research gap of financial literacy

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• > Financial literacy and financial well-being: Evidence...

Article contents

• Introduction
• Economic conditions in the US
• Data overview and summary statistics
• Empirical analysis and results
• Concluding remarks

Financial literacy and financial well-being: Evidence from the US

Published online by Cambridge University Press:  05 October 2023

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.

1. Introduction

Many existing studies have demonstrated the importance of financial literacy. As a key determinant of wealth inequality, financial knowledge helps individuals make investment decisions and better allocate financial resources (Lusardi et al. , Reference Lusardi, Michaud and Mitchell 2017 ). People with more financial knowledge learn about new financial issues faster (Delavande et al. , Reference Delavande, Rohwedder and Willis 2008 ). The lack of financial literacy, on the other hand, can lead to high-cost borrowing (Lusardi & Tufano, Reference Lusardi and Tufano 2015 ), and inadequate financial planning for both the short- and the long-term (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2014 ).

Financial knowledge is especially critical in the US today – as the economy has just experienced the COVID-19 pandemic, a spike in inflation, and a subsequent increase in interest rates. The uncertainties and risks in the macroeconomic environment amplify the importance of financial literacy. Despite its importance, financial literacy is low in the US (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2014 , Reference Lusardi and Mitchell 2023 ).

In this paper, we analyze financial literacy in the US, using the most recent data from the National Financial Capability Study (NFCS), collected by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation in 2021. This is a very large data set allowing us to do an in-depth analysis of both financial literacy and its link to financial wellbeing.

Several findings emerge. First, we show that low levels of financial literacy documented, for example in Lusardi and Mitchell ( Reference Lusardi and Mitchell 2011 b), continue to persist. Less than 30% of respondents in the NFCS could answer three basic financial literacy questions correctly. Second, not only is financial literacy low but it is unevenly distributed. Younger people, females, Black Americans and Hispanics, and those with low education attainment (high school or less) were among the least financially literate, including knowing little about inflation. Older people generally had more financial literacy; moreover, those who had lived through prior inflationary periods knew more about inflation than younger generations. Third, people overestimated how much they knew, and the gap between one’s actual financial knowledge and self-perception was often large. People who had less financial literacy tended to be more overconfident about their knowledge. Fourth, financial literacy matters as it is associated with financial behaviors and outcomes. Our results show that the more financially literate respondents were more likely to have planned for retirement, prepared for economic emergencies, and kept their debt at a manageable level.

The paper is organized as follows: In section 2 , we lay out a few economic characteristics and conditions of the US. In section 3 , we discuss the data and summary statistics. In section 4 , we show the results of descriptive and regression analyses. We conclude in Section 5 with some thoughts on how to improve financial literacy in the US.

2. Economic conditions in the US

As of 2020, the US population was over 333 million, with about 60% non-Hispanic White, 14% non-Hispanic Black, 18.9% Hispanic or Latino, and 6.1% Asian. The population is ageing: about 16.8% of Americans are over 65. The fertility rate has also declined: total births per woman decreased from 3.65 in 1960 to 1.66 in 2021 (FRED, 2023 c). Educational attainment has steadily increased: the percentage of people with a college degree increased from 7.7% in 1960 to 37.9% in 2021 (Statista, 2023 ); however, there has been a decline in male enrollment in college since the Great Recession of 2008. And the gender gap in educational attainment continues to widen: in 2020, only 41% of students enrolled in college were male (Smith, Reference Smith 2021 ).

Besides the changes in demographics, we must note several important changes in the US financial markets and financial system in the last several decades, which have increased the stake in financial decision-making at the individual and household levels. First, since the 1970s, retirement plans shifted away from defined-benefit (DB) plans to defined-contribution (DC) plans and Individual Retirement Accounts (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2014 ). The transition to the DC retirement saving model meant that individuals were now responsible for preparing for their golden years.

Second, financial institutions and financial markets have become increasingly complex. Meanwhile, the advance of technology has enabled people to trade stocks, options, bitcoins, and other financial instruments from the convenience of their personal computers and smartphones. Online banking has made it easier for people to transfer money with a click. For those with inadequate financial knowledge, such convenience to engage in financial transactions and trading can expose them to undesirable risks and potentially disastrous outcomes.

Third, following the COVID-19 pandemic, the US experienced the highest inflation since the mid-1980s. The growth rate of the consumer price index increased from 1.2% in 2020 to 8% in 2022 (see Figure  1 ). As a result, real earnings declined by about 7.6% during the same period (FRED, 2023 b). The last high inflation episode happened more than three decades ago, thus many younger people had no memory of fast-rising prices. Knowledge of inflation is crucial in deciding asset allocation, consumption, borrowing, and more. For those experiencing high inflation for the first time in life, a lack of financial literacy can lead to both poor economic decisions and anxiety.

