Unpacking the Causal Chain of Financial Literacy

A growing body of literature examines the causal impact of financial literacy on individual, household, and firm level outcomes. This paper unpacks the mechanism of impact by focusing on the first link in the causal chain. Specifically, it studies...

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Main Authors:	Carpena, Fenella, Cole, Shawn, Shapiro, Jeremy, Zia, Bilal
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCESS TO FINANCE ACCOUNTING APR ARITHMETIC AVERAGE SCORE BANK ACCOUNT BASIC FINANCIAL LITERACY BORROWING BORROWING MONEY BUDGETING BUSINESS EDUCATION BUSINESS SCHOOL BUSINESS TRAINING CALCULATIONS CASH PAYMENT CHECKS CHILD CARE CLASSROOM CLASSROOM SESSION CLASSROOM SESSIONS CONSUMER CONSUMER FINANCE CONSUMER PROTECTION CONSUMER PROTECTION MEASURES CONSUMERS CONTRIBUTION DEBT DECISION MAKING DEMAND FOR SAVINGS DEPOSIT DEPOSIT INSURANCE DEVELOPMENT BANK DISCOUNT RATE DISCOUNT RATES DIVERSIFICATION EARNINGS ECONOMIC DECISIONS ELEMENTARY SCHOOL EMPLOYEE EMPLOYEE BENEFITS ENROLLMENT ENTREPRENEURS EXPENDITURE EXPENDITURES FARM ENTERPRISE FINANCIAL ADVICE FINANCIAL BEHAVIOR FINANCIAL CHOICES FINANCIAL CONCEPTS FINANCIAL CURRICULUM FINANCIAL DECISION FINANCIAL DECISIONS FINANCIAL EDUCATION FINANCIAL EDUCATION PROGRAM FINANCIAL EDUCATION PROGRAMS FINANCIAL INCENTIVE FINANCIAL INCENTIVES FINANCIAL INSTRUMENTS FINANCIAL KNOWLEDGE FINANCIAL LITERACY FINANCIAL LITERACY EDUCATION FINANCIAL LITERACY PROGRAM FINANCIAL LITERACY PROGRAMS FINANCIAL LITERACY SURVEYS FINANCIAL LITERACY TRAINING FINANCIAL MANAGEMENT FINANCIAL MATTERS FINANCIAL OPTIONS FINANCIAL OUTCOMES FINANCIAL PRODUCT FINANCIAL PRODUCTS FINANCIAL PROVIDERS FINANCIAL REFORM FINANCIAL SERVICES FINANCIAL SOPHISTICATION FORMAL FINANCIAL SERVICES GENDER GENERAL POPULATION HEALTH EDUCATION HEALTH INSURANCE HEALTH TRAINING HIGH SCHOOL HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLDS HUSBAND INCOMES INFLATION INFORMAL SAVINGS INFORMED FINANCIAL CHOICES INHERITANCE INSTALLMENT INSURANCE INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERVENTIONS INVESTING KNOWLEDGE TEST LENDER LIFE INSURANCE LIFE INSURANCE POLICY LIMITED FINANCIAL LITERACY LITERACY LEVELS LITERACY TEST LOAN LOAN PROCESSING LOAN REPAYMENT LOW-INCOME MATH MATHEMATICS MEDICAL INSURANCE MFI MICRO-ENTREPRENEURS MICROFINANCE MONETARY INCENTIVES MONEY LENDER MONEYLENDER MONEYLENDERS MONTHLY INCOME MORTGAGE MORTGAGE CHOICE NUMERACY PAYDAY LOAN PEOPLES PREGNANT WOMEN PROBABILITY PUBLIC ECONOMICS RENTS REPAYMENT RETIREMENT RETIREMENT PLAN RETIREMENT READINESS RETIREMENT SAVINGS RETIREMENT SAVINGS ACCOUNTS RISK AVERSION SAVING MONEY SAVINGS SAVINGS ACCOUNT SAVINGS BEHAVIOR SAVINGS INSTRUMENTS SAVINGS OPTION SAVINGS PRODUCT SCHOOLING SECONDARY SCHOOL SMALL LOAN SOCIAL PROCESSES STOCK MUTUAL FUND SUPPLY OF CREDIT TEACHING TRAINING CENTER TRAINING PROGRAM URBAN DEVELOPMENT VALUE OF MONEY VITAMIN A
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110919154530 http://hdl.handle.net/10986/3562

