No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Financial Literacy Around the World: An Overview
Abstract
In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average. Other common patterns are also evident: women are less financially literate than men and are aware of this shortfall. More educated people are more informed, yet education is far from a perfect proxy for literacy. There are also ethnic/racial and regional differences: city-dwellers in Russia are better informed than their rural counterparts, while in the U.S., African Americans and Hispanics are relatively less literate than others. Moreover, the more financially literate are also those most likely to plan for retirement. In fact, answering one additional financial question correctly is associated with a 3-4 percentage point higher chance of planning for retirement in countries as diverse as Germany, the U.S., Japan, and Sweden; in the Netherlands, it boosts planning by 10 percentage points. Finally, using instrumental variables, we show that these estimates probably underestimate the effects of financial literacy on retirement planning. In sum, around the world, financial literacy is critical to retirement security.
... Financial literacy represents the combination of financial knowledge and financial skills required for performing financial processes on the usage of financial products and services (Lusardi 2011;Lusardi and Mitchell 2011). According to Huston (2010), financial literacy comprises the dimensions of personal financial knowledge and personal finance application, that is, the ability to perform financial skills (Huston 2010). ...
... We measured financial literacy with a five-item financial literacy questionnaire adopted from Lusardi and Mitchell (2011) heavily utilized in the research worldwide. It is important to address the possible limitation of the simplicity of the definition and measurement based on a five-item scale which may overlook the complexity of the financial decision-making process. ...
... It is important to address the possible limitation of the simplicity of the definition and measurement based on a five-item scale which may overlook the complexity of the financial decision-making process. However, we believe that the definition of financial literacy ought to take a limited view, which is consistent with the methodology promoted by Lusardi and Mitchell (2011). This means that the cognitive and rational aspects-which include things like financial knowledge and skills-must be prioritized. ...
Understanding how young people learn to manage their finances responsibly can guide interventions to improve their financial health and stability in the short and long term, yet merely increasing financial knowledge and skills is ineffective. Psychological and environmental factors appear to be important determinants of financial behavior, yet such factors have long been neglected in the literature. The present study appears to be the first to assess empirically the contribution of intuitive and rational mental capacity as well as opportunities and motivation to financial behavior formation. We surveyed 2299 young adults at 229 high schools and universities in Croatia. Through structural equation modeling, we found that intuitive and rational thinking as well as motivation and opportunity substantially influenced the formation of financial behavior, whereas financial knowledge played a negligible role. Rational thinking was a stronger determinant than intuitive thinking in the case of healthy financial behavior, while the opposite was true in the case of impulsive consumption. These insights may help develop effective interventions for promoting positive financial habits among young adults.
... Fonseca et al. (2012) investigate gender differences in financial literacy, highlighting that women are less likely to engage in financial planning and investment activities, influenced by societal norms and behavioral factors (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). Additionally, Lusardi and Mitchell (2011) find that financial literacy varies significantly by gender, with men typically outperforming women, attributed to both educational and behavioral factors (Lusardi & Mitchell, 2011). These insights collectively underscore the need for financial education programs to address gender-specific barriers and promote inclusive financial literacy to enhance overall financial well-being. ...
... Fonseca et al. (2012) investigate gender differences in financial literacy, highlighting that women are less likely to engage in financial planning and investment activities, influenced by societal norms and behavioral factors (Fonseca, Mullen, Zamarro, & Zissimopoulos, 2012). Additionally, Lusardi and Mitchell (2011) find that financial literacy varies significantly by gender, with men typically outperforming women, attributed to both educational and behavioral factors (Lusardi & Mitchell, 2011). These insights collectively underscore the need for financial education programs to address gender-specific barriers and promote inclusive financial literacy to enhance overall financial well-being. ...
... For instance, Lusardi and Mitchell (2011) highlight that occupational differences significantly impact financial literacy, with certain professions requiring more financial knowledge and skills, thereby enhancing financial outcomes (Lusardi & Mitchell, 2011). Additionally, van Rooij, Lusardi, and Alessie (2011) found that professionals in finance-related occupations exhibit higher financial literacy and better financial behaviors compared to those in other fields (van Rooij, Lusardi, & Alessie, 2011). ...
This study aims to understand what causes financial wellbeing among Indonesian Buy-Now-Pay-Later Users in terms of demographical. A survey from 400 respondents was collected through an online questionnaire from January to June 2024 and analyzed using descriptive statistics, and continued by using Kruksal Wallis and Mann Whitney U in SPSS to test whether there is a statistically significant difference between two or more independent variables. This study is confirmed as the study demonstrates that demographic factors significantly influence financial well-being. These insights emphasize the importance of considering demographic variables when assessing financial health and tailoring financial education, policy-making, and service provision to effectively address the diverse needs of different demographic groups.
... Prior literature that has investigated the impact of FL on financial decision-making has primarily focused on individuals/households (Drexler et al., 2014;Lusardi and Mitchell, 2011;van Rooij et al., 2011). Regarding the measurement of FL, van Rooij et al. (2011) documented that FL proxies need to be relevant for the study group, while Carpena et al. (2011) highlighted the need for FL questions to be appropriate for different economic settings. ...
... In addition, poor FL impacts individuals in many ways. For example, individuals with poor FL tend not to plan for retirement (Lusardi and Mitchell, 2007) and/or seek credit from lenders that charge higher interest rates (Lusardi and Mitchell, 2011). Hilgert et al. (2003), reporting on several consumer surveys, identified that individuals with poor FL are more likely to rely on expensive credit cards and predatory lenders. ...
... Higher levels of exposure to financial activities tend to promote better FL, which is reflected in social behavioural norms. Lusardi and Mitchell (2011) investigated the level of FL in men and women and concluded that gender is a contributing factor when it comes to FL. In addition, Almenberg and Säve-Söderbergh (2011) and van Rooij et al. (2011) suggested that levels of FL differ by gender, with women generally found to be less financially literate than men. ...
... In many studies, the authors associate FinLit exclusively with financial knowledge (e.g., Agnew & Szykman, 2004;Bucher-Koenen et al., 2017;Lusardi & Mitchell, 2011;Lyons et al., 2007;van Rooij et al., 2011). Huston (2010) analysed seventy-one published studies on FinLit and determined that "financial literacy" and "financial knowledge" were used synonymously in 47% of these studies. ...
... Hung et al. (2009) approached FinLit as a compound of financial knowledge, financial skills, perceived knowledge, and financial behaviour. The link between these components has also been argued by Lusardi and Mitchell (2011) and Xiao et al. (2014) as financial literacy. Similarly, Khan et al. (2017) conceptualised financial literacy as including knowledge, skills, and attitudes that affect individuals' financial behaviours. ...
... A similar result revealing a FinLit gender gap against women was obtained by Santini et al. (2019) from their FinLit meta-analysis. Furthermore, the result of this meta-analysis is consistent with many highly-cited individual studies in the literature, which found that the FinLit level of women is significantly lower than men among young (Lusardi et al., 2010;Sekita, 2011) and older people (Lusardi & Mitchell, 2008), within households (Fonseca at al., 2012), widows or single people (Bucher-Koenen et al., 2017), throughout stock market participants (Almenberg & Dreber, 2016), and in both developed and developing countries (Lusardi & Mitchell, 2011). (Table 5). ...
Several studies around the world identify a gender gap in financial literacy against women regardless of age, education level, and socioeconomic status. Although gender is included as one of the variables in many studies focusing on Türkiye, as far as we know, none of them particularly has examined the gender difference. This paper integrates the outputs of these studies in terms of gender and combines them into one measure by conducting meta-analysis techniques. The results reveal a gender gap in financial literacy among women. Financial literacy is essential for women who mostly experience the gender pay gap, face more significant employment interruption challenges and tend to live longer than men. Given those issues, this study highlights implementing inclusive education policies and establishing comprehensive, long-term education programs to improve women’s financial literacy.
... Therefore, we conducted a single-country study focused on Italy. Given the influence of individual factors in shaping interactions with automated systems and financial behavior (Lusardi and Mitchell, 2011;Grable et al., 2014;Deloitte, 2019;Andreou and Anyfantaki, 2021;Mahmud et al., 2022) we also explore the roles played by variables related to financial wellbeing, financial literacy, demographics, and socioeconomic status. We further perform some robustness analyses to check our results, including running an instrumental variable (IV) two-stage least squares (2SLS) regression. ...
... The previous literature underlines the importance of considering financial well-being and knowledge when studying financial behavior (Grable et al., 2014;Lusardi and Mitchell, 2011;Andreou and Anyfantaki, 2021;Deloitte, 2019). Therefore, in the survey's third section, we included the Financial Anxiety Scale (FAS) (four items) (F€ unfgeld and Wang, 2009) and IJBM Financial Security Scale (FSS) (three items) (Str€ omb€ ack et al., 2017). ...
... To obtain the final variables, we used the average score obtained from the four and three items, respectively. To measure financial knowledge (FK), we presented the so-called "big five" questions, that is, the Lusardi and Mitchel questions (Lusardi and Mitchell, 2011), which include questions about inflation, the time value of money, mortgage interest, risk diversification, and the relationship between interest rates and bond prices. We assigned 1 point for each question the respondent answered correctly and zero for each question answered incorrectly. ...
Purpose
This study aims to investigate the drivers of bank automation system performance expectancy compared to that of bank employees. The purpose is to shed light on the role played by consumers' cognitive schema on automation that is the perfect automation schema (PAS).
Design/methodology/approach
A survey was administered to about 500 Italian subjects to measure their PAS; financial knowledge, anxiety, and security; and sociodemographic and socioeconomic variables. Ordered probit regressions and an instrumental variable two-stage least squares regression are run.
Findings
The analyses reveal that cognitive schemas play a crucial role in consumer expectations in banking. Individuals with stronger PAS tend to have more positive expectations about bank automation performance compared to employee performance. Financial anxiety and knowledge positively affect bank automation performance expectancy while women, older people, and financially insecure subjects have poor expectations of automated banking systems.
Originality/value
This study extends the understanding of key consumer characteristics that affect bank automation performance expectancy compared to that of bank employees in services delivery in the Italian context. Moreover, it provides useful results for researchers, practitioners, banking institutions, and regulators.
... Given how gender roles are changing, it is important to comprehend how these changes are mirrored in financial behavior, especially in light of the current economic issues (Bucher-Koenen et al., 2021). Financial literacy, or the ability to understand and use a range of financial skills, including investing, budgeting, and personal financial management, is one of the major variables influencing financial behavior (Lusardi & Mitchell, 2011). Research has repeatedly demonstrated that there are gender differences in financial literacy, with males often displaying higher levels than women. ...
