Low Level Of Financial Literacy Research Articles

Exploring the relationship between investors' financial literacy and advisor use with securities‐based loans

AbstractPast literature has explored the characteristics of individuals who use high‐interest and tax‐inefficient consumer debt products, such as carrying a monthly credit card balance and engaging with alternative financial services. That literature revealed that users of these debt products tended to be financially constrained households faced with an immediate liquidity need, and that they had lower levels of financial literacy. Much less is known, however, about the role financial literacy may play when a more advantageous solution may be available but not used—an example of which is securities‐based loans, which offer lower rates and potential tax preferences. Therefore, this study used the 2018 National Financial Capability Study to examine why investors use traditional debt products when they could likely have qualified for a securities‐based loan. Using bounded rationality as a theoretical framework, this research advances the literature in consumer debt and borrowing decisions. The results found that objective knowledge, as opposed to self‐assessed ability or confidence, explained the use of optimal debt products. Additionally, advisor engagement was positively associated with securities‐based loan use.

Keeping it in the family: financial constraints and the succession intention of micro and small enterprises in China

Despite the significance of business succession in the family firm literature, few studies have paid attention to the role of financial constraints, a common feature of micro and small firms, in entrepreneurs’ succession intention. Using a nationally representative survey of micro and small firms in China, we find that a higher degree of financial constraints significantly strengthens the entrepreneur’s intention of passing the firm on to the next generation. Moreover, the effect of financial constraints works particularly for firms whose entrepreneurs possess lower levels of financial literacy and for firms in regions with less-developed financial markets. Our results still hold after addressing potential endogeneity problems and conducting a wide array of robustness checks.

Designing behavioral prompts to improve saving decisions: Implications for retirement plans

AbstractRetirement plan sponsors, financial advisors, and public policy makers are increasingly interested in encouraging higher levels of retirement savings. This study enhances understanding of the behavioral biases that may adversely impact retirement savings decisions and financial outcomes and suggests mechanisms for improving outcomes. In an incentivized laboratory experiment, we study participants' investment and asset allocation decisions over a meaningful time horizon and test the efficacy of alternative behavioral prompts to motivate investment decisions. We find that greater financial literacy, higher levels of risk tolerance, and lower discount rates significantly increase levels of investment and expected return. Controlling for these factors, we find that behavioral prompts encouraging reflection on goals or on future needs have significant effects on allocation decisions and expected returns for young adults. We also find that the prompts increase expected returns for women and individuals with lower levels of financial literacy. These results suggest that behavioral prompts can be an effective method of improving retirement saving decisions, particularly for the less financially‐literate.

Assessment of financial literacy: case study of business students

The study of financial literacy on business students aims to highlight the financial literacy level of senior students of bachelor degree and postgraduate students.. Although the study illustrates how financial literacy associated with socio- demographic characteristics, financial education, financial behavior, family background, and social capital. The study employs mixed research methodology in which an administered questionnaire and focus group tools are used. The study finds that students’ interest for obtaining financial information is very low which reflects a low level of financial literacy. Although, theresults show a critical red flag of warning in understanding the basic financial concepts (inflation, simple interest rate calculation and portfolio diversification). Moreover, the results find that family background and financial socialization play a significant role in shaping family members’ financial literacy weather intentionally or spontaneously. Based on theresults of the analysis and focus group justification, theresearcher recommends that there is an insisting need for; enhancing the role of the universities in improving financial literacy, and recommends future studies to expand the range of study in light of the role of high education ministry, universities and financial institutions.

