The Impact of Financial Literacy on Household Investment Decisions and Wealth Management Behavior

Posted: Dec 12, 2023

• Grace Campbell
• Grace Nelson
• Harper Anderson

Abstract

The relationship between financial literacy and household investment behavior represents a critical intersection of economics, psychology, and computational social science. Traditional approaches to understanding this relationship have primarily relied on survey-based methodologies and linear econometric models, which often fail to capture the complex, non-linear nature of financial decision-making processes. This research introduces an innovative computational framework that bridges this methodological gap by applying advanced machine learning techniques to analyze how financial knowledge translates into practical investment decisions and wealth management strategies. Financial literacy encompasses not only the understanding of basic financial concepts but also the ability to apply this knowledge in real-world contexts involving risk assessment, opportunity evaluation, and long-term planning. Previous research has established correlations between financial literacy and various economic outcomes, yet the mechanisms through which financial knowledge influences specific investment behaviors remain inadequately understood. The novelty of our approach lies in the development of a multi-modal analytical system that processes diverse data types simultaneously, enabling a more comprehensive examination of the financial decision-making ecosystem.