Figure 1. Inflation in the US (%), 1960–2022.

Source: FRED (2023).

Fourth, the loose monetary policy and low-interest rate environment in the US over the last several decades until early 2022 incentivized household borrowing and spending, and sometimes risky investment, but disincentivized savings. Indeed, the market yield on the 10-year Treasury decreased from 15.8% in 1981 to 0.55% in 2020 (FRED, 2023 e). The 30-year fixed rate mortgage average fell from 18.44% in 1981 to 2.87% in 2021 (FRED, 2023 a). Household debt as a percent of GDP rose instead from 24.8% in 1950 to 99.15% in 2008. Although this ratio decreased somewhat after the Great Recession, it still hovered around 80% (IMF, 2023 ). Between February 2022 and February 2023, the commercial bank interest rate on credit card plans rose from 14.56% to 20.09% (FRED, 2023 d). Such rising interest rates can impact those carrying credit card debt, who now face higher borrowing costs.

Financial literacy is critical in helping individuals and households navigate complex financial circumstances and make sound financial decisions. In the next section, we explain the data that we use in our work.

3. Data overview and summary statistics

Since 2009, the FINRA Investor Education Foundation has conducted a detailed survey every three years known as the NFCS, which examines key indicators of financial literacy and financial capability, perceptions, attitudes, experiences, and behaviors.

This paper uses the latest wave of NFCS data, fielded from June to October 2021. The sample consisted of 27,118 adults (18+) across the US with about 500 respondents from each state and the District of Columbia. The respondents were drawn from online Footnote 1 panels and were offered incentives to participate. The survey responses were weighted to be representative of the national population in terms of age, gender, ethnicity, education, and Census Division. As with previous NFCS State-by-State surveys, the questionnaire did not specifically target heads of households or primary financial decision-makers (FINRA Investor Education Foundation, 2021 ).

We must keep in mind the potential implications of the unusual context of the COVID-19 pandemic on our results. The pandemic and the inflationary environment exposed some individuals and families to unexpected economic shocks. For example, one in five respondents in the 2021 NFCS said they were laid off or furloughed due to the pandemic during 2020 or 2021, and more than one in four respondents experienced a large, unexpected drop in income (FINRA Investor Education Foundation, 2022 ).

Summary statistics are in Appendix Table A1 . In the full sample, there were 27,118 individuals, with an average age of 47 years. About 31% of the respondents had a high school education or less, 39% had some college, 21% had a college degree, and 9% had a graduate degree. About 47% of the respondents were married and 36% were single. In terms of employment status, about 46% were working for an employer full-time or part-time, 8% were self-employed, 21% were retired, and the rest were not employed, including homemakers, full-time students, disabled, and the unemployed. Close to 60% were homeowners. In the next section, we will perform our empirical analyses on the total sample but also look at sub-groups and those in the working years and who are not retired yet.

4. Empirical analysis and results

4.1. how financially literate are individuals in the us.

Survey respondents were asked three carefully crafted financial literacy questions – the “Big Three” (Lusardi & Mitchell, Reference Lusardi, Mitchell, Lusardi and Mitchell 2011 a) – which measure the knowledge of basic but fundamental concepts underlying financial decision-making. The exact wording of the questions is as follows:

Q1. Understanding of interest rate (numeracy)

“Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?”

a) More than $102 (correct)

b) Exactly $102

c) Less than $102

d) Do not know

e) Refuse to answer

Q2. Understanding of inflation

“Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy?”

a) More than today

b) Exactly the same as today

c) Less than today (correct)

Q3: Understanding of risk diversification

“Do you think that the following statement is true or false? ‘Buying a single company stock usually provides a safer return than a stock mutual fund.’”

b) False (correct)

c) Do not know

d) Refuse to answer

The question on interest rates tests whether respondents have basic numeracy and the capacity to do simple calculations in the context of interest compounding. The question on inflation is particularly relevant for the 2021 wave of the survey as the US was experiencing rising inflation. The last question assesses people’s understanding of risk diversification. This is important for those actively engaged in the stock markets, and buying stocks and mutual funds.

Responses to the financial literacy questions are summarized in Table  1 . Panel (A) shows that about 69.4% of all respondents could correctly answer the interest rate question. Many people could not do these calculations: 14.2% answered the question incorrectly and another 15.4% simply did not know the answer.

