School and family environments promote adolescents' financial confidence: Indirect paths to financial literacy skills in Finnish PISA 2018

This study investigates the associations of adolescents' financial socialization factors—financial education in school and families—with financial confidence (i.e., confidence in using financial and digital financial services). In addition, we examine how financial socialization factors indirectly relate to financial literacy skills through financial confidence and the role of demographic factors (adolescent gender, grade level, parental education, family wealth) on financial socialization, financial confidence, and financial literacy scores. We used data on the 4328 Finnish 15-year-olds participating in the 2018 Programme for International Student Assessment (PISA). We measured financial literacy by cognitive test items and assessed financial socialization and financial confidence by adolescent questionnaires. First, the results showed that financial education in school positively predicted adolescents' confidence in using financial and digital financial services. Second, financial education at schools and in families indirectly predicted students' financial literacy through confidence in using digital financial services. Third, older adolescents were more exposed to financial education at school and in families, whereas adolescents from wealthier families and girls (vs. boys) were exposed to a more frequent discussion of financial matters with parents at home. Furthermore, the boys were more confident in using financial services than the girls, although the financial literacy score did not differ by gender; older adolescents were more confident in using financial services and achieved better financial literacy than younger ones. Finally, higher parental education in the family related to higher financial literacy but not to higher financial confidence, whereas family wealth was related to higher financial confidence but not financial literacy.     

A glimpse of the complexity of factors that influence financial literacy

Financial literacy has been recognised as a vital life skill, but there is little evidence of the factors behind the differences in managing personal finance. Socio‐economic factors and the provision of financial education do explain the variance in financial literacy in some countries, but not in all. In the PISA 2012 financial literacy test, Estonian students ranked very highly in international comparison; although only a few had received financial education at school. Compared with other countries, socio‐economic factors explained the smallest proportion of variance in the test score. There was, however, a significant difference between the mean financial literacy scores of Estonian‐ and Russian‐language communities. The aim of the article is to analyse the factors behind the differences in financial literacy when financial education is not provided. It also offers insight into how students in a similar education system in two different cultural and language frameworks achieve different financial literacy scores. Moreover, the results demonstrate how indicators, such as family background can work through different channels as opposed to the usual parental education or occupation based socio‐economic indicators. The latter implies that unexplained factors remain, such as cultural, developmental and societal indicators, which most researchers pay little attention to when explaining efficient policies for improving financial literacy. Multivariate regression models show that the level of financial literacy in Estonia is correlated with gender, language of the school, the number of books at home, mathematics and reading scores. The Blinder–Oaxaca decomposition explains less than half of the gap between the two communities. The only variable significantly explaining the gap is the number of books at home. Books can be interpreted as a symbol of social status, evidence of cultural background or source of influence for broader picture and better problem solving skills.     

Factors that influence the financial literacy of young Spanish consumers

This study examines the development of mathematical and financial literacy skills amongst 471 students in Spain. Most studies on this topic have looked at either one or the other skill but they have not examined the relationship between the two.  The use of simultaneous equations has enabled us to do so. The aim of the paper is to disentangle the factors determining the financial skills of young consumers in Spain. To do this, the PISA Financial Literacy Assessment conducted by the OECD in 2012 is used. Our paper’s main contribution lies in the methodological way to deal with the empirical challenges overshadowing our study. Particularly, our methodological strategy is defined by the application of a multi‐level model of simultaneous equations (MSiEM). This method allows us to take into account the simultaneous determination of math and financial skills at school and the nested structure of the database. This MSiEM permits the identification of the determinants of financial skills, differentiating between the influences operating at school level from those at student level. A first conclusion is that the development of financial abilities of young consumers is mediated by their mathematical skills. A second conclusion, in accordance with those of other international studies, is the importance of the family on the financial literacy of 15‐year‐old Spanish students. The family, a first‐order determinant in reading, science and math scores, is also a key variable in the development of financial skills. Finally, school type (public vs. private) does not display any effect on either the financial or math performance of Spanish young people.     

