Marie-Eve Lachance (Marie.Lachance@sdsu.edu) is an Associate Professor of Finance at San Diego State University.
Financial Literacy and Neighborhood Effects
Article first published online: 29 JAN 2014
Copyright 2014 by The American Council on Consumer Interests
Journal of Consumer Affairs
Volume 48, Issue 2, pages 251–273, Summer 2014
How to Cite
LACHANCE, M.-E. (2014), Financial Literacy and Neighborhood Effects. Journal of Consumer Affairs, 48: 251–273. doi: 10.1111/joca.12024
- Issue published online: 9 JUL 2014
- Article first published online: 29 JAN 2014
- Manuscript Accepted: 24 SEP 2013
- Manuscript Revised: 17 SEP 2013
- Manuscript Received: 2 MAY 2013
This study uses data from the 2009 and 2012 waves of the National Financial Capability Study to examine the effects of neighborhood characteristics on financial literacy. Controlling for individual characteristics, multivariate regression analysis shows that a zip code's education level has a significant impact on financial literacy. This finding is consistent with social learning as a mechanism of financial knowledge acquisition, with neighborhood education serving as a proxy for the level of financial knowledge of one's social network. Although social effects are not the only possible explanation for this finding, the result is robust even after controlling for a host of other factors such as getting advice from financial professionals, receiving financial education, and living in a zip code with greater employment in the financial industry. This study additionally documents that zip code education effects are present with various savings and credit measures.