Basic Financial Literacy Research Articles

Financial Literacy in Romania: A Test of Economics and Business Students

Abstract Romania is in a rather dishonorable position from the financial literacy perspective in the European Union, ranking last among countries. To increase the level of financial education of the Romanian population, public and private institutions, organizations, and companies have recently taken the initiative in this field, mostly after 2015. Our contribution builds on these recent developments and aims at testing the level of basic financial literacy of Romanian university students, enrolled in business and economics studies, using the OECD Financial literacy test. Data was collected through an online survey on a voluntary basis, and the responses were analyzed using statistical indicators. Results indicate a rather high level of financial literacy among students, but also significant differences among respondents that may be explained by several demographic characteristics and specific attributes. The most important characteristics that influence the degree of financial literacy of students are age, students’ cycle of studies, the way the students live, property ownership and students’ involvement in financial market transactions and contracts. We stress towards the need to act through concrete measures to improve young people financial literacy, as a necessary condition to navigate in an increasingly complex environment, where finance plays an essential role.

Can financial literacy overconfidence be predicted by narcissistic tendencies?

PurposeIn this study, it is investigated whether narcissistic tendencies can predict financial literacy overconfidence.Design/methodology/approachFinancial literacy overconfidence is analyzed under these three subcategories: overestimation, overplacement and overprecision, according to individual's self-perception of his/her own financial literacy. In order to evaluate narcissistic tendencies, the Turkish version of the Structured Clinical Interview for the Diagnostic and Statistical Manual of Mental Disorders Axis II (SCID II) Fourth Edition (DSM-IV) is used. To measure the financial literacy overestimation, overplacement and overprecision biases, a multistaged measurement process designed specially on basic and advanced financial literacy is implemented.FindingsThe current study provides strong evidence that narcissistic tendencies are predictors of financial literacy overestimation, overplacement and overprecision biases. These tendencies in men are greater than in women. Evaluated risk factors of being exposed to these biases among people who have narcissistic tendencies are found to be greater than among people who do not have those tendencies. Due to a particular exposure of narcissistic tendencies, the probability of financial literacy overprecision bias has the highest rate among the others, and it is followed by overestimation and overplacement bias.Originality/valueThis is the first study that measures overconfidence under three subcategories of overestimation, overplacement and overprecision, according to financial literacy. For this reason, it is believed that these results provide valuable evidence in favor of the relation between overconfidence in finance and narcissistic tendencies.

Influence of the Board of Management Financial Practices on Students' Academic Performance in Public Secondary Schools in Nyamira County Kenya

The Board of Management plays an important role in school management which encompasses policy formulation and resource allocation. This study therefore sought to investigate the influence of the Board of Management financial practices on students' academic performance in public secondary schools in Nyamira County, Kenya. A convergent parallel mixed-method research design was used. The study targeted students, teachers, departmental heads and Board of Management Members making a total study population of 19,609. Both probability and non-probability sampling methods were used to select a sample size of 396 participants. Data was collected using questionnaires, interview guide observation tool and school examination performance analysis document. Statistical package for social sciences aided the quantitative analysis, while qualitative data used thematic analysis technique. Reliability testing was done using Cronbach’s Alpha. Descriptive and inferential statistics were used to present the analyzed data. Analysis of variance (ANOVA) was used to test significance between means. The study found out that there was a statistical significant association between board of management financial practices and student academic performance. The study also found out that Board of management did not utilize the school finances well and therefore students’ academic performance was affected. The study recommended that Board of Management, in collaboration with the government, should ensure appointment of board members with some basic financial management literacy. Keywords: Board of Management, Students' Academic Performance, Financial Management. DOI: 10.7176/JEP/11-23-02 Publication date: August 31 st 2020

