Authors: Evgenii Gilenko and Aleksandra Chernova
Abstract: Understanding of types and determinants of saving behavior of people is important for securing financial stability of the person, individually, and the country, at large. The commonly accepted viewpoint is that a higher level of financial literacy (as brought by the relevant economic education) via, in particular, better saving, leads to increasing financial well-being of people. But, as we discuss in this paper, this relation may have a more complicated nature: in some cases, financial literacy may have an adverse effect on people’s financial well-being. Moreover, to secure the positive effect of financial literacy on financial well-being, specifically, via more active saving, the appropriate programs should be introduced at the early stages of education of a person (e.g., in school).
We use a representative sample of Russian high school students to test the above-mentioned ideas, accounting for the endogenous nature of financial literacy and, thus, employing a copula-based bivariate logistic regression to detect the actual magnitude of influence of financial literacy on the willingness to make savings.
As a result, we demonstrate that for the studied cohort of adolescents, this magnitude of influence is much higher when we appropriately control for the endogeneity effect. Necessary policy recommendations are provided.
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