Abstract
Many policymakers and economists argue that financial literacy is key to financial well-being. Why do many individuals remain financially illiterate despite the apparent importance of being financially informed?
This paper presents results from a field study linking individual decisions to acquire personal financial information to a critical, and normally unobservable, characteristic: time preferences. A large credit counseling firm offered a short, free credit counseling and information program to more than 870 individuals. About 55 percent chose to participate. Independently, we elicited time preferences using incentivized choice experiments both for individuals who selected into the program and those who did not. Our results show that the two groups differ sharply in their measured discount factors. Individuals who choose to acquire personal financial information through the credit counseling program are more patient than individuals who choose not to participate. Our results provide one potential explanation for why individuals remain financially illiterate: time preferences.