Practical Applications of Improving Retirement Savings by Alleviating Behavioral Biases with Financial Literacy

In Improving Retirement Savings by Alleviating Behavioral Biases with Financial Literacy, from the Fall 2023 issue of The Journal of Retirement, Kanin Anantanasuwong of the Mahidol University College of Management finds that financial literacy improves retirement saving behavior by mitigating the adverse effects of present bias (the tendency to favor immediate reward over a deferred reward). He also finds that financial literacy mitigates the effects of exponential growth bias (EGB) by equipping savers with knowledge about the strength of compounding returns over time. Anantanasuwong analyzed a dataset of household financial information from the American Life Panel survey to investigate whether improved financial literacy mitigated the effects of present bias and EGB.