Measuring Usability on User-Centered Mobile Web Application: Case Study on Financial Mathematics Calculator

Financial literacy is a person's skills regarding financial knowledge and behavior. In 2019, the National Survey of Financial Literacy and Inclusion (SNLIK) stated that Indonesia had a low level of financial literacy with a percentage of 38.03%. In 2016, the Indonesian government incorporated financial literacy into the K13 curriculum for the high school level to improve financial literacy at the student level. In line with that, students need facilities to help them learn financial literacy. This study aims to build an interaction design of financial mathematics calculators using the User-Centered Design method. The limitation of this study is the design uses a mobile web platform that targets high school students. The results of usability testing on effectiveness get an average task-completion rate score of 92.3%, an average efficiency of 92.0% overall relative efficiency, user satisfaction using the System Usability Scale (SUS) gets a score of 93.2 for the usability factor and a score of 74 for the learnability factor. The findings of this study indicate that the application is easy to use and provides a positive experience in learning financial literacy. The current study's results will support this application's use in future research as a new tool for providing financial literacy.

Socio-Economic Inequality in Young People’s Financial Capabilities

ABSTRACT Previous research has shown that the UK has low levels of financial literacy by international standards, particularly among those in lower socio-economic groups. This may have an impact upon young people, with social inequalities in financial attitudes, behaviours and skills perpetuating across generations. Using parent-child linked survey data from 3,745 UK families, we find sizeable socio-economic inequalities in young people’s financial capabilities, aspects of their mindset, and their financial behaviours. Sizeable differences are also observed in the financial education that socio-economically advantaged and disadvantaged children receive at school, and how they interact with their parents about money. Parental interactions can account for part of the socio-economic gap in money confidence, money management, financial connections, and financial behaviours, but less so in boosting financial abilities. However, we find no evidence of differences in financial education in schools driving differences in young people’s financial capabilities.

PENYULUHAN MANAJEMEN KEUANGAN PADA KELOMPOK MASYARAKAT CINA BENTENG SEWAN RAWA KUCING

Financial management plays an important role in the business development of MSME actors. One of the basic financial management that needs to be understood by business actors is managing finances properly and correctly. This Community Service activity is carried out to assist in improving the financial management of community financial literacy, especially MSMEs in Sewan Rawa Kucing Tangerang. The method of implementation is in the form of material distribution, lectures, and discussions/debriefings which are conducted offline. The conclusions obtained from this activity show that most MSME actors and the community in Sewan Rawa Kucing still have a low level of financial literacy, however, after carrying out this community service activity, participants' knowledge of the basic concepts of financial management has improved.

Is there a link between financial literacy and financial behaviour?

In this paper, we are motivated by the growing complexity of financial service products amidst an unending wave of Ponzi schemes as well as the low levels of financial literacy reported by prior studies. Particularly, while the extant literature has focused on various determinants of financial literacy, limited insights exist on the implications of financial literacy on financial behaviour. Consequently, we focus our empirical test on identifying the link between financial literacy and financial behaviour. We formulated our hypotheses from the family resource management theory which postulates that individual behaviour is a function of their knowledge. Thus, relative to financial literacy and financial behaviour, we argue that financially literate individuals are more likely to exhibit sound financial behaviour than those who are financially illiterate. We tested our hypothesis by using the logistic regression technique on a cross-sectional sample of 3,932 students pursuing various undergraduate and postgraduate programs in Ghanaian public and private universities. Notably, we selected our respondents from six (6) public and six (6) private universities. Consistent with our theoretical predictions, our results show that financially literate students are more likely to exhibit sound financial behaviour. Specifically, the results demonstrate that financial literacy is a major input for financial behaviour. Additionally, we observe that variables such as family characteristics particularly the father’s educational background, and discussion of financial matters at home are significant predictors of sound financial behaviour. Generally, our results have implications for various stakeholders including governments, academic institutions, and families.

