Old Age and the Decline in Financial Literacy

Finke, Michael; Howe, John S.; Huston, Sandra J.

doi:10.2139/ssrn.1948627

Cited by 79 publications

(74 citation statements)

References 41 publications

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“…This is one reason why the OECD included a battery of financial literacy questions in the 2012 PISA assessment for 15-year old students as increasing financial literacy for this group seems to be particularly promising. 27 Low levels of financial literacy among the old is also problematic as individuals aged 60 and older hold about 50% of the wealth in the U.S. (Finke et al 2016). With respect to cognitive changes associated with aging, Gamble et al (2015) show that a decrease in episodic memory is associated with decreasing abilities in numeracy.…”

Section: Agementioning

confidence: 99%

“…In consequence, a decrease in cognitive abilities is associated with decreasing financial literacy for the elderly. With respect to the magnitude of the effect of aging, Finke et al (2016) find that financial literacy scores decline by about 1% a year for people older than 60. As already mentioned in Sect.…”

Section: Agementioning

confidence: 99%

“…As already mentioned in Sect. 2.3, there is a wide discrepancy between test-based and self-assessed financial literacy for the elderly as this group shows high levels of overconfidence: Gamble et al (2015) and Finke et al (2016) show that confidence in financial abilities does not decline with age, making the elderly particularly vulnerable to financial scams and fraud (Deevy et al 2012). Analyzing the SAVE survey, Bucher-Koenen and Lusardi (2011) underscore this evidence for Germans.…”

Section: Agementioning

confidence: 99%

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Financial literacy, financial advice, and financial behavior

2017

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In this survey, we review the voluminous body of literature on the measurement and the determinants of financial literacy. Wherever possible, we supplement existing findings with recent descriptive evidence of German households' financial literacy levels based on the novel Panel on Household Finances dataset, a large-scale survey administered by the Deutsche Bundesbank and representative of the financial situation of households in Germany. Prior research not only documents generally low levels of financial literacy but also finds large heterogeneity in financial literacy across the population, suggesting that economically vulnerable groups are placed at further disadvantage by their lack of financial knowledge. In addition, we assess the literature evaluating financial education as a means to improve financial literacy and financial behavior. Our survey suggests that the evidence with respect to the effectiveness of the programs is rather disappointing. We also review the role of individuals' financial literacy for the use of professional financial advice and assess whether expert intervention can serve as a substitute to financial literacy. We conclude by discussing several directions for future research.

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Section: Agementioning

confidence: 99%

Section: Agementioning

confidence: 99%

Section: Agementioning

confidence: 99%

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Financial literacy, financial advice, and financial behavior

2017

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“…For example, high levels of financial knowledge are associated with better financial behaviours and practices, whereas low levels of financial knowledge place individuals at risk of financial insecurity and poverty (Collins, 2013;Grinstein-Weiss, Guo, Reinertson, & Russell, 2015;Hui, Nguyen, Palameta, & Gyarmati, 2016;Xiao, Chen, & Chen, 2014). Important for gerontological social workers, evidence suggests that older adults have lower levels of financial knowledge than other age groups (Finke, Howe, & Huston, 2011;Lusardi & Mitchell, 2011a, 2011bLusardi, Mitchell, & Curto, 2012) making them particularly vulnerable to financial insecurity and exploitation (Lusardi, 2012). As a consequence, concerted efforts have been made to increase financial knowledge in older age through educational seminars (e.g.…”

Section: Introductionmentioning

confidence: 99%

Understanding the Financial Knowledge Gap: A New Dimension of Inequality in Later Life

Khan¹,

Rothwell²,

Cherney³

et al. 2016

Preprint

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To understand the relationship between financial knowledge and financial behaviors, it is important to understand the financial knowledge gap -the distance between objectively and subjectively measured financial knowledge. Overestimating one's financial knowledge can lead to risky financial behaviors and economic vulnerability. To date, limited empirical work has examined how the gap between one's perception of their own financial knowledge and their actual knowledge varies across the life course. We analyze the size and nature of the financial knowledge gap and its variation across the life course. We use nationally representative data from the Canadian Financial Capability Survey (CFCS) and find robust evidence that older adults overestimate their financial knowledge. Social workers can assess the financial knowledge gap and inform and educate their clients to protect from financial fraud, exploitation, and, abuse.Furthermore, social workers can offer informational seminars, workshops, and financial planning and counseling sessions.

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“…Some research, as shown in Figure 3, has found that older adults are significantly worse at financial decision-making, with one study even suggesting that financial literacy scores decrease by 1% each year after age 60 (e.g., Gamble et al, 2015;Finke, Howe & Huston, 2011). Note: "The figure shows mean CFM [Consumer Monthly Finance] financial literacy scores for each year of age and predicted financial literacy scores using regression estimates when age is specified as age and age-squared, and as a 5-year-age groups, in a regression mode that controls for household characteristics" (Finke, Howe & Huston, 2011, 35).…”

Section: Pitfalls Of Prosperitymentioning

confidence: 99%

Older adults and fraud: Suggestions for policy and practice

DaDalt

2016

JEFS

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Old Age and the Decline in Financial Literacy

Cited by 79 publications

References 41 publications

Financial literacy, financial advice, and financial behavior

Financial literacy, financial advice, and financial behavior

Understanding the Financial Knowledge Gap: A New Dimension of Inequality in Later Life

Older adults and fraud: Suggestions for policy and practice

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