In this editorial, we provided an overview of the papers in the inaugural issue of the Journal of Financial Literacy and Wellbeing. They cover topics that are at the center of academic research, from the effects of financial education in school and the workplace to the importance of financial literacy for the macro-economy. They also cover financial inclusion and how financial literacy can promote the use of basic financial instruments, such as bank accounts. Moreover, they cover financial decision making in the context of complex instruments, such as mortgages, reverse mortgages, and crypto assets. The papers all share similar findings: financial literacy is low and often inadequate for making the types of financial decisions that are required today. Moreover, financial literacy is particularly low among already vulnerable groups. Importantly, financial literacy matters: it helps people make savvy financial decisions, including being less influenced by framing, better understand information that is provided to them, better understand the workings of insurance, and being more comfortable using basic financial instruments. In a nutshell, financial literacy improves financial wellbeing.

Financial education is a crucial determinant of informed decisions, in both the private and social spheres. From a life cycle perspective, it improves personal finance. From youth to retirement, basic economic and financial competences, including specific pension literacy, help to plan for the future and to make better choices, thus reducing the probability of financial fragility, particularly in old age, and increasing economic independence, particularly for women. In the social sphere, a growing literature is demonstrating that basic financial education also affects public choices, influencing voting behavior, economic reforms, policy outcomes, and, more generally, the workings of our democracies.

This paper examines global data on unbanked and underbanked consumers to highlight the role improved financial literacy and capability could play in motivating and enabling the safe and beneficial use of financial services. The paper uses Global Findex data, a demand-side survey on ownership and use of accounts at formal financial institutions, such as a bank or similar financial institution, or a mobile money service provider. The paper reviews the self-reported barriers to account ownership and use cited by unbanked adults and identifies the challenges faced by account owners who could not use an account without help. Together, these issues point to the importance of financial education to improve digital and financial literacy skills, in addition to product design that considers customer abilities, and strong consumer safeguards to ensure that customers benefit from financial access.

Since 2012, the Programme for International Student Assessment (PISA), an initiative of the Organisation for Economic Co-operation and Development (OECD), has been collecting data to evaluate the financial literacy of 15-year-old students in various countries. The triennial assessments provide an opportunity to study the determinants of financial literacy among the young and how it evolves over time. This article looks back at a decade of PISA financial literacy data and examines the four waves of student-level data collected so far (2012, 2015, 2018, and 2022). We document stylized facts across waves and provide guidance on using the test scores estimated from psychometric models.

The “Fear of Missing Out” or FoMO has become an accepted motivator of behaviours extending from the purchase of limited-edition sneaker brands to social media use and cryptocurrency investment. As a motivator of individual financial behaviours, such as cryptocurrency and stock investment, it is unclear how FoMO relates to consumer financial literacy and other consumer traits, including risk tolerance and personality. We propose, and assess, a model of reported investment behaviour and investment behaviour intention. We find a larger association between FoMO and crypto ownership, both current and intended, compared with stocks. FoMO has a small association with current stock ownership, relative to the association of financial literacy and risk tolerance. Context matters when measuring FoMO with the more context-specific measures having the largest associations with investment behaviour and investment intentions. Finally, our results suggest financial literacy is an antecedent of FoMO, more so for stocks.

This paper studies whether school-based financial education has spillover effects from children to parents. Leveraging data from a large-scale experiment with public high schools in Peru and credit bureau records on the parents of the youth targeted, this study measures the impact of providing personal finance lessons during secondary school on parental financial behavior. Financial education lessons in the school yield limited average spillover effects, but lead to sizable effects on parental financial behavior within disadvantaged households. Among parents from poorer households, the treatment reduces default probability by 26%, increases credit scores by 5%, and increases current debt levels by 40%. The treatment has stronger effects among the parents of daughters, who experience a significant 6.7% increase in their credit score and a 28% reduction in their loan portfolio in arrears. Among the parents of boys, most of the spillover effects are muted.

