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This chapter discusses the basic determinants of the generation of wealth and its distribution across households; it has four sections. Section 7.1 considers the life cycle motive as a basis of household saving behaviour, paying particular attention to the role played by the pension annuity system. Section 7.2 discusses the role of education in transmitting wealth between parents and children. Section 7.3 turns to the topic of macroeconomics and looks at how the rate of return is determined in the long term, thereby showing how the theoretical discussions in this book form a general equilibrium framework. Section 7.4 takes up the question of asset and related expectations––asset price fluctuation is considered one of the major causes of generation of huge wealth in the short term, but there are various conflicting dimensions to this problem.

This chapter, which describes a well-crafted financial education program implemented by Teachers Insurance and Annuity Association-College Retirement Equities Fund, also assesses the effect of financial education seminars on retirement income goals and retirement saving behavior. The results show that participants in financial education seminars respond to the knowledge and information gained by altering their retirement goals and changing their saving behavior. In response to the seminars, the proportion of participants who changed either of their retirement goals was relatively small. Women are more likely to change goals and behavior after the seminar. Female respondents had much lower account balances in their retirement plans than men. Financial education can cause workers to reconsider their retirement goals and alter their saving behavior. The lack of financial literacy has resulted in movements to automate the retirement saving process.

This book investigates the financial education programs that are in place, examines available investment products, and looks at the experiences of countries that have privatized the pension systems or experienced changes in the social security systems. It presents suggestions on how to enhance the effectiveness of these programs and products, thereby enabling the United States to make the transition to this new system more smoothly. The book shows that although the problems are many and the challenges daunting, programs can be designed to change saving behavior and overcome the saving slump now facing so many individuals. It also reveals that financial education programs can be effective and that increased literacy does result in better saving habits. Finally, an overview of the chapters included in the book is provided.