231 - Financial Literacy and Retirement Planning in the Netherlands

DNB Working Papers
Date 4 December 2009

The complexity of financial decisions households are faced with has increased to unprecedented levels. At the same time, recent research documents large differences in economic knowledge among households and indicates that household financial skills may be inadequate to cope with the increasing responsibility for making retirement decisions. In this paper, we examine the relationship between financial knowledge and retirement planning in the Netherlands. For this purpose, we have designed a customized module for the DNB (De Nederlandsche Bank) Household Survey. We identify a strong and positive association between financial knowledge and retirement planning. Using information on economics education when young, we show that the nexus of causality goes from literacy to planning rather than the other way around.

Keywords: Thinking about Retirement, Knowledge of Finance and Economics, Financial Sophistication, Economics Schooling.

JEL Classification: J26, D12.