... Though there are few studies claiming that there is no difference in financial literacy between male and female (Andriani & Nugraha, 2018;Herdjiono et al., 2018), more studies says otherwise. Studies have repeatedly shown that there are gender disparities in financial literacy levels, and that these variations have an impact on financial outcomes (Lusardi & Mitchell, 2011;Bucher-Koenen et al., 2021), that is men tend to manage their money well than women. Studies reveal that men perform consistently better than women on tests of financial literacy; this discrepancy is evident across a range of countries and socioeconomic contexts (Chen & Volpe, 2002;Atkinson & Messy, 2012).There are extensive consequences for this financial literacy divide. ...
Finance is an essential aspect of existence. Handling it is reflected in one's financial behavior. Poor financial decisions have consequences, therefore it's critical for people of both genders, men and women, to be financially informed in making financial decisions. A synthesis of the differences in financial behavior between men and women is the aim of this systematic literature review. Twenty-seven papers (27) published papers between 2014 and 2024 were extracted from the database using the Preferred Reporting Items for Systematic Review (PRISMA) framework. The findings showed that, in comparison to women, men are more financially knowledgeable; they have a greater risk appetite than women, which allows then to take advantage of financial products and services. Contrarily, females with their risk aversion attitude, leaves them financially susceptible because it prevents them from taking advantage of financial products and services like optimizing the potential for money growth. In terms of spending, women are more conservative, and are price sensitive than men. The findings also indicates that women are more vulnerable to financial misconduct; yet, financial literacy will mitigate this risk. Therefore, programs for gender-sensitive financial education should be taken into consideration to close the gap in financial literacy and give women more power in making financial decisions. With this, it would promote financial inclusion and aid in the realization of Sustainable Development Goals (SDG) 5 and 10 or Gender Equality and Reduce inequalities respectively. Future studies may focus on how financial technology affects gendered financial behavior to promote more equal economic outcomes.
... In addition, this can be attributed to accumulated experience, the increased necessity for financial planning as they approach retirement and possibly more stable financial situations. This result is consistent with previous literature that emphasizes the role of age and life stage in financial behavior (Henager & Cude, 2016;Lusardi & Mitchell, 2011). ...
... The result highlights the critical role of financial literacy in promoting equitable financial behaviors. This finding supports our Hypothesis 5 and aligns with studies by Mitchell (2011) andVan Rooij et al. (2011), which emphasize the importance of financial education in improving financial decision-making for both genders. It also supports the idea that targeted financial education programs can effectively reduce gender differences in financial behaviors (de Bassa Scheresberg, 2013;Fan, 2021). ...
Plain language summary
Financial knowledge and short- and long-term financial behavior across gender and generations: evidence from Japan
This study investigates how financial knowledge influences short- and long-term financial behaviors across gender and age groups in Japan. Using a comprehensive survey conducted by the Bank of Japan, we developed indicators for financial knowledge and short- and long-term financial behaviors. Our results indicate that financial knowledge has a positive impact on both short- and long-term financial behaviors. We also find that women generally exhibit more responsible financial behaviors than men, although they are less likely to invest in financial assets. Additionally, older individuals are more likely to engage in more prudent financial behaviors than younger individuals. As age increases, however, the influence of financial knowledge on most financial behaviors tends to diminish. Moreover, we find that the gender gap in financial behaviors narrows among those with higher levels of financial knowledge. These findings highlight the importance of financial education programs in shaping individuals’ financial behaviors and carry important implications for policy development.
... This gendered difference in financial knowledge also has implications for women's financial security in the long run, as they are more likely to have financial hardships due to lower lifetime earnings and longer life expectancies. Lusardi and Mitchell (2011) discovered similar occurrences, but also found that women are aware of their shortfalls in regards to financial literacy, whereas men are less conscientious of their own levels of financial knowledge. In other words, while women are on average less financially literate, they are generally more aware of their position in this regard. ...
... Literature and prior studies done on the subject show that financial literacy plays a critical role in determining financial behavior, as those with greater financial literacy have a higher likelihood of engaging in beneficial economic activities. Research done by Lusardi and Mitchell (2011) exhibits the strong relationship between financial literacy and retirement planning. These authors found that answering one additional financial question correctly was associated with a 3-4 percentage point higher chance of planning for retirement. ...
The financial landscape is becoming increasingly complex, with the rise of diverse financial products, technologies, and new investment options, making financial knowledge more crucial than ever. However, immigrants and non-English speakers in the United States face significant obstacles in acquiring the financial literacy essential to their economic security. This paper examines the relationship between financial knowledge, immigration, time spent living in the U.S., and English language proficiency. Drawing on data from two national data sets, the research reveals that non-native English speakers demonstrate lower financial literacy in the United States, proportionate to their English proficiency. New immigrants also exhibit poor financial sophistication, which improves the longer they reside in the U.S. While financial education courses positively affect financial literacy, their impact varies across demographic groups. This paper concludes by underscoring the critical need for financial literacy initiatives tailored to immigrants and non English speakers, to increase familiarity and remove barriers to the U.S. financial system. Expanding access to financial education and banking services is essential for integrating these populations, ultimately enhancing their economic security.
... According to financial performance, it consists of several indicators, namely: Basic knowledge of financial management, Credit Management, Investment Management or Savings. (Lusardi, 2019) (Lusardi & Mitchell, 2012;Sanistasya et al., 2019) (Hidayati et al., 2018;Lusardi & Mitchell, 2012;Sanistasya et al., 2019) Payment gateway is one way to process electronic transactions, where payment gateways provide tools to process payment transactions between customers, businesses, and banks Payment gateways are also the most important part of a transaction between customers, businesses, and banking institutions. Payment Gateway is also used to provide facilities for electronic transactions (Benedicta, 2023) Payment Gateway is a service that authorizes payments for digital transactions using credit cards, debit cards, bank transfers, or e-money. ...
... According to financial performance, it consists of several indicators, namely: Basic knowledge of financial management, Credit Management, Investment Management or Savings. (Lusardi, 2019) (Lusardi & Mitchell, 2012;Sanistasya et al., 2019) (Hidayati et al., 2018;Lusardi & Mitchell, 2012;Sanistasya et al., 2019) Payment gateway is one way to process electronic transactions, where payment gateways provide tools to process payment transactions between customers, businesses, and banks Payment gateways are also the most important part of a transaction between customers, businesses, and banking institutions. Payment Gateway is also used to provide facilities for electronic transactions (Benedicta, 2023) Payment Gateway is a service that authorizes payments for digital transactions using credit cards, debit cards, bank transfers, or e-money. ...
This research, aimed at testing the influence of financial literacy and payment gateways on the financial performance of MSMEs in Palembang, yields significant findings. The sampling technique, non-probability with purposive sampling, was employed to gather data from 100 respondents in the culinary subsector MSMEs in Palembang. The research method, a quantitative approach involving the distribution of questionnaires, was used. The data analysis, facilitated by SmartPLS 3 software, included the evaluation of measurement models, structural models (inner models), and hypothesis testing. The research results, which are of paramount importance, reveal that financial literacy has a positive and significant effect on financial performance, payment gateway has a negative and insignificant effect on financial performance, financial literacy has a positive and significant effect on payment gateways, and payment gateways are unable to mediate and have a negative impact between financial literacy and financial performance
... The foregoing is in line with Khawar and Sarwar (2021), assertion that financial literacy is more than just financial knowledge, it includes utilization of rational and practical abilities, attitudes and or enthusiasm. This seems to be the same line propagated by Lusardi and Mitchell (2011), who argue that to be financially literate, one should be able to process economic information and make informed financial decisions. The different angles from which financial literacy is looked at by different scholars is neither unique nor only applicable to the concept. ...
... In order to measure the variables of interest, data on participants' levels of financial literacy, was collected on a modified Financial Literacy Assessment Scale following Lusardi and Mitchell (2011). Education level was measured through three key indicators including highest level of Academic qualification, Financial education certification and number of years of schooling within the bio data section of the instrument. ...
This study explored the interplay between financial literacy, education level, and financial behaviour among employees in Higher Education Institutions. Drawing on a sample of employees from various departments within these institutions, the research investigates whether education level mediates the relationship between financial literacy and financial behaviour. Data were collected through a survey and analysed using SMARTPLS for mediation. The findings suggest that financial literacy has a statistically significant positive association with financial behaviour, financial literacy has a statistically significant positive association with Education level but the relationship between education level and financial behaviour is not statistically significant. Additionally, the mediating effect of education level between financial literacy and financial behaviour was not statistically significant. These results have implications for financial literacy programs and policies targeting employees in higher education institutions with the major focus pointing towards building of financial literacy levels regardless of the employees’ education level if the financial behaviour is to be positively influenced
... Questions 1-4 were initially proposed by Lusardi and Mitchell (2011a) and have been added to the survey instrument of various studies worldwide over the years, providing a consistent and reliable assessment of an individual's basic financial knowledge (Lusardi and Mitchell 2011b). We included them in their original format. ...
... We included them in their original format. All the other questions listed above adhere to the guidelines suggested by Lusardi and Mitchell (2011b) in that they are meant to assess fundamental financial literacy concepts (simplicity) and to relate to financial decisions that people make regularly (relevance). They are all multiple-choice or true/false questions to help respondents identify and select their preferred answer. ...
We provide a brief history of administering financial literacy questions in probability-based Internet panels. After financial literacy questions were asked in the Centerpanel in the Netherlands and the RAND American Life Panel, the Understanding America Study (UAS) has been administering 14 financial literacy questions in its biannual core surveys since 2014. Due to its longitudinal nature and the vast amount of available information on its panel members, the UAS provides unique opportunities for analyzing patterns of financial literacy over time and its associations with financial outcomes, cognition, health, personality, and economic preferences, among others. The UAS survey-based dataset is further enriched with administrative records from consenting respondents. Importantly, researchers can incorporate additional questions and modules to gather specific data, which can then be linked to both existing and forthcoming information on panel members. In this paper, we describe the UAS financial literacy measures and offer descriptive analyses, highlighting the patterns of financial knowledge over time and by individuals’ background characteristics. We also show how financial outcomes, such as financial wealth and retirement preparedness, relate to financial literacy scores.
