Extending financial literacy to insurance literacy: a survey approach

We extend behavioural research in investment and retirement savings to insurance, by investigating factors that may influence individuals’ insurance decision making. These factors include financial literacy, specialist insurance education and some behavioural biases. Based on a definition of insurance literacy that requires both having, and applying insurance knowledge, we find from a survey of postgraduate students that financial literacy does not necessarily translate to insurance literacy, whereas more specialised education can improve insurance literacy. Results also indicate specialist education potentially reduces susceptibility to anchoring effects.     

An intersectional approach to evaluating consumer financial literacy

This study applies a novel approach to explore consumer financial literacy—the necessary skills and knowledge to make personal financial decisions—across different demographic groups. Rather than exploring demographic variables independently of each other, an intersectional approach is employed to identify the most critical and vulnerable consumer groups in light of financial literacy. A survey of 1047 respondents from a panel of consumers residing in the United States demonstrates that identifying the most critical and vulnerable consumer groups is achieved using an intersectional approach. For example, although we find Generation Y exhibits lower financial literacy compared with previous generations, by examining the demographic variables simultaneously, we find that Generation Y females who are members of ethnical minorities are at the greatest risk of being financially vulnerable. Implications for research and financial literacy programs are discussed.     

Financial literacy and over-indebtedness in low-income households

Financial literacy can explain a significant proportion of wealth inequality. Among the key components of financial literacy are numeracy and money management skills. Our study examines the relative importance of these components in the determination of consumer debt and household net worth among credit union members in socially disadvantaged areas. The main finding from our analysis is that money management skills are important determinants of financial outcomes but that numeracy has almost no role to play. This result adds to a recent US-based behavioural finance literature on the role of attention and planning in consumer finance. Findings are found to be robust when the sample is reduced to only those who have a clear role in household financial decision-making and also when controlling for potential endogeneity. Our findings have policy implications in the UK and elsewhere as credit unions across the world are important players in national financial literacy strategies.     

Participation in risky asset markets and propensity for financial planning: a missing link?

This study examines whether the association between financial literacy and participation in risky asset markets is robust to variation on a more innate level: the propensity for financial planning. I find that individuals’ propensity for financial planning is strongly positively related to stock market participation as well as membership in a voluntary workplace retirement savings scheme. This result holds when controlling for financial literacy and a range of demographic and control variables in a multivariate regression setting. Importantly, the positive association between financial literacy and risky asset market participation also persists, suggesting that these two variables operate through separate channels.     

传统家庭观念抑制了城镇居民商业养老保险参与吗？———基于金融信任与金融素养视角的实证分析

随着我国人口老龄化的加速和金融产品的不断创新,以商业养老保险为代表的个人养老金逐步成长为我国养老金体系的第三大支柱,为解决养老问题提供了重要渠道。但现阶段我国城镇居民的商业养老保险参与度不足,养老金融市场发展缓慢。区别于既有研究的经济理性视角,本研究从影响金融发展的文化观念视角为这一“有限参与”现象提供新的理论解析。利用CHFS 2015数据进行实证分析,本文发现“养儿防老”等传统家庭文化观念会抑制我国城镇居民的商业养老保险参与,这一影响在控制了内生性后依然显著;进一步研究发现,传统家庭观念(养儿防老等)会削弱居民的金融信任,减少居民对金融信息的关注,不利于居民金融素养的提升,进而降低其商业养老保险参与度;异质性分析表明,传统家庭观念(养儿防老等)对商业养老保险参与的负向影响在中西部地区和受教育水平偏低的群体中更加突出。本研究揭示了影响居民商业养老保险参与和我国养老金融市场发展的深层文化因素,对推进我国多支柱养老保险体系的建设也具有政策启示意义。     

Financial well-being amongst elderly Australians: the role of consumption patterns and financial literacy

Consumption behaviour and financial literacy are primary factors in determining the financial well-being of retirees. This paper uses an existing financial literacy index to examine how financial literacy directly, and via an interaction with consumption patterns, affects elderly Australians’ financial well-being. We find that most elderly Australians hold an optimistic attitude towards their financial situation, and those who are relatively older, more educated, healthier and outright homeowners are more likely to report higher levels of financial well-being. Financial literacy significantly improves financial well-being. It also helps strengthen the positive effects of meeting more of non-essential consumption needs on financial well-being.     

