Understanding of the determinants of saving behavior of people is important for securing the financial stability of both the person, individually, and the country, at large. The commonly accepted viewpoint here is that a higher level of financial literacy (as brought by the relevant economic education via, in particular, smarter saving) leads to increasing of financial well-being. But, as we discuss in this paper by providing an appropriate conceptual theoretical framework, this relation has a more complicated nature: in some cases, financial literacy may have an adverse effect on people’s financial well-being. To secure the positive effect of financial literacy on financial well-being, specifically, via saving more actively, the appropriate programs should be introduced at the early stages of education (e.g., at school).
This study aims to appropriately assess the magnitude of influence of the fact of being financially literate on the fact of making savings. To this end, we use a representative sample (n = 1,243) of Russian high school students. In order to account for the endogenous nature of the influence of financial literacy on the willingness to make savings, we employ a copula-based bivariate probit-regression approach to identify the actual magnitude of this influence. To the best of our knowledge, we are the first to apply a copula-based modeling to this problem. As a result, for the considered cohort of Russian adolescents, we demonstrate that the studied magnitude is substantially greater when the endogeneity effect is appropriately controlled for. We also reveal and discuss the factors that impact the level of financial literacy and saving behavior of a Russian teenager. Relevant recommendations are provided for Russian financial authorities and institutions.
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