Analysis of the Financial Literacy Behavior Model

Financial literacy is a combination of awareness, knowledge, abilities, attitudes, and behaviors needed to make financial decisions. This study aims to find a behavioral model of financial literacy. This study uses a survey method with a quantitative approach. Respondents involved homemakers in Maros Regency, South Sulawesi, to fill out the questionnaire provided. Path Analysis was used to analyze the data SPSS and Winistep are used as tools in analyzing the data. Specifically, the data analysis used in this study used Structural Equation Modeling (SEM) data analysis techniques. Statistically, the value of the sample covariance matrix must not differ significantly from the population covariance matrix value. Financial Literacy Attitudes had a direct effect on Financial Literacy Behavior. Basic Knowledge of Financial Literacy had a direct effect on Financial Literacy Behavior. Financial literacy behavior is determined by financial literacy attitudes and basic financial literacy knowledge. Therefore, financial literacy knowledge and attitudes need to be improved to improve financial literacy behavior among homemakers. Financial Literacy Attitudes contribute the most to financial literacy factors. financial attitudes that have a more significant influence on financial knowledge in financial management practices.

Culture and adult financial literacy: Evidence from the United States

Using a US nationally representative sample of over 6000 adults from 26 countries of ancestry, we find a strong association between their financial literacy in the US and the financial literacy level in their self-reported country of ancestry. More specifically, if an individual from a country of ancestry with ‘average’ financial literacy had instead come from a country with financial literacy one-standard deviation above the mean, his or her likelihood of answering correctly basic financial literacy questions regarding inflation, risk diversification, and interest rate in the US would have increased by 4 percentage points, a 9% increase relative to the average financial literacy in our sample of 43%. The cultural components behind this observed association include a strong emphasis on patience, long-term orientation and risk-aversion in the country of ancestry. We also find that the association is driven by financial literacy on risk diversification and interest compounding.

Basic financial literacy: A comparative study at Delhi NCR

Basic financial literacy: A comparative study at Delhi NCR

Culture and Adult Financial Literacy: Evidence from the United States

Using a US nationally representative sample of over 6,000 adults from 26 countries of ancestry, we find a strong association between their financial literacy in the US and the financial literacy level in their self-reported country of ancestry. More specifically, if an individual from a country of ancestry with financial literacy had instead come from a country with financial literacy one-standard deviation above the mean, his or her likelihood of answering correctly basic financial literacy questions regarding inflation, risk diversification, and interest rate in the US would have increased by 4 percentage points, a 9% increase relative to the average financial literacy in our sample of 43%. The cultural components behind this observed association include a strong emphasis on patience, long-term orientation and risk-aversion in the country of ancestry. We also find that the association is driven by financial literacy on risk diversification and interest compounding.

The role of financial literacy in retirement investment choice

Research background: Preparation for retirement is a major concern for the people in the workforce as they have to encounter considerable difficulties in making the right investment decisions for their retirement.
 Purpose of the article: This research extends the literature on personal finance by investigating the impact of both financial literacy levels and pension knowledge on employees? investment choice decision for their retirement, while in previous literature the role of these factors has mainly been explored separately. 
 Methods: To conduct the research, a survey questionnaire was applied to collect data in three main regions of Vietnam comprising Northern, Central and Southern Vietnam. Data collection was made in 2018, in which 427 valid questionnaires were used for data analysis from 700 questionnaires. Two estimation methods are employed for analysis in this study, including a linear probability model (LPM) and two-stage least squares (2SLS) model. The findings of this research remain significant after the Two-Stage Least Squares (2SLS) regression model is used as an estimation technique to eliminate potential bias caused by endogenous problems.
 Finding & Value added: The results show that basic financial literacy level and pension knowledge are principal factors which significantly increase the probability of exercising retirement investment choice of employees, while advanced financial literacy level factor has a significant effect on choosing growth investing options for their retirement. Further, this research finds that there is no correlation between employees? financial risk tolerance and their retirement investment choice. Furthermore, the study proposes and offers new evidence that pension knowledge is a decisive factor providing employees with encouragement to exercise retirement investment choice and those who consult with financial advisors tend to take part in growth investing option.