Money talks – a program to improve financial literacy of teens

Many researchers have studied and documented the financial literacy of youth. Even more have developed educational programs or curricula to teach financial and consumer issues to youth; however, few have actually evaluated the effectiveness of their programs. The Money Talks: Should I be Listening? curriculum, developed by a University of California Cooperative Extension team, was created to appeal to teenagers as it increased their financial literacy. In order to develop a program that young people would readily use, and from which they would learn, teenagers were surveyed prior to program development to determine the topics that were relevant to them, the educational format that appealed to them, and when and where they preferred to receive the information (Varcoe, Peterson, Garrett, Martin, Rene, & Costello, 2001). This paper discusses the effectiveness of The Money Talks: Should I be Listening? curriculum on the financial knowledge and behaviour of participants using the series. The curriculum was designed for use as a part of school curriculum as well as for presentation in other venues. The findings indicate that using the curriculum did improve the financial literacy of high school students with significant positive changes in both knowledge and behaviour. They have a better understanding of the value of savings and have changed behaviours. It is interesting to note that the males demonstrated a significantly greater increase in knowledge from pre‐test to post‐test than females. Perhaps the females have more interest in or knowledge of financial issues prior to participation in this project? Overall the results of this study are consistent with the findings of others. Research based curricula in personal finance seem to yield results. This age group has specific requirements for method of delivery and location of the seminars suggesting that it is important to keep the materials interactive. To address this issue, a web‐site http:www.moneytalks.ucr.edu was added to the program. Included on the web‐site are interactive games and a video on the importance of saving. The teens are naturally more interested in learning about the consumer and financial issues they perceive as salient in their lives at that particular time. Educators should identify topics of interest to the teens and develop, or use existing, interactive methodology to present the information.     

Personal finance blogs: Helpful tool for consumers with low financial literacy or preaching to the choir?

Recent transitions from defined benefit to defined contribution plans assign greater individual responsibility to consumers to prepare for retirement and make consequential financial choices. However, many consumers are ill‐equipped to do so, considering overall low levels of financial literacy. At the same time, there is increasing controversy about the effectiveness of traditional financial education, such as high school financial education, counselling and seminars or workshops. Alternative sources of (just‐in‐time) financial training or advice may be needed to financially empower consumers and help them make important financial decisions. In the light of these developments, this study investigates if consumers perceive personal finance blogs as a helpful alternative in acquiring financial knowledge, and which factors influence perceived helpfulness of and intention to use personal finance blogs. Using Structural Equation Modelling to analyse data from a sample of U.S. consumers, the results of this study uncover that financial literacy and susceptibility to informational influence have a significant positive association with perceived helpfulness. Perceived financial uncertainty, which refers to uncertainty in terms of consumers’ perceived ability to accurately predict their future financial needs, has a significant negative association with perceived helpfulness of and intention to use personal finance blogs. Finally, perceived helpfulness of a personal finance blog is a significant positive predictor of consumers’ intention to use it. Overall, the findings suggest that personal finance blogs are preaching to the choir, since the consumers who are most likely to use personal finance blogs seem to need them the least given their higher levels of financial literacy and lower levels of perceived financial uncertainty. Taken together, the findings shed light on the potential users of personal finance blogs and underline the challenges of a ‘one‐size‐fits‐all’ financial education. This study aids in assessing personal finance blogs as an online resource which is scarcely researched, but which has the potential to provide just‐in‐time financial education to consumers across the world.     

Financial literacy: A comparative study across four countries

This study analysed differences in financial literacy across four countries: Canada, Italy, the UK and the US. The purpose was to understand whether factors associated with financial literacy in one country can be generalized to other countries as well or whether unique national characteristics make it necessary to examine financial literacy in each country individually. A financial literacy index, based on the number of correct answers to four multiple‐choice questions, was used to test the relevance of country of origin to financial literacy. Results suggest significant differences among countries indicating that there are national and cultural differences in what households know and need to know about their personal finances. Policy makers should consider these differences when developing financial literacy assessment tools for their respective countries.     

Consumer financial education and financial capability

The purpose of this study was to explore potential effects of financial education on the financial capability of American consumers. Data from the 2012 National Financial Capability Study were used to test the hypothesis that financial education is positively associated with financial capability. Four financial literacy and behaviour variables were used to form a financial capability index. Multivariate linear regression results showed that, after controlling for demographic and financial variables, respondents who ever received financial education had higher scores in all financial capability indicators (objective financial literacy, subjective financial literacy, desirable financial behaviour, perceived financial capability and the financial capability index). In addition, high school, college and workplace financial education variables showed positive associations with these financial capability indicators. Additional state comparison analyses provided evidence suggesting high school financial education may have direct impacts and spillover effects on consumer financial capability.     

