FINANCIAL LITERACY: MEASUREMENT AND IMPROVEMENT STRATEGIES

Abstract

Prior research conducted by organizations such as the Organization for Economic Co-operation and Development (OECD) has shown that many people claim they feel secure with their knowledge of financial planning and management. However, as witnessed during the government shutdown, feelings are not the same as actions. If that was the case, then many people would have been able to cover their expenses despite missing a few paychecks. Moreover, whenever a financial literacy quiz has been provided to the public, history has shown that “less than ten percent of the respondents pass” (Martin, 2017) showing that financial literacy levels are low. Over the years, many people have gained more knowledge on saving strategies, budgeting, and the benefits of investing. In their report, the Federal Reserve found that, “when asked about their finances, 75 percent of adults say they are either doing okay or living comfortably. This result in 2018 is similar to 2017 and is 12 percentage points higher than 2013.” (The Federal Reserve, 2019, p. 1). However, the number of individuals still living paycheck to paycheck while drowning in debt is alarmingly high. A blogger from Equifax found that “56% of Americans don’t have any money left over at the end of the month after paying their bills” (Financial Literacy Survey: Do You Save for a Rainy Day?, 2019). This is caused by poor financial planning, living beyond one’s means or taking on too much debt, and sometimes, a combination of all three. This study will add to research by emphasizing the importance of financial literacy by evaluating the financial health of survey respondents and their knowledge of common concepts of finance. These concepts include interest, investments, and inflation. The respondents were recruited via Facebook and personal contact, such as family and classmates. The data collected will be used to examine how financial literacy varies across socioeconomic demographics. Lastly, the study will provide recommendations on ways financial education programs can improve to reach a larger audience and educate the public. These recommendations will be based on the survey responses on how people would like to receive financial education in the future.