金融素养与家庭储蓄率——基于理财规划与借贷约束的解释

金融科技的发展使得人们参与金融市场的门槛与成本迅速降低,金融产品也不断丰富,金融市场参与者的异质性增加,金融素养对家庭金融决策的影响越来越明显。本文研究发现:(1)家庭在安排储蓄与消费时,金融素养有显著影响,金融素养与家庭储蓄率呈倒U型关系。(2)理财规划和借贷约束是影响家庭储蓄率上升的两个渠道。(3)金融素养由低逐渐升高时,家庭的理财规划意识增强,通过提高储蓄率来保障资金充足。当金融素养增加到一定程度,理财规划意识优化资产配置的作用增强,抑制消费的作用减弱,同时借贷约束缓解会帮助家庭增加消费。本文的发现有助于厘清家庭储蓄率差异的成因,对提升居民福利,增强金融教育政策的针对性,有积极意义。     

A Comparative Analysis of Financial Professionals’ Perception of the Level of Graduating Business Student Retirement Planning Familiarity,Motivation, and Preparedness

Academic, government, employer, and individual interest in personal financial literacy have mushroomed as financial decision making has become more complex, costly, and less paternalistic. Financial illiteracy in America manifests in many ways, including low levels of personal saving, high levels of personal debt, negative financial wealth, a decline in standard of living, and increased demand on social safety networks. For college students, of particular concern is the high level of public and private debt accrued while working toward a degree. It is important to understand how prepared households are for retirement planning decisions and which factors can improve their preparedness. We show that financial education is impactful in reducing financial illiteracy, and provides evidence that taking a personal risk management and insurance course helps to prepare college students to make retirement decisions. Second, we provide evidence that life stage explains differences (similarities) in how professionals self‐rate the importance, familiarity, and motivation to plan and save for retirement versus their opinion on how vital the questions should be to students. Finally, additional evidence is provided showing that demographic characteristics explain differences in the importance and motivation to plan and save for retirement and in the familiarity that respondents have with retirement planning and saving products.     

Resilience and wellbeing in the midst of the COVID-19 pandemic: The role of financial literacy

Using the 2021 wave of the TIAA Institute-GFLEC Personal Finance Index (P-Fin Index), this paper provides an in-depth examination of the financial literacy of U.S. adults in the midst of the COVID-19 pandemic. Knowledge is troublingly low, with U.S. adults averaging a score of 50 percent on the twenty-eight questions that compose the P-Fin Index. Even more disturbingly, only 28 percent of U.S. adults correctly answered a question testing their ability to comprehend and compare probabilities. Financial literacy matters. Lower financial literacy is associated with increased time spent worrying about personal finances. After controlling for income, education, and key demographic information, the more financially literate are found to be more likely to be financially resilient, to plan for retirement, and to feel unconstrained by debt. These findings highlight the importance of financial knowledge, in particular in a time of crisis, and raise concerns about the public’s ability to comprehend complex messages about risk during the pandemic.     

Situating financial literacy

This paper comments on the conceptualisation of financial literacy by investigating how it is defined, problematised, and operationalised as a part of the efforts to overcome its perceived impediments. The backdrop of this study is the idea that the financial literacy movement goes hand in hand with the financialisation of society. By reporting from a study of financial literacy practices, the aim is to disentangle the notion of financial literacy from the assumption that it is a singular capability that, when gained, will automatically affect people's financial practices. The paper draws on a recent development in literacy research, New Literacy Studies, and on its division into autonomous and ideological definitions of literacy. The empirical illustrations originate from the efforts made to decrease financial illiteracy among Swedish adolescents and the demand for financial literacy in audit committees. Contrary to earlier studies, this paper demonstrates that financial literacy does not merely refer to a character trait that researchers may find lacking among the marginalised actors in society. Financial literacy cannot merely be viewed as the ability to read and write in the language of finance and accounting. Instead, financial literacy is a concept that needs to be situated and studied in practice because the characteristics that constitute financial literacy, or those that apply to it, vary with time and place.     

Can financial literacy reduce anxiety about life in old age?

This study examines the role of financial literacy in reducing anxiety about life in old age. We hypothesize that financial literacy increases preparedness for old age through better savings and investment decisions, leading to the accumulation of more assets and earning more income, which enhances financial capacity and reduces anxiety. Using data from a nationwide panel survey in Japan, we provide evidence that financial literacy can reduce anxiety about life in old age by making people capable of accumulating more assets and earning more income. Moreover, the interaction of financial literacy with age and spouse reduces anxiety, while living with children increases anxiety about life during old age. We check the robustness of our results using an alternative measure of financial literacy, changing composition of the sample, controlling for residents’ geographical dispersion, and testing for endogeneity bias. The major findings remain unchanged after considering these factors.     

Financial literacy and consumer credit portfolios

We use survey data from a sample of UK households to analyse the relationship between financial literacy and consumer credit portfolios. We show that individuals who borrow on consumer credit exhibit worse financial literacy than those who do not. Borrowers with poor financial literacy hold higher shares of high cost credit (such as home collected credit, mail order catalogue debt and payday loans) than those with higher literacy. We also show that individuals with poor financial literacy are more likely to lack confidence when interpreting credit terms, and to exhibit confusion over financial concepts. They are also less likely to engage in behaviour which might help them to improve their awareness of the credit market.     

