Financial Literacy: Understanding the Concept, Assessment, and Global Levels, Diapositivas de Psicología

¡Descarga Financial Literacy: Understanding the Concept, Assessment, and Global Levels y más Diapositivas en PDF de Psicología solo en Docsity! Economic Psychology Summer 2019 Economic Psychology Summer term 2019 Erik Hoelzl, Corinna Michels and Michael Blens Chapter 4 Lay Theories: Knowledge and Money Content based on Kirchler, E. & Hoelzl, E. (2018). Economic Psychology: An Introduction. Cambridge, UK: Cambridge University Press. Exercise 1 Economic Psychology Summer 2019 Orientation 4 Lay Theories: Knowledge and Money 4.1 Lay Theories 4.1.1 Theory of Social Representations 4.1.2 Social Representations about the Economic System 4.1.3 Social Representations about Poverty and Unemployment 4.1.4 Social Representations about Money and Currency 4.2 Economic Knowledge 4.2.1 Development of Economic Understanding 4.2.2 Development of Economic Motives 4.2.3 Development of Economic Behaviour 4.2.4 Financial Literacy 4.3 Money 4.3.1 Subjective Meanings of Money 4.3.2 Subjective Value of Money 4.3.3 Currency Reforms and Currency Changeovers 4.3.4 Subjective Interpretation of Prices 2 Economic Psychology Summer 2019 Input: Financial Literacy Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Financial Literacy • Financial literacy – “people’s ability to process economic information and make informed decisions about financial planning, wealth accumulation, debt, and pensions.” (Lusardi & Mitchell, 2014, p. 2)  the ability to understand and use financial concepts • Broad range of conceptualizations and measures – Huston (2010): • 72% of studies examining financial literacy do not give a definition • 47% equated financial literacy with financial knowledge 6 Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Financial Literacy Idea: • Rational and well-informed individuals will consume less than their income in times of high earnings to save for times of low earnings (Lusardi & Mitchell, 2014) • It is assumed that in countries with higher social security, less financial literacy is necessary (Jappelli & Padula, 2013) 7 Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Various Ways of Measuring Financial Literacy • There is no single way to measure Financial Literacy • Different items and different answering formats are used (true vs. false, single-choice answer options, open-end text answers) • Items can have a very local focus (Hung et al., 2009), e.g. benefits of retirement plans for US citizens 10 Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Financial Literacy Worldwide 11 Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Levels of Financial Literacy - US • Lusardi and Mitchell (2007a) report results from 2004 Health and Retirement Study – N = 1,984 – Adults 51-56 years (baby-boomers) 12 Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Ethnic Background Levels of Financial Literacy are higher for Whites than for Blacks and Hispanics 15Table 2 (Lusardi & Mitchell, 2007a, p. 38) Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Gender Comparsion 16Table 3 (Lusardi & Mitchell, 2014, p. 40) Icons made by https://roundicons.com/ from www.flaticon.com Levels of Financial Literacy are higher for men than for women Economic Psychology Summer 2019 International Comparison 17 • Low levels of Financial Literacy—as found in the U.S.— are also prevalent in other countries across the globe • Highest level of Financial Literacy found in Germany (53.2% correct answers) Table 4 (Lusardi & Mitchell, 2014, p. 43) Economic Psychology Summer 2019 Educating Financial Literacy • Providers – Employers – Military – Community Colleges – Community-based organizations – Commercial banks • Additional goal: bring new people to the financial market 20(Braunstein & Welch, 2002) Photo by rawpixel.com on Unsplash Icons made by https://roundicons.com/ from www.flaticon.com Economic Psychology Summer 2019 Educational Programmes - Goals Specific Home ownership Saving accumulations Debt reductions Teaching for children and youth 21 Broad Teaching fundamentals of saving and credit Photo by rawpixel.com on Unsplash Icons made by https://roundicons.com/ from www.flaticon.com (Braunstein & Welch, 2002) Economic Psychology Summer 2019 Efficacy of Financial Literacy Programmes • Difficulty: defining and quantifying „success“ – Achieving a specific outcome Goal-oriented Programmes • Homebuyer Counselling Programmes – Pre-purchase counselling – Government-based and community-based • Saving Initiatives – Designed to increase the rate of saving among middle- and lower- income households – “America Saves” • Workplace Programmes – Training seminars for employees to assess needs and evaluate options for the future 22 Photo by rawpixel.com on Unsplash (Braunstein & Welch, 2002) Economic Psychology Summer 2019 Meta-Analysis on Effectiveness • Meta-analysis of the effect of financial education on financial behaviour • Covers 201 previous studies • Two type of studies: – Studies manipulating financial literacy (by educational interventions) – Studies measuring financial literacy (by financial knowledge questions) 25 Financial Behaviour Icons made by https://roundicons.com/ from www.flaticon.com (Fernandes, Lynch, & Netemeyer, 2014) Economic Psychology Summer 2019 Meta-Analysis on Effectiveness Main findings Small but significant positive correlation of measured financial literacy and financial behaviour  Interventions to improve financial literacy only explain 0.1% of variance in financial behaviour Weaker effects for low-income samples 26 Icons made by https://roundicons.com/ from www.flaticon.com (Fernandes, et al., 2014) Economic Psychology Summer 2019 Why are interventions so weak?  Financial education decays over time (negligible effects on behaviour 20 months after intervention) • Argues in favour of “just-in-time” interventions 27 Table 5 (Fernandes et al., 2014, p.1867) Icons made by https://roundicons.com/ from www.flaticon.com (Fernandes, et al., 2014) Economic Psychology Summer 2019 Overview of Effectiveness • Individual (as opposed to mass) and goal-specific (as opposed to broad) programmes better at improving financial literacy and resulting behaviour • Interventions should be “just-in-time” for financial decisions to be made • Interventions might not help to increase financial knowledge at all • Other variables (such as money planning in the long term and planning and pursuing a goal) might be more relevant to financial behaviour than pure knowledge and should be considered in studies focusing on financial literacy 30(Hirad & Zorn, 2001; Fernandes et al., 2014) Economic Psychology Summer 2019 Wrap-Up Economic Psychology Summer 2019 Questions? Next Exercise: May 9th 2019 5 Consumer Markets: Purchasing and Credit Use  Answers to questions raised today Icons made by https://roundicons.com/ from www.flaticon.com