... The first part covers socio-demographic and economic data of the respondents, where respondents were asked to provide genuine response about their age, gender, marital status, education level, work experience, monthly income, dependents on household, field of study, and whether they have access to financial news. Whereas the second part of the questionnaire consisted of five questions related to financial literacy, adopted from [43] and other subsequent studies on the subject. Those five questions have been applied in several studies, mainly due to their relative precision [27], and covers the concepts of basic numeracy, compound interest, inflation, time value of money, and money illusion. ...
... According to Razali [67], a respondent who scored greater than or equal to three points out of the five questions developed by Lusardi & Mitchell [43] is considered as high financially literate, whereas one who scored less than three points is considered as low financially literate. In view of that, this study classified respondents into high and low financial literacy categories, based on their score points, and thus consid-60 ers financial literacy as dummy variable. ...
Financial literacy is increasingly recognized as a crucial factor for individual and societal well-being. This study investigates the determinants of financial literacy within a unique financial and economic context, focusing on civil servants in Maichew Town, Tigray. A mixed-methods approach was employed, combining quantitative and qualitative data collected through a self-administered questionnaire distributed to a random sample of 271 civil servants. The study employed a binary logistic regression model to examine the relationship between financial literacy, measured as a binary outcome, and a range of socio-demographic and economic variables. These variables included age, gender, income level, work experience, marital status, field of study, access to financial news, and the number of dependents in the household. The findings reveal that gender, field of study, access to financial news, and the presence of dependents significantly influence the financial literacy levels of the respondents. Notably, female civil servants, those with a background in fields related to finance and economics, individuals with access to financial news, and those with dependents demonstrated higher levels of financial literacy. Conversely, age, work experience, marital status, education level, and income level did not exhibit a statistically significant relationship with financial literacy. This study contributes valuable insights into the factors shaping financial literacy among civil servants in a specific Ethiopian context. The findings underscore the importance of targeted interventions and financial education programs that address the unique needs of different demographic groups, particularly women and those in professions not directly related to finance. By enhancing financial literacy, policymakers and educators can empower individuals to make informed financial decisions, ultimately fostering greater economic stability and well-being.
... Despite its critical importance, as highlighted by the OECD (2017), FL remains a widespread challenge across global financial markets, indicating a substantial need for improvement in this area (Lusardi & Mitchell, 2011). On a broader scale, FL plays a pivotal role in enabling individuals to manage everyday financial tasks, thus reducing the likelihood of economic downturns (Sohn et al., 2012;van Ooijen & van Rooij, 2016). ...
... Notably, gender-related differences in FL have been extensively explored, with inconsistent findings. While some studies report lower financial knowledge among females (Agnew & Harrison, 2015;Karakurum-Ozdemir et al., 2019;Koh et al., 2020;Lusardi & Mitchell, 2011), others find no significant gender gap (Bucher-Koenen et al., 2017;Klapper & Panos, 2011;OECD, 2020b). These disparities often vary by age group and are associated with cultural and regional contexts. ...
The “campus loans” crisis has highlighted the importance of financial literacy among Chinese college students. Based on an analysis of 2,266 valid questionnaires, this study utilized survey data and logistic regression to examine the correlations between demographic and behavioral factors and financial literacy among students. The results indicated that, compared to their international counterparts, Chinese students generally possess less financial knowledge. However, they exhibit stronger financial attitudes and behaviors. A significant gender disparity was observed, with female students outperforming male students in financial literacy. Students attending more prestigious universities, particularly those majoring in economics, management, science, and engineering, and those dedicating more time to financial education, showed higher levels of financial literacy. Additionally, positive social interactions were associated with enhanced financial literacy. The study also identifies a “Surrounding People Effect,” where the presence of financially knowledgeable peers, friends, and family correlates with improved financial literacy among college students. These findings offer critical insights for developing targeted policies to enhance financial literacy among Chinese college students.
... Additionally, research indicates that one of the main causes of declining savings rate worldwide is financial illiteracy (Hilgert et al., 2003), scaling consumer deficit (Stango & Zinman, 2007), inadequate planning on for retirement (Lusardi & Mitchell, 2011),foundation for divorce, impoverished mental soundness and a combination of other negative and unhappy experiences (Kinnunen & Pulkkinen, 1998). Rosacker et al. (2009);Braunstein & Welch (2002) expands that most firms, particularly SMEs and emerging domestic sectors, fail because of a lack of knowledge and comprehension of the financial interactions between enterprises. ...
... Decisions made by investors were significantly influenced by the timing and manner in which such market information was delivered (Karan Gupta & Negi, 2014). Mitchell (2011) andJanor, et al. (2017) showed in their studies on "Financial literacy and planning," that workers who benefit financially in their retirement stages and continue to enjoy the ease of living without completely depending on their children are largely the ones who had some level of financial knowledge and understood some level of financial investment while working. The study came to a conclusion and suggested that young people who are employed should arm themselves with financial knowledge to help them make important investment decisions to protect them when they retire; otherwise, they risk living in poverty in their old age even though they had plenty of resources when they were younger. ...
... Kramer (2016) found that subjective financial knowledge is associated with a lower likelihood of seeking financial advice, but others report a positive association (Fan, 2021). The current study measured objective financial knowledge using the Big Three scale (Lusardi & Mitchell, 2011), which evaluates respondents' knowledge of stocks, interest rates, and inflation. If respondents answered a question correctly, one point was allotted; therefore, a summation scale ranged from 0 to 3, where 0 indicated that respondents had low objective financial knowledge and 3 indicated that respondents had high objective financial knowledge. ...
Financial advice seeking is associated with many positive benefits for consumers. Yet, most U.S. households are not working with a financial planner and research has pointed to the lack of racial and ethnic diversity among those who do. This study examines racial/ethnic disparities in using a financial planner. Logistic regression analyses show that Black and White consumers are more likely than Asian and Hispanic consumers to use financial planners for saving and investment decisions. A Fairlie decomposition analysis shows racial/ethnic differences among the determinants that are associated with financial advice seeking. The differences in the determinants were large between White and Hispanic consumers and much narrower between Black and Hispanic consumers. Risk tolerance, objective financial knowledge, and income were the most important determinants to explain racial/ethnic differences in financial planner use. This study provides insight into possible barriers to working with financial planners for a diverse group of consumers.
... It has gained increasing attention in academic research and policy-making circles. In [1] financial literacy involves both knowledge of financial concepts and the ability to apply that knowledge in real-life situations. Planning requires calculation which is facilities by financial literacy. ...
Financial literacy encompasses the knowledge and skills essential for making informed financial decisions, impacting both personal and professional lives. This study explores the significance of financial literacy in navigating today's complex financial landscape, emphasizing its role in budgeting, saving, investing, debt management, retirement planning, and understanding financial products. It highlights the necessity of financial literacy for achieving financial stability, independence, and overall well-being, as well as its contribution to a stronger economy. Case studies, such as a family's successful debt reduction strategy and a business's effective budgeting process, illustrate how financial literacy leads to improved outcomes. The findings highlight the need for targeted financial education programs and policies that can bridge knowledge gaps and empower individuals to make better financial choices. The study reviews existing literature on financial literacy, noting disparities in knowledge across demographics and the challenges in translating knowledge into effective financial behavior. Ultimately, improving financial literacy is integral to enhancing economic well-being and fostering more equitable financial systems.
... In another study, Index of Financial Inclusion (Sarma, 2008), introduces a metric to assess financial inclusion, which evaluates banking penetration, availability of services, and the overall banking system. While this index is comprehensive, it does not consider factors like affordability and timeliness, indicating potential areas for further (Lusardi & Mitchell, 2011) investigate the connection between financial literacy and retirement planning, revealing that financial illiteracy is prevalent even in developed countries. Their study also emphasizes the significant role of gender in financial literacy and its critical importance f or retirement preparedness. ...
Since the independence of our country, there has been major focus on policy development and financial reforms. Financial inclusion has become a priority for both the central government and the RBI. For a nation to achieve financial inclusion effectively, the population should be financially literate. A review of existing literature in this field reveals that most studies have focused on three key variables, viz., financial literacy, financial development and economic growth. To contribute to this existing body of research, this paper explores the distinction between ‘financial literacy’ and ‘financial awareness’ to better understand what can truly drive ‘financial inclusion’ in the country. Primary data from 130 respondents was collected from the district of Rajkot, Gujarat, of which 100 respondents were taken into consideration, followed by statistical analysis of the data. The study concludes that gender makes a significant impact on financial literacy, where males showed higher financial literacy as compared to females. Further, age and education of the people makes a significant impact of financial literacy of the population, which in turn, will lead to financial inclusion. There do exist a marginal correlation between financial awareness and financial literacy (r=0.054).
... The survey questionnaire consisted of a total of 4 variables with 31 items. The independent variables in this research are financial literacy, measured using scales developed by Lusardi and Mitchell (2011), and financial behavior, based on the measurement scales from Jacob (2002) and Mokhtar et al. (2020), both assessed using a 1-5 Likert scale. The dependent variable is financial planning actions (FPAs), with measurement sources from Cong and Feng (2022) and Koonce et al. (2008), also utilizing a 1-5 Likert scale. ...