Literasi Keuangan pada Generasi Milenial

Literasi keuangan yang rendah akan berdampak pada pembuatan keputusan dalam kehidupan sehari-hari. Pembuatan keputusan yang salah akan berakhir pada pengelolaan ekonomi yang buruk dan tidak efektif dapat mengakibatkan perilaku masyarakat yang rentan akan krisis keuangan dan berpotensi mengalami kerugian akibat kejahatan di sektor keuangan. Tingkat literasi keuangan akan berbeda-beda sesuai dengan ciri-ciri demografinya. Wanita, kaum minoritas dan golongan berpenghasilan rendah cenderung memiliki tingkat literasi keuangan yang rendah. Begitu juga dengan usia, usia sangat menentukan sudut pandang orang terhadap sesuatu. Generasi Y adalah generasi yang lahir di rentang tahun 1980-1994 dimana generasi ini sangat erat dengan teknologi dan memiliki kebiasaan yang berbeda dengan generasi lainnya. Tujuan dari penelitian ini adalah mengukur indeks literasi keuangan pada generasi milenial. Penelitian ini menggunakan jenis penelitian deskriptif sehingga peneliti menjabarkan indeks yang telah dihitung sebelumnya. Indeks tersebut kemudian diuji pengaruhnya dengan perilaku keuangan. Hasil pengujian menunjukkan literasi keuangan dasar dan syariah berpengaruh positif signifikan terhadap perilaku keuangan. Hal tersebut dibuktikan dengan nilai t hitung kedua variabel yang lebih besar daripada t tabel (3,147>1,97; 2,512>1,97). Semakin seseorang paham akan konsep keuangan maka semakin ia mampu mengelola dengan baik keuangannya.

Incorporating financial literacy into the accounting curriculum

ABSTRACTFinancial literacy education, or the lack thereof, has received much attention in recent years. Over the past two decades, we have witnessed the dot com bubble, corporate scandals that stirred the market, and a large recession. Because many individuals turn to accountants for financial advice, it is now more important than ever for professionals to possess a strong foundation in basic financial literacy to better serve their clients. While the responsibility of financial literacy education does not lie with one institution or one individual, multiple efforts have been put in place to provide financial literacy education to the public. The purpose of this paper is to describe how financial literacy education was successfully incorporated into the accounting classroom to provide tomorrow’s professionals with a strong foundation in financial literacy.

Financial Literacy and Behavioral Biases among Traditional Age College Students

Financial literacy and planning are crucial for everyone. This is especially true for college students who as the decisions they make in this stage of their lives can haunt them throughout their income earning years and beyond. In this paper, we examine several financial literacy issues facing college students. We identify college students’ perceptions about their own financial situation, assess student financial literacy knowledge, as well as evaluate their awareness about the status of their savings and retirement positions. We find that basic financial literacy is not the only factor in making sound financial decisions. Our results show the majority of the college students surveyed are financially literate and have the ability to make informed decisions about their personal finances in the short-run. While our respondents appear confident in making short-run financial decisions, their behavior tends to suggest that their confidence is somewhat misguided. In addition, a large number of the students surveyed feel they do not have the requisite knowledge to make wise retirement planning choices. Furthermore, several respondents report a distrust of retirement plans offer by private companies, which may lead to suboptimal retirement savings.

Financial literacy among high school students: Evidence from India

Financial literacy is an important but oft ignored skill that is vital for young people. This study measured financial literacy levels among high school students ( N = 608) in India and found low levels of performance on standard measures of financial literacy. The percentage correct score on the basic financial literacy questions was 45% and on the sophisticated financial literacy questions the score was 44%. Financial literacy levels in India were found to be lower than those in developed countries. Gender differences were found, with females outperforming males, contrary to findings in developed countries. Students who pursued the commerce/economics stream of education were found to have higher levels of financial literacy than students pursuing the science stream. Results showed that students, despite having high levels of numeracy, were unable to transfer that knowledge to do financial computations. Parental involvement was also found to have a significant influence on financial literacy. Interviews with students highlighted the fact that understanding of societal and macroeconomic impacts of financial literacy was low. These findings lend support for high school financial education which involves parents and stresses practical hands-on application, societal and macroeconomic impact, as a means of improving financial literacy.

