Financial Literacy and Debt
Given the empirical evidence of the effect of financial literacy on a number of debt-related financial behaviors, such as e.g., mortgage-related decisions and use of credit cards, the construct of financial literacy is defined (including both level of objective knowledge and individuals’ own perception of level of knowledge) and discussed, both in general and connected to borrowing decisions. Together with age, gender, education, and income, the impact of financial literacy on a number of variables (including choice of variable or fixed mortgage rates, use of credit cards and use of pawn shops) is assessed and discussed. The connection between literacy and indebtedness for the group of young adults is also specifically addressed.
KeywordsFinancial literacy Financial knowledge Borrowing decision Credit cards Interest rates
- Carlsson Hauff, J., Carlander, A., Gärling, T., & Nicolini, G. (2018). Stages of retirement financial behavior related to a new survey measure of financial literacy (CFF Working Paper). Available at https://cff.handels.gu.se/digitalAssets/1681/1681821_financial-literacy–working-paper-cff-2018-new.pdf.
- Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution. Washington, NW: World Bank Publications, The World Bank Group. ISBN 978-1-4648-1268-2.Google Scholar
- Harrow, R. (2017, February 3). Discover’s daring bid for credit-card revolvers. Forbes. Available at https://www.forbes.com/sites/robertharrow/2017/02/03/discovers-daring-bid-for-credit-card-revolvers/#331ef77e588a.
- Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Federal Reserve Bulletin, 89(7), 309–322.Google Scholar
- Klapper, L., Lusardi, A., & van Oudheusden, P. (2015). Financial literacy around the world: Insights from the Standard & Poor’s ratings services global financial literacy survey. Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business. Available at http://gflec.org/initiatives/sp-global-finlit-survey/.
- Neuteboom, P. (2008). On the rationality if borrowers behaviour: Comparing risk attitudes of homeowners. Delft: Delft University Press.Google Scholar
- Noctor, M.,Stoney, S., & Stradling, S. (1992). Financial literacy: A discussion of the concepts and competencies of financial literacy and opportunities for its introduction into young people’s learning. National Foundation for Educational Research.Google Scholar
- Ottaviani, C., & Vandone, D. (2017). Financial literacy, debt burden and impulsivity: A mediation analysis. Economic Notes, 47(2–3), 439–454.Google Scholar
- PACFL. (2008). Presidents Advisory Counsil on Financial Literacy (Annual Report to the President). Available at https://www.treasury.gov/about/organizational-structure/offices/domestic-finance/documents/exec_sum.pdf.
- Riksbank. (2018). Payment statistics. Available at https://www.riksbank.se/en-gb/statistics/payments-notes-and-coins/payment-statistics/.
- Vitt, L. A., Anderson, C., Kent, J., Lyter, D. M., Siegenthaler, J. K., & Ward, J. (2000). Personal finance and the rush to competence: Financial literacy education in the U.S. Middleburg, VA: Institute for Socio-Financial Studies.Google Scholar