakdowns by question item show that 81% of respondents answered the interest rate question correctly, 72% answered the inflation question correctly, and 46% answered the risk diversification question correctly. SeeKoh et al (2018) for detailed analyses how FinLit varies in the Singapore population.…”

Trust and Retirement Preparedness: Evidence from Singapore

“…Singaporeans, yet most prior analysis has explored pension system cost structures, investment patterns, and financial literacy (Fong et al, 2011;Koh et al 2007Koh et al , 2008Koh et al , 2010Koh et al , 2018. To date, no research of which we are aware has linked trust and older households' retirement preparedness in terms of pension saving, insurance coverage, and stock market participation.…”

Financial Literacy and Suboptimal Financial Decisions at Older Ages

“…A different market survey reported that around 60% of all adult Singaporeans were financially literate, compared to 18% in Nepal and Cambodia (Karekar, 2015). Koh et al (2018) Particularly valuable for our study is the high frequency at which the survey is carried out.…”

“…12 Breakdowns by question item show that 81% of respondents answered the interest rate question correctly, 72% answered the inflation question correctly, and 46% answered the risk diversification question correctly. See Koh et al (2018) for detailed analyses how FinLit varies in the Singapore population.…”