The Economic Importance of Financial Literacy: Theory and Evidence

Abstract

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

Financial inclusion in Colombia: A scoping literature review

“…Several studies associate financial inclusion with economic development, as it incorporates segments of the population that were previously excluded from the financial system, hence reducing poverty (Anzoategui et al, 2014;Arora, 2012;Chakravarty & Pal, 2013;Cnaan et al, 2011;Duncombe, 2012;García Cediel, 2013;Lusardi & Mitchell, 2014;Mishra & Singh Bisht, 2013;Sarma & Pais, 2011;Soederberg, 2013). Others assert that financial exclusion is a key obstacle to sustainable economic development (Beck & Demirguc-Kunt, 2008;Gómez-Barroso & Marban-Flores, 2013;Honohan, 2008;Hudon, 2008;Marron, 2013).…”

“…Financial education is considered essential to achieving and creating financial inclusion. It is conceived as a tool through which individuals develop the values, knowledge, and skills needed to make responsible financial decisions requiring the application of basic financial concepts and understanding (Arora, 2012;Duncombe, 2012;Figart, 2013;Horska et al, 2013;Lusardi & Mitchell, 2014). Additionally, financial education is closely related to financial exclusion.…”

Financial Literacy Assessment on Tertiary Students in Sub-Saharan Africa: A Ghanaian Perspective

“…According to Abel (2016), people with less financial knowledge are more prone to making bad decisions with regards to finance. Monticone (2010) argues that the less financially literates are heavily indebted and in the same direction whilst Lusardi and Mitchell (2014) also found out that people who were unable to calculate interest rates are more inclined to excessive borrowing and they tend to accumulate less wealth. Similarly, Schagen and Lines (1996) proposed that students, who were in higher level of education and were either residing independently or not living with their parents, are prone to debt mismanagement.…”

Causality Illusion and Overconfidence in Predicting (Quasi)Stochastic Financial Events

“…Meta-studie a randomizované experimenty analyzující reálný dopad finančního vzdělá-vání však ukazují, že zlepšení finanční gramotnosti je po jejich absolvování spíše slabé, popř. nevýznamné, zejména u obecných finančně-vzdělávacích kurzů [Bernheim et al, 2001;Duflo a Saez, 2003;Lusardi a Mitchell, 2014]. Schopnosti a vědomosti získané v těchto kurzech jsou často teoretické, bez kontextu či jsou předávány v době, kdy je lidé nevyužívají.…”