Effect of Financial Literacy on Household Wealth Accumulation among Swedish Households

Abstract: The objective of this study is to examine the effect of financial literacy on household wealth accumulation among Swedish households. Prior research have suggested that financial literacy plays a significant role in financial decision making. Using household data from The Financial Supervisory Authority (FI) of Sweden and instrumental variable approach, the study aims to isolate the effect of financial literacy on household wealth accumulation. The results show that people with better understanding of basic and advanced financial concepts are less likely to end up in financial distress and more likely to have higher wealth accumulation. The findings of my study supports the viewpoint that policies aimed towards providing financial education might lower the probability of people encountering financial hardships.