How Financial Literacy And Impatience Shape Retirement Wealth And Investment Behaviors

Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs.

Provided by: National Bureau of Economic Research Topic: CXO Date Added: Jan 2011 Format: PDF

Find By Topic