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Financial Literacy, Household Investment and Household Debt: Evidence from Switzerland

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  • Brown, Martin
  • Graf, Roman

Abstract

We use a novel, representative survey to document the level of financial literacy among Swiss households and to examine how financial literacy is related to household investment and borrowing. We find that half of the respondents were able to answer three questions on basic financial concepts (compound interest, inflation and risk diversification) correctly. Financial literacy is lower among low-income and immigrant households as well as among women. Young households seem to be less familiar with the concept of inflation, while retirees are less familiar with the concepts of compound interest and risk diversification. We find that financial literacy is strongly correlated with financial market participation, voluntary retirement saving and mortgage borrowing.

Suggested Citation

  • Brown, Martin & Graf, Roman, 2013. "Financial Literacy, Household Investment and Household Debt: Evidence from Switzerland," Working Papers on Finance 1301, University of St. Gallen, School of Finance.
    • Handle: RePEc:usg:sfwpfi:2013:01
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    References listed on IDEAS

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    3. Petia Niederländer & Doris Ritzberger-Grünwald & Karin Turner-Hrdlicka, 2021. "Gender, money and finance," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/21, pages 83-92.
    4. Müller, Anna K. & Theuvsen, Ludwig, 2015. "Food safety standards in the Guatemalan fresh pea sector: The role of financial literacy in technology adoption," GlobalFood Discussion Papers 205289, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
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    8. Eva Sierminska & Karina Doorley, 2018. "To own or not to own? Household portfolios, demographics and institutions in a cross-national perspective," Journal of Income Distribution, Ad libros publications inc., vol. 26(1), pages 1-43, March.
    9. French, Declan & McKillop, Donal, 2016. "Financial literacy and over-indebtedness in low-income households," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 1-11.
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