nep-fle 2022-09-26 papers

on Financial Literacy and Education

Issue of 2022‒09‒26
one paper chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

Popular Personal Financial Advice versus the Professors By James J. Choi

By:	James J. Choi
Abstract:	I survey the advice given by the fifty most popular personal finance books and compare it to the prescriptions of normative academic economic models. Popular advice frequently departs from normative principles derived from economic theory, which should motivate new hypotheses about why households make the financial choices they do, as well as what financial choices households should make. Popular advice is sometimes driven by fallacies, but it tries to take into account the limited willpower individuals have to stick to a financial plan, and its recommended actions are often easily computable by ordinary individuals. I cover advice on savings rates, the advisability of being a wealthy hand-to-mouth consumer, asset allocation, non-mortgage debt management, simultaneous holding of high-interest debt and low-interest savings, and mortgage choices.
JEL:	D14 D15 G11 G4 G5
Date:	2022–08
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:30395&r=

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