Financial Literacy Overconfidence and Financial Advice Seeking Financial Literacy Overconfidence and Financial Advice Seeking

Abstract

The objective of this study is to examine potential effects of overconfidence on financial advice usage. We define financial literacy overconfidence as the gap between consumers‘ subjective and objective financial knowledge. Using data from the 2012 National Financial Capability Study, we find that roughly ten percent of respondents display financial literacy overconfidence: they score themselves higher than the sample average on perceived financial knowledge but are unable to answer three or more financial literacy questions correctly. These overconfident consumers are less likely to seek the types of financial advice usually associated with asset building such as investment advice but more likely to demand advice related to financial difficulties such as debt counseling. Other levels of confidence in financial knowledge and policy implications are also discussed.