How the pandemic altered Americans' debt burden and retirement readiness

AbstractThis article analyzes Americans' perceptions of being debt‐constrained. We focus on which population subgroups reported feeling most debt‐constrained, how this perception was impacted by the COVID‐19 pandemic, and how it relates to financial literacy and retirement readiness. To this end, we analyze two datasets, namely the 2020 and 2021 TIAA Institute‐GFLEC Personal Finance Index files (P‐Fin Index). The evidence shows that, prior to and during the pandemic, one in three American adults felt constrained by their debt. The percentage was even higher among vulnerable subgroups such as Black and Hispanic individuals, those lacking a bachelor's degree, those with lower incomes, and those with low levels of financial literacy. Being debt‐constrained also has long‐term financial consequences, as it is negatively linked to planning and saving for retirement. Finally, we show that financial literacy has a strong connection to both debt and retirement money management, confirming that financial knowledge is essential if people are to be able to manage their debt and build financial well‐being.

Does SME’s financing decisions follow pecking order pattern? The role of financial literacy, risk preference, and home bias in SME financing decisions

This paper aims to explore the role of financial literacy, risk preference, and home bias in Minangkabau ethnic SME financing decisions, and whether their financing pattern follow the pecking order theory. The theoretical framework model was developed to determine the impact of financial literacy, risk preference, and home bias on the financing decisions of SMEs. The study applied the SEM-PLS method in testing the model. Data collection was carried out through online and offline survey techniques with a sample of 623 SMEs. The results reveal that home bias and risk preference have a negative direct effect on financing decision. Home bias also has a direct positive influence on risk preference. Financial literacy can minimize home bias from negative to positive toward financing decision. However, financial literacy does not have a direct effect on the financing decisions and does not have a significant direct influence on risk preference. Most SMEs have a low level of financial literacy, a high tendency for home bias and a high-risk preference. Financial literacy has strong positive moderation effect on the influence of home bias toward financing decision. Home bias make SME financing decision does not follow pecking order pattern. As SMEs financial literacy level is still very low, thus it is important for financial institutions to educate SMEs by providing several trainings about financial matters. The findings suggest to improve the financial literacy of SMEs informal association groups in order to help them reducing their home bias tendency. This study seeks to explore the pecking order pattern in financing decisions of SMEs.

Three little words? The impact of social security terminology on knowledge and claiming intentions

AbstractWe study the impact of changing the existing terminology to describe the rules governing Social Security retirement benefits. We provided respondents from a nationally representative online panel with information pertinent to the decision of when to claim Social Security retirement benefits. The content of the information treatments was identical for all respondents, but some were randomly given an alternative set of terms to refer to the key claiming ages (the experimental treatment group), while others were given the current terms (the control group). Despite the minimal nature of the change, there were significant differences in outcomes. Those in the treatment group spent less time reading the information, but their understanding of the Social Security program improved more than the control group. In addition, the treatment delayed retirement claiming intentions by an average of about two and a half months and increased the recommended claiming age to vignette characters by a similar magnitude. The effects were particularly strong for those with low levels of financial literacy. The relative gains in knowledge persisted several months after the treatment.

ФАКТОРЫ ВЛИЯНИЯ НА ТЕНЕВОЙ БАНКИНГ В СИСТЕМЕ БАНКОВСКОЙ ДЕЯТЕЛЬНОСТИ

The article reflects the main functions of banks: storing money, providing loans, money transfers, etc. The author examines the mechanisms that are used by banks to perform tasks, such as maintaining financial stability, controlling inflation and ensuring liquidity in the market. This paper presents the main factors influencing the development of shadow banking in Russia: the complexity of the procedures for obtaining a banking license, the lack of adequate control by government agencies, the underdevelopment of the financial infrastructure, including the lack of electronic payment systems and the low quality of banking services, the low level of financial literacy of the population - and approaches to solving these problems are analyzed.

