Financial literacy and retirement planning in the Netherlands

The complexity of financial decisions that households now face has increased to unprecedented levels. At the same time, households seem to lack the financial knowledge to cope with these decisions, including how to save and invest adequately for retirement. In this paper, we examine the relationship between financial knowledge and retirement planning in the Netherlands. For this purpose, we have designed a module on financial literacy and planning for the De Nederlandsche Bank (DNB) Household Survey. We find a strong and positive relationship between financial knowledge and retirement planning; those who are more financially knowledgeable are more likely to plan for retirement. Using information on economics education acquired in school, we show that the nexus of causality goes from financial literacy to planning rather than the other way around.

► We examine the relationship between financial knowledge and retirement planning in the Netherlands. ► We provide evidence of widespread illiteracy. Financial literacy is strongly related to economics education in school. Many households do not plan for retirement. ► Financially knowledgeable households are more likely to think about retirement. ► We show that the causality goes from financial literacy to planning rather than the other way around.