IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v112y2020icp472-477.html
   My bibliography  Save this article

Financial literacy is not enough: The role of nudging toward adequate long-term saving behavior

Author

Listed:
  • García, Jesús María
  • Vila, José

Abstract

This paper analyzes whether nudging has a relevant effect on financially literate individuals, even if these individuals are professionals with extensive experience of finance and pensions. The paper presents the results of a field experiment with employees of a leading life and pensions company in Spain. The results of the experiment show that financial literacy and awareness of the importance of saving are not enough for individuals to act. Even with pension plan experts, the combination of two types of instruments is necessary: rational instruments, such as financial literacy and awareness of the economic implications of retirement, and nudging, which moves individuals to action in a meaningful way. In this case, an effective approach is to use the default option to increase long-term saving patterns. The Ahorra+ program, which was implemented in 2016 with 282 employees and in 2017 with 405 employees, significantly increases voluntary savings and helps people prepare for retirement.

Suggested Citation

  • García, Jesús María & Vila, José, 2020. "Financial literacy is not enough: The role of nudging toward adequate long-term saving behavior," Journal of Business Research, Elsevier, vol. 112(C), pages 472-477.
    • Handle: RePEc:eee:jbrese:v:112:y:2020:i:c:p:472-477
    DOI: 10.1016/j.jbusres.2020.01.061
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296320300746
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2020.01.061?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    2. Daniel Fernandes & John G. Lynch & Richard G. Netemeyer, 2014. "Financial Literacy, Financial Education, and Downstream Financial Behaviors," Management Science, INFORMS, vol. 60(8), pages 1861-1883, August.
    3. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy and retirement planning in the United States," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 509-525, October.
    4. Boisclair, David & Lusardi, Annamaria & Michaud, Pierre-Carl, 2017. "Financial literacy and retirement planning in Canada," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(3), pages 277-296, July.
    5. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    6. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(1), pages 35-44, January.
    7. Charness, Gary & Gneezy, Uri & Kuhn, Michael A., 2012. "Experimental methods: Between-subject and within-subject design," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 1-8.
    8. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," The World Bank Economic Review, World Bank, vol. 31(3), pages 611-630.
    9. Lauren E. Willis, 2011. "The Financial Education Fallacy," American Economic Review, American Economic Association, vol. 101(3), pages 429-434, May.
    10. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    11. Arrondel, L. & Debbich, M. & Savignac, F., 2013. "Financial Literacy and Financial Planning in France," Working papers 465, Banque de France.
    12. Annamaria Lusardi & Olivia Mitchell, 2006. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education Programs," Working Papers wp144, University of Michigan, Michigan Retirement Research Center.
    13. Robert Clark & Annamaria Lusardi & Olivia S. Mitchell, 2017. "Employee Financial Literacy And Retirement Plan Behavior: A Case Study," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 248-259, January.
    14. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    15. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
    16. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    17. Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    18. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
    19. Anders Anderson & David T. Robinson, 2018. "Who Feels the Nudge? Knowledge, Self-Awareness and Retirement Savings Decisions," NBER Working Papers 25061, National Bureau of Economic Research, Inc.
    20. Peter Kooreman & Henriëtte Prast, 2010. "What Does Behavioral Economics Mean for Policy? Challenges to Savings and Health Policies in the Netherlands," De Economist, Springer, vol. 158(2), pages 101-122, June.
    21. Alessie, Rob & Van Rooij, Maarten & Lusardi, Annamaria, 2011. "Financial literacy and retirement preparation in the Netherlands," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 527-545, October.
    22. Fornero, Elsa & Monticone, Chiara, 2011. "Financial literacy and pension plan participation in Italy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 547-564, October.
    23. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2009. "The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 167-195, National Bureau of Economic Research, Inc.
    24. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2003. "Optimal Defaults," American Economic Review, American Economic Association, vol. 93(2), pages 180-185, May.
    25. Anderson, Anders & Baker, Forest & Robinson, David T., 2017. "Precautionary savings, retirement planning and misperceptions of financial literacy," Journal of Financial Economics, Elsevier, vol. 126(2), pages 383-398.
    26. Richard H. Thaler & Cass R. Sunstein, 2023. "Libertarian paternalism," Chapters, in: Cass R. Sunstein & Lucia A. Reisch (ed.), Research Handbook on Nudges and Society, chapter 1, pages 10-16, Edward Elgar Publishing.
    27. Jesús Marí­a García & José Vila, 2018. "Nudging long-term saving: The Ahorra+ program," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(2), pages 49-53, September.
    28. Francesco C. Billari & Carlo A. Favero & Francesco Saita, 2017. "Nudging financial and demographic literacy: experimental evidence from an Italian Trade Union Pension Fund," BAFFI CAREFIN Working Papers 1767, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    29. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    30. repec:hal:pseose:halshs-00859682 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shari De Baets & Dilek Önkal & Wasim Ahmed, 2022. "Do Risky Scenarios Affect Forecasts of Savings and Expenses?," Forecasting, MDPI, vol. 4(1), pages 1-28, February.