Research on the relationship between financial literacy, financial behavior, and financial planning actions (FPAs) in Malaysia is limited, with existing studies focusing mainly on financial well-being. This gap is concerning given the rising trend of bankruptcy and debt issues among young Malaysian employees. Understanding how financial literacy and behavior impact FPAs is crucial, particularly for individuals transitioning from academic to professional financial responsibilities. This paper examines these relationships among 1,105 undergraduate students in Malaysia. Using Ordinary Least Squares (OLS) regression, the study finds significant positive relationships between financial literacy, financial behavior, and FPAs, consistent with human capital and reasoned action theories. Additionally, it explores the moderating role of Socialization, Externalization, Combination, and Internalization (SECI) strategies. The results highlight that parental guidance, personal finance websites, and college information effectively moderate the relationship between financial literacy, financial behavior, and FPAs. Financial workshops also significantly moderate the relationship between financial behavior and FPAs. Overall, the findings demonstrate that both financial literacy and behavior are critical factors influencing FPAs among undergraduate students, emphasizing the need for effective financial education and support. ABSTRAK Penyelidikan mengenai hubungan antara literasi kewangan, tingkah laku kewangan, dan tindakan perancangan kewangan (FPAs) di Malaysia adalah terhad, dengan kajian sedia ada tertumpu terutamanya kepada kesejahteraan kewangan. Jurang ini membimbangkan memandangkan tren peningkatan kebankrapan dan isu hutang di kalangan pekerja muda Malaysia. Memahami bagaimana literasi kewangan dan tingkah laku mempengaruhi FPAs adalah penting, terutamanya untuk individu yang sedang beralih dari tanggungjawab akademik ke pengurusan kewangan profesional. Kajian ini mengkaji hubungan ini di kalangan 1,105 pelajar sarjana muda di Malaysia. Dengan menggunakan regresi Ordinary Least Squares (OLS), kajian ini mendapati hubungan positif signifikan antara literasi kewangan, tingkah laku kewangan, dan FPAs, selaras dengan teori modal insan dan teori tindakan beralasan. Selain itu, kajian ini meneroka peranan moderasi strategi Sosialisasi, Eksternalisasi, Kombinasi, dan Internaliasi (SECI). Hasil kajian menekankan bahawa panduan ibu bapa, laman web kewangan peribadi, dan maklumat kolej berfungsi dengan berkesan sebagai moderator dalam hubungan antara literasi kewangan, tingkah laku kewangan, dan FPAs. Bengkel kewangan juga secara signifikan memoderasi hubungan antara tingkah laku kewangan dan FPAs. Secara keseluruhan, penemuan ini menunjukkan bahawa literasi kewangan dan tingkah laku adalah faktor penting yang mempengaruhi FPAs di kalangan pelajar sarjana muda, menekankan keperluan untuk pendidikan dan sokongan kewangan yang berkesan. Kata kunci: Tingkah laku kewangan; Literasi kewangan; Tindakan perancangan kewangan; Strategi SECI
... Interestingly, the elderly population proportion did not exhibit statistical significance in developing countries or economies in transition countries. This could be due to various factors, such as differences in investment behavior, retirement planning practices, or the availability and attractiveness of alternative investment options in these economies (Buchmann et al., 2023;Lusardi and Mitchell, 2011). The effects of an aging society on stock market performance have important implications for policymakers, financial institutions and individual investors alike. ...
Purpose
The primary purpose of this study is to explore the effects of demographic transition toward aging populations on the performance of stock market indices across various economic developments. The research aims to provide valuable insights into the life-cycle hypothesis on savings patterns, investment behavior and the potential reverberations on global financial markets.
Design/methodology/approach
The study adopts a comprehensive global perspective, scrutinizing the effects of aging populations on stock market indices across developed, developing and transitional economies through the panel data analysis. Using annual data spanning the period from 1991 to 2020, encompassing a sample of 10 countries from each economic development level, the study employs the panel autoregressive distributed lag (ARDL) model with fixed effect estimation.
Findings
The findings unveil a statistically significant positive impact of the elderly population proportion on global stock market indices. However, the magnitude and contours of this impact exhibit considerable heterogeneity across different country groups. Specifically, the study finds that while the aging population significantly influences stock market performance in developed nations, its effect is overshadowed by other economic factors, such as consumer price indices and interest rates, in developing countries and economies in transition.
Originality/value
The originality and value of this study lie in its comprehensive global perspective, which encompasses a diverse array of economies at varying developmental stages. The research contributes to an understanding of the effects of demographic transitions on stock market performance on a global scale. The insights derived from this study hold significant implications for policymakers, financial institutions and investors seeking to navigate the challenges and opportunities posed by aging societies in an increasingly interconnected global economy. Additionally, the findings highlight the need for specific strategies and policies that account for the unique economic characteristics and developmental stages of different nations.
... This surplus serves various purposes, including future needs, handling emergencies, or achieving specific goals (Chayakornsopit, 2020); Brounen et al, 2015) From a psychological standpoint, saving often involves a deliberate decision to allocate a portion of income for anticipated future necessities. Lusardi (2019) and Lusardi & Mitchell (2011) define financial knowledge as more than just understanding financial concepts; it also involves possessing the skills, motivation, and confidence to apply this knowledge effectively in various financial situations. They stress the importance of providing continuous and tailored financial education to different audiences. ...
Purpose: This study investigates the influence of financial literacy and materialism on the savings behavior of Indonesian Banking School students. Design/methodology/approach: Financial literacy and materialism levels were measured through questionnaires, revealing that the majority of respondents were 19-20 years old, female, single, engaged in part-time work, and received a monthly allowance below 1.000.000 IDR from their parents. Regression analysis identified a positive influence of financial literacy on savings behavior, while materialism exhibited a negative relationship. Findings: The findings suggest a potentially positive outlook on future financial habits among young Indonesians. To further promote financial well-being, the study recommends integrating financial education into the curriculum at all levels. Originality/value: The study contributes to national financial inclusion and human resource development goals.
... The potential of financial education to lessen economic inequality is a noteworthy additional advantage. It may aid in closing wealth disparities and raising people's standard of living by giving them the knowledge and skills they need to take advantage of financial opportunities, make prudent investments, and make financial plans [17]. ...
The literature review emphasized the crucial significance of elements including artificial intelligence (AI) skills, technological access, financial investments, macroeconomic considerations, partnerships, and collaborations in the context of this study, which focused on the adoption of AI in business. In order to validate the constructs, the study's approach included gathering data from a representative sample of organizations, statistical analysis, and assessments of validity and reliability. The findings showed that financial investments, technological availability, and AI expertise all positively affect AI adoption, which in turn has a modest but substantial effect on businesses' financial success. This study recognizes that other elements and effective management techniques also play a vital part in the successful adoption of AI in today's corporate environment, while simultaneously emphasizing the significance of investing in AI skills and access to technology to optimize the advantages of AI.
... Previous literature (Lusardi and Mitchell, 2011) has identified three main economic concepts individuals should have a good understanding of in order to make good financial choices, known as the "Big Three": compound interest, inflation, and risk diversification. ...
For the very first time, in the Spring of 2023, the European Commission (EC) carried out a survey across all member states to assess their level of financial literacy. This survey complements other national surveys and fills an important gap because it provides a consistent metric that allows comparisons among the European Union (EU) countries. The motivation behind the EC’s survey stems from the need to advance the state of financial literacy to safeguard financial stability and promote important projects, such as the creation of a Capital Markets Union. In this paper, we analyze these new data and confirm findings in the literature about the importance of being financially knowledgeable to achieve good financial outcomes. Unfortunately, the survey also confirms that barely one in two individuals, on average in the EU, is financially literate.
... From a consumer perspective, good sharia financial literacy will lead to spending decisions that prioritize quality. (Lusardi & Mitchell, 2011) Sharia Financial Literacy Sharia financial literacy is a person's ability to use financial knowledge to manage their funds in accordance with sharia principles and implement it in sharia financial attitudes and behaviors in order to achieve future prosperity. (Handayani, 2021). ...
This research aims to determine how much influence sharia financial inclusion, financial experience and financial management have on the welfare of MSMEs through sharia financial literacy at PT. Pegadaian Syariah Langsa. This research uses a quantitative approach using 88 MSME actors who are registered in Ultra Micro financing. Based on cross section data using analysis techniques in the form of SEM-PLS. The results. of the research analysis conducted with 5% alpha show that sharia financial literacy moderates by strengthening the relationship between sharia financial inclusion and sharia financial experience on the welfare of MSMEs, while sharia financial literacy neither strengthens nor weakens the relationship between financial management and the welfare of MSMEs. The welfare of MSMEs is based on a good and increasing condition of productive businesses owned by individuals and / or individual business entities that have micro business criteria must be based on an understanding of sharia financial literacy, because sharia financial literacy is a fundamental factor for economic growth and financial stability in sharia.
... From calculating expenses to planning savings and investments, basic arithmetic and percentages are essential. For instance, understanding interest rates and loan payments requires a good grasp of mathematics to ensure financial health and prevent debt accumulation (Lusardi & Mitchell, 2011). • Cooking and Baking: Mathematics plays a significant role in cooking and baking. ...
This paper presents a comprehensive investigation into the role of mathematics in everyday life and the pivotal function of mathematics teachers in fostering mathematical understanding and competence. Mathematics plays a crucial role in everyday life, enhancing decision-making, financial management, problem-solving, and critical thinking. The ubiquitous presence of mathematics in activities such as budgeting, cooking, shopping, and planning underscores its importance. Mathematics is essential for good governance, as it underpins data-driven decision-making, policy formulation, economic planning, and resource allocation. Recommendations for promoting mathematical proficiency include integrating real-world applications into the curriculum, offering professional development for teachers, and encouraging collaborative learning. Such measures can enhance mathematical literacy, contributing to personal development, societal progress, and effective governance. Mathematics, with its rich historical roots stretching back to ancient civilizations, has evolved into a broad discipline encompassing various branches such as arithmetic, algebra, geometry, and calculus. Each branch plays a crucial role in practical applications ranging from personal finance and cooking to navigation and health monitoring. Effective mathematics education, however, hinges on the proficiency and dedication of mathematics teachers who not only impart theoretical knowledge but also cultivate critical thinking and problem-solving skills in their students. To optimize performance in high-stakes assessments like the West African Examination Council (WAEC) Mathematics examination, it is essential to employ diverse instructional strategies, integrate technology, and provide continuous practice and assessment. It is recommended that governments should support teachers through robust remuneration, timely salary payments, and ongoing professional development to sustain motivation and high-quality instruction. Furthermore, the establishment of mathematics laboratories in schools is recommended to enhance practical learning experiences and deepen students' understanding of mathematical concepts. In the realm of governance, mathematics is indispensable for data analysis, policy formulation, and strategic planning. By addressing these areas comprehensively, we can create an educational environment that not only demystifies mathematics and reduces associated phobias but also prepares students to excel academically and apply mathematical principles effectively in their daily lives and future careers.
... While it is important to make sense of the overarching constructs of financial socialisationfrom its theoretical underpinnings to its determinants-the significance of individual traits in shaping financial behaviour should not be overlooked. For example, a gender gap in financial literacy has been well-documented in the literature (for an overview, Lusardi & Mitchell, 2011;Hung et al., 2012;Hasler & Lusardi, 2017;as cited in Blaschke, 2022). The financial literacy gap between males and females is a widely researched area, with evidence consistently showing a notable advantage for males. ...
This study investigated the impact of family financial socialisation on the financial perceptions and behaviours of adolescents. Drawing from social learning theory, Gudmunson and Danes’ model of family financial socialisation, and the theory of planned behaviour, we examined the influence of family affluence and family financial openness on adolescents’ financial confidence, intentions, and behaviours. The research also explores gender differences and the distinct effects of family socialisation in banking and budgeting contexts. With a large sample of adolescents in New Zealand (n = 5,370), results using structural equation modelling reveal that family affluence corresponds with a higher perception of family financial openness, which influences their confidence in specific financial domains such as banking and budgeting. Our results also highlight a gap between confidence, intentions, and action in financial behaviours, with gender differences also impacting this dynamic. The findings offer insights for parents, policymakers, and financial institutions, emphasising the importance of family financial socialisation in fostering responsible financial practices among young people.
