What Influences the Financial Literacy of Young Adults? A Combined Analysis of Socio-Demographic Characteristics and Delay of Gratification.

Christin Siegfried,Eveline Wuttke

doi:10.3389/fpsyg.2021.663254

Abstract

The current economic landscape is complex and globalized, and it imposes on individuals the responsibility for their own financial security. This situation has been intensified by the COVID-19 crisis, since short-time work and layoffs significantly limit the availability of financial resources for individuals. Due to the long duration of the lockdown, these challenges will have a long-term impact and affect the financial well-being of many citizens. Moreover, it can be assumed that the consequences of this crisis will once again particularly affect groups of people who have already frequently been identified as having low financial literacy. Financial literacy is therefore an important target for educational measures and interventions. However, it cannot be considered in isolation but must take into account the many potential factors that influence financial literacy alone or in combination. These include personality traits and socio-demographic factors as well as the (in)ability to defer gratification. Against this background, individualized support offers can be made. With this in mind, in the first step of this study, we analyze the complex interaction of personality traits, socio-demographic factors, the (in-)ability to delay gratification, and financial literacy. In the second step, we differentiate the identified effects regarding different groups to identify moderating effects, which, in turn, allow conclusions to be drawn about the need for individualized interventions. The results show that gender and educational background moderate the effects occurring between self-reported financial literacy, financial learning opportunities, delay of gratification, and financial literacy.

Highlights

In recent years, citizens of most industrialized countries have experienced an increasing degree of complexity and uncertainty in social and economic contexts
It can be assumed that the consequences of this crisis will once again affect groups of people who have already frequently been identified as having low financial literacy, such as women, people with a migration background, and those with an educationally distant background, since these people are often employed in sectors that have been affected by the crisis
If a distinction is made regarding whether the migration background is merely due to the country of origin or whether the spoken language at home is different, the results indicate that native speakers in particular have an advantage in financial literacy (Brown and Graf, 2013; Cameron et al, 2014; Happ and Förster, 2019)

Summary

Introduction

Citizens of most industrialized countries have experienced an increasing degree of complexity and uncertainty in social and economic contexts. This has been intensified by the COVID-19 crisis (Van Dalen and Henkens, 2020). To make financial decisions, individuals need to have financial literacy and to fulfill their social role as responsible citizens (Aprea et al, 2016) and to reach a desired state of financial well-being. Besides being influential at the micro level, financial literacy is considered to be important when it comes to macro-level concerns, like financial stability, as, for example, the experience of the 2008 subprime crisis suggests (e.g., Mitchell and Lusardi, 2015)

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