Discussant: William Even, Miami University of Ohio
Dean Maki asked: Why might financial education have an impact? He stressed three reasons: (1) Financial decision-making is difficult; (2) Basic financial knowledge is not widespread; and (3) The poorly informed are less likely to participate in a 401(k) plan. Using a Merrill Lynch survey, he tested for the impact of financial education on financial knowledge. He found that employer education is correlated with knowledge of relative asset returns and pension plan features. He also noted that high school financial education has an impact, and that states with high financial literacy have lower rates of personal bankruptcy.
Bill Even said that the increased complexity of a decision leads people to defer decision-making. Non-savers procrastinate making decisions to save and plan for retirement because they are complex. In this regard, he noted that default rules – say for pension plan participation – may be particularly powerful.