    2. Kausel, Edgar E. & Reyes, Tomas & Larach, Francisco & Chacon, Alvaro & Enei, Gonzalo, 2024. "Does enhancing the vividness in connection with the future self increase savings behavior? A field experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 110(C).
    3. Dawid Dawidowicz & Joanna Hernik & Elzbieta Jaworska, 2022. "Why Women Do not Save for Retirement – In search of Determinants of Saving Procrastination, against the Background of Changes in Pension Systems," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 337-356.
    4. Wan Mashumi Wan Mustafa & Md. Aminul Islam & Muhammad Asyraf & Md. Sharif Hassan & Pradip Royhan & Shafiqur Rahman, 2023. "The Effects of Financial Attitudes, Financial Literacy and Health Literacy on Sustainable Financial Retirement Planning: The Moderating Role of the Financial Advisor," Sustainability, MDPI, vol. 15(3), pages 1-17, February.
    5. Guiling Zhao & Yunpeng Fu & Deyu Zhou, 2024. "Study on the Impact of China’s Pension Insurance System on the Savings Rate of Urban Residents Based on the Preventive Saving Perspective," Sustainability, MDPI, vol. 16(21), pages 1-23, October.
    6. Min Jung Kim, 2022. "Two sides of the same coin: The simultaneous effects of spending and saving needs on budget estimation," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(4), pages 360-371, December.
    7. Gallego-Losada, Rocío & Montero-Navarro, Antonio & Rodríguez-Sánchez, José-Luis & González-Torres, Thais, 2022. "Retirement planning and financial literacy, at the crossroads. A bibliometric analysis," Finance Research Letters, Elsevier, vol. 44(C).
    8. Riedlsperger, Patrick, 2024. "Decarbonizing Travel Decisions by Using Digital Nudges," Junior Management Science (JUMS), Junior Management Science e. V., vol. 9(1), pages 1178-1210.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Azra Zaimovic & Anes Torlakovic & Almira Arnaut-Berilo & Tarik Zaimovic & Lejla Dedovic & Minela Nuhic Meskovic, 2023. "Mapping Financial Literacy: A Systematic Literature Review of Determinants and Recent Trends," Sustainability, MDPI, vol. 15(12), pages 1-30, June.
    2. Keane, M.P. & Thorp, S., 2016. "Complex Decision Making," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 661-709, Elsevier.
    3. Michael P. Keane & Susan Thorp, 2016. "Complex Decision Making: The Roles of Cognitive Limitations, Cognitive Decline and Ageing," Economics Papers 2016-W10, Economics Group, Nuffield College, University of Oxford.
    4. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    5. Margherita Fort & Francesco Manaresi & Serena Trucchi, 2016. "Adult financial literacy and households’ financial assets: the role of bank information policies," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(88), pages 743-782.
    6. Li, Xiao, 2020. "When financial literacy meets textual analysis: A conceptual review," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    7. Billari, Francesco C. & Favero, Carlo A. & Saita, Francesco, 2023. "Online financial and demographic education for workers: Experimental evidence from an Italian Pension Fund," Journal of Banking & Finance, Elsevier, vol. 151(C).
    8. Zuzana Brokesova & Andrej Cupak & Gueorgui Kolev, 2017. "Financial literacy and voluntary savings for retirement in Slovakia," Working and Discussion Papers WP 10/2017, Research Department, National Bank of Slovakia.
    9. Annamaria Lusardi, 2019. "Financial literacy and the need for financial education: evidence and implications," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-8, December.
    10. Noviarini, Jelita & Coleman, Andrew & Roberts, Helen & Whiting, Rosalind H., 2023. "Financial literacy and retirees' resource allocation decisions in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    11. Kadoya, Yoshihiko & Khan, Mostafa Saidur Rahim, 2020. "What determines financial literacy in Japan?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 19(3), pages 353-371, July.
    12. Luc Arrondel, 2020. "Financial literacy and French behaviour on the stock market," Working Papers halshs-02505320, HAL.
    13. Vieira, Kelmara Mendes & Rosenblum, Tamara Otilia Amaral & Matheis, Taiane Keila, 2022. "And tomorrow, how will it be? Developing a Financial Preparation for Retirement Scale (FPRS)," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).
    14. Luc Arrondel, 2018. "Financial Literacy and Asset Behaviour: Poor Education and Zero for Conduct?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 60(1), pages 144-160, March.
    15. Albert Hizgilov & Jacques Silber, 2020. "On Multidimensional Approaches to Financial Literacy Measurement," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 787-830, April.
    16. Lusardi, Annamaria & Kaiser, Tim, 2024. "Financial literacy and financial education: An overview," CEPR Discussion Papers 19185, C.E.P.R. Discussion Papers.
    17. Tabea Bucher-Koenen & Annamaria Lusardi & Rob Alessie & Maarten van Rooij, 2017. "How Financially Literate Are Women? An Overview and New Insights," Journal of Consumer Affairs, Wiley Blackwell, vol. 51(2), pages 255-283, July.
    18. Sconti, Alessia, 2022. "Digital vs. in-person financial education: What works best for Generation Z?," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 300-318.
    19. Elisabeth Beckmann & Sarah Reiter, 2020. "How financially literate is CESEE? Insights from the OeNB Euro Survey," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/20, pages 36-59.
    20. Kiliyanni, Abdul Latheef & Sivaraman, Sunitha, 2016. "The perception-reality gap in financial literacy: Evidence from the most literate state in India," International Review of Economics Education, Elsevier, vol. 23(C), pages 47-64.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:112:y:2020:i:c:p:472-477. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.