... In terms of the definition of financial literacy, knowledge (or understanding) serves as the most frequent foundation, but there is also a definition that focuses on the use of judgement and decision-making (Hung et al., 2009). A study by Garg & Singh (2018) and Lusardi & Mitchell (2011) on financial literacy levels among youth around the world found low levels of financial literacy, which is cause for concern. This is because lower knowledge will likely expose them to more financial challenges (Kadir & Jamaluddin, 2020). ...
This study examines the financial literacy and saving habits of Malaysia’s youth, with a particular focus on gender-based disparities and their implications. Recent reports highlighted a lot of young Malaysian’s struggles in terms of financial management, including high debt levels and inadequate savings among youth due to low financial literacy. Gender differences in financial literacy have been well documented, with men typically demonstrating higher levels of confidence and understanding in this area. Hence, this study aims to evaluate the saving habits and financial literacy levels of young Malaysians by looking at these factors via a gender lens. The research utilises a quantitative approach, using an online survey to gather information from 332 participants who are under 30 years old. SPSS was used to analyse the data, and descriptive statistics were used to discuss and summarise the results. The respondents’ saving habits and financial literacy were assessed using Likert-scale questions. A regression and correlation analysis were conducted to investigate the relationship between saving habits and financial literacy. The findings suggest that young people in Malaysia are usually quite financially literate; however, there are still gaps in their knowledge of advanced financial instruments. The majority of respondents have good saving habits; nonetheless, there are clear gender disparities, with males rating their financial literacy higher than women, especially when it comes to budgeting and investing. Regression analysis reveals a moderately positive correlation between financial literacy and saving habits, with financial literacy accounting for approximately 26.5% of the variance in saving habits. It appears that while financial literacy influences saving behaviour, there were fewer obvious gender variations in saving behaviours, suggesting that both genders engage in similar saving practices. These findings highlight the need for improved financial education to address identified gaps and promote better financial management for Malaysia’s youth.
... An effective financial management requires a person to identify goals, time horizon, financial stability and financial risk tolerance and accordingly prepare for it (Grable and Ly on 1999). One who understands these inputs makes be er use of his/her money and is called financially literate (Lusardi and Mitchell 2011). A person's level of willingness to take the risk when outcome could be negative is known as financial risk tolerance (Grable 2000(Grable , 2008International Organization for Standardization 2006, Nobre andGrable 2015). ...
The present study aims to find out the financial risk tolerance scores of the rural residents of Ludhiana district. Also, how drivers such as socio-demographic factors, namely, gender, age, education, annual income, existence of loan, occupation, employment status and psychological factors, namely, deliberative thinking, optimism and personality type A/ B impact financial risk tolerance of rural residents. The study is important for financial policy makers as they will become aware about scenario of rural residents and frame policies accordingly. Stepwise regression analysis was carried on. The result was found out that optimism positively and deliberative thinking negatively impacted financial risk tolerance, but personality type A/B did not have a significant impact on financial risk tolerance. Socio-demographic factors such as existence of loan, full-time salaried individuals, marital status significantly impacted financial risk tolerance. Other factors failed to have impact on financial risk tolerance of rural residents in the current study.
... Retirement planning/readiness/behavior studies have received substantial attention from scholars (cf. Eyjolfsdottir et al., 2021;Lusardi and Mitchell, 2011), and Malaysian researchers (cf. Zulfaka and Kassim, 2021;Afthanorhan et al., 2020;Krishnan et al., 2018) have not localized the concept of retirement and its measures. ...
In an effort to avert the high old-age dependency ratio in Malaysia, the study reconceptualized and developed retirement readiness scales based on the Capacity Willingness Opportunity Model (CWOM). The developed scales emphasized the importance of capacity and opportunity as catalytic traits in a retirement preparatory process. The study adopted three phases of designing a scale meticulously-item development, scale development, and scale evaluation. This process involved qualitative and quantitative research approaches. In the pilot study, out of the 61 items loaded into the exploratory factor analysis (EFA), 27 items were retained based on items with reasonable inter-item correlation, and they yielded four components. This study applied a multistage sampling technique to collect data from an adult family member of students from a local university in Klang-Valley, Malaysia. Based on the four factors yielded by the EFA in the pilot study, the researchers conducted another EFA using Varimax rotation with the remaining items and discovered a similar result to the pilot outcome. Subsequently, a pooled confirmatory factor analysis on 27 items confirmed the psychometric properties of 17 newly developed indicators. Notably, the study contributes to the literature on the robustness of CWOM as a catalyst for retirement readiness and establishes the statistical compatibility of the constructs. JEL Classification: J26, J32
... There is also a notable difference in financial decision-making between families with high levels of financial education and those without it. Lusardi and Mitchell (2011) found that households with higher financial literacy are more likely to plan for retirement, ultimately leading to substantially greater assets than nonplanners. Therefore, financial literacy enhances household financial decisionmaking, savings, and welfare (Cole et al., 2010). ...
This paper examines the critical roles of financial awareness and entrepreneurial readiness in enhancing the effectiveness of the Islamic microfinance model in Yemen. Despite the potential of microfinance to create new opportunities and reduce unemployment, several challenges-primarily high financial illiteracy and low entrepreneurial readiness-limit its impact. The study highlights the importance of financial literacy in empowering entrepreneurs to make informed financial decisions, access funding, and improve business performance. It also explores how entrepreneurial readiness, shaped by psychological, social, and economic factors, influences the success of new business ventures. Drawing on existing literature, this paper identifies key determinants of financial awareness, such as promotion, social culture, education, and technology, and discusses their impact on the adoption of financial practices and technology. Additionally, it outlines the factors influencing entrepreneurial readiness, including government policies, cultural norms, and human capital. The findings suggest that enhancing financial awareness and entrepreneurial readiness can significantly improve the effectiveness of Islamic microfinance institutions in supporting micro-entrepreneurship in Yemen.
... Literasi keuangan sebagai pengetahuan keuangan dan kemampuan untuk mengaplikasikannya (Knowledge and Abilitiy). Menurut (Lusardi & Mitchell, 2011) The economic importance of financial literacy theory and evidence dimana dijelaskan strategi literasi keuangan dilaksanakan dengan menggunakan strategi edukasi yang sesuai dengan kelompok atau dengan kata lain sesuai dengan tingkatan masyarakat seperti tingkat pendidikan, strata sosial, dan kelompok usia. Sementara itu, (Kewal Anastasia Sri, 2013) mengartikan litertasi keuangan sebagai pengetahuan untuk mengelola keuangan (Financial Literacy is Money Management Knowledge). ...
This study aims to examine the effect of Financial Literacy and Debt Behavior on Finance Decisions pawn customers PT. Pegadaian Kanwil VI Makassar Pelita Branch. The population in this study consisted of 4.023 respondents and the sampling was carried out using the non-probability sampling method. The sample used is 98 respondents. The analytical tool used is multiple linear regression analysis which aims to re-examine the Effect of Financial Literacy and Debt Behavior on Finance Decisions pawn customers PT. Pegadaian Kanwil VI Makassar Pelita Branch by using the Statistical Package for the Social Sciences Vers. 25. The results of this study indicate that partially the financial literacy variable has a positive and significant effect on financial decisions, debt behavior does not have a significant effect on financial decisions.
... Financial literacy plays a crucial role in shaping customers' financial decisions (Lusardi, 2008(Lusardi, , 2011a(Lusardi, , 2011b(Lusardi, , 2013(Lusardi, , 2015. The richness of financial literacy reserves directly affects households' participation in financial markets, as well as their choice of holding risky assets (Yin et al., 2014). ...
The rise of financial inclusion has notably increased household engagement in risky financial asset allocation, posing challenges to macro-financial stability. This study explored the crucial role of financial literacy in enabling households to effectively engage with complex financial markets and products. Specifically, it examined how different aspects of financial literacy—knowledge, attitudes, and skills—influence both the participation and depth of household investment in risky financial assets in China. Utilizing a comprehensive dataset from the 2019 China Household Finance Survey, which included 32,458 households, this study employed a robust indicator system and regression analysis via STATA 17.0 to assess these impacts. The results demonstrated that enhancements in financial literacy significantly foster increased engagement and deeper involvement in risky asset allocation, particularly through improved financial attitudes. Additionally, the analysis revealed that households led by women show a higher propensity towards risky asset investments than those led by men. These insights suggested the potential for targeted financial education to improve the financial health and economic resilience of Chinese households.
... We also asked a few demographic questions and provided a few abridged scales. The financial literacy scale was taken from Lusardi and Mitchell (2011). The scarcity mindset scale A new law raises the maximum interest rate that lenders can charge on their loans. ...
Psychologists often posit relatively straightforward attitude-behavior links. They also often study cultural arrangements as manifestations of attitudes and values writ large. However, we illustrate some difficulties with scaling up attitude-behavior principles from the individual-level to the cultural-level: Historical attitudes and values can lead to the creation of intermediating institutions, whose value-expressive functions may be at odds with the behavioral outcomes they produce. Through “institutional inversion,” institutions may facilitate rather than inhibit stigmatized behavior. Here we examine attitudes and behavior related to
debt, contrast historically Protestant versus Catholic places, and show how cultural attitudes against debt may lead to the creation of institutions that increase—rather than decrease—borrowing. Historical anti-debt attitudes in Protestant places have led to contemporary households in Protestant cultures now carrying the highest debt loads. We discuss the importance of supply side factors, attitude --> institutions --> behavior causal chains, and some blind spots that lead to unintended consequences.
... Financial literacy, according to Lusardi and Mitchell (2011), is the capacity of a person to analyze economic data is used to make judgments about financial planning and asset growth., debt, and pension. A person who has financial literacy is able to understand their financial strategy and make decisions that are in line with it. ...
