Working Paper: CEPR ID: DP9882
Authors: Florian Deuflhard; Dimitris Georgarakos; Roman Inderst
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.
Keywords: financial literacy; household finance; interest rates; savings accounts
JEL Codes: D12; E21; G11; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial literacy (G53) | online banking utilization (G21) |
| online banking utilization (G21) | median interest rate (E43) |
| financial literacy (G53) | median interest rate (E43) |
| financial literacy (G53) | median interest rate (E43) |
| financial literacy (G53) | weighted annualized percentage rate (APR) of savings accounts (E43) |