Discounting financial literacy: Time preferences and participation in financial education programs

Many policymakers and economists argue that financial literacy is key to financial wellbeing. But why do many individuals remain financially illiterate despite the benefits of being financially informed? This paper presents results from a field study linking individual decisions to acquire financial information to a normally unobservable characteristic: time preferences. We elicited time preferences using incentivized choice experiments for all individuals to whom a financial education program was offered. Our results show that individuals who choose to acquire personal financial information have substantially higher discount factors than individuals who do not. The results can be interpreted as non-participants discount the benefits of being financially literate more. (C) 2012 Elsevier B.V. All rights reserved.