This paper examines financial literacy in the United States, using the 2021 National Financial Capability Study data. A large volume of papers have demonstrated the importance of financial knowledge and documented the low level of financial literacy in America. Using recent data collected during an unusual time when inflation was rising and the country was in the midst of the COVID-19 pandemic, we show that the knowledge of fundamental financial concepts continues to be low in the US, especially among people who are young, less educated, female, or not employed. Our analysis also highlights people’s lack of inflation knowledge and identifies the subgroups that are particularly vulnerable. Finally, we examine how financial literacy affects financial well-being and behaviors. Responses to the Big Three financial literacy questions are linked to important financial behaviors and outcomes, including planning for retirement, financial resilience, and not carrying too much debt.

In this paper, we examine financial literacy in Singapore. Using data from the SKBI-GFLEC Sustainable Investment Survey, we find that approximately 40% of Singaporeans are financially literate. We also find that financial literacy is low among specific groups such as women, the less educated, and the unemployed. Moreover, we examine financial literacy across Environmental, Social, and Governance (ESG) literacy. We find that those with higher ESG knowledge are also more financially literate, showing that knowledge of these two different financial concepts is positively correlated. Finally, our results show that financial literacy can be linked to investment behavior which may affect financial well-being in the long run.

This paper examines financial literacy in Japan using a recent dataset from 2022 and finds that financial literacy levels are low. Only 36% of the respondents could correctly answer the Big Three financial literacy questions, three well-known questions assessing the understanding of interest, inflation, and risk diversification. Also, significant demographic variation exists in the Japanese population: the young, women, and the less educated are those who struggle the most with these fundamental financial concepts. Additionally, we find that Japanese who know the basics about environmental, social, and corporate governance (ESG)-related principles are also those who show better financial literacy levels than those who do not know about ESG. Lastly, our results confirm that financial literacy matters: it is strongly and positively correlated with active investment behavior, which may affect wealth accumulation and financial wellbeing.

Access to financial education courses makes a difference in high school students’ future financial lives. However, little data have been available to assess the access students have to these classes and what types of financial education are offered throughout the United States. We describe a novel dataset of over 19,000 hand-coded high school personal finance courses for over 7,400 high schools across the United States. These data cover the academic years from 2019–2020 to 2022–2023. The most common type of financial education offered is a semester-long course focused entirely on financial education, rather than, for example, a course on another topic that builds in a section on financial education. Schools that are in rural areas, schools with a higher percentage of Black students and schools that are geographically isolated from peers with high financial education requirements are less likely to require financial education courses for graduation.

We examine financial literacy in Germany and its relevance for financial wellbeing. Using data from the Panel on Household Finances collected in 2021, we show that about 62% of German households answer the Big Three financial literacy questions correctly. Those with lower education, who are out of the labor force, women, and those living in East Germany have lower levels of financial literacy. Identifying groups with lower financial literacy and developing strategies to reach them and enhance their abilities should therefore be an integral part of the German national financial literacy strategy. Financial literacy is linked to financial wellbeing: we document that those with higher financial literacy have a higher stock market participation rate and are less likely to report financial difficulties.

Financial literacy is today globally recognized as an essential life skill. However, many young adults have large debts due to consumption loans, and the situation in Sweden is escalating. Previous research has indicated a low financial literacy, and that the prevalence of mental illness is high within the group. In this report, we studied financial literacy, personal financial situation, and self-reported mental illness in a Swedish sample, comprising 2 057 respondents between 18 and 29 years. Our main findings indicate that financial literacy is lower than has previously been described, especially concerning knowledge about inflation. One in four reported they had consumption loans, one in three had loans to relatives, almost half of the respondents had perceived financial difficulties during the past year, and one out of ten had turned to the budget and debt advisor to receive help. Women showed lower financial literacy compared to men, indicating an important gender aspect. Our findings per se are sounding the alarm for policymakers to immediately pay attention in order to prevent the risk of becoming overindebted early in life. The present study highlights the urgent need to further study the complex relationship between financial literacy, personal financial situation, and mental illness among young adults.