Financial literacy and private old-age provision in Germany : evidence from SAVE 2008


Bucher-Koenen, Tabea


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URL: https://ub-madoc.bib.uni-mannheim.de/2572
URN: urn:nbn:de:bsz:180-madoc-25725
Document Type: Working paper
Year of publication: 2009
The title of a journal, publication series: MEA Discussion Papers
Volume: 192
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject: 330 Economics
Classification: JEL: J26 D14 D12 D91 ,
Subject headings (SWD): Deutschland , Bevölkerung , Wissen , Wirtschaft , Finanzlage , Private Altersversorgung , Privater Anleger
Abstract: The German population has good financial knowledge measured on the basis of three financial literacy questions. Around 85 % of the individuals comprehend the functioning of interest and inflation. And 60 % of the individuals understand the relationship of risk and diversification. Overall around 52 % of the individuals give correct answers to all three considered questions of financial literacy. Bi-variate and multivariate analyses of the relation between giving three correct answers and socio-demographic characteristics reveal that higher wealth is associated with higher levels of financial literacy. Moreover, financial literacy relates to higher levels of income and education. There is a significant difference between men and women to give three correct answers. Individuals in East and West, are equally literate, when controlling for differences in income, wealth and education. A positive correlation of financial literacy and financial decision making is identified: more literate households are more likely to save privately for their old-age and at the same time households saving privately for their old-age acquire financial knowledge to improve their investment decisions. Interestingly, the possession of a state subsidised Riester contract is related to lower levels of financial literacy than the possession of other non-subsidised forms of private old-age provision. This indicates that Riester subsidies to some extent successfully encourage individuals with lower financial knowledge to save for old-age. Nevertheless, individuals in the lowest income quintile still have very low levels of private coverage despite the high subsidies. At the same time they show the lowest levels of financial literacy.
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Bucher-Koenen, Tabea (2009) Financial literacy and private old-age provision in Germany : evidence from SAVE 2008. Open Access MEA Discussion Papers Mannheim 192 [Working paper]
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