Using the Right Yardstick

Assessing Financial Literacy Measures by Way of Financial Well-Being

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Using data from nine waves of the Health and Retirement Study (HRS), Jason Seligman and Maximilian Schmeiser examine whether existing measures of financial literacy are descriptive and/or predictive of successful household financial management, as well as resilience in the recent financial crisis. We find that once individual characteristics are carefully accounted for in our analysis, correct responses to many of the financial literacy questions in widespread use are not significant predictors of asset accumulation or resilience to financial shocks.