The Long-term Impact of Financial Literacy on Wealth: Evidence From Longitudinal Data

Abstract

This paper investigates the long-term impact of financial literacy on wealth accumulation using unique longitudinal data on Dutch households, thereby resolving important endogeneity issues that plague cross-sectional analyses. We find that financial literacy significantly influences income and savings, driving wealth accumulation over time. The effects vary by age: younger individuals with higher financial literacy tend to earn more, whereas older individuals prioritize savings. Additionally, we identify a notable gender disparity, where financial literacy significantly influences wealth accumulation for men, but has no significant impact for women.