Consumer debt attitudes: The role of gender,debt knowledge and skills

The link between financial attitudes and consumer financial market behaviour is well documented. However, little is known about the role of financial knowledge and skills—the main components of the financial literacy construct—in shaping debt attitudes. This link is especially absent from the gender perspective. This study focuses on consumer debt literacy and debt attitudes. A representative sample of adult Poles (N = 1,004) was participated in a computer‐assisted telephone interview. Latent class analysis was employed to reveal their debt attitudes, and subsequently, links between debt literacy and debt attitudes were studied with multinomial regression models. The results show that respondents in Poland can be grouped into five classes exhibiting different attitude profiles. The structure of debt attitudes is complex and differs from a simple unidimensional pro‐debt/ anti‐debt construct. Although this study did not find significant gender differences either in the conceptualization of debt attitudes or in their drivers, the results showed that in all but one class, consumer attitudes are strongly linked to either debt knowledge or debt skills or to both. Debt skills were revealed to be a particularly strong predictor of consumer debt attitudes.     

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.     

Financial Literacy: The Role of the Local Context

In this article, we investigate the role of local factors associated with the financial literacy of Italian adults (no. 945). Using a multilevel regression model, together with the common socioeconomic and sociodemographic variables already used in previous studies, we also add certain environmental variables at the local level. We separately analyze the three indexes that define the OECD financial literacy index—Financial Attitude Index (FAI), Financial Knowledge Index (FKI), and Financial Behavior Index (FBI)—because they show a dynamic of their own in each region. Our findings confirm that the FKI and the FAI are associated to some extent with environmental traits, while the FBI is not. We conclude that not only the sociodemographic and socioeconomic conditions of individuals but also certain features of the regional context where they live have an impact on their financial literacy. Consequences for financial education programs are highlighted.     

How Financially Literate Are Women? An Overview and New Insights

We document strikingly similar gender differences in financial literacy across countries. When asked to answer questions that measure knowledge of basic financial concepts, women are less likely than men to answer correctly and more likely to indicate that they do not know the answer. Both young and old women show low levels of financial literacy. Moreover, women for whom financial knowledge is likely to be very important—for example widows or single women—also know little about concepts relevant for day‐to‐day financial decisions. The gender differences are present for very basic as well as more advanced measures of financial literacy. This is important because financial literacy has been linked to economic behavior, including retirement planning and wealth accumulation. Women live longer than men and are likely to spend time in widowhood. Thus, improving women's financial literacy is key to helping them prepare for retirement and promoting their financial security.     

Integration of a Financial Literacy Curriculum in a High School Economics Class: Implications of Varying the Input Mix from an Experiment

We taught a mere seven‐period financial literacy curriculum to two 12th grade economics classes, where one treatment was Financial Fitness for Life^® (FFFL)‐intensive and the other was “stock market learning” (SML)‐intensive. Two control groups received no financial literacy treatment—an 11th grade group with no exposure to economics and a 12th grade economics class. The 12th grade economics classes, i.e., the two treatment groups and one control group, also worked on identical stock market portfolio assignments that their teachers required independently of our curriculum. In a test of overall financial knowledge, the FFFL‐intensive group outscored both control groups and the SML‐intensive groups, even on questions that were not taught in our curriculum. We conclude that an FFFL‐intensive input mix was beneficial in directly adding to financial knowledge and also in terms of leading to spillovers in such knowledge.     

Borrowing Capacity and Financial Decisions of Low‐to‐Moderate Income First‐Time Homebuyers

This study documents the extent to which first‐time homebuyers seeking a mortgage accurately estimate their borrowing capacity and how this is associated with their decisions regarding mortgage debt and the take‐up of a free offer of financial coaching. We find that consumers who underestimate their nonmortgage debt (31.5% of the sample) also take out larger mortgages relative to income. Consumers who underestimate or overestimate their total debt as well as their monthly debt payments are more likely to accept the offer of financial coaching. Moreover, overconfidence in financial matters reduces the take‐up of financial coaching. These biases in perceived financial status appear to be systematically related to behavior among a group of relatively inexperienced consumers. These findings suggest that efforts to extend homeownership may need to include debiasing mechanisms to help less informed consumers accurately assess their current debt levels and ability to make ongoing mortgage payments.     