Table 1. Summary statistics for the Big Three financial literacy questions, NFCS 2021

Note: Figures are weighted. DK indicates respondents who do not know.

Respondents had more difficulty answering the inflation question, where 22.7% answered incorrectly and another 23.1% did not know the response to this question (Panel B). The pattern of answers changes with risk diversification, where the proportion of do not know answers jumped to more than 45%; this is the topic about which people knew the least (Panel C).

Panel (D) examines the correlation between responses to the Big Three financial literacy questions. Less than 50% of the respondents know about interest rates and inflation, and fewer than 30% of the respondents got all three questions correct. Nearly 20% answered none of the questions right. More than half of the respondents indicated they did not know the answer to one or more questions, and nearly 10% did not know how to answer all three questions. These are alarming findings given the complex financial decisions that individuals must make.

4.2. Who is financially illiterate?

We compare the level of financial literacy across socio-demographic subgroups in Table  2 . Previous studies (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2011 c) have documented a hump-shape profile with respect to age. This is not confirmed by the present study. The 2021 wave of the survey shows that financial literacy is lowest among younger persons and rises with age. Only 14% of the youngest respondents answered all three questions correctly, compared to 47% of those over 65. The age gap in financial knowledge was bigger for the knowledge of inflation and risk diversification. Only 34% of the youngest group answered the inflation question correctly, compared to 76% of the 65+ group. On the risk diversification question, the 65+ group was twice as likely to answer it correctly compared to those under 35. It is possible that the hump-shape profile found by the prior study was not an age effect but a cohort effect.

Table 2. Distribution of responses (%) to financial literacy questions by age, sex, education, and employment status in the 2021 NFCS. Full sample

Notes: All figures are weighted. DK indicates respondents do not know.

Compared to men, women were less financially literate, and the gender knowledge gap was substantial. While close to 38% of men answered all three questions correctly, the proportion among women was only half that (19.7%). Across the three financial literacy questions, women knew more about interest rates than about inflation and risk diversification: only 46% and 33% of women could correctly answer the inflation and risk diversification questions, respectively. Women were much more likely to answer “do not know” to each of the Big Three questions than men. The high prevalence of “do not know” responses can be attributed to both a lack of confidence and a lack of knowledge (Bucher-Koenen et al. , Reference Bucher-Koenen, Alessie, Lusardi and van Rooij 2021 ).

Not surprisingly, financial literacy was correlated with educational attainment, and the knowledge gap was the largest between those with and without a college education. A college graduate was over three times more likely to have answered all three questions correctly than a high school graduate (45% vs. 13%). The differences between a high school graduate and those with some college were larger than between people with some college and those with a Bachelor’s degree. However, even the best educated displayed low financial literacy. About 30% of those with a graduate degree did not answer the inflation question correctly, and 40% of them did not answer the risk diversification question correctly.

Lastly, financial literacy differed by employment status. The not-employed group did the worst – only 14.5% answered all three questions correctly. This group of respondents included full-time students, the unemployed, the disabled, and homemakers. Interestingly, the self-employed and those working for an employer performed similarly. The retiree group did the best of all, as the older respondents in this survey were the most financially literate.

4.2.1 Inflation knowledge in the US

The NFCS survey used in this paper was conducted in the second half of 2021 when inflation was on the rise in the US. As shown in Figure  1 , inflation was high in the US in the 1970s to mid-1980s, reaching 14 percent at its peak in the early 1980s. After that and up until 2020, inflation remained low around 2–4 percent. After 2020, however, inflation started rising again: between 2020 and 2022, inflation increased from under 2 percent to 8 percent.

In this section, we focus on inflation knowledge and its correlation with socio-demographic characteristics. Ceteris paribus, people who were younger, female, less educated, or not employed knew less about inflation. Age being one of the most significant predictors of inflation knowledge suggests that the experience of a high inflation period helps people get a grasp of this concept. Respondents in our survey who lived through the high inflation period in the 1970s and early 1980s were more likely to understand inflation. Compared to people under age 35, the likelihood of someone age 65+ answering the inflation question correctly was 36.3 percentage points higher (Figure  2 and Table  2a ).

Figure 2. Regression estimation for correct answers to inflation question. Full sample.

Note: For specific coefficient estimates, see Table  2a .

Table 2a. OLS estimates of answering inflation correctly on demographic variables. Full sample

Note: *for p  < .1,

**for p  < .05, and

***for p  < .01. Full sample (18+) regardless of whether retired or not. The dummy variable is created so that it takes the value 1 if answered correctly, and 0 if answered incorrectly, don’t know, or prefer not to say.

