2013 Conference

Financial Services

Numerous studies suggest that health literacy improves health outcomes; similarly scholarly literature indicates financial literacy increases financial outcomes.  But how, and to what extent,  health literacy contributes to improving financial outcomes has not been examined. This study articulates the role of health literacy on financial outcomes and security in later years. This study proposes a comprehensive model to explain the mechanisms between health/financial literacy and retirement savings. To test this model, data from the 2010 Health and Retirement Study (HRS) are used with measures of health literacy and detailed financial information. Regression analyses are conducted for estimating 1) the impact of health literacy on out of pocket medical expenses (OOP), and 2) direct and indirect effects of health literacy on financial wealth and net worth. Adequate health literacy is associated with lower OOP: $1,168 less spending of OOP (marginally, p=0.09) than inadequate health literacy for the two previous years (annually $584).  Furthermore, adequate heath literacy has indirect effects on higher level of wealth: 4.08 % (net worth) and 7.3 % (financial wealth). These findings indicate that health literacy is an important factor to affect financial wealth and net worth for financial security in later years as well as a determinant of OOP. These findings also provide information to motivate individuals to increase health literacy for retirement savings as well as for healthy lifestyle.