Using the Wisconsin Longitudinal Study, Pamela Herd and Karen Holden examine the links between early-life cognition and schooling experiences and late-life financial literacy. We find that early-life cognition, especially for those with very low IQ scores, and schooling have a relationship with late-life financial literacy. If the trend continues towards very individualized retirement planning, with defined contribution plans and private savings dominating much of retirement income, we will need to generate strategies to help these vulnerable populations with more limited cognitive functioning manage this increasingly complex financial world.
University of Wisconsin-Madison Center for Financial Security 