This study investigates how the perception of scarcity affects impulsive buying behavior in an online retail setting, with perceived competitive arousal acting as a mediator and financial literacy as a moderator. The study utilized an online experimental survey with 99 people to examine these connections. The findings indicate that perceived scarcity and perceived competitive stimulation have a notable influence on impulsive buying behavior. Financial Literacy did not influence the connection between competitive arousal and impulsive buying behavior. Consumers are more inclined to make impulsive purchases when they view a product as scarce and experience competitive arousal, according to the findings. The results have theoretical implications for comprehending consumer behavior in online retail environments and practical consequences for marketers aiming to utilize scarcity and competitive arousal in their promotional tactics. Introduction:
... Ninth, the reduction of anxiety among individuals can also help them escape from the cyclic nature of poverty-mental disorder (Anakwenze & Zuberi, 2013;Lund et al., 2011). Finally, effective retirement plans are also associated with increased wealth accumulation and poverty alleviation, particularly during old age (Lusardi & Mitchell, 2011b;Behrman et al., 2012). Overall, the alleviating effect of financial literacy on poverty may be explained through many mechanisms, including savings, emergency funds, insurance usage, lending from formal institutions, debt management, usage of bank accounts and debit cards, digital transactions, asset diversification, entrepreneurship, and retirement plans. ...
The World Bank assessed that meeting the goal of eradicating extreme poverty by 2030 appears to be challenging (or even impossible) for the world. This observation requires an urgent need for policymakers to explore potent instruments to combat poverty globally. Numerous studies have examined various determinants of poverty. However, financial literacy—a relatively new concept—remains underexplored, especially on a global scale. As such, this study is conducted to assess whether financial literacy can reduce the likelihood of falling into poverty using a unique dataset of 113 countries. We find that financial literacy has a significant and negative association with the likelihood of falling into poverty. Beyond association, the causal analysis shows that financial literacy exerts a negative effect on poverty. Our findings remain largely unchanged across different sub-samples based on socio-demographic factors, regions and country income levels, and robustness analyses.
... Past experiences about unemployment, changes in net worth, or prices paid in the grocery store may shape macroeconomic expectations Nagel, 2011, 2016;Kuchler and Zafar, 2019;D'Acunto et al., 2021a). Additionally, personal characteristics including economic preferences, financial literacy, and the length of one's financial planning horizon can also influence macroeconomic expectations (Zikmund-Fisher and Parker, 1999;Lusardi and Mitchell, 2011;Van Rooij et al., 2012;Li and Huang, 2020). 4 As a proxy to account for past experiences, our data include selfassessments of changes in the household's economic situation in the past year. ...
Economic decisions depend on economic expectations. Using Hungarian monthly survey data between 2000 and 2009, we show that the relationship between expectations (both at the macroeconomic and household levels) and socioeconomic status (SES), as represented by income rank and education level, is non-linear. In many instances, there is no significant difference in expectations between the two lower quintiles. However, individuals in the upper (fourth and top) quintiles exhibit significantly more positive expectations than those in the lower quintiles. There is also a clear difference in expectations between the fourth and the top quintiles. In terms of education level, individuals with a high-school degree have significantly more positive expectations compared to their peers without one. Significant differences in economic expectations are also observed between high-school graduates and individuals with a university diploma, particularly regarding inflation, savings expectations, and the assessment of the household's future financial situation. Disparities in household-level expectations based on SES are more pronounced than those in macroeconomic expectations. Past experiences and household-level optimism seem to be key factors influencing macroeconomic expectations. Furthermore, we document that both macroeconomic and household-level expectations predict the intention for significant expenditures, even after controlling for SES variables.
KRTK-KTI Working Papers are distributed for purposes of comment and discussion. They have not been peer-reviewed. The views expressed herein are those of the author(s) and do not necessarily represent the views of the Centre for Economic and Regional Studies. Citation of the working papers should take into account that the results might be preliminary. Materials published in this series may be subject to further publication.
The aim of the study is to measure the financial literacy, financial stress and financial well-being levels of students studying in the Finance and Banking Department of Burhaniye Faculty of Applied Sciences, Balikesir University. It is also investigated whether there is a significant difference in financial literacy, financial stress and financial well-being according to the level of the financial education received in terms of class. In this context, the survey link prepared in the internet environment was delivered to the classes via the teams application and filled by 189 volunteer students. The analyses were conducted in the SPSS 17 package program. Correlation, Tukey HSD test, Bonferroni test, differences between classes and groups and hypothesis testing were conducted in the analyses. According to the analysis results obtained, it was seen that the financial knowledge of first-year students was lower than other classes and they felt more stressed. In addition, another outcome of the study is that individuals do not feel financially well as financial knowledge increases.
This study explores the relationship between employee financial literacy and their retirement planning behavior, with a focus on understanding how financial knowledge influences retirement preparedness. As the global workforce faces increasingly complex financial landscapes and the shift from employer-sponsored pensions to self-managed retirement plans, financial literacy has emerged as a key factor in shaping individuals' retirement saving and investment behaviors. Using a case study approach, this research examines a sample of employees across different industries to assess their levels of financial literacy and the extent to which it impacts their retirement planning decisions. The study employs both quantitative surveys and qualitative interviews to capture a comprehensive view of employees' understanding of financial concepts, including budgeting, saving, investing, and managing retirement accounts. The findings reveal that employees with higher financial literacy are more likely to engage in proactive retirement planning, contributing more to retirement accounts, selecting diverse investment portfolios, and taking advantage of employer-sponsored retirement benefits. Conversely, those with lower financial literacy tend to exhibit passive behavior, often resulting in inadequate retirement savings. The study also highlights the importance of workplace financial education programs and policy recommendations to improve employees' financial capabilities. Ultimately, this research underscores the need for tailored interventions to enhance financial literacy as a means to foster better retirement planning outcomes and long-term financial security.
Çalışmanın amacı, Balıkesir Üniversitesi Burhaniye Uygulamalı Bilimler Fakültesi Finans ve Bankacılık bölümünde öğrenim gören öğrencilerin finansal okuryazarlık, finansal stres ve finansal iyi olma seviyelerini ölçmektir. Ayrıca alınan finans eğitiminin sınıf düzeyine göre finansal okuryazarlık, finansal stres ve finansal iyi olma hali açısından anlamlı bir fark olup olmadığı araştırılmaktadır. Bu bağlamda internet ortamında hazırlanmış anket linki sınıflara teams uygulaması üzerinden ulaştırılmış ve gönüllü 189 öğrenci tarafından doldurulmuştur. Analizler SPSS 17 paket programında yapılmıştır. Analizlerde korelasyon, Tukey HSD test, Bonferroni test, sınıflar ve gruplar arası farklılıkları ve hipotez testi yapılmıştır. Elde edilen analiz sonuçlarına göre birinci sınıf öğrencilerinin finansal bilgilerinin diğer sınıflara göre düşük olduğu ve kendilerini daha fazla stresli hissettikleri görülmüştür. Ayrıca finansal bilgi arttıkça bireylerin kendini finansal yönden iyi hissetmedikleri de araştırmanın bir diğer çıktısıdır.
Objective: This study aims to investigate the consequences and boundaries of technological innovation's influence on financial literacy in the context of the COVID-19 pandemic. Theoretical Framework: The research investigates the nature of financial literacy and digital financial literacy and its relation to sustainability. Additionally, interrelations between digital financial literacy and Artificial Intelligence and the way COVID promotes digital financial literacy improvement are presented. Method: The research methodology is based on content analysis, comparative analysis and impact analysis. The data collection was carried out through a survey. The survey was carried out using the method of the respondents and the selection included all voluntary respondents. The survey was conducted in an online environment using Google Workspace tools, in particular Google Forms, and was self-administered by the authors. Results and Discussion: The results revealed a positive attitude of users towards digital technologies in the conditions of a pandemic crisis and this inevitably leads to an increase in financial literacy. These results highlight the role of digital financial literacy and technology in achieving better financial behaviour and resilience during the pandemic. They also show the limitations of their effectiveness in certain aspects, such as the formation of financial attitudes. Research Implications: The operational and conceptual consequences of the study are examined, presenting perspectives on how outcomes might be implemented or influenced by methods employed in financial literacy development. These ramifications could include AI adoption, digital culture improvement, and so forth. Originality/Value: This study contributes to the literature by examining the relationship between financial literacy and artificial intelligence in the context of the COVID-19 epidemic. The fast adoption of artificial intelligence and the necessity for increased financial literacy demonstrate the relevance and significance of this research.
This study aimed to investigate the factors influencing personal savings behavior, focusing on the independent variables of financial literacy, economic conditions, and cultural factors. The research employed a snowball sampling method, with a sample size of 200 participants through structured questionnaire.The Correlation and regression analyses were conducted to examine the relationships between the independent variables and the dependent variable, personal savings behavior. Positive correlations and significant regression coefficients were found in the data, suggesting that increasing personal savings behavior was correlated with both good economic conditions and better levels of financial literacy. Notably, financial literacy exhibited a stronger influence on personal savings behavior compared to economic conditions. However, the impact of cultural factors on personal savings behavior was relatively weaker. The findings underscore the importance of financial education and stable economic environments in promoting positive savings habits among individuals. Furthermore, the study highlights the potential benefits of tailoring interventions and policies to address cultural norms and attitudes that may hinder or promote personal savings behavior. Notwithstanding the drawbacks of the snowball sampling method, the study offers insightful information about the intricate interactions among variables influencing people’s inclination to save. To further our understanding of this important component of financial well-being, future research may look at more variables, use bigger and more representative samples, and examine possible interactions among the independent variables.
This paper surveys what we have learned on financial literacy and its relation to financial behavior from data collected in the Dutch Central Bank (DNB) Household Survey, a project done in collaboration with academics. A pioneering survey fielded in 2005 included an extensive set of financial literacy questions and questions that can serve as instruments for financial literacy in regression analyses to assess the causal effect of financial literacy on behavior. We describe how this survey spurred a series of research papers demonstrating the crucial role of financial literacy in stock market participation, retirement planning, and wealth accumulation. This inspired various follow-up studies and experiments based on new data collections in the DNB Household Survey. Researchers worldwide have used these data for innovative studies, and other surveys have included similar questions. This case study exemplifies the essential role of data in empirical research, showing how innovative data collections can inspire new research initiatives and significantly contribute to our understanding of household financial decision-making.
