Does Financial Literacy Affect Household Financial Behavior? The Role of Limited Attention


Financial literacy is essential for every individual concerned with public welfare and household portfolio choices. In this study, we investigate the impact of household financial literacy on individuals’ financial behavior using the China Household Financial Survey Data of 2015 and 2017. The results show that financial knowledge has significant current, long-term, and dynamic effects on financial behavior. This finding suggests that financial literacy is an important factor in shaping and improving financial behavior. Second, financial literacy can improve residents’ limited attention, and residents with high attention tend to have formal bank accounts, participate in the stock market, and engage in financial behaviors in situations such as risky financial markets. High attention also helps to improve residents’ financial behavior. This relationship suggests that financial literacy positively impacts formal bank account holding, participation in financial markets, participation in commercial insurance, participation in pension plans, and credit card holdings through limited attention channels that facilitate access to specific financial information. In addition, heterogeneity analysis showed that the impact of financial literacy on financial behavior differs significantly between urban and rural households, between men and women, and between high and low education levels. The study provides valuable insights for policy implications to enhance financial literacy, such as carrying out financial training to improve residents’ knowledge about financial aspects, which further helps to optimize household financial decision-making.

Download options


    Upload a copy of this work     Papers currently archived: 72,856

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library


Added to PP

1 (#1,560,988)

6 months
1 (#386,040)

Historical graph of downloads

Sorry, there are not enough data points to plot this chart.
How can I increase my downloads?

Author Profiles

Zhen Yang
Goethe University Frankfurt

References found in this work

On the Psychology of Prediction.Daniel Kahneman & Amos Tversky - 1973 - Psychological Review 80 (4):237-251.
Multiple Factor Analysis.L. L. Thurstone - 1931 - Psychological Review 38 (5):406-427.

Add more references

Citations of this work

No citations found.

Add more citations

Similar books and articles

Financial Gerontology.Erik Selecky & Andrzej Klimczuk - 2021 - In Danan Gu & Matthew E. Dupre (eds.), Encyclopedia of Gerontology and Population Aging. Springer Verlag. pp. 1861–1864.
Financial Gerontology.Erik Selecky & Andrzej Klimczuk - 2020 - In Danan Gu & Matthew E. Dupre (eds.), Encyclopedia of Gerontology and Population Aging. Springer Verlag. pp. 1--5.