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Financial Literacy, Risk and Time Preferences: Results from a Randomized Educational Intervention

Author

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  • Sutter, Matthias

    (Max Planck Institute for Research on Collective Goods)

  • Weyland, Michael

    (Ludwigsburg University of Education)

  • Untertrifaller, Anna

    (University of Cologne)

  • Froitzheim, Manuel

    (University of Siegen)

Abstract

We present the results of a randomized intervention in schools to study how teaching financial literacy affects risk and time preferences of adolescents. Following more than 600 adolescents, aged 16 years on average, over about half a year, we provide causal evidence that teaching financial literacy has significant short-term and longer-term effects on risk and time preferences. Compared to two different control treatments, we find that teaching financial literacy makes subjects more patient, less present-biased, and slightly more risk-averse. Our finding that the intervention changes economic preferences contributes to a better understanding of why financial literacy has been shown to correlate systematically with financial behavior in previous studies. We argue that the link between financial literacy and field behavior works through economic preferences. In our study, the latter are also related in a meaningful way to students' field behavior.

Suggested Citation

  • Sutter, Matthias & Weyland, Michael & Untertrifaller, Anna & Froitzheim, Manuel, 2020. "Financial Literacy, Risk and Time Preferences: Results from a Randomized Educational Intervention," IZA Discussion Papers 13566, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13566
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    Cited by:

    1. Kaiser, Tim & Lusardi, Annamaria, 2024. "Financial Literacy and Financial Education: An Overview," IZA Discussion Papers 16926, Institute of Labor Economics (IZA).
    2. Mequanint B. Melesse & Amos Nyangira Tirra & Yabibal M. Walle & Michael Hauser, 2023. "Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(6), pages 1294-1321, December.
    3. Lukas Kiessling & Shyamal Chowdhury & Hannah Schildberg-Hörisch & Matthias Sutter, 2021. "Parental Paternalism and Patience," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2021_03, Max Planck Institute for Research on Collective Goods.
    4. Ante Sterc, 2022. "Limited Consideration in the Investment Fund Choice," CERGE-EI Working Papers wp729, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Zhou, Renee, 2023. "Can Education Change Risk Preference? Evidence from Indonesia and Mexico," Warwick-Monash Economics Student Papers 45, Warwick Monash Economics Student Papers.

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    More about this item

    Keywords

    time preferences; risk preferences; randomized intervention; financial literacy; field experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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