Authors: Gian Paolo Stella, Umberto Filotto, & Enrico Maria Cervellati
Date: January 13, 2020
Source: Stella, G. P., Filotto, U., & Cervellati, E. M. (2020). A proposal for a new financial literacy questionnaire. International Journal of Business and Management, 15(2), 34-48.
Making financial and economic decisions comes with great responsibility that can place people in undesirable positions when not done so efficiently. To put encouraging systems into place for families and communities to improve their financial literacy, scholars are constantly in search of measurements to test their participants’ levels. Some propose that it could be done through the testing of their financial knowledge, which has shown positive correlations, but is that really enough? Yes, financial knowledge is the foundational variable in assessing one’s financial literacy, but in previous studies assessing such knowledge, their financial attitude and skills are also fundamental.
In previous methods to test financial literacy, self-reported and performance tests were commonly used. Participants were commonly seen overestimating their results; however, scholars also noticed a strong correlation between their self-perceived results and actual ones. This study is to figure out a system to find a concrete correlation between the three pillars: financial skills, attitude, and knowledge. This study will be measured through a set of questions for each pillar. Knowledge will be questions from the report “Financial Capability in the United States” conducted by NFCS in 2009. Next, financial skills will be assessed based on day-to-day financial situations following Lusardi and Mitchell (2011b), Lusardi (2015), and OECD (2016)’s guidelines. Lastly, financial attitude will test the participant’s capability to handle common financial problems.
With the results of 161 female and 135 male participants with various educational backgrounds and incomes, the study has found a positive correlation between financial skills and literacy but NOT with financial attitude. As indicated before the experiment, financial knowledge has also a notable positive correlation with financial literacy. The study has also found that other variables such as subjective financial knowledge, income, and civil and work status have shown a positive influence on financial literacy while age had a negative influence.
With a proven positive correlation between the variables indicated above, the authors propose this new set of questionnaires as guidelines for future testing.
Understanding that financial literacy doesn’t deal with simply the financial knowledge of the person but also with their skills and attitude is something that will be relevant when conducting my primary research and translating into the potential features of the final product/service. When reflecting on my peers’ past steps when they want to understand finance, it was common for them to simply try to learn how to manage their finances solely based on searching for answers online (knowledge) without reflecting on their behavior toward the goal they are trying to pursue or the skills that would take a prolonged period of time to attain.
On a personal note, these three factors will most likely be the three pillars of my project. The final product will need to address not only the understanding of financial affairs but skills and improving attitude toward the user’s personal financial habits.