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The Links between Early-Life Cognition and Schooling and Late-Life Financial Knowledge

Authors

  • PAMELA HERD,

    1. Pamela Herd (pherd@lafollette.wisc.edu) is Associate Professor of Public Affairs and Sociology, Faculty Affiliate at the Institute for Research on Poverty, and Co-Director of the Wisconsin Longitudinal Study, University of Wisconsin-Madison.
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  • KAREN HOLDEN,

    1. Karen Holden is Professor Emeritus of Public Affairs and Consumer Science, Faculty Affiliate at the Institute for Research on Poverty, Center for the Demography and Health of Aging, Institute on Aging, University of Wisconsin-Madison.
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  • YUNG TING SU

    1. Yung Ting Su is a PhD Student at the Department of Consumer Affairs, University of Wisconsin-Madison.
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  • The research reported herein was performed pursuant to a grant from the US Social Security Administration funded as a part of the Financial Literacy Research Consortium and was also supported by National Institutes for Health, National Institute for Aging grant P01 AG021079 (Wisconsin Longitudinal Study: Tracking the Life Course); NIA training grant T32 AG00129; and by Center for Demography of Health and Aging (University of Wisconsin-Madison) grant P30 AG017266. The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the Federal Government or the Center for Financial Security at the University of Wisconsin-Madison.

Abstract

Using the Wisconsin Longitudinal Study, a sample of Wisconsin high school graduates from the class of 1957, we explore the relationship between late-life financial knowledge and human capital formed in early life. Specifically, we examine the associations between early-life cognition and schooling experiences—such as academic performance and coursework—and late-life financial knowledge. Financial knowledge is measured as individuals' knowledge of their own financial situations, which we argue is a prerequisite for good financial behavior. We find that those with lower early-life cognitive functioning, especially those without college degrees, have lower levels of financial knowledge in late life. We find more limited evidence for independent associations of academic performance and math course work with late-life financial knowledge.

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