Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



We examined financial literacy among the young using data from the 1997 National Longitudinal Survey of Youth. We showed that financial literacy is low among the young; fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy is strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings is about 50 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy. These findings have implications for consumer policy.

Working Paper Number

WP2009-09, BWP2009-01

Copyright/Permission Statement

Opinions and errors are solely those of the authors and not of the institutions with which the authors are affiliated. © 2009 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The research reported herein was conducted pursuant to a grant from the U.S. Social Security Administration (SSA) to the Michigan Retirement Research Center, funded as part of the Retirement Research Consortium. Additional support was provided by the Pension Research Council and Boettner Center at the Wharton School of the University of Pennsylvania, and FINRA Investor Education Foundation. We would like to thank Brenda Cude, four anonymous referees, Dan Black, and participants in the conference “Improving Financial Literacy and Reshaping Financial Behavior” at the Networks Financial Institute at Indiana State University, Indianapolis, IN, the symposium on “Improving the Effectiveness of Financial Education in the Classroom” at the Take Charge America Institute at the University of Arizona, Tucson, AZ, and the University of Michigan Retirement Research Center research workshop, Ann Arbor, MI, for many helpful suggestions and comments. Hiroaki Matsuura provided excellent research assistance.

Included in

Economics Commons



Date Posted: 23 August 2019