4.2.2 Race and ethnicity

We compare financial literacy across different racial/ethnic groups (Table  3a ). Results show that Black respondents had the lowest level of financial literacy – fewer than 12% answered all three questions correctly, compared to 33% of Whites and 45% of Asians. Hispanic respondents performed poorly on the test as well with about 20% answering the Big Three correctly.

Table 3a. Distribution of responses to the Big Three by race/ethnicity, NFCS 2021. Full sample

Notes: All figures are weighted. DK indicates respondents do not know. NH: non-Hispanic.

Examining the Big Three financial literacy questions separately, the results show that Black respondents lagged behind other racial/ethnic groups, but the knowledge gap was especially pronounced in inflation and risk diversification. Less than one-third of Black Americans answered the inflation question correctly. Moreover, they had the most difficulty answering the risk diversification question – only 28% responded correctly to this question. This result is consistent with studies that found financial literacy gaps across racial and ethnic differences (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2014 ), and only 34 percent of Black American households invest in the stock market, compared with 61 percent of White families (Federal Reserve Board, 2023 ).

4.2.3. Self-reported vs. actual financial literacy

How do people perceive their financial literacy? And, how does that perception compare to their actual financial knowledge? To examine these questions, survey respondents were asked to rate their self-assessed financial literacy, from 1 (very low) to 7 (very high). As shown in Table  3b , despite the low actual level of financial literacy, most respondents gave themselves relatively high ratings. For example, although only 28.5% of all respondents were able to answer the Big Three correctly, when asked to rate their financial knowledge, the same group of people gave themselves an average rating of 5.1 out of 7.

Table 3b. Distribution of self-reported financial literacy by age, sex, education, employment status, and race/ethnicity in the National Financial Capability Study (%). Full sample

Notes: All figures are weighted. 1-“very low” 7-“very high”

Despite wide gaps in actual financial knowledge in terms of age, gender, and education, the gaps in perceived financial knowledge were smaller. The same can be found across race and ethnicity groups. Black and Hispanic respondents had lower actual financial literacy levels than Whites and Asians; yet, their self-rating of financial literacy was very similar to that of Whites and Asians. The average self-rating was 5.1, 5, 4.9, and 5.1 among Whites, Blacks, Hispanics, and Asians. While more people with low financial literacy choose ratings between 1 and 3, the percentage of those doing so is fairly small. These findings raise concerns that the gap between perception and reality can cause overconfidence when it comes to critical financial decision-making. Again, similar findings are reported in other papers (Lusardi & Mitchell, Reference Lusardi and Mitchell 2011 b, Lusardi & Tufano, Reference Lusardi and Tufano 2015 ).

4.3. Does financial literacy matter?

In this section, we examine the link between financial literacy and financial well-being. We focus on three measures for financial well-being: retirement planning, financial fragility, and debt burden. The survey asked people whether they have ever tried to figure out how much they need to save for retirement (“retirement planning”), how confident they were that they could come up with $2,000 if an unexpected need arose within the next month (“financial fragility”); and how strongly they agreed that they had too much debt (“debt burden”). The definition of the financial outcome variables and coding are shown in Table A2 in the appendix.

Retirement planning is a good proxy for wealth accumulation (Lusardi & Mitchell, 2014a). An inability to come up with $2000 in a month has proven to be a good measure of financial fragility (Lusardi et al. , Reference Lusardi, Schneider and Tufano 2011 ). The question about debt indicates the health of the household’s balance sheet, and how much debt is a burden (Lusardi & Tufano, Reference Lusardi and Tufano 2015 ). These variables are used as indicators of financial well-being.

Table  4 shows a simple tabulation of financial outcomes between people who correctly answered and those who did not know the answer to the Big Three questions. We find that retirement planning and financial literacy are positively correlated. Interestingly, the “do not know responses” are highly indicative of failing to plan for retirement. For instance, if someone answered “I don’t know” on the inflation question, then the person was over twice as likely to be a non-planner than a planner (30.4% vs. 12.2%).

Table 4. Financial literacy and financial well-being in the National Financial Capability Study (%). Full sample

Financial literacy is also correlated with financial fragility. Responses to the three financial literacy questions are strong predictors of the ability to come up with $2,000 in a month. Among people who answered the Big Three correctly, 37% could come up with $2,000 while only 13.4% could not.