Basic Needs,Government Debt and Economic Growth

This paper investigates the relationships between basic needs and economic growth where the interactions between output, health, nutrition and education are explicitly simultaneous. We find a unidirectional relationship that improving basic welfare contributes strongly to labour productivity change, but a clear reverse causation only from growth to nutrition. There are substantial differences in the patterns of simultaneous interactions at different income and welfare levels. There are strong self‐reinforcing effects of literacy and debt service on poverty, making it difficult for poor countries to rectify their situation. Channelling resources towards improving health, education and nutrition could bring dramatic economic returns.     

Debt problems,home‐leaving,and boomeranging: A register‐based perspective on economic consequences of moving away from parental home

This article analyses the development of financial problems after leaving one's parental home, and considers how financial problems are associated with likelihood of boomeranging (i.e., adult children returning to parental home). The 9‐year follow‐up study focused on a nationally representative sample of Finnish young people between the ages of 15 and 25 who moved out from their parental home between 2006 and 2009 (n = 9,196). The measure of debt problems was based on monthly data on debt enforcement, a legal matter which may bring serious consequences for the debtors. The primary within‐individual, longitudinal analyses showed that debt problems increased directly after leaving parental home. Education and family background were significant predictors of debt problems in the four years after leaving parental home. Early leavers had significantly more debt problems than later leavers. Debt problems were associated with a higher likelihood of moving back to parental home. The results imply that it is important to support economic decision‐making during early adulthood.     

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.     

Changes over Time in College Student Credit Card Attitudes and Debt: Evidence from One Campus

Over the past 10 years, both public awareness of, and research about, college student credit card debt have increased. This study examined changes in college students' debt and possession of credit cards, as well as attitudes toward debt and credit cards over that time at one American college campus. Results indicate that the number of credit cards held and the amount of credit card debt both decreased in the time following the 2009 Credit CARD Act. Attitudes toward debt gradually became more negative over the past 10 years, whereas perceived personal financial well‐being increased. Although debt is decreasing, some students continue to report high levels of debt and correlates of higher levels of debt continue to include year in school, decreased ability to delay gratification, and lower levels of perceived financial well‐being. Overall, it appears that students' relationship with credit cards is changing, but many still have difficulty managing credit.     

What Explains the Gender Gap in Financial Literacy? The Role of Household Decision Making

Using newly collected data from the RAND American Life Panel, we examine potential explanations for the gender gap in financial literacy, including the role of marriage and who within a couple makes the financial decisions. Blinder–Oaxaca decomposition reveals the majority of the gender gap in financial literacy is not explained by differences in the characteristics of men and women—but rather differences in coefficients, or how literacy is produced. We find that financial decision making of couples is not centralized in one spouse although it is sensitive to the relative education level of spouses.     

Debt as a source of financial stress in Australian households

This paper examines the role of demographic, socio‐economic and debt portfolio characteristics as contributors to financial stress in Australian households. The data are drawn from the most recent Household Expenditure Survey and relate to 3268 probability‐weighted households. Financial stress is defined, among other things, in terms of financial reasons for being unable to have a holiday, to have meals with family and friends, to engage in hobbies and other leisure activities, and general money management. Characteristics examined include family structure and composition, source and level of household income, age, gender and marital status, ethnic background, housing value, debt repayment of various types and credit card usage. Binary logit models are used to identify the source and magnitude of factors associated with financial stress. The evidence provided suggests that financial stress is higher in families with more children and those from ethnic minorities, especially when reliant on government pensions and benefits, and lower in families with higher disposable incomes and housing values. There is weak evidence that Australia's historically high levels of household debt cause financial stress.     

Building the case for financial education

The need for financial education among Americans is often demonstrated with alarming rates of bankruptcy, high consumer debt levels, low savings rates, and other negative outcomes that may be the result of poor family financial management and low financial literacy levels. The collective response by public and private organizations to the accepted and often demonstrated need for financial education has been impressive in size and scope. This article provides an overview of the wide range of programs aimed at improving Americans’ financial literacy as well as a short review of the current evidence of the effectiveness of financial education programs. We advocate for the adoption of a comprehensive framework or approach to evaluation to assist those currently delivering, and planning to deliver, financial education and highlight some of the key challenges. A five‐tiered approach to program evaluation is described and outlined to provide a general framework to guide financial education evaluation.     

