Financial Literacy to Prevent Poor Borrowing Choices

Authors

  • Terrance Martin Department of Finance & Economics, Utah Valley University
  • Janine K. Sam Department of Business Administration, Shepherd University
  • Philip Gibson College of Business Administration, Winthrop University

DOI:

https://doi.org/10.61190/fsr.v29i4.3464

Keywords:

High-cost borrowing, Retirement plan loans, Financial literacy, Retirement planning

Abstract

Working Americans face the new reality of having to fund and manage their retirement while fac- ing rising levels of indebtedness. A basic level of financial knowledge is essential to make good long-term financial decisions. Using the 2015 National Financial Capacity Study, we investigate the impact of financial literacy on the decision to access retirement plan loans before retirement or use one or more high-cost lenders. Our results show that being financially literate reduces the likelihood of using high-cost lenders and using retirement-plan loans. Furthermore, we find evidence of a nega- tive relation between financial literacy and myopic spending.

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Published

2021-12-30

How to Cite

Martin, T., Sam, J. K., & Gibson, P. (2021). Financial Literacy to Prevent Poor Borrowing Choices. Financial Services Review, 29(4), 293–314. https://doi.org/10.61190/fsr.v29i4.3464

Issue

Vol. 29 No. 4 (2021): Winter 2021

Section

New Original Submission

License

Copyright (c) 2021 Academy of Financial Services

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