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spelling	okr-10986-35622021-04-23T14:02:10Z Unpacking the Causal Chain of Financial Literacy Carpena, Fenella Cole, Shawn Shapiro, Jeremy Zia, Bilal ACCESS TO FINANCE ACCOUNTING APR ARITHMETIC AVERAGE SCORE BANK ACCOUNT BASIC FINANCIAL LITERACY BORROWING BORROWING MONEY BUDGETING BUSINESS EDUCATION BUSINESS SCHOOL BUSINESS TRAINING CALCULATIONS CASH PAYMENT CHECKS CHILD CARE CLASSROOM CLASSROOM SESSION CLASSROOM SESSIONS CONSUMER CONSUMER FINANCE CONSUMER PROTECTION CONSUMER PROTECTION MEASURES CONSUMERS CONTRIBUTION DEBT DECISION MAKING DEMAND FOR SAVINGS DEPOSIT DEPOSIT INSURANCE DEVELOPMENT BANK DISCOUNT RATE DISCOUNT RATES DIVERSIFICATION EARNINGS ECONOMIC DECISIONS ELEMENTARY SCHOOL EMPLOYEE EMPLOYEE BENEFITS ENROLLMENT ENTREPRENEURS EXPENDITURE EXPENDITURES FARM ENTERPRISE FINANCIAL ADVICE FINANCIAL BEHAVIOR FINANCIAL CHOICES FINANCIAL CONCEPTS FINANCIAL CURRICULUM FINANCIAL DECISION FINANCIAL DECISIONS FINANCIAL EDUCATION FINANCIAL EDUCATION PROGRAM FINANCIAL EDUCATION PROGRAMS FINANCIAL INCENTIVE FINANCIAL INCENTIVES FINANCIAL INSTRUMENTS FINANCIAL KNOWLEDGE FINANCIAL LITERACY FINANCIAL LITERACY EDUCATION FINANCIAL LITERACY PROGRAM FINANCIAL LITERACY PROGRAMS FINANCIAL LITERACY SURVEYS FINANCIAL LITERACY TRAINING FINANCIAL MANAGEMENT FINANCIAL MATTERS FINANCIAL OPTIONS FINANCIAL OUTCOMES FINANCIAL PRODUCT FINANCIAL PRODUCTS FINANCIAL PROVIDERS FINANCIAL REFORM FINANCIAL SERVICES FINANCIAL SOPHISTICATION FORMAL FINANCIAL SERVICES GENDER GENERAL POPULATION HEALTH EDUCATION HEALTH INSURANCE HEALTH TRAINING HIGH SCHOOL HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLDS HUSBAND INCOMES INFLATION INFORMAL SAVINGS INFORMED FINANCIAL CHOICES INHERITANCE INSTALLMENT INSURANCE INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERVENTIONS INVESTING KNOWLEDGE TEST LENDER LIFE INSURANCE LIFE INSURANCE POLICY LIMITED FINANCIAL LITERACY LITERACY LEVELS LITERACY TEST LOAN LOAN PROCESSING LOAN REPAYMENT LOW-INCOME MATH MATHEMATICS MEDICAL INSURANCE MFI MICRO-ENTREPRENEURS MICROFINANCE MONETARY INCENTIVES MONEY LENDER MONEYLENDER MONEYLENDERS MONTHLY INCOME MORTGAGE MORTGAGE CHOICE NUMERACY PAYDAY LOAN PEOPLES PREGNANT WOMEN PROBABILITY PUBLIC ECONOMICS RENTS REPAYMENT RETIREMENT RETIREMENT PLAN RETIREMENT READINESS RETIREMENT SAVINGS RETIREMENT SAVINGS ACCOUNTS RISK AVERSION SAVING MONEY SAVINGS SAVINGS ACCOUNT SAVINGS BEHAVIOR SAVINGS INSTRUMENTS SAVINGS OPTION SAVINGS PRODUCT SCHOOLING SECONDARY SCHOOL SMALL LOAN SOCIAL PROCESSES STOCK MUTUAL FUND SUPPLY OF CREDIT TEACHING TRAINING CENTER TRAINING PROGRAM URBAN DEVELOPMENT VALUE OF MONEY VITAMIN A A growing body of literature examines the causal impact of financial literacy on individual, household, and firm level outcomes. This paper unpacks the mechanism of impact by focusing on the first link in the causal chain. Specifically, it studies the experimental impact of financial literacy on three distinct dimensions of financial knowledge. The analysis finds that financial literacy does not immediately enable individuals to discern costs and rewards that require high numeracy skills, but it does significantly improve basic awareness of financial choices and attitudes toward financial decisions. Monetary incentives do not induce better performance, suggesting cognitive constraints rather than lack of attention are a key barrier to improving financial knowledge. These results illuminate the strengths and limitations of financial literacy training, which can inform the design and anticipated effects of such programs. 