Financially literate Americans worry less about life in old age

Researchers have found through a new study that financially literate Americans – those who are better at saving money and investing during their young age – are less anxious about their life in old age.

Researchers at the Hiroshima University carried out this new household economics study – a first of its kind that examines how financial literacy influences anxiety about life in old age in the United States. Researchers at the University looked at the answers of surveys sent to adults across the US. Respondents answered questions that tested their financial literacy, including basic calculation skills and understanding the pricing behavior of bonds. They also reported to what degree they felt anxious about life after turning 65 years old.

While there was not a direct causal link between levels of financial literacy and anxiety about life in old age as a whole, researchers tried to find a relation between the two by examining household characteristics like wealth, education, and number of children.

They found that people with high financial literacy are significantly less anxious by way of accumulating assets, such as savings, bonds, and insurance. Less financially literate people, meanwhile, are less likely to have gathered enough assets to reduce anxiety, possibly because they rely more on social security income for assurance in old age. The researchers found that having a child and doing regular exercise also reduced concern about life in old age.

Even with differences in cultural orientations and social norms between Japan and the United States, results from both countries appear similar among gender, education, and age. Financial literacy was higher among male, more educated, and older adults compared to female, less educated, and younger adults.

The relationships between financial literacy and economic outcomes are intricate. As such, having a better understanding of money does not cause low anxiety about life in old age. Rather, the two are associated with one another through wealth accumulation.