Conscientiousness,Financial Literacy,and Asset Accumulation of Young Adults

This study utilizes the 1997 National Longitudinal Survey of Youth to examine the relationship between financial literacy, conscientiousness, and asset accumulation among young adults. Findings indicate that both conscientiousness and financial literacy are consistent predictors of asset accumulation among young Americans. A one‐standard‐deviation increase in conscientiousness is correlated with a 40% increase in net worth, a 53% increase in illiquid asset holdings, and a 33% increase in liquid asset holdings. A one‐standard‐deviation increase in financial literacy is correlated with a 60% increase in illiquid asset holdings and a 30% increase in liquid asset holdings. Financial literacy moderates the effect of conscientiousness on net worth. These findings suggest that conscientiousness and financial literacy are important factors and that policies and programming with a dual emphasis on increasing conscientiousness and financial literacy are likely to have a positive impact on consumer savings and asset‐building.     

Impact of Financial Education Mandates on Younger Consumers' Use of Alternative Financial Services

Over one‐quarter of American adults used credit‐based alternative financial services (AFS) in the past five years, which carry a typical APR of 300%. Young adults are especially more likely to use AFS yet are also more likely to be exposed to personal finance education in schools. In this study, I use data from pooled 2012 and 2015 waves of National Financial Capability Study to examine whether state‐mandated financial education impacts young adults' use of AFS. I find that financial education mandates significantly reduced the likelihood and frequency of payday borrowing in particular. Additionally, I show that exposure to required personal finance courses could affect payday borrowing through increased financial literacy and improved financial planning practices. These findings suggest that policymakers and other stakeholders need to understand the full benefits of financial education when making cost–benefit analysis comparisons as to whether or not to implement.     

居民金融素养与家庭诈骗损失

本文基于中国家庭金融调查(CHFS)的数据,采用工具变量法,从微观层面研究了居民金融素养对家庭遭遇诈骗产生损失概率的影响。研究发现:(1)居民金融素养水平的提高可以显著降低家庭因诈骗产生损失的可能性,即家庭具备的金融素养越多,越不会在诈骗中受损。(2)家庭收入在居民金融素养和家庭诈骗受损概率关系中起显著负向调节作用,当家庭收入越高时,其在诈骗中遭受损失的可能性受居民金融素养水平的影响越小。进一步的异质性研究表明,金融素养对不同教育水平家庭诈骗受损概率都具有显著的负向影响,但是影响效果存在差异。     

Identifying financially illiterate groups: An international comparison

Targeted policy interventions are more effective than one‐size‐fits‐all initiatives. This paper proposes the use of k‐means cluster analysis to identify vulnerable groups with respect to financial literacy. Using a rich sample of 12 countries, we distinguish 4 groups with varying financial literacy levels, and examine their socio‐economic characteristics. The results suggest that individuals in the most vulnerable financially illiterate groups are on average, single, less‐educated and unemployed with low incomes. This contrasts with those in the strongest group: individuals with the highest financial knowledge, financial behaviour and financial attitudes scores are on average highly educated males who live together with a partner. They earn a high income and hold several financial products. Integrating these insights into national strategies which promote financial literacy will not only lead to more effective but also to more efficient policy initiatives by focusing on the particular weaknesses of certain subgroups and using the appropriate transmission channels.     

Financial Literacy and Self‐Employment

In this paper, we study the relationship between financial literacy and self‐employment. We use established financial literacy questions to measure literacy levels. The analysis shows a highly significant and positive correlation between the index and self‐employment. We address the direction of causality by applying instrumental variable techniques based on information about maternal education. We also exploit information on financial support and family background to account for concerns about the exclusion restriction. The results provide support for a positive effect of financial literacy on the probability of being self‐employed. As financial literacy is acquirable, the findings suggest that entrepreneurial activities might be increased by enhancing financial literacy.     

The influence of consumer socialisation in the home on gender differences in financial literacy

The lower level of financial literacy amongst females relative to males has been well documented in the literature. There has however been a less than compelling argument constructed as to why this discrepancy occurs. This article introduces findings showing the influence the home, particularly financial discussions in the home, has on the financial literacy levels of children and young adults. A key finding is that males have their first financial discussion in the home at a younger age than females on average, with this differential statistically significant across students of differing socioeconomic status. For males, the age of the child when they have their first financial discussion in the home influences their financial literacy levels some years later at university, even accounting for other variables such as socioeconomic status. The findings of this article suggest that financial socialisation in the home may be subject to a gender bias, which over time contributes to differential financial literacy knowledge levels between the genders.     

