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The Evolution of Financial Literacy over Time and its Predictive Power for Financial Outcomes: Evidence from Longitudinal Data
General Information
Title
The Evolution of Financial Literacy over Time and its Predictive Power for Financial Outcomes: Evidence from Longitudinal Data
Author
Marco Angrisani, Jeremy Burke, Annamaria Lusardi, and Gary Mottola
Publication Type
Working paper
Outlet
G53 Network Working Paper Series
Year
2022
Abstract
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 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.