Working Paper: NBER ID: w17821
Authors: Annamaria Lusardi
Abstract: Financial decisions, be they related to asset building or debt management, require the capacity to do calculations, including some complex ones. But how numerate are individuals, in particular when it comes to calculations related to financial decisions? Studies and surveys implemented in both the United States and in other countries that are described in this paper show the level of numeracy among the population to be very low. Moreover, lack of numeracy is not only widespread but is particularly severe among some demographic groups, such as women, the elderly, and those with low educational attainment. This has potential consequences for individuals and for society as a whole because numeracy is found to be linked to many financial decisions. Now more than ever, numeracy and financial literacy are lifetime skills necessary to succeed in today's complex economic environment.
Keywords: Numeracy; Financial Literacy; Financial Decision-Making
JEL Codes: D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low numeracy levels (G53) | poor financial decisions (D14) |
| higher numeracy (C12) | better financial behaviors (G53) |
| lower numeracy (G53) | less likely to plan for retirement (D14) |
| understanding interest compounding (E43) | more likely to participate in pension funds (G23) |
| lower numeracy (G53) | poorer financial decision-making outcomes (G41) |
| lower numeracy (G53) | less likely to accumulate wealth (G51) |