SOCIAL EMANCIPATION OF WOMEN THROUGH FINANCIAL LITERACY AMONG BLUE COLLAR WORKERS IN BANGALORE

Low levels of financial literacy in India continue to persist, especially amongst blue-collared working women. Traditional patriarchal practices continue, where it is observed that “single women outperform married women in terms of their financial literacy score.” Furthermore, women have performed better in financial attitude than in financial knowledge, highlighting low financial literacy levels. (Arora, 2016). In order to bridge the gender finance gap, a not-for-profit organisation, FINWIN conducted a series of workshops for women blue collared workers in Bangalore. The research study is based on the pre-workshop and post-workshop survey undertaken by 45 women who were a part of the course. The aim of the research was to investigate the financial literacy levels of the blue collared women workers in Bangalore. The survey, translated into the regional language was handed out to all the women where they filled in three sections: background, decision making habits and pre-workshop survey. After the workshop was delivered, a post-workshop survey was handed out to see the difference in financial literacy levels and the effectiveness of the workshop. Most modules were reported to be a success as the majority of the women were able to apply the new knowledge gained. This research study paves a path for the financial literacy workshop modules to be refined further, concepts addressed in the workshop can be applied in real life by the women blue collared workers to work towards achieving financial independence and away from patriarchal practices. Lastly, the survey not only tests one’s level of financial literacy but the co-relating psychological impact on one’s self confidence which has scope to be researched further.

РОЛЬ ЦЕНТРАЛЬНОГО БАНКА РОССИЙСКОЙ ФЕДЕРАЦИИ В ФОРМИРОВАНИИ ФИНАНСОВОЙ ГРАМОТНОСТИ НАСЕЛЕНИЯ

The article is devoted to the study of the assessment of the activities of the Central Bank of Russia in improving the level of financial literacy of the population, as well as identifying problems and prospects for the development of this activity. The development of financial services and the introduction of innovative banking services require the deepening of financial knowledge of consumers of financial services. The development of financial knowledge should be accompanied by government measures that should be aimed at strengthening the protection of the rights of consumers of financial services, as well as improving the level of financial literacy. A low level of financial literacy can lead to financial problems, debts, bankruptcy and an increased level of social risks. The Central Bank of Russia plays an important role in improving the financial literacy of the population, developing a system of financial education and programs for the population.

Mechanisms to protect the interests of investors in the securities market

The relevance of the research topic is dictated by the current situation in the stock market, associated with greater involvement and increasing interest of individuals in various investment instruments. In this direction, only over the past two years, there has been a significant increase in retail investors. The interest of Kazakhstani retail investors in foreign markets is also increasing. On the other hand, there is a rather low level of financial literacy of citizens, which hinders the development of financial markets, reduces confidence in financial institutions, and also inevitably leads to the growth of unscrupulous players in the securities market. Against this background, the problem of creating legal mechanisms to protect the rights and interests of investors in the securities market is being actualized. The purpose of the study is to develop mechanisms for the protection of qualified and unskilled investors in the securities market through the introduction of modern international approaches to their regulation. Within the framework of this goal, a number of tasks have been put forward. This article focuses on one of them - the study and analysis of the legislation of the Republic of Kazakhstan regulating the regulation of qualified and unqualified investors for compliance with its international practice. The object of the study was the legislation of the Republic of Kazakhstan on the securities market. Assessment of compliance of Kazakhstan's regulation of qualified and unqualified investors with international practice. The methodology of the study consists of a comparative legal, formal-logical and systematization method. The theoretical and empirical base of the study includes the legislation of the EU countries and the Republic of Kazakhstan regulating the securities market, the results of research by various scientists on this topic, as well as statistical data.

Application of Capital Market Investment Planning Expert System Using Website-Based Forward Chaining Method

Good investment planning is the beginning to achieve investment goals. Price fluctuations in the capital market and financial behavior are the guides for the community in making investment plans. The low level of financial literacy in the community causes people to more often forget to make investment plans and if they are made only based on feelings. Thus, it is necessary to have a system that helps the community to make effective investment plans. The expert system was chosen for that because it has everything needed to meet these needs. In this study, the expert system uses the forward chaining method. After developing the expert system, it runs well and can meet the needs of the community.

