Understanding the impact of employer‐provided financial education on workplace satisfaction

The present study examines the linkage between workplace financial education and workplace satisfaction. Data gathered from a national sample of employees of an insurance company favor the hypothesis that employees who participate in workplace financial education more fully understand personal finances and recognize how financial literacy impacts their future financial expectations. In addition, employees who gain considerable literacy in financial matters and confidence in their future financial situation are also more likely to be satisfied with and supportive of their company. Implications of these results for nonwork settings and for consumers in general have also been developed.     

Financial Adviser Anxiety,Financial Literacy,and Financial Advice Seeking

Seeking professional financial advice to assist with financial decision making is an important option for consumers faced with increased responsibility for their own financial circumstances. We explore the role of two potential barriers/enablers to accessing financial advice. First, we explore the role of a variety of financial literacy measures to explain observed financial advice consultation. Second, we introduce a newly developed measure of financial adviser anxiety. We define adviser anxiety as (an existing or prospective clients') concerns involving the prospect of meeting with a financial adviser. The notion of adviser anxiety is inspired by evidence from medical settings that suggest individuals may refrain from seeking advice when objectively, it is in their best interests to do so. This anxiety may be due to embarrassment, worry, or other forms of apprehension associated with the consultation process. A new scale is presented which has strong validity and a demonstrated ability to explain reported future levels of professional advice seeking.     

Presentation Format and Financial Literacy: Accessibility and Assessability of Retirement Savings Statements

While increased financial literacy may improve individual retirement savings decisions, modifying the placement of key information in retirement savings statements can produce further improvements. We examined the extent to which placement of information and financial literacy affected the accessibility of information for individuals and assisted in their financial decision making. We also disaggregated financial literacy into numeracy and knowledge to identify key drivers. Using an experimental design, we find the increased salience resulting from modifying the presentation format improved participants' ability to locate important information (accessibility) and to evaluate the relative performance of funds (assessability). However, the incremental benefits of placement are only found for individuals with moderate numeracy skills. We conclude there is value accruing from financial literacy programs as advocated by regulators, but suggest additional benefits may be reaped from focusing on numeracy skills and from using presentation formats that improve information accessibility and assessability.     

Financial literacy among university students: A study in eight European countries

This study analysed the level of financial literacy among university students in Estonia, Germany, Italy, Netherlands, Poland, Romania, Russian Federation and Turkey. The purpose of the study was to determine the level of financial literacy among university students, and to find out the relationship between financial knowledge and demographic characteristics of students. Online survey instrument was used to collect data. 409 fully completed questionnaires were accepted for analysis. Logistic regression was used to analyse of impact of the demographic characteristics on financial literacy. Overall mean of correct answers for the survey was 72.2%. This result represents a medium level of financial literacy about personal finance. Results indicate that male students, business major students, PhD students, those who live in a rental house, those whose parents have high level income, those who get advice on financial matters from their friends, those who took financial course before, those who get financial information about financial issues from university education, and students from Poland are more knowledgeable on personal finance. More financial courses should be provided in university education programmes, which could help more students handle their finances better and improve their financial wellbeing. It should be taken into consideration that in recent years, environmental and technological influences on financial literacy may be more important than parental influence.     

A Framework for Setting Retirement Savings Goals

The purpose of this paper is to develop a framework for calculating savings needed to meet retirement goals under a variety of alternative assumptions about the economic and institutional environment. A “base case” that incorporates a zero real rate of interest serves as a starting point; next, differences resulting from a positive interest rate are examined. The analysis is further modified to take into account the effects of inflation, the role of Individual Retirement Accounts (IRAs), and possible future changes in tax laws. Throughout, the goal is to evaluate how best to plan for a smooth, regular consumption level before and after retirement and to adjust savings programs for changes in one's situation or expectations. The framework provided herein is expected to be useful to consumer educators and financial counselors concerned with helping individuals to meet their retirement goals.     

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 savings decisions by adult financial consumers in Zimbabwe

We use survey data from a sample of 4000 adult financial consumers in Zimbabwe to analyse the determinants of financial literacy and its effect on individual's savings decisions. Results show that women have lower financial literacy than men. Furthermore, individuals' residing in rural areas exhibit lower financial literacy compared with urban financial consumers. Financial literacy and financial services interventions targeting women and rural individuals should be strengthened. Econometric results show that financial literacy positively influences savings behaviour for both rural and urban individuals. Furthermore, financial literacy positively influences informal and formal savings. Policy interventions that foster financial literacy are needed to improve individuals saving behaviours.     

Measuring responsible financial consumption behaviour

Sound consumption decisions determine individuals’ well‐being; responsible financial consumption behaviour (RFCB) affects not only their finances but also their societal status and emotional state. The failure to manage personal finances responsibly may result in serious long‐term consequences for individuals and society overall. In order to evaluate the concept of RFCB, this study combines two established theoretical frameworks—the family management system and the theory of planned behaviour. The paper investigates the relationships among RFCB, responsible financial attitudes, financial literacy and behavioural control. Its theoretical model is tested on a random sample of 494 respondents and analysed using PLS‐SEM. The results confirm the formation of responsible consumption behaviour by six formative elements: self‐control in spending, planning for the future, seeking information, education, rational decision‐making and solvency. The findings also indicate that all three focal variables have a direct effect on RFCB.     

Financial literacy in the digital age—A research agenda

Digital innovations are transforming financial services and resulting changes in consumer behavior and personal money management. Diffusion of pervasive digital technologies offers individuals quick and easy access to various digital services bringing opportunities and challenges into their personal money management. The study aimed to explore how digitalization affects individuals' financial literacy and financial capability. As a result, we identified three main themes in the intersection of finance and digitalization: Fintech, Financial behavior in digital environments, and Behavioral interventions. We propose directions for measuring digital financial literacy, updates to the financial literacy curriculum, and developments of digital learning tools. Further, we highlight collaboration between the public and private sectors to create a fairer and more inclusive economic landscape. Our study contributes to existing research by proposing a framework for digital financial literacy and financial capability and a research agenda for future studies.     

MARKETS FOR INFLATION‐INDEXED BONDS AS MECHANISMS FOR EFFICIENT MONETARY POLICY

We consider a continuous‐time framework featuring a central bank, private agents, and a financial market. The central bank's objective is to maximize a functional, which measures the classical trade‐off between output and inflation over time plus income from the sales of inflation‐indexed bonds minus payments for the liabilities that the inflation‐indexed bonds produce at maturity. Private agents are assumed to have adaptive expectations. The financial market is modeled in continuous‐time Black–Scholes–Merton style and financial agents are averse against inflation risk, attaching an inflation risk premium to nominal bonds. Following this route, we explain demand for inflation‐indexed securities on the financial market from a no‐arbitrage assumption and derive pricing formulas for inflation‐linked bonds and calls, which lead to a supply‐demand equilibrium. Furthermore, we study the consequences that the sales of inflation‐indexed securities have on the observed inflation rate and price level. Similar to the study of Walsh, we find that the inflationary bias is significantly reduced, and hence that markets for inflation‐indexed bonds provide a mechanism to reduce inflationary bias and increase central bank's credibility.     

Sludged! Can financial literacy shield against price manipulation at the shops?

Retailers lure consumers with clever use of choice architecture; examples include “bargains” heavily restricted in the fine print and discounts structured to exaggerate the true saving. Given that financial literacy is a key competency for managing money, good financial literacy may provide protection from these “sludges.” In an exploratory experiment, we measure 48 university students' retail literacy and financial literacy, while concurrently tracking their emotional reactions and decision time using FaceReader software. We then test hypotheses on a larger sample using an online survey. We find that strong financial literacy supports retail literacy and vice versa, but the two constructs are distinct. The differences are identified through mathematical and methodological reasoning, gender, and emotion. While gender remains a factor for financial literacy, it is less prominent in retail literacy, and women respond more positively to retail literacy performance measurement. We recommend future investigation into building women's financial literacy performance using materials that are aesthetically pleasing and based on familiar financial frames and scenarios.     

An Ordered Probit Approach to Predicting the Probability of Inflation/Deflation

This paper provides an ordered probit approach that estimates the probability six months in the future of three distinct scenarios for prices: inflation, deflation, or price stability. The traditional way of forecasting inflation is to predict a single level and/or growth rate of the PCE deflator. However, this approach is not useful for identifying options or risks facing decision-makers, especially in financial markets. Also, point estimates of inflation convey a sense of overconfidence. Our approach is more practical for decision-makers who must hedge their portfolios, but it is also useful for policymakers, investors, and consumers who must attach a probability with each possible scenario of future price trends. Our results indicate that since June 2011 the probability of deflation has been persistently higher than of the other two scenarios. Thus, the recent years’ higher deflation probabilities may offer a justification for the persistence of the Federal Reserve’s highly accommodative monetary policy during 2012–14.     

The Effects of Financial Literacy Overconfidence on the Mortgage Delinquency of US Households

This study investigated the effect of objective and subjective financial literacy on mortgage payment delinquency using the 2015 National Financial Capability Study dataset. A hierarchical model showed a substantial negative effect of objective literacy on delinquency, but subjective literacy did not have a significant effect. The predicted likelihood of delinquency at the 10th percentile of objective literacy was over three times as high as the likelihood at the 90th percentile. In a model with combinations of high or low objective and subjective financial literacy, those who were overconfident had a delinquency likelihood three times as high as those who had high objective and subjective literacy. Subjective literacy had substantial effects on delinquency both for high- and low-objective literacy levels. In financial education, attention should be focused not only on objective learning but also making sure consumers are aware of the limitations of their understanding.     

Animal Spirits and the Business Cycle: Empirical Evidence from Moment Matching

In this article, we empirically examine a hybrid New‐Keynesian model with heterogeneous bounded rational agents who may adopt an optimistic or pessimistic attitude—so called animal spirits—toward future movements of the output and inflation gap. The model is estimated via the simulated method of moments using Euro Area data from 1975Q1 to 2009Q4. In addition, we compare its empirical performance to the standard model with rational expectations. Our empirical results show that the model‐generated auto‐ and cross‐covariances of the output, inflation and nominal interest rate gap can provide a good approximation of the empirical second moments.     

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.     

Inflation and Financial Statement Analysis in the International Accounting Classroom

This article provides an exercise for students to contemplate the effects of inflation during financial statement analysis. Even small amounts of inflation accumulating over time can grow to distort a company's reported financial position and results of operations. The growing economies in emerging markets, the international market for oil, and other economic factors threaten to increase inflation rates in the future. As a result of changing global conditions, interest in inflation accounting is expected to increase. The exercise we suggest in this article provides an efficient tutorial on the potential effects of inflation on financial statement analysis and on the application of International Accounting Standard 29 in hyperinflationary environments.     

Sanctions and the Exchange Rate

Intereconomics - Stabilising the exchange rate allows the Russian government to anchor inflation expectations and support consumption but comes at the cost of the financial repression of domestic...     

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.     

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.     

Financial literacy education and behaviour unhinged: combating bias and poor product design

The growth of products available in the consumer financial market has provided more choice and formal control over household financial decisions than ever before. Financial literacy education programs are generally assumed to improve consumer behaviour in relation to financial products and services. However, there is scant evidence that demonstrates the causal link between education, literacy and behaviour. Through the use of a sample study, we show that the actions of individuals who are financially literate do not necessarily mean they will demonstrate good financial behaviour. We propose that in order to improve the financial behaviour of consumers, two critical areas need to be addressed. Firstly, the objectives of financial literacy programs should be not only to educate consumers about financial markets and products but highlight to individuals the psychological biases and limitations that they as humans cannot easily avoid. Secondly, the regulation of financial products sold to consumers needs alteration to meet the aim of protecting retail consumers from complex financial products that are confusing, ambiguous and inappropriate. We propose regulation and redesign of product information offerings using techniques employed in ecological interface design models to derive a suitability test for consumer financial products.