2012-03-19T18:04:39Z 2012-03-19T18:04:39Z 2011-09-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110919154530 http://hdl.handle.net/10986/3562 English Policy Research working paper ; no. WPS 5798 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCESS TO FINANCE ACCOUNTING APR ARITHMETIC AVERAGE SCORE BANK ACCOUNT BASIC FINANCIAL LITERACY BORROWING BORROWING MONEY BUDGETING BUSINESS EDUCATION BUSINESS SCHOOL BUSINESS TRAINING CALCULATIONS CASH PAYMENT CHECKS CHILD CARE CLASSROOM CLASSROOM SESSION CLASSROOM SESSIONS CONSUMER CONSUMER FINANCE CONSUMER PROTECTION CONSUMER PROTECTION MEASURES CONSUMERS CONTRIBUTION DEBT DECISION MAKING DEMAND FOR SAVINGS DEPOSIT DEPOSIT INSURANCE DEVELOPMENT BANK DISCOUNT RATE DISCOUNT RATES DIVERSIFICATION EARNINGS ECONOMIC DECISIONS ELEMENTARY SCHOOL EMPLOYEE EMPLOYEE BENEFITS ENROLLMENT ENTREPRENEURS EXPENDITURE EXPENDITURES FARM ENTERPRISE FINANCIAL ADVICE FINANCIAL BEHAVIOR FINANCIAL CHOICES FINANCIAL CONCEPTS FINANCIAL CURRICULUM FINANCIAL DECISION FINANCIAL DECISIONS FINANCIAL EDUCATION FINANCIAL EDUCATION PROGRAM FINANCIAL EDUCATION PROGRAMS FINANCIAL INCENTIVE FINANCIAL INCENTIVES FINANCIAL INSTRUMENTS FINANCIAL KNOWLEDGE FINANCIAL LITERACY FINANCIAL LITERACY EDUCATION FINANCIAL LITERACY PROGRAM FINANCIAL LITERACY PROGRAMS FINANCIAL LITERACY SURVEYS FINANCIAL LITERACY TRAINING FINANCIAL MANAGEMENT FINANCIAL MATTERS FINANCIAL OPTIONS FINANCIAL OUTCOMES FINANCIAL PRODUCT FINANCIAL PRODUCTS FINANCIAL PROVIDERS FINANCIAL REFORM FINANCIAL SERVICES FINANCIAL SOPHISTICATION FORMAL FINANCIAL SERVICES GENDER GENERAL POPULATION HEALTH EDUCATION HEALTH INSURANCE HEALTH TRAINING HIGH SCHOOL HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLDS HUSBAND INCOMES INFLATION INFORMAL SAVINGS INFORMED FINANCIAL CHOICES INHERITANCE INSTALLMENT INSURANCE INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERVENTIONS INVESTING KNOWLEDGE TEST LENDER LIFE INSURANCE LIFE INSURANCE POLICY LIMITED FINANCIAL LITERACY LITERACY LEVELS LITERACY TEST LOAN LOAN PROCESSING LOAN REPAYMENT LOW-INCOME MATH MATHEMATICS MEDICAL INSURANCE MFI MICRO-ENTREPRENEURS MICROFINANCE MONETARY INCENTIVES MONEY LENDER MONEYLENDER MONEYLENDERS MONTHLY INCOME MORTGAGE MORTGAGE CHOICE NUMERACY PAYDAY LOAN PEOPLES PREGNANT WOMEN PROBABILITY PUBLIC ECONOMICS RENTS REPAYMENT RETIREMENT RETIREMENT PLAN RETIREMENT READINESS RETIREMENT SAVINGS RETIREMENT SAVINGS ACCOUNTS RISK AVERSION SAVING MONEY SAVINGS SAVINGS ACCOUNT SAVINGS BEHAVIOR SAVINGS INSTRUMENTS SAVINGS OPTION SAVINGS PRODUCT SCHOOLING SECONDARY SCHOOL SMALL LOAN SOCIAL PROCESSES STOCK MUTUAL FUND SUPPLY OF CREDIT TEACHING TRAINING CENTER TRAINING PROGRAM URBAN DEVELOPMENT VALUE OF MONEY VITAMIN A
spellingShingle	ACCESS TO FINANCE ACCOUNTING APR ARITHMETIC AVERAGE SCORE BANK ACCOUNT BASIC FINANCIAL LITERACY BORROWING BORROWING MONEY BUDGETING BUSINESS EDUCATION BUSINESS SCHOOL BUSINESS TRAINING CALCULATIONS CASH PAYMENT CHECKS CHILD CARE CLASSROOM CLASSROOM SESSION CLASSROOM SESSIONS CONSUMER CONSUMER FINANCE CONSUMER PROTECTION CONSUMER PROTECTION MEASURES CONSUMERS CONTRIBUTION DEBT DECISION MAKING DEMAND FOR SAVINGS DEPOSIT DEPOSIT INSURANCE DEVELOPMENT BANK DISCOUNT RATE DISCOUNT RATES DIVERSIFICATION EARNINGS ECONOMIC DECISIONS ELEMENTARY SCHOOL EMPLOYEE EMPLOYEE BENEFITS ENROLLMENT ENTREPRENEURS EXPENDITURE EXPENDITURES FARM ENTERPRISE FINANCIAL ADVICE FINANCIAL BEHAVIOR FINANCIAL CHOICES FINANCIAL CONCEPTS FINANCIAL CURRICULUM FINANCIAL DECISION FINANCIAL DECISIONS FINANCIAL EDUCATION FINANCIAL EDUCATION PROGRAM FINANCIAL EDUCATION PROGRAMS FINANCIAL INCENTIVE FINANCIAL INCENTIVES FINANCIAL INSTRUMENTS FINANCIAL KNOWLEDGE FINANCIAL LITERACY FINANCIAL LITERACY EDUCATION FINANCIAL