Do we invest as we are? The role of early non-cognitive skills on household savings in adulthood

Abstract

Abstract Household face a variety of financial products when making decisions about investing their money, from simple bank accounts to financial products more sophisticated like stocks, funds, or bonds. Getting a greater understanding of the factors influencing the financial household decisions could enhance their financial well-being. The aim of this paper is to examine the link between early non-cognitive skills and household saving decisions in adulthood. Our results suggest that certain early non-cognitive skills are predictors of savings decisions in later life. Specifically, higher level of conscientiousness and neuroticism increases the probability of investing in any financial product, while high level of neuroticism, extraversion, and agreeableness increase the probability of holding financial products with risk. Moreover, the effect of non-cognitive skills was different across monthly income decile. For conscientiousness and neuroticism, a negative gradient effect was found, while this gradient effect was positive for agreeableness and extraversion These findings may be relevant from a policy perspective since boosting non-cognitive skills in childhood through educational policies could improve financial well-being in adulthood. JEL classification: D14 D91 G11