Financial literacy and anxiety about life in old age: evidence from the USA

This study examines whether financial literacy can help to reduce anxiety about life in old age. We hypothesized that financially literate people are more able to earn income and accumulate assets, leading them to have a less anxious life in old age. On the other hand, less financially literate people rely more on social security to secure themselves in the old age as they are not able to accumulate sufficient assets. By using US survey data, we provide evidence that assets significantly reduce anxiety about life in old age only for people who are more financially literate. For less financially literate people, social security plays an important role in reducing anxiety about life in old age. Besides these, having a child and doing regular exercise also reduced anxiety for all respondents but marital status reduced anxiety in respondents over 40 years of age. The results of our study are robust to measurement of financial literacy and endogeneity problems.