Essays on financial literacy and financial education

The growing complexity of financial markets places a greater burden of financial responsibility on individuals. As a consequence, financial literacy has increased in importance as a basis for understanding and managing financial matters. In response, financial education programs have been offered to adults and youth to improve their financial literacy and capability. This research studies the effects of financial literacy or the effects of financial education on three topics—withdrawing funds from retirement accounts, seeking financial advice, and assessing financial risk tolerance. The first topic analyzes the effects of financial literacy on the likelihood of withdrawing funds from retirement accounts, before retiring. With defined benefit plans almost entirely replaced with defined contribution plans, retirement responsibility is now shouldered by individuals. This chapter shows that financial literacy is significant in the model of withdrawing funds before retirement—individuals with more financial literacy are less likely to withdraw funds from their retirement accounts compared to individuals with less financial literacy, before reaching retirement status, ceteris paribus. The second topic in this dissertation assesses the effects of both financial literacy and financial education on the likelihood of consulting with financial advisors. The first part of this chapter replicates the model for the demand of financial advice developed by previous studies. Results from this part of the analysis are very similar to the results from previous research—those with more financial knowledge are more likely to seek financial advice in all areas, except for debt. The second part of this chapter focuses on the effects of financial education on the likelihood of seeking financial advice. Results show that individuals who have had financial education are more likely to obtain certain financial advice— especially, respondents who have not attended college and who have low financial literacy. Lastly, an exploratory analysis on the relationship between financial risk tolerance and financial education is undertaken. Little research has been done investigating the correlation between financial education and financial risk tolerance. Results from this chapter show that individuals who have attended financial education courses may be more likely to report higher measures of financial risk tolerance in certain samples