Financial Literacy and Savings Account Returns
|Research Area:||Financial Markets|
Savings accounts are owned by most households, but little is known about the performance of households’ investments. The authors create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document considerable heterogeneity in returns across households, which can be partly explained by financial sophistication. A one standard deviation increase in financial literacy is associated with a 13% increase compared to the median interest rate. We is olate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns.