Adapting the National Financial Capability Test to Address Generational Differences in Cognitive Biases

Abstract

This study examined the influence of cognitive biases on financial literacy test outcomes across four generational groups: Gen Z, Millennials, Gen X, and Baby Boomers. Using the National Financial Capability Test and an online in silico experiment, we analyzed how cognitive biases influence the likely responses of each generation. The results indicate that the current test format aligns more closely with Baby Boomers, who are less affected by certain biases but tend to exhibit resistance to new financial strategies. A key contribution of this research is the identification of generational bias profiles and actionable recommendations for tailoring financial literacy assessments to reflect these differences. Our approach not only advances behavioral finance literature but also introduces innovative methodology through AI-driven simulations, providing a replicable framework for exploring cognitive influences in decision-making. The findings underscore the need for tailored financial education programs that consider these cognitive biases, aiming to foster unbiased financial decision-making across age groups.