| China's economy has been maintaining rapid and steady growth and household income,consumption,savings and debt have also increased substantially from 1978.The background which households manage their wealth has also changed dramatically in a relatively short period.On the one hand,the individuals' economic welfare has reached an unprecedented level and there are more opportunities of accumulating savings and investing wealth;on the other hand,as the market liberalization and reforms,individuals are assumed to be more responsibility for their own financeial wellbeing.The relaxation of financial market regulation leads to the keen competition among financial institutions and a large number of new financial instruments appear.In sharp contrast to the more and more complex decisions,many households are financial illiteracy.So households are more and more responsible for their own financial decisions and risk-taking.The financial crisis originated in the United States is from households' irrational borrowing practices in 2007.During this period,some family wealth has shrunk and some has increased.What does affect household financial behaviors? This paper attempts to study the problem from the perspective of the level of household financial literacy.The main conclusions of this paper are as follows:First,using the data from the year 2010 and 2011 “Chinese Survey of Consumer Finance and the Investor Education”,this study finds that many households are unfamiliar with financial products,such as stocks and housing mortgage loan,and many households are financial illiteracy.Then we use the factor analysis to construct the subjective financial literacy and examine the distribution of financial literacy according to demographic classification: The relationship between financial literacy and attained education is positive;women display much lower financial literacy than men;the portfolio of financial literacy has a hump shape with regard to age;the wealthy household display much higher financial literacy than the poor family.Second,households with higher financial literacy are more likely to have debt and have greater availability of the use of formal sources of borrowing,but are significantly less likely to report overindebtedness.What's more,the household with more wealth is less likely to have debt and also reduce overindebtedness.The household income is positively related to the possibility of having debt and the use of formal source of borrowing and is negative related to the overindebtedness.The attained education of the head of the household is positive with the owning debt,overindebtedness and the use of formal borrowing.The possibility of having debt and overindebtedness is positively related to the ratio of real estate to household asset.Male headed households are more likely to have debt and use formal borrowing,but the gender is no relationship with the overindebtedness.The age has no effect on the debt and debt channels,but the excessive debt on the age is hump.Third,individuals with higher financial literacy have more efficient portfolio.The sharp ratio of rich family is higher than the poor family and the relationship between the head's age and the sharp ratio is positive.Fourth,the low level of financial literacy hampers the household to participate in the personal insurance market.The households with higher financial literacy are more likely to use personal insurance to diversify the risk,such as longevity risk,major disease risk,accident risk and the fluctuation risk of economic system and so on.The family's net wealth and disposable income are positively related to personal insurance purchases.The relationship between the head's education and the demand of personal insurance is positive.The more the household debt size is,the greater the possibility of the demand of personal insurance is.Self-employ households are more likely to have the life insurance and health insurance,but there is no relationship between self-employ households and accident insurance.The health condition of the family will affect the demand for health insurance,but not affect the demand for life insurance and accident insurance.At last,the households with a high level of financial literacy are more likely to consult an advisor to acquire information,which supports the view that financial literacy and the demand for financial advice act as complements.In addition,there are also many factors which affect the demand for financial advice,such as age of household head,gender,education,household size,wealth and income and so on.Higher wealth increases the probability of consulting the advisor.The head's attained education positively affects the demand for financial advice.The demand for financial advice is hump on the family income,and is “U” on the head's age.The family size appears to be related to a lower probability of counseling financial advisors.The household that has a child is less likely to obtain financial information by counseling financial advisors.The main contributions of this paper are as follows:First,using the data from the year 2010 and 2011 “Chinese Survey of Consumer Finance and the Investor Education”,the measure of financial literacy is constructed.The distribution of the financial literacy is reported acorss demographic variables such as education,age,gender and wealth and so on.Second,the indices of owning debt,overindebtedness and the channel of borrowing from formal institutions are constructed,and the effect of financial literacy on debt decisions are studied.Third,the index of household's portfolio efficiency is constructed,and the effect of financial literacy on portfolio efficiency is studied.Fourth,the effect of financial literacy on the demand of personal insurance is studied.At last,the index of demand for financial advice is constructed,and empirical studies the effect of financial literacy on the demand for financial advice. |
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