The purpose of this study is to analyze and identify the existing literature on financial literacylearning in early childhood education in the Indonesian context. In this article, the researchertries to raise the concept of financial literacy learning practices which have been reluctant toinvolve children in managing finances because they are too young. This happens because thechild is considered not the time to get financial education stimulation. This study uses theliterature study method in analyzing previous studies. Based on the results of the literaturestudy, it shows that the practice of learning financial literacy is carried out through variousstrategies, namely, through the activation of the executive function. Second, it is carried outthrough an integration process into existing learning. Third, it is done through activities likesaving and saving from an early age. Fourth, the practice of financial literacy education inearly childhood education is carried out through a learning cycle. Therefore, the panel on theidentification of financial literacy learning practices can contribute both to practical needsand to the development of knowledge in the field of ECE, especially to develop financial literacylearning
El presente capítulo tiene como objetivo analizar el impacto de las políticas públicas y su influencia dentro de los argumentos, acciones o prácticas a favor de la socialización, educación e inclusión financiera en América Latina. El presente documento está dirigido al público en general, que tiene a bien revisar el funcionamiento e impacto de estas temáticas; pero principalmente para los hacedores de política pública, ya que el capítulo de libro está enfocado a visibilizar la importancia que tienen las políticas públicas en el diseño de programas transversales con perspectiva financiera. Este capítulo expone la importancia que tienen la educación, socialización e inclusión financiera en la dinámica económica y cómo el estado a través de sus políticas públicas establece acciones que coadyuvan a mejorar la situación económica de su población, dotándolos de diversas herramientas para que puedan tomar decisiones más conscientes, informadas, considerando los riesgos existentes, propiciando entornos más participativos para el emprendimiento, autoempleo, empleo, crecimiento y desarrollo económico, entre otros.
Purpose-This study aims to examine the relationships between various components of digital financial literacy, namely, awareness, subjective knowledge, experience, the digital legal framework and skills, and their influence on the adoption of cashless payment systems among university affiliates in Jordan. It also explores the mediating role of gender in this relationship. The study integrates the Theory of Planned Behavior (TPB) and social role theory (SRT). Design/methodology/approach-This study uses a cross-sectional survey across 34 Jordanian universities. Data from 418 participants were analyzed, focusing on factor analysis to assess the constructs' reliability and validity and to explore the moderating effects. Findings-The findings illuminate that digital financial awareness, experience and skills are significant catalysts for using cashless payments among the targeted demographic. In contrast, the digital legal framework and subjective financial knowledge did not significantly influence cashless payment use. Additionally, gender differences emerged, highlighting a stronger association between digital financial experience and cashless payment usage for women. Originality/value-The study's uniqueness stems from its detailed analysis of digital financial literacy's effect on cashless payment adoption in Jordan's academia, incorporating aspects like legal frameworks, awareness, and skills. It innovatively considers gender's moderating role, adding fresh insights into digital finance practices. Using the TPB and SRT, the research connects theory with Jordan's empirical data, suggesting strategies for education and policy. This work advances understanding of digital financial literacy in fostering a more inclusive digital financial system, contributing significantly to digital finance and behavioral economics literature.
Purpose
This study aims to examine the relationships between various components of digital financial literacy, namely, awareness, subjective knowledge, experience, the digital legal framework and skills, and their influence on the adoption of cashless payment systems among university affiliates in Jordan. It also explores the mediating role of gender in this relationship. The study integrates the Theory of Planned Behavior (TPB) and social role theory (SRT).
Design/methodology/approach
This study uses a cross-sectional survey across 34 Jordanian universities. Data from 418 participants were analyzed, focusing on factor analysis to assess the constructs' reliability and validity and to explore the moderating effects.
Findings
The findings illuminate that digital financial awareness, experience and skills are significant catalysts for using cashless payments among the targeted demographic. In contrast, the digital legal framework and subjective financial knowledge did not significantly influence cashless payment use. Additionally, gender differences emerged, highlighting a stronger association between digital financial experience and cashless payment usage for women.
Originality/value
The study's uniqueness stems from its detailed analysis of digital financial literacy's effect on cashless payment adoption in Jordan's academia, incorporating aspects like legal frameworks, awareness, and skills. It innovatively considers gender's moderating role, adding fresh insights into digital finance practices. Using the TPB and SRT, the research connects theory with Jordan's empirical data, suggesting strategies for education and policy. This work advances understanding of digital financial literacy in fostering a more inclusive digital financial system, contributing significantly to digital finance and behavioral economics literature.
Os debates sobre Educação Financeira vêm recebendo maior atenção de pesquisadores de todo o mundo. Um dos aspectos de relevância diz respeito à verificação do impacto da posse de conhecimentos de Educação Financeira sobre a qualidade das decisões financeiras dos indivíduos. Nesse sentido, este trabalho tem por objetivo fazer uma compilação de pesquisas que buscaram verificar possíveis desdobramentos da Educação Financeira (ou falta dela) sobre a qualidade das decisões financeiras, a propensão ao consumo e ao endividamento, o uso de cartões de crédito e o comportamento de poupança e planejamento previdenciário. As pesquisas citadas demonstram que a falta de Educação Financeira tem fortes impactos no comportamento dos indivíduos quanto às decisões sobre produtos financeiros e propensão a endividamento. Demonstram também que a falta de conhecimento e de experiências com relação ao uso do dinheiro são fatores determinantes nas questões de tomada de decisão financeira e planejamento financeiro para as pessoas.
This article in Japanese provides an overview of financial education in the United States, along with a review of previous research and my own contributions to this field.
The link between individual risk choice and technology dependence is an essential field of research for understanding the effect of technology on managerial processes. The function of this study is to investigate how dependence on technological tools and systems alters risk-taking behaviour. This research investigates the link between risk appetite, technology dependence and financial literacy in the academic zone. Survey feedbacks, financial attitudes, financial knowledge and financial behaviour from 107 candidates were used to completely characterize personal financial education. We levied respondents' risk appetite and adoption of technology in their daily course. The intent of this study is to show the link between financial literacy, risk appetite and technology dependence by evaluating the relationship between these variables. The evidences show how distinctive people understand and engage in financial literacy and give to the risk and extent of technology assimilation in these viewpoints and behaviours. Understanding these links is crucial to inform educational approach to intensify financial literacy and encourage responsible financial decisions in the education area.
La medición del constructo de la alfabetización financiera es un tema de gran interés tanto para académicos como para diseñadores de políticas públicas. A pesar de ello, pocos investigadores latinoamericanos han emprendido trabajos que propongan escalas con las cualidades metodológicas necesarias. En este contexto, este estudio tiene como objetivo evaluar la escala de Alfabetización Financiera sobre Decisiones Financieras Clave (FLKD, por sus siglas en inglés) en tres muestras de tres países latinoamericanos, con la finalidad de identificar si el instrumento es apto para ser utilizado como herramienta que calibra de manera válida y confiable entre jóvenes adultos. Para esto se lleva a cabo el análisis de confiabilidad, de correlaciones y factorial confirmatorio, utilizando además el Modelado de Sistema de Ecuaciones Estructurales (SEM). Se destaca que este proceso es confirmatorio, es decir, no semi confirmatorio. Los resultados indican que el ajuste del modelo en cada muestra se aproxima a lo esperado, obteniendo mejores resultados en la muestra global, aunque por debajo de los parámetros de corte más estrictos. A pesar de este hecho, los resultados respaldan la afirmación de que la escala FLKD constituye un adecuado punto de partida para ser afinado y aplicado en jóvenes universitarios de países latinoamericanos. Además, los hallazgos sugieren que existe la posibilidad de explorar nuevas relaciones y análisis que amplíen la comprensión de cómo la variable de comportamiento financiero se relaciona. Este enfoque holístico puede enriquecer la comprensión de la alfabetización financiera y su impacto en el bienestar financiero de los individuos en la región.
This paper explores who is financially literate, whether people accurately perceive their own economic decision-making skills, and where these skills come from. Self-assessed and objective measures of financial literacy can be linked to consumers' efforts to plan for retirement in the American Life Panel, and causal relationships with retirement planning examined by exploiting information about respondent financial knowledge acquired in school. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready.
We use responses to a survey and experiment with participants in Mexico's privatized social security system to examine how financial literacy impacts workers' choice behavior and how simplifying information on management fees may increase measures of price elasticity sensitivity among the financially illiterate. We find that by presenting fees in pesos instead of annual percentage rates, financially illiterate workers focus much more on fees when choosing between investment funds, selecting funds with lower average fees in hypothetical choice settings. Even though changes in information have small impacts on fees of the selected fund, holding fees constant, we show that changes in choice behavior imply a substantial increase in price sensitivity. Hence, the way in which information is presented to workers can have a substantial impact on optimal fees that firms can charge in the marketplace.
Consumer financial literacy has become a growing concern to educators, community groups, businesses, government agencies, and policymakers. Correspondingly, there has been an increase in the number and types of financial education programs available to households. Many of these programs focus on providing information to consumers and operate under the implicit assumption that increases in information and knowledge will lead to changes in financial-management practices and behaviors. ; This article focuses on four financial-management activities--cash-flow management, credit management, saving, and investment. Data from the Surveys of Consumers are used to analyze some of the connections between knowledge and behavior--what consumers know and what they do. Overall, financial knowledge was statistically linked to financial practices: Those who knew more were more likely to engage in recommended financial practices. In addition, certain types of financial knowledge were statistically significant for particular financial practices--knowing about credit, saving, and investment was correlated with higher probabilities of engaging in recommended credit, saving, and investment practices respectively. Although the causality could flow in either direction, this finding indicates that increases in knowledge may lead to improvements in financial-management practices. Thus, financial education in combination with skill-building and audience-targeted motivational strategies may be one way to elicit the desired behavioral changes in financial-management practices.
This article presents a new way of looking at and measuring financial literacy. Financial education work to date has focused on managing money, yet the survey described here shows that this is the area where levels of capability are highest. At least half of the UK population needs reminding that it is dangerous to live for the day and make no provision for changes in circumstance, unexpected expenditure, or retirement. In addition, with the low levels of financial capability identified by the survey, it is likely that mis-selling of financial products will continue in the UK. The authors conclude with policy priorities for the government.
A growing literature shows how consumers make mistakes in a variety of different settings pertinent to financial decision-making. Using data from a randomized experiment in Chile, we show how different ways of presenting pension management fees shape consumer choices, and how responses to pension fee information varies by level of financial literacy. Our results indicate that, in choosing pension funds, those with lower levels of education, income, and financial literacy rely more on employers, friends, and coworkers, than on fundamentals. We also find that such individuals are more responsive to information framing when interpreting the relative benefits of different investment choices.
This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications.
We examined financial literacy among the young using the most recent wave of the 1997 National Longitudinal Survey of Youth. We showed that financial literacy is low; fewer than one-third of young adults possess basic knowledge of interest rates, inflation and risk diversification. Financial literacy was strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings was about 45 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy.
