Despite increasing interest in and funding for financial literacy and financial education programs in the private and public sectors, the field of financial literacy still has a major obstacle to overcome: the lack of a widely disseminated measure of financial literacy, developed through rigorous psychometric analyses. In this article, we develop such a measure, focusing specifically on financial knowledge. Using item response theory (IRT), we analyze items from three national surveys, resulting in a psychometrically sound 20-item financial knowledge scale. By using IRT, the current analysis uses individuals' answers to inform which questions to include in the scale in the first place, rather than simply confirming relationships between these answers and other financially relevant outcomes post hoc. Widespread use of this index and the continued use of modern psychometric techniques would allow for the comparison of financial knowledge, measured consistently and reliably, across studies, populations, and programs.

People often laugh about being “no good at math.” Unrecognized, however, is that about one-third of American adults are likely too innumerate to operate effectively in financial and health environments. Two numeric competencies conceivably matter—objective numeracy (ability to “run the numbers” correctly; like literacy but with numbers) and numeric self-efficacy (confidence that provides engagement and persistence in numeric tasks). We reasoned, however, that attaining objective numeracy’s benefits should depend on numeric confidence. Specifically, among the more objectively numerate, having more numeric confidence (vs. less) should lead to better outcomes because they persist in numeric tasks and have the skills to support numeric success. Among the less objectively numerate, however, having more (vs. less) numeric confidence should hurt outcomes, as they also persist, but make unrecognized mistakes. Two studies were designed to test the generalizability of this hypothesized interaction. We report secondary analysis of financial outcomes in a diverse US dataset and primary analysis of disease activity among systemic lupus erythematosus patients. In both domains, best outcomes appeared to require numeric calculation skills and the persistence of numeric confidence. “Mismatched” individuals (high ability/low confidence or low ability/high confidence) experienced the worst outcomes. For example, among the most numerate patients, only 7% of the more numerically confident had predicted disease activity indicative of needing further treatment compared with 31% of high-numeracy/low-confidence patients and 44% of low-numeracy/high-confidence patients. Our work underscores that having 1 of these competencies (objective numeracy or numeric self-efficacy) does not guarantee superior outcomes.

young adults who were married were more likely than all other groups (including cohabitors) to perceive retirement as an important savings goal and to have an individual retirement account. Married persons were more likely than their single counterparts to participate in a defined contribution pension plan. Single women fared particularly poorly on retirement savings outcomes. A range of possible theoretical links between marriage and retirement savings at young adulthood are discussed.Limited retirement savings is a major contributing factor to economic vulnerability among the elderly (

We use data from the Understanding America Study (UAS) internet panel to build upon the Knoll and Houts Financial Knowledge Scale (FKS). Specifically, we provide practitioners with a shorter 10‐item scale, describe additional analyses on both the full‐ and short‐form versions of the scales, and explore the relationship between FKS scores and a variety of retirement‐related outcome variables. Importantly, the full‐ and short‐form scales are developed using a statistical model that accounts for guessing, which allows us to provide more accurate estimates of financial knowledge than similar scales that do not account for guessing. The paper also provides conversion tables that can aid in the analysis and interpretation of FKS scores in practice. With the development of a 10‐item short form that accounts for guessing, we hope to provide practitioners and researchers with a tool that will enable them to reliably measure financial knowledge more parsimoniously and accurately than other measures currently in use.

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