Financial literacy and financial literacy programmes in Australia

Financial services markets require consumers to be more financially literate if they are to manage their finances effectively. Consequently, there have been an increasing number of attempts to measure financial literacy, as variously defined, and in response to observed deficiencies in financial literacy, an expanding number of financial literacy programmes implemented worldwide, not least in Australia. The purpose of this article is twofold. First, review the existing evidence on the level of financial literacy in Australia, along with the posited determinants and potential impacts on consumers and the marketing of financial services. Second, discuss the financial literacy programmes currently in place in Australia aimed at increasing the level of financial literacy across the population as a whole and in specific groups set in place by government, industry, community and workplace initiatives. The article includes brief critiques of the process of measuring, assessing and understanding financial literacy as it stands and the purpose, design and evaluation of the financial literacy programmes currently in place.     

Investment in financial literacy and saving decisions

We present an intertemporal consumption model of investment in financial literacy. Consumers benefit from such investment because financial literacy allows them to increase the returns on wealth. Since literacy depreciates over time and has a cost in terms of current consumption, the model delivers an optimal investment in literacy. Furthermore, literacy and wealth are determined jointly, and are positively correlated over the life-cycle. The model drives our empirical approach to the analysis of the effect of financial literacy on wealth and saving and indicates that the stock of financial literacy early in life is a valid instrument in the regression of wealth on financial literacy. Using microeconomic and aggregate data, we find strong support for the model’s predictions.     

Financial literacy and the demand for financial advice

The low level of financial literacy across households suggests that they are at risk of making suboptimal financial decisions. In this paper, we analyze the effect of investors’ financial literacy on their decision to demand professional, non-independent advice. We find that non-independent advisors are not sufficient to alleviate the problem of low financial literacy. The investors with a low level of financial literacy are less likely to consult an advisor, but they delegate their portfolio choice more often or do not invest in risky assets at all. We explain this evidence with a highly stylized model of strategic interaction between investors and better informed advisors with conflicts of interests. The advisors provide more information to knowledgeable investors, who anticipating this are more likely to consult them.     

Is financial advice a cure-all or the icing on the cake for financial literacy? Evidence from financial market participation in China

We examine how financial advice interacts with financial literacy to shape household decisions on stock market participation in China. Particularly, we investigate how the effect of financial advice varies with economic expectations, preferences for asset diversification and the level of financial literacy. Feeding the data of 5274 households into a Probit model that predicts the probability of holding stocks, we find that, while an increase in financial literacy significantly raises the stock market participation of all households, seeking financial advice only increases the participation for those households which have a preference for asset diversification or which have an optimistic expectation about the economy. Moreover, the effect of financial advice is concentrated on households with high financial literacy, implying that an insufficient level of financial literacy is the reason for the poor performance of financial advice in China. We also examine if there are influential trust or quality concerns which would reduce the effectiveness of financial advice but we find no significant evidence for it.     

The impact of undergraduate personal finance education on individual financial literacy,attitudes and intentions

Financial literacy education features prominently among the policy options available to improve personal financial decision‐making. Notwithstanding calls to expand delivery of financial literacy units at university level, such offerings are relatively rare with little evaluation. We provide an evaluation of the impact on financial literacy, financial attitudes and financial behaviour intentions of a semester unit in personal finance delivered to undergraduates at an Australian university, carefully controlling for confounding effects in the analysis. We report increases in objective and subjective financial literacy and an additional gender effect. Contrary to previous speculation, we do not find overconfidence as an associated outcome.     

Financial literacy and its consequences: Evidence from Russia during the financial crisis

The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.     

Economic System and Financial Literacy: Evidence from North Korean Refugees

We compare the financial literacy of two groups of Koreans living in South Korea, namely, native-born South Koreans and North Korean refugees, who were born and raised in contrasting economic systems. Examining the financial literacy of North Korean refugees and its changes over time after their settlement in a capitalistic society underscores the importance of institutional environments in developing financial literacy. We find that North Korean refugees, with very limited access to financial markets in their home country, are significantly less financially literate than native-born South Koreans. The gap is significant even after controlling for cognitive ability, which is also starkly different between the two groups. The financial literacy of the refugees increases over time during their settlement in South Korea, but the magnitude of such improvement is insubstantial. Our findings suggest that financial literacy is developed at the early life stages and cannot be easily modified at the later stages.     

人口年龄结构与金融结构——宏观事实与微观机制

人口年龄结构是影响宏观经济的重要因素,不仅能够通过“人口红利”影响经济增长,也能通过金融资产需求作用于金融结构,进而影响经济增长。首先,本文基于宏观数据发现人口年龄结构与金融结构之间存在紧密联系,伴随老年人口占比的提高,金融结构更偏向间接融资,且以金融行为来衡量的风险偏好程度显著下降;其次,本文基于2013年中国家庭金融调查数据,从微观主体对金融资产需求的角度研究人口年龄结构对金融结构的影响机制,分析家庭人口年龄结构对风险资产参与行为及风险态度的影响。实证结果表明,家庭老年人口占比越高,家庭参与股票或基金投资意愿及比重越低;对于已持有风险资产的家庭,老年人口占比提高,家庭风险资产持有比重会降低。此外,家庭人口年龄结构会影响风险态度,家庭老年人口占比提升会显著降低风险偏好程度,这是其影响家庭风险资产参与行为的重要渠道。