Professor, Public Affairs and Sociology
La Follette School of Public Affairs
University of Wisconsin-Madison
Areas of Research Interest: Aging, Policy, Health, and Inequality
Date: May 10, 2011
Description: Pamela Herd hosted a webinar on the relationship between financial literacy and cognitive functioning. Results revealed that cognitive ability is linked to financial knowledge for those without college degrees but not for those with college degrees, and for those without college degrees, late-life measures of cognitive functioning are correlated with financial knowledge, but these effects weaken substantially after accounting for childhood cognitive functioning.
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.