The effects of financial literacy on the borrowing behaviour of Turkish financial consumers

Our research attempts to measure the effects of financial literacy of Turkish financial consumers on the borrowing behaviour. A questionnaire is administered to a sample of 550 people in the city of Eskisehir. In‐depth interviews are undertaken with 10 financial consumers to support the findings. Findings of the study indicate differences in the borrowing behaviour of consumers with different levels of financial literacy. Considering the relationship between financial literacy and borrowing behaviour, we suggest that attempts to increase financial literacy of financial consumers may have important implications in the prevention of excessive borrowing.     

Financial Literacy as More than Knowledge: The Development of a Formative Scale through the Lens of Bloom's Domains of Knowledge

For well over a decade, financial literacy has been a primary lens through which researchers approach financial education. Unfortunately, in most cases, this potentially rich construct is reduced to mere financial knowledge. This myopic conceptualization hampers the development of the concept and programs to build financial literacy. Despite research that reveals these limits, the field has either persisted with this narrow definition of financial literacy or abandoned the model altogether in favor of capability or similar constructs. Using Bloom's domains of knowledge, we redefine financial literacy as the combination of three different indicators reflecting three domains of knowledge: financial skill, self‐efficacy, and explicit knowledge. Using data from a national survey, we apply the methods of formative scale development to construct and validate a more robust conceptualization and measurement of financial literacy. We explore how this financial literacy index might inform development of innovative financial education programs.     

Racial Differences in the Returns to Financial Literacy Education

We examine financial literacy and the returns to financial literacy education, specifically focusing on the racial financial literacy gap. We confirm evidence that whites have higher financial literacy scores relative to minorities and that financial literacy increases with participation in financial literacy education. However, we find the benefit of participation in financial literacy education is higher for whites than that for minorities. Thus, the impact of being white alone persists, indicating a racial financial literacy and/or behavioral difference despite financial literacy education. Our findings have implications for policymakers interested in narrowing the racial wealth gap via financial literacy education.     

Financial Literacy among the Young

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.     

Gender differences in financial socialization in the home—An exploratory study

Recent literature has stressed the need for research examining the causes of females in general having lower levels of financial literacy than males. This article uses social cognitive theory of gender development as a framework to propose differing financial socialization of children in the home by gender as a possible cause of gender differences later in life. Evidence is found of gender based differences in the financial socialization of eleven and twelve year olds. Findings include more frequent parent‐child discussions being correlated to more positive financial attitudes, but not to saving behaviour. Saving behaviour of children is influenced by attitudes to money along with the presence of parents when spending, which is subject to a same sex gender bias for girls, with large effect sizes. Girls are over 200% more likely to state they save some of their pocket money if their mother is present when they spend their pocket money, compared to having no parent present. This difference does not exist for male children. When a boy is with both parents when spending, they are 245% more likely to report saving some of their pocket money then when neither parent is present. Having a father present when spending does not yield significantly different results to when no parent is present. These findings of gender biased financial socialization in the home are important considerations for the design of school‐based financial literacy programmes. Specifically, these programmes should consider a goal of encouraging discussion and questioning gender based attitudes and roles in the home. They are also important findings in terms of going some way to explaining the existence of a gender difference in financial knowledge in adulthood.     

Financial Services and the Trust Deficit: Why the Industry Should Make Better Governance a Top Priority

The U.S. economy, while recovering, is still feeling lingering effects of the 2008 financial crisis and the recession that followed. Although government has acted to prevent a future recurrence, much needs to be done—particularly in corporate governance of financial firms. Currently, there is a pervasive lack of trust in the financial industry, which will be difficult to undo. Nonetheless, finance is so important that it is critical that trust be restored. This is particularly true in an era in which planning for retirement is inadequate, and financial literacy is increasingly important. This implies a critical role for a financial services industry whose guidance can be trusted. This trust must be built through appropriate corporate governance on the part of all stakeholders, and specific recommendations are advanced for bringing this about.     

Building Financial and Health Literacy at Older Ages: The Role of Online Information

Improving financial and health literacy is an important step in reducing economic vulnerability in older age, yet the means by which individuals accumulate these types of human capital remains an open question. This article evaluates the impact of online search activities on the levels of financial and health literacy. We find that using the internet for such information increases literacy significantly: doing so frequently (versus not at all) increases financial literacy by 16%, and health literacy by 12%. Our results are robust to alternative measures of financial literacy. They are also robust to an instrumental variable approach using other web skills such as email use to proxy for how individuals use the internet.