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.     

Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis

There is evidence of a large and growing student debt burden over the last decade. Previous research has shown that the presence of student debt jeopardized the short‐term financial wealth of U.S. households during the Great Recession. We examine the effects of student loan use on the wealth of U.S. households post‐recession, using recent data from the 2013 and 2016 Survey of Consumer Finances. We find that mean 2016 wealth for households with no outstanding student debt is more than four times higher than households with student debt. We find that living in a household at the 15th, 30th, 50th, 70th, and 85th percentile of the wealth distribution with student debt is associated with an 80%, 49%, 37%, 35%, and 36% wealth loss compared with a similar household with no student debt. Our decomposition results suggest that student loan use can explain between 3% and 7% of the Black‐White wealth gap across the wealth distribution but is insignificant in explaining the Hispanic‐White wealth gap.     

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。     

External Public Debt,Trade Linkages and Contagion During the Eurozone Crisis

Against the backdrop of the contagion literature, the paper analyses the impact of financial and trade linkages on sovereign bond spreads in the Eurozone crisis. Using quarterly data for a sample of EMU countries during the period 2000–13, we estimate fixed‐effect panel models with Driscoll and Kraay standard errors that are robust to general forms of spatial and temporal dependence. Our main results can be summarised as follows: first, we suggest that the ‘sudden stop’ of capital inflow towards the peripheral sovereign debt triggered a re‐segmentation of financial markets and economic systems along national borders, with negative implications for risk‐sharing and the efficient allocation of capital. The ‘home bias’ effect – that is the increase in the share of sovereign debt held by domestic banks – worsened the country‐specific risk because the twin crisis (sovereign and banking) began to be conceived as more closely intertwined within countries than before. Second, the structure of international trade helps to account for the geographic scope of contagion, even after controlling for macroeconomic and fiscal vulnerabilities. Finally, the ‘substitution effect’ of public debt securities of stand‐alone emerging countries has affected more the sovereign spreads in the core than in the periphery.     

Small‐Dollar Credit Lending: The Effect of Financial Burden on Personal Asset Misvaluation

Small‐dollar credit lenders offer consumers quick access to cash in the form of products, such as pawn loans. The consumers who tend to use these small‐dollar credit products are more likely to face financial burden and potential for default—particularly when loan‐to‐value ratios are high. However, the cognitive effects of financial burden can impair financial decision making. If financial literacy educators are to empower consumers, more consumer‐centric evidence is necessary to determine how small‐dollar credit consumers make decisions when purchasing loans. One critical decision consumers make is accepting how lenders value their assets in exchange for credit. Three lab studies assess how consumers facing financial burden value their own assets. We find that, due to cognitive constraints of financial burden, consumers can undervalue functional assets and overvalue symbolic assets. Importantly for financial literacy efforts, however, we show that framing a symbolic asset in terms of other‐benefit construal helps attenuate asset overvaluation.     

Using the Right Yardstick: Assessing Financial Literacy Measures by Way of Financial Well‐Being

Despite the proliferation of academic studies examining financial literacy and financial outcomes, no consistent definition or empirically validated measures of financial literacy exist. While a handful of questions have become the standard measures of financial literacy in previous research, little work has been done examining whether responses to these questions accurately capture underlying financial capability, or whether they causally relate to subsequent financial well‐being. Taking advantage of longitudinal data from the Health and Retirement Study we examine whether some of the questions previously used as measures of financial literacy are consistent measures of financial knowledge and effective predictors of future changes in wealth. We find that respondents frequently do not consistently answer questions across survey waves and that the context in which a question is asked affects the likelihood of correctly responding. Moreover, our regression analyses suggest that correctly answering these questions, consistently or not, has little significant relationship to changes in wealth over time, and is often related to a decrease in future wealth. Our findings should give pause to researchers using the financial literacy questions examined here, particularly from cross‐sectional data.     

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.