LITERACY PROGRAM FINANCIAL LITERACY PROGRAMS FINANCIAL LITERACY SURVEYS FINANCIAL LITERACY TRAINING FINANCIAL MANAGEMENT FINANCIAL MATTERS FINANCIAL OPTIONS FINANCIAL OUTCOMES FINANCIAL PRODUCT FINANCIAL PRODUCTS FINANCIAL PROVIDERS FINANCIAL REFORM FINANCIAL SERVICES FINANCIAL SOPHISTICATION FORMAL FINANCIAL SERVICES GENDER GENERAL POPULATION HEALTH EDUCATION HEALTH INSURANCE HEALTH TRAINING HIGH SCHOOL HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLDS HUSBAND INCOMES INFLATION INFORMAL SAVINGS INFORMED FINANCIAL CHOICES INHERITANCE INSTALLMENT INSURANCE INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERVENTIONS INVESTING KNOWLEDGE TEST LENDER LIFE INSURANCE LIFE INSURANCE POLICY LIMITED FINANCIAL LITERACY LITERACY LEVELS LITERACY TEST LOAN LOAN PROCESSING LOAN REPAYMENT LOW-INCOME MATH MATHEMATICS MEDICAL INSURANCE MFI MICRO-ENTREPRENEURS MICROFINANCE MONETARY INCENTIVES MONEY LENDER MONEYLENDER MONEYLENDERS MONTHLY INCOME MORTGAGE MORTGAGE CHOICE NUMERACY PAYDAY LOAN PEOPLES PREGNANT WOMEN PROBABILITY PUBLIC ECONOMICS RENTS REPAYMENT RETIREMENT RETIREMENT PLAN RETIREMENT READINESS RETIREMENT SAVINGS RETIREMENT SAVINGS ACCOUNTS RISK AVERSION SAVING MONEY SAVINGS SAVINGS ACCOUNT SAVINGS BEHAVIOR SAVINGS INSTRUMENTS SAVINGS OPTION SAVINGS PRODUCT SCHOOLING SECONDARY SCHOOL SMALL LOAN SOCIAL PROCESSES STOCK MUTUAL FUND SUPPLY OF CREDIT TEACHING TRAINING CENTER TRAINING PROGRAM URBAN DEVELOPMENT VALUE OF MONEY VITAMIN A Carpena, Fenella Cole, Shawn Shapiro, Jeremy Zia, Bilal Unpacking the Causal Chain of Financial Literacy
geographic_facet	The World Region The World Region
relation	Policy Research working paper ; no. WPS 5798
description	A growing body of literature examines the causal impact of financial literacy on individual, household, and firm level outcomes. This paper unpacks the mechanism of impact by focusing on the first link in the causal chain. Specifically, it studies the experimental impact of financial literacy on three distinct dimensions of financial knowledge. The analysis finds that financial literacy does not immediately enable individuals to discern costs and rewards that require high numeracy skills, but it does significantly improve basic awareness of financial choices and attitudes toward financial decisions. Monetary incentives do not induce better performance, suggesting cognitive constraints rather than lack of attention are a key barrier to improving financial knowledge. These results illuminate the strengths and limitations of financial literacy training, which can inform the design and anticipated effects of such programs.
format	Publications & Research :: Policy Research Working Paper
author	Carpena, Fenella Cole, Shawn Shapiro, Jeremy Zia, Bilal
author_facet	Carpena, Fenella Cole, Shawn Shapiro, Jeremy Zia, Bilal
author_sort	Carpena, Fenella
title	Unpacking the Causal Chain of Financial Literacy
title_short	Unpacking the Causal Chain of Financial Literacy
title_full	Unpacking the Causal Chain of Financial Literacy
title_fullStr	Unpacking the Causal Chain of Financial Literacy
title_full_unstemmed	Unpacking the Causal Chain of Financial Literacy
title_sort	unpacking the causal chain of financial literacy
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110919154530 http://hdl.handle.net/10986/3562
_version_	1764387217297375232

Unpacking the Causal Chain of Financial Literacy

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