In a world of declining state pension provision, it is becoming increasingly important that individuals are able to understand the financial choices they face and can choose savings products, portfolios and contribution rates accordingly. In this paper, we look at numerical ability and other dimensions of cognitive function in a sample of older adults in England and examine the extent to which these abilities are correlated with various measures of wealth and retirement saving outcomes. As well as finding that relatively large fractions of the older population can be seen to have low levels of numeracy, we show that numeracy levels are strongly correlated with measures of retirement saving and investment portfolios, even when controlling for other dimensions of cognitive ability as well as educational attainment. Numeracy is also related to knowledge and understanding of pension arrangements, and with perceived financial security. In the short run, there may be a role for targeting simple retirement planning information at low-numeracy, low-education groups; a longer-run goal for retirement saving policy might be to improve numeracy levels more generally. Copyright 2007 Institute for Fiscal Studies.
Individuals are increasingly put in charge of their financial security after retirement. Moreover, the supply of complex financial products has increased considerably over the years. However, we
still have little or no information about whether individuals have the financial knowledge and skills to navigate this new financial environment. To better understand financial literacy and its relation to financial decision-making, we have devised two special modules for the DNB Household Survey. We have designed questions to measure numeracy and basic knowledge related to the working of inflation and interest rates, as well as questions to measure more advanced financial knowledge related to financial market instruments (stocks, bonds, and mutual funds). We evaluate the importance of financial literacy by studying its relation to the stock market: Are more financially knowledgeable individuals more likely to hold stocks? To assess the direction of causality, we make use of questions measuring financial knowledge before investing in the stock market. We find that, while the understanding of basic economic concepts related to inflation and interest rate compounding is far from perfect, it outperforms the limited knowledge of stocks and bonds, the concept of risk diversification, and the working of financial markets. We also find that the measurement of financial literacy is very sensitive to the wording of survey questions. This provides additional evidence for limited financial knowledge. Finally, we report evidence of an independent effect of financial literacy on stock market participation: Those who have low financial literacy are significantly less likely to invest in stocks.
We study the relation between cognitive abilities and stockholding using the recent Survey of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on wealth and portfolio composition of individuals aged 50+ in 11 European countries and three indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We find that the propensity to invest in stocks is strongly associated with cognitive abilities, for both direct stock market participation and indirect participation through mutual funds and retirement accounts. Since the decision to invest in less information-intensive assets (such as bonds) is less strongly related to cognitive abilities, we conclude that the association between cognitive abilities and stockholding is driven by information constraints, rather than by features of preferences or psychological traits.
We compare wealth holdings across two cohorts of the Health and Retirement Study: the early Baby Boomers in 2004, and individuals in the same age group in 1992. Levels and patterns of total net worth have changed relatively little over time, though Boomers rely more on housing equity than their predecessors. Most important, planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non-planners. Instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little or no wealth.
Two competing explanations for why consumers have trouble with financial decisions are
gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people
persistently choose immediate gratification instead of taking advantage of larger long-term payoffs. We use experimental evidence from Chile to explore how these factors appear related to poor financial decisions. Our results show that our measure of impatience is a strong predictor of
wealth and investment in health. Financial literacy is also correlated with wealth though it appears to be a weaker predictor of sensitivity to framing in investment decisions. Policymakers interested in enhancing retirement well-being would do well to consider the importance of these
factors.
Financial literacy and schooling attainment have been linked to household wealth accumulation. Yet prior findings may be biased due to noisy measures of financial literacy and schooling, as well as unobserved factors such as ability, intelligence, and motivation that could enhance financial literacy and schooling but also directly affect wealth accumulation. Here we use a new household dataset and an instrumental variables approach to isolate the causal effects of financial literacy and schooling on wealth accumulation. While financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, our approach reveals even stronger and larger effects of financial literacy on wealth. It also indicates no significant positive effects of schooling attainment conditional on financial literacy in a linear specification, but positive effects when interacted with financial literacy. Estimated impacts are substantial enough to suggest that investments in financial literacy could have large positive payoffs.
In the United States, religious attendance rises sharply with education across individuals, but religious attendance declines sharply with education across denominations. This puzzle is explained if education both increases the returns to social connection and reduces the extent of religious belief, and if beliefs are closely linked to denominations. The positive effect of education on social connection is the result of both treatment and selection: schooling creates social skills and may increase people’s utility from engaging in other social activities such as church attendance. The negative effect of education on religious belief occurs because secular education emphasizes secular beliefs that are at odds with many traditional religious views.
Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's "propensity to plan." We show that those with a higher such propensity spend more time developing financial plans, and that this shift in planning is associated with increased wealth. These findings are consistent with broad psychological evidence concerning the beneficial impacts of planning on goal pursuit. Those with a high propensity to plan may be better able to control their spending, and thereby achieve their goal of wealth accumulation. We find direct evidence supporting this effortful self-control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Assessing the price evolution of houses on the basis of average sales prices, as is current practice in Belgium, might be misleading due to changing characteristics of the houses sold in the periods observed. A hedonic index which takes into account changes in characteristics is more appropriate. We use the budget surveys of the Belgian Statistical Institute to illustrate how this also applies for Belgium. The estimated hedonic price index for house sales on the secondary market is practically always below the index based on average sales values for the period considered. This demonstrates the need to collect more extensive data on the characteristics of the dwellings sold in Belgium.
This paper provides a joint analysis of household stockholding participation, stock location among stockholding modes, and participation spillovers, using data from the US Survey of Consumer Finances. Our multivariate choice model matches observed participation rates, conditional and unconditional, and asset location patterns. Financial education and sophistication strongly affect direct stockholding and mutual fund participation, while social interactions affect stockholding through retirement accounts only. Household characteristics influence stockholding through retirement accounts conditional on owning retirement accounts, unlike what happens with stockholding through mutual funds. Although stockholding is more common among retirement account owners, this fact is mainly due to their characteristics that led them to buy retirement accounts in the first place rather than of any informational advantages gained through retirement account ownership itself. Finally, our results suggest that, taking stockholding as given, stock location is not arbitrary but crucially depends on investor characteristics.
The present paper introduces a new dataset, the Rand American Life Panel (ALP), which offers several appealing features for an analysis of financial literacy and retirement planning. It allows us to evaluate financial knowledge during workers’ prime earning years when they are making key financial decisions, and it offers detailed financial literacy and retirement planning questions, permitting a finer assessment of respondents’ financial literacy than heretofore feasible. We can also compare respondents’ selfassessed financial knowledge levels with objective measures of financial literacy, and most valuably, we can investigate prior financial training which permits us to identify key causal links. By every measure, and in every sample we examine, financial literacy proves to be a key determinant of retirement planning. We also find that respondent literacy is higher when they were exposed to economics in school and to company-based financial education programs.
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
This study uses data from the module on planning and financial literacy devised for the Health and Retirement Study in 2004. It finds that women display much lower levels of literacy than respondents in the total sample. Lack of literacy has implications for planning: women who are less financially literate are less likely to plan for retirement and be successful planners. These findings have important implications for policy and for programs aimed at fostering financial security. Because financial illiteracy is widespread among women, a one-time financial education seminar is unlikely to sufficiently influence planning and saving decisions. Similarly, education programs targeted specifically at women may be better suited to addressing large differences in preferences, savings needs, and financial knowledge.
Evidence suggests only a minority of American households feels "confident" about retirement saving adequacy. Little is known about why people fail to plan for retirement, and whether planning and information costs might affect retirement saving patterns. To better understand these issues, we devised and fielded a purpose-built module on planning and financial literacy for the 2004 Health and Retirement Study (HRS). This module measures how workers make their saving decisions, how they collect the information for making these decisions, and whether they possess the financial literacy needed to make these decisions. Our analysis shows that financial illiteracy is widespread among older Americans: only half of the age 50+ respondents could correctly answer two simple questions regarding interest compounding and inflation, and only one-third understood these as well as stock market risk. Women, minorities, and those without a college degree were particularly at risk of displaying low financial knowledge. We also evaluate whether people tried to figure out how much they need to save for retirement, whether they devised a plan, and whether they succeeded at the plan. In fact, these calculations prove to be difficult: fewer than one-third of our age 50+ respondents ever tried to devise a retirement plan, and only two-thirds of those who tried, actually claim to have succeeded. Overall, fewer than one - fifth of the respondents believed that they engaged in successful retirement planning. We also find that financial knowledge and planning are clearly interrelated: those who displayed financial knowledge were more likely to plan and to succeed in their planning. Moreover, those who did plan were more likely to rely on formal planning methods such as retirement calculators, retirement seminars, and financial experts, and less likely to rely on family/relatives or co-workers.
Saving Between Cohorts: The Role of Planning Redefining Retirement: How Will Boomers Fare?
- Annamaria Lusardi
- Jason Beeler
Lusardi, Annamaria and Jason Beeler. (2007). " Saving Between Cohorts: The Role of Planning, "
in B. Madrian, O. Mitchell, and B. Soldo (eds.), Redefining Retirement: How Will
Boomers Fare? Oxford University Press, Oxford: 271-295.
Americans' Financial Capability Report for the Financial Crisis Inquiry Commission
- Annamaria Lusardi
Lusardi, Annamaria. (2010). Americans' Financial Capability. Report for the Financial Crisis
Inquiry Commission. Washington, DC. February.
What American Teens and Adults Know about Economics
National Council on Economic Education (NCEE; 2005). What American Teens and Adults
Know about Economics. NCEE: Washington, D.C.
Levels of Financial Capability in the UK: Results of a baseline survey
- Adele Atkinson
- Stephen Mckay
- Elaine Kempson
- Sharon Collard
Atkinson, Adele, Stephen McKay, Elaine Kempson, and Sharon Collard. (2006). " Levels of
Financial Capability in the UK: Results of a baseline survey. " UK: Financial Services
Authority.
Increased Saving but Little Planning: Results of the 1997 Retirement Confidence Survey
- Paul Yakoboski
- Jennifer Dickemper
Yakoboski, Paul and Jennifer Dickemper. (1997). " Increased Saving but Little Planning: Results
of the 1997 Retirement Confidence Survey, " EBRI Issue Brief, 191.
The Changing Landscape of Pensions in The United States In Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs
- James Poterba
- Steve Venti
- David Wise
Poterba, James, Steve Venti, and David Wise (2008), " The Changing Landscape of Pensions in
The United States. " In Overcoming the Saving Slump: How to Increase the Effectiveness
of Financial Education and Saving Programs. Ed. A Lusardi. Chicago: University of
Chicago Press: 17-46.