Financial Literacy, Short-run Impatience, and the Determinants of Savings and Financial Management

Published: 2010
Project ID: UM10-11

Abstract

Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. The first is that people are financially illiterate, lacking the skills needed to calculate expected returns or present discounted values which may cause them to make suboptimal financial decisions. Secondly, some researchers suggest that “present-bias” can explain suboptimal financial decisions: that is, people are impatient and persistently choose immediate gratification relative to long-term investment payoffs. The proposed study seeks to provide evidence as to which of these behavioral limitations are at the root of poor financial decisions.

Publications