СУЧАСНИЙ СТАН ТА ПЕРСПЕКТИВИ РОЗВИТКУ РИНКУ НЕДЕРЖАВНОГО ПЕНСІЙНОГО ЗАБЕЗПЕЧЕННЯ В УКРАЇНІ

The article examines the essence, features and legal framework that regulates the market of non-state pension market in Ukraine. Certain advantages of concluding pension contracts by insurance companies over the conclusion of pension contracts by non-state pension funds have been identified. An analysis of the main indicators of the balance sheet of non-state pension funds was carried out, namely the amount of pension payments, pension assets and pension contributions. It has been established that the balance sheet of non-state pension funds is highly liquid and non-state pension funds of Ukraine are a fairly reliable financial institution. An assessment of the dynamics of the volumes of pension contracts concluded by pension funds was carried out. The main trends of concluding pension contracts by non-state pension funds were determined, it was established that more than 90% of concluded pension contracts are contracts of individuals, while legal entities are not interested in involving workers in the third level of the pension system of Ukraine, and the share of pension contracts of individual entrepreneurs is generally 0.01%. The main problems restraining the activity of the non-state pension system were identified: low level of financial literacy of the population, low level of income of the population, lack of tax incentives for employers, low level of public trust in financial institutions, imperfection of normative and legal regulation, narrow choice of financial instruments for investment, lack of qualified staff and others. The main ways of improving the efficiency of the third level of the pension system are proposed.

Islamic Financial Literacy and Financial Behavior on Investment Intention

The low level of financial literacy, especially Islamic financial literacy which can affect individual readiness to plan finances and accept risks in relation to financial investments. This research aims to determine the effect of Islamic financial literacy and financial behavior on investment intentions.. The research used in this research is quantitative research with the questionnaire method on google form to respondents as well as using secondary data derived from literature and the results of previous studies then the survey results were processed using SPSS and analyzed and interpreted to conclude the findings. The result is that Islamic financial literacy, financial risk tolerance and behavioral biases have a positive effect on investment intentions.

The Influence of Financial Literacy and Lifestyle Against Consumptive Behavior of Generation Z during the Covid-19 Pandemic

This study aims to determine the influence of financial literacy and lifestyle levels against consumptive behavior of Generation Z during the Covid-19 pandemic in Special Region of Yogyakarta, Indonesia. The method used in this study was by distributing questionnaires to 200 students in D.I. Yogyakarta Province by sampling method through Google Form. This sampling determination is expected to be a representative of Generation Z i in Special Region of Yogyakarta, Indonesia. The result of this study is that lower level of Financial Literacy, the higher the consumptive behavior of Generation Z in Special Region of Yogyakarta, Indonesia during the Covid-19 pandemic. On the other hand, the higher the Lifestyle, the higher the Consumptive Behavior of Generation Z in Special Region of Yogyakarta, Indonesia during the Covid-19 Pandemic.

An Uphill Battle: Financial Education in Romania in the Midst of Societal Transformation

Given Romania’s relatively poor performance from a financial literacy perspective, many public and private entities are currently implementing various initiatives to address this problem. Assuming that financial education projects are a source of insights into broader societal issues, we analyze a sample of financial education projects to discern the issues of societal transformation reflected in their contents. We collected data from financial education websites and analyzed them through qualitative content analysis. We identify and discuss several manifest and latent themes and note the absence of others commonly found in the literature. The emphasis in the manifest themes falls on offering calibrated advice to a public with a relatively low level of financial literacy, prone to unhealthy behaviors such as consumerism, impulse buying, and indebtedness. Several latent concerns concentrate on the changing economic and social landscape, the fear that some traits of national character may hinder the individual appetite for adaptation, and the threat of an economic crisis. The needs of vulnerable groups are rarely addressed, while topics such as the ethical dimension of consumption, environmental and sustainability issues, and gender stereotypes are lacking. We thus find that the financial education initiatives in Romania address an underdeveloped range of topics.