Identifying Factors of a Financial Literacy Scale Used among Vulnerable Populations

Abstract

Financial literacy scales are often used as a diagnostic tool to assess financial knowledge levels among various populations, although few of them have undergone empirical testing. This study utilized exploratory factor analysis (EFA) with a sample of Chinese rural migrant workers to identify the underlying structure of a financial literacy scale and its psychometric properties. EFA reduced the 23 items to 5 factors that explain for 69.08% of the variance in financial literacy. Five factors are identified that are daily money management, math skills, saving and borrowing, inflation, and long-term investment. Findings suggest that practitioners who work with migrant workers or groups with lower income, lower educational levels can use this instrument to assess financial literacy levels and explore interventions that improve specific areas of financial knowledge.