ÜNİVERSİTE ÖĞRENCİLERİNİN İLERİ FİNANSAL OKURYAZARLIK DÜZEYLERİNİN İNCELENMESİ, ANADOLU ÜNİVERSİTESİ ÖRNEĞİ

2008 Küresel Finans Krizi bireyin finansal sorumluluklarını artırmıştır. Sorumlulukları yerine getirebilmenin temel koşulu finansal okuryazar olmaktır. Bu çalışmada ise üniversite öğrencilerinin finansal okuryazarlıkta ileri düzey becerileri sorgulanmaktadır. İleri finansal okuryazarlığın, temel finansal okuryazarlık ve çeşitli demografik değişkenler arasındaki ilişki de eş anlı olarak araştırılmıştır. Bu amaçla Anadolu Üniversitesi İktisadi ve İdari Bilimler Fakültesi’nde kayıtlı farklı bölüm ve sınıflardan 335 öğrencinin görüşleri değerlendirilmiştir. Çalışmaya katılanların %35,7’ si ileri düzeyde finansal okuryazar bulunmuştur. Öğrencilerin ileri finansal okuryazarlık sınıf üyeliğinin belirlenmesinde en etkili değişkenin temel finansal okuryazarlık skoru olduğu belirlenmiştir.

ÜNİVERSİTE ÖĞRENCİLERİNİN İLERİ FİNANSAL OKURYAZARLIK DÜZEYLERİNİN İNCELENMESİ, ANADOLU ÜNİVERSİTESİ ÖRNEĞİ

The 2008 Global Financial Crisis increased the financial responsibilities of the individual. The basic condition for fulfilling the responsibilities is to be a financial literate. In this study, the advanced skills of university students in financial literacy are questioned. The relationship between advanced financial literacy, basic financial literacy and various demographic variables has also been investigated simultaneously. For this purpose, the opinions of 335 students from different departments and classes were evaluated at Anadolu University Faculty of Economics and Administrative Sciences. 35,7% of those who participated in the study have advanced financial literacy. It has been determined that the most influential variable in determining students’ advanced financial literacy class membership is the basic financial literacy score.

Financial Literacy and Level of Financial Competence in Pre-University Students: A Comparison by Academic, Personal and Family Profile

Abstract The aim of this paper is to diagnose the level of personal financial knowledge of to date pre-university students in the Valencian Community, Spain. This is carried out by means of a double measure, one of which is a novel approach. First, we analyze their level of financial literacy, using the Basic Financial Literacy Test designed by the World Bank in 2012. Second, we determine their level of financial competence, enhancing the abovementioned test to a total of 17 questions, in order to provide a comprehensive view of their understanding of personal finance concepts. Both instruments were fully completed by a total of 1283 pre-university students of the Valencian Community during the 2017/2018 academic year. In both cases, comparisons were made by academic (level of studies, subjects studied and results to date) and personal profile (gender, influence level of their main role model and its activity as entrepreneur). We applied descriptive and inferential analysis techniques, such as Test t, Chi-square, Anova and Krustal Wallis. Obtained results show how groups with different academic background and achievement obtain significantly different results in both financial literacy and competence tests; however, when breaking down different measures of the former academic profile, results are heterogeneous. Finally, we find, with little exceptions, no significant differences between different personal profiles.

Financial Literacy and Level of Financial Competence in Pre-University Students: a Comparison by Academic, Personal and Family Profile

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Literasi Keuangan Dosen-Dosen Perguruan Tinggi di Palembang: Faktor Gender dan Usia

This study aims to measure the level of financial literacy of lecturers in Palembang. The method of analysis in this research is descriptive analysis. The number of respondents in this study were 153 respondents. Data collection techniques used survey techniques with questionnaires. Financial literacy index is determined through four stages: (1) Grouping of financial literacy variables in 2 groups, namely basic financial literacy and advanced financial literacy, (2) giving score 1 for correct answer and 0 for other answer that is unknow, wrong answer and refused to answer, (3) Calculate the weight of each variable by using simple weight, (4) Calculate index of financial literacy. The results showed that on average the basic financial literacy of lecturers in Palembang was included in the moderate category, while the average advanced financial literacy was in the low category. The level of financial literacy or Financial Literacy Index as a whole including the low category. Distribution of basic financial literacy based on gender and age average dominant in high category reverse dominant advanced financial literacy distribution in low category.

