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Title: Financial Literacy and Savings Account Returns

Author(s): Florian Deuflhard, Dimitris Georgarakos and Roman Inderst

Publication Date: March 2014

Keyword(s): Financial literacy, Household finance, Interest rates and Savings accounts

Programme Area(s): Financial Economics

Abstract: Savings accounts are owned by most households, but little is known about the performance of households? investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document considerable heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 13% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.

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Bibliographic Reference

Deuflhard, F, Georgarakos, D and Inderst, R. 2014. 'Financial Literacy and Savings Account Returns'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9882