Financial Knowledge Among University Students and Implications for Personal Debt and Fraudulent Investments

Abstract

2018) 'Financial knowledge among university students and implications for personal debt and fraudulent investments.', Cyprus economic policy review., 12 (2). pp. 3-23. Further information on publisher's website:http://www.ucy.ac.cy/erc/en/publications/cyprus-economic-policy-review Publisher's copyright statement: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractThe study is the first attempt to examine financial literacy, financial aptitude and behaviour among university students in Cyprus. The student survey covers 881 Cypriot students, aged mostly 18-24, across the five biggest universities in Cyprus. The financial knowledge scale used in the survey measures the understanding of basic concepts including interest rates, inflation, risk and diversification. Results show that 6.24% of students answered all questions correctly, with only 36.9% having a good financial knowledge proficiency level (answering at least 4 correct responses out of 6). While socio-demographic characteristics and students' soft skills and traits distinguish high financial knowledge students, strikingly, parental background and parental advice does not seem to play an important role for high financial knowledge. Financial knowledge is also seen to have a distinct channel of influence on students' understanding of managing their credit card debt and students' ability to deter themselves from fraudulent investments.

Financial Literacy and Fraud Detection

“…In an experimental setup, Anderson (September, 2016) observe that consumer literacy related to understanding various financial marketplaces significantly affect respondents' propensities to accurately identify fraudulent advertisements. Also, Andreou & Philip (2018) find that financially knowledgeable younger generation have a significantly higher propensity of declining an offer to engage in a Ponzi or fraudulent scheme than their peers, after being solicited.…”

Financial Literacy and Its Influence on Consumers’ Internet Banking Behaviour

“…As such, consumers in Cyprus face an ever-increasing need for financial and digital sophistication to make informed financial decisions. Unfortunately, however, recent evidence among students revealed the worrisome issue of inadequate basic financial knowledge in Cyprus (Andreou and Philip, 2018). In general, contrary to the range and depth of studies already conducted in other European countries to measure financial literacy, there has been a very little effort in the case of Cyprus.…”

“…Individuals with a higher level of financial literacy are less vulnerable to being exploited or deceived (Campbell et al, 2011;Lusardi and Mitchell, 2011;Deevy et al, 2012;de Bassa Scheresberg, 2013;Balloch et al, 2015;Andreou and Philip, 2018), are less prone to overindebtedness (Lusardi and Tufano, 2015), are better in retirement planning (Lusardi and Mitchell, 2007;van Rooij et al, 2012), participate more often in financial markets (van Rooij et al, 2011) and have higher returns on savings accounts (Deuflhard et al, 2018). Despite the long list of studies on financial literacy, there is however a notable gap in the literature concerning an in-depth analysis of the relationship between financial literacy and consumers' usage of digital financial services, such as i-banking behaviour.…”

“…For example, Lusardi et al (2018) show that millennials know little about their student loans and many do not attempt to calculate the payment amounts that will later be associated with the loans they take. Further, Andreou and Philip (2018) show that Cypriot university students, mostly aged 18 to 24, exhibit low levels of financial literacy while most of them fail to effectively manage credit card debt and are more susceptible to financial fraud.…”

“…Heretofore, in-depth empirical evidence for the level of financial literacy in Cyprus was extremely scarce. The only exception is the recent study by Andreou and Philip (2018) that measures the level of financial literacy among Cypriot students aged mostly 18-24 and investigates its implications for debt management and avoidance of fraudulent schemes. Conversely, the current study provides the first evidence about the level and antecedents of financial literacy among the adult population (aged 25-64) in Cyprus, and as such it complements previous academic studies.…”