We review journal publications from 2007 to 2023 that specifically study or consider racial/ethnic and gender differences in financial knowledge. Of the 32 papers we review, 12 focus on racial/ethnic differences, 7 focus on gender differences, and 13 consider racial/ethnic and gender differences. From these studies, we estimate that, on average White adults score 17 percentage points higher than Black adults on objective financial knowledge, 14 percentage points higher than Hispanic adults, and 2 percentage points lower than Asian adults. We also estimate that, on average, men score 13 percentage points higher than women on objective financial knowledge. We also provide average racial/ethnic and gender differences in subjective financial, knowledge, and these differences across groups seem much smaller. We provide an overview of possible determinants for these racial/ethnic and gender gaps in financial knowledge. We discuss how stakeholders should leverage research on financial knowledge and directions for future research with the purpose to address racial/ethnic and gender gaps in financial knowledge in the United States.

This study gauges Finnish people’s knowledge about pensions and their trust in the pension system. A further aim is to see if knowledge and trust are related and to explore the role of sociodemographic factors in that relationship. We examine both self-assessed and objective knowledge of pension system details and look at how age, gender, education, income, and socioeconomic status are reflected in pension knowledge and trust. The results reveal that the relationship between pension knowledge and trust is driven by sociodemographic factors. However, for those with a primary education, there is a positive association between pension knowledge and trust.

We use the 529 college savings plan setting to investigate whether and why households make suboptimal choices to invest in local assets. We estimate that 67% of open accounts between 2010 and 2020 were located suboptimally due to the plans’ tax inefficiencies and high expenses. Over the accounts’ projected lifetimes, such investments yielded expected losses of 8% on average or $15.6 billion in 2020 alone. We then investigate why suboptimal investment is so prevalent. Consistent with households’ lack of understanding of state-level tax benefits, we find that a meaningful proportion of households does not account for the potential tax benefits and costs of local versus nonlocal 529 investment. Household financial literacy and plan disclosure complexity appear to explain suboptimal investment patterns, which further supports the role of information-processing frictions. Our study presents novel evidence on individuals’ preferences for local assets and how information-processing frictions shape their investment decisions, reducing their financial well-being.

A crucial first step in helping consumers improve their financial lives is understanding their financial circumstances and well-being. The Financial Well-Being (FWB) scale measures a consumer’s subjective well-being related to aspects of their financial circumstances. It is available in standard-length (10-item) and abbreviated (5-item) versions, but no research has compared how completing either version may alter consumers’ responses. Notably, the 5-item scale includes a higher share of reverse-coded (i.e., negatively framed) items. We hypothesize that the difference in item framing between scale versions influences participants’ feelings about their financial situation, predicting that completing the 5-item FWB scale will result in more negative responses compared to completing the 10-item FWB scale. To test this hypothesis, we implement a randomized survey experiment using the Understanding America Study. In our experiment with nearly 6,000 participants, we find that completing the 5-item versus the 10-item FWB scale reduces FWB scores (average decline in the 5-item FWB score of 0.9 points, 95% CI [–1.552, –0.249]), and increases the share with a “low” 5-item FWB score by 5.0 percentage points, 95% CI [0.028, 0.071]), responses to individual scale items, and self-rated FWB. This pattern is strongest among lower-income respondents (average decline in FWB score of 2.3 points, 95% CI [–3.385, –1.171] and increases the share with a “low” 5-item FWB score by 8.1 percentage points, 95% CI [0.041, 0.121]). These findings highlight that FWB scale choice can have unexpected consequences. We discuss the implications for research on FWB and on the measurement of well-being more broadly.