Financial Knowledge and Short- and Long-Term Financial Behaviors – Evidence from Japan

This study investigates the effect of financial knowledge on short-term and long-term financial behaviors in Japan. Using an instrumental variable approach, we establish a causal relationship between financial knowledge and financial behavior. The results show that financial knowledge has a strong and statistically significant impact on short- and long-term financial behaviors. Moreover, we also find that both short- and long-term financial knowledge positively affects short- and long-term financial behavior indices, respectively. Furthermore, our empirical results reveal that older individuals tend to exhibit more responsible financial behavior than younger individuals and that the effects of financial information on most short-time financial behaviors decline as age increases, except asset investment. Our study uncovers some gender disparities in financial behavior, indicating that women demonstrate more responsible financial behaviors than men in both short-term and long-term contexts, excluding investment in financial assets. Overall, the findings of this study have significant implications for designing effective financial education programs tailored to different demographic groups and individual developmental stages