Financial literacy determinants among West Java athletes

The anecdotal evidence suggests that in Indonesia professional athletes struggle to make ends meet after retiring from their profession. This is because they are unable to manage their investments and their savings wisely. This study measures the financial literacy index among Indonesian athletes by using West Java as a sample. A total of 183 questionnaires were distributed to athletes in West Java, in which the questions centred upon concepts in financial literacy. By using one-way ANOVA as well as Tukey-Kramer's analysis, the study showed the link between financial literacy and demographic profile. The result of financial literacy index among West Java athletes is 51 indicating that the index is low. The index result is based on the calculation of two variables of individual's literacy, which are basic financial literacy and advanced financial literacy. The statistical analysis indicates that six of seven demographic profile variables (type of sports, age, last educational background, monthly income, monthly expense, and yearly income from tournaments) have significantly different of financial literacy index. The analysis shows that gender is the only one demographic profile that does not have significant different level of financial literacy index.

Micro-Finance and Rural Poor: A Case of Stree Nidhi Initiative

Inclusive growth is an important component of development to mainstream the excluded sections of the society for promotion of equitable growth. Micro finance would enable and shows the effective path for reaching the poor. The Government of India and Reserve Bank of India have taken measures to facilitate financial services for the poor for inclusive development. The reforms and approaches taken up by the Government to induce competition in expanding outreach by providing small loans and services to the poor. Micro-financial services and its delivery to the poor is widely discussed and watched by many developmental professionals. In this context, technology plays an important role to increase the outreach to massive numbers. The cost effective and efficient technology under Digital India programme facilitating the internet services to the poor people in the remote areas of the country. The present paper focuses on the credit delivery of micro finance services of Stree Nidhi at door step of poor members of SHG through IVRS mode. IVRS solution enables village Organization of SHG to send loan request and access the loan amount directly through bank account of SHGs. The loan sanction and appraisal through IVRS and Web portal are communicated to SHG members through SMS. Further the paper focuses on ascertaining the awareness levels of SHG members on financial services and perception towards IVRS mode of credit delivery. The data was collected through questionnaire and Focused group discussion with SHG members in Medak district of Telangana state. The finding of this research revealed that the SHG members are appreciating the IVRS mode credit delivery. However, they are not having required awareness on availing the financial services through Debit Credit, unable to read the SMS because of lack of basic literacy and financial literacy.

Informed and uninformed investors in Iran: Evidence from the Tehran Stock Exchange

The financial markets of the Islamic Republic of Iran, mainly represented by the Tehran Stock Exchange (TSE), remain one of the least studied of major emerging stock markets. We have collected a large data set on investment behavior of informed and uninformed investors at the Tehran Stock Exchange (TSE). Using exploratory factor analysis and structural equation modeling of latent variables, we find that investors in Iran are not homogenous, exhibiting different behavior across demographic, psychological, and economic variables. Informed investors’ behavior is consistent with the general recommendations of the economic theory. They view investment knowledge and economic-related variables more importantly than uninformed investors who are more influenced by behavioral variables such as sentiment and personality. Such behavioral differences have also been observed in other studies analyzing the relationship between investment performance variation and investors’ type in emerging stock markets. From a public policy perspective and given Iran's emerging economic opportunity, our findings emphasize the need for more effective regulation of investment products, sales, and advisory services, coupled with some basic financial literacy education both at pre-and-post-secondary levels in Iran. Such steps will improve the quality of individual investors’ decisions, increase investor confidence and participation in capital markets, provide companies with better access to cheaper source of risk capital, and, ultimately, advance the overall economy in Iran.