Earlier financial literacy and later financial behaviour of college students

Abstract

This study examined the association of earlier financial literacy and later financial behaviour of college students. Financial literacy was measured by both subjective and objective knowledge and financial behaviours were categorized into risky paying and borrowing behaviours. Based on data collected at two time points from a panel of college students at a major state university in the USA, the results showed that the association between earlier knowledge and later financial behaviours differed by the specific type of knowledge (subjective vs. objective), with stronger effect of subjective knowledge, compared with objective knowledge on both composite and individual measures of risky borrowing and paying behaviours. We found that only subjective knowledge was correlated with a reduction in both composite behaviours. Both subjective and objective knowledge, however, reduced some specific risky paying and borrowing behaviours. Finally, we found consistent differences for two of the control variables: higher GPA (Grade Point Average) was associated with fewer risky paying behaviours; and gender (male vs. female) was associated with more of both types of risky behaviours.

Factors Influencing College Students’ Financial Behaviors in Turkey: Evidence from a National Survey

“…Later on, Lyons (2004) investigated credit card practices in a sample of 835 college students and found that gender, ethnicity, financial independence, total amount of debt and credit card acquisition prior to the college were significant predictors of risky financial behaviors. In a more recent study, Xiao, Ahn, Serido, and Shim (2014) used data collected at two points in time from a group of college students in a state university in the USA and analyzed risky borrowing and paying behaviors. Results showed that subjective and objective finance knowledge reduced the likelihood of displaying negative financial behaviors.…”

Financial Literacy: Literature Review and Research Directions

“…Academic work has concluded that financial literacy can be measured both objectively (performance tests) and subjectively (self-reported methods) (Xiao et al 2014). Nevertheless, existing measures of financial literacy are dominated by measures of objective knowledge (i.e., Lusardi et al 2010;Fernandes et al 2014).…”

“…Nevertheless, existing measures of financial literacy are dominated by measures of objective knowledge (i.e., Lusardi et al 2010;Fernandes et al 2014). There is ample evidence in past literature of large disparities between the objectively (performance tests) and subjectively (self-reported methods) measures (Xiao et al 2014). Thus, some recent studies (i.e., Lusardi & Mitchell 2014) combined both objective measure and subjective evaluation of financial literacy to offers "robust and nuanced insights about how the two different dimensions of financial literacy work together to influence financial outcomes".…”

Groundhog day? Nietzsche, Deleuze and the eternal return of prosumption in lifelong learning

“…Such prosumers become responsible for their own long-term financial well-being (Xiao et al, 2014:592 see also Heller and Callender, 2013), whilst also, in the corporatist discourse of lifelong learning, adding value for wider international competitivity of the nation and of course its businesses.…”

“…Recent work suggests that basic financial concepts such as risk diversification and compound interest are not well understood, especially among the socio-economically less successful (Letkiewicz and Fox, 2014;Xiao et al, 2014, Harrison et al, 2013. In particular, Estelami (2014:330) found that the single most important reason for financial decision errors lay in underestimating the negative effects of time on financial value, notably the cost of interest and the fall of cash value over time.…”