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School Research Seminar

Financial Literacy and Household Portfolio Puzzles among the Elderly

This paper assesses how financial literacy shapes financial decision-making among older adults. We devise a special module in the Singapore Life Panel survey to measure financial literacy and study its relationship to three aspects of household financial and investment behaviors: credit card debt repayment, stock market participation, and adherence to age-based investment glide paths. We find that the majority of respondents age 50+ have some grasp of concepts such as interest compounding and inflation, but fewer know about risk diversification. We provide evidence of a strong positive association between financial literacy and each aspect of behavior, controlling on many other factors. A three-unit increase in the literacy score is associated with a 2.3 percentage points lower likelihood of committing a credit card repayment error in any given year; 20 percentage points greater chance of stock market participation; and 4 percentage points higher likelihood of following an age-appropriate investment glide path. Results also show that formal education plays a salient role in older adults’ decisions relating to investment and stock market participation, but not for credit card repayment decisions. Our findings have important implications for designing interventions to assist older adults make better financial choices.

Seminar Room 2-2,
Level 2, Manasseh Meyer,
Lee Kuan Yew School of Public Policy,
National University of Singapore
Thu 18 April 2019
12:15 PM - 01:30 PM

Joelle Fong

Joelle Fong

Assistant Professor, Lee Kuan Yew School of Public Policy

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Tikki Pang

Tikki Pang

Visiting Professor, LKYSPP

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