On a Need-to-Know Basis: How the Distribution of Responsibility Between Couples Shapes Financial Literacy and Financial Outcomes

Abstract

Many consumers suffer from low levels of financial literacy, and attempts to increase this dimension of consumer expertise via educational interventions are typically unsuccessful. We propose that many of these apparent deficits in literacy and learning may be caused by a cognitively efficient distribution of responsibility for knowledge and decision-making in different domains between relationship partners. New relationship partners adopt specialized domains of responsibility quickly and intuitively in a process guided more by circumstantial factors than by matching tasks with aptitudes (study 1). Cross-sectional data from consumers in long-term relationships provide evidence that distributions of responsibility for financial decision-making between partners may give rise to differences in financial literacy, such that the financial specialist develops expertise in this area while the non-specialist does not (study 3). This ever-growing gap in financial literacy is generally unrecognized by consumers (studies 2, 4), despite being linked to corresponding differences in both financial decision-making (studies 5, 6) and financial information search (study 6). Consumers seem to develop expertise on a “need to know” basis. We argue that offloading responsibility to a relationship partner may eliminate this need in the present, while simultaneously creating barriers to developing expertise if and when it is needed in the future.