The correlation between financial literacy and debt burden was weaker. Even among those who answered correctly, a substantial proportion of them had too much debt. This may be attributed to the constraints induced by student loans or mortgages, regardless of households’ financial literacy levels.

Findings are similar when we consider the sample of working-age non-retirees (see Table A3 in the Appendix).

4.3.1. A multivariate model of financial literacy and well-being

We now examine the relationship between financial literacy and the above measures of financial well-being using OLS regressions (Table  5 ). We use three different model specifications for financial literacy: in the first specification, the main independent variable is an indicator for answering all the Big Three correctly. In the second specification, the main independent variable is the total number of correct answers among the Big Three questions. In the third specification, the main independent variables are indicators for correctly answering each of the financial literacy questions. Results show that, in all specifications, financial literacy is linked to planning for retirement, the ability to come up with $2,000 within a month, and having a manageable level of debt.

Table 5. Financial literacy and financial well-being in the National Financial Capability Study, 2021. OLS estimates. Full sample.

Note: Robust standard errors in parentheses; *for p  < .1,

***for p  < .01. Full sample. Weights are used. Regression also controls for children, homeownership, and geographic regions. For full results see Appendix.

Respondents who answered all Big Three correctly had a 12.8 percentage point higher likelihood of planning for retirement. Note that most of the gain is attributed to understanding risk. When comparing the three dimensions of financial knowledge – interest compounding, inflation, and risk diversification – understanding of risk diversification is more relevant (0.107***) than inflation (0.038**) or interest compounding (0.017***).

The demographic variables that correlate most with retirement planning are having a college degree and higher income. Similar to other studies (Lusardi & Mitchell Reference Lusardi and Mitchell 2011 b, Reference Lusardi and Mitchell 2014 ), people who suffered income shocks were more likely to plan for retirement.

Financial literacy is also positively related to financial resilience and good debt management. Our results show that people who answered the Big Three correctly had a 6.3 percentage points lower likelihood of being financially fragile, and a 3.8 percentage points lower likelihood of having too much debt. Comparing the three financial wellbeing outcomes, we can see that financial literacy was most strongly associated with retirement planning, and least associated with debt. These findings are similar to those of Angrisani et al. ( Reference Angrisani, Burke, Lusardi and Mottola 2023 ). Meta-analyses of financial education programs also show weaker effects on debt (Kaiser et al. , Reference Kaiser, Lusardi, Menkhoff and Urban 2022 ).

Lastly, the demographic variables that correlate most with financial fragility are having had an income shock (0.137***) and owning a home (−0.152***). The demographic variable that correlated most with having too much debt was having had an income shock (0.210***). See Tables A4 and A5 for the full set of estimates and estimates on the sample of working-age non-retirees, respectively.

4.3.2. Robustness checks

One may argue that financial literacy could be an endogenous variable. For instance, people may invest in financial education to better prepare for retirement, to be better able to face shocks, or to better manage their debt. Moreover, measurement errors in financial literacy could also lead to estimation bias.

To address these issues, we make use of another variable that is potentially more exogenous than financial literacy. The survey provides information on exposure to financial education. The following question was asked: “Was financial education offered by a school or college you attended or a workplace where you were employed?”

(a) Yes, but I did not participate in the financial education

(b) Yes, and I did participate in the financial education

(d) Don’t know

(e) Prefer not to say

In our sample, 10.44% of the respondents said they were offered financial education but they did not participate, 21.92% said they participated, and 67.64% said they were not offered financial education.

Table  6 replaces the financial literacy variables with exposure to financial education. Here we only focus on whether financial education was offered, regardless of whether the respondent participated. We find that both retirement planning and financial fragility are affected by such exposure, but that is not the case for debt. Exposure to financial education is associated with an 11.3 percentage point increase in the likelihood of people planning for retirement and a 6.2 percentage point decrease in the likelihood of being financially fragile. These results are consistent with previous findings using financial literacy (Angrisani et al. , Reference Angrisani, Burke, Lusardi and Mottola 2023 ) and the fact that many financial education programs, in particular those in the workplace, focus more on retirement savings and do not often cover topics such as debt and debt management. See Table A6 for the full set of estimates.

Table 6. Exposure to financial education and financial well-being, OLS estimates

***for p  < .01. Weights are used. Regression also controls for children, homeownership, and geographic regions. For full results see Appendix.

5. Concluding remarks

Over the last several decades, financial institutions in the US have changed substantially. The transition from DB to DC plans has shifted the responsibility of planning and saving for retirement from employers to employees. Moreover, the decades-long low-interest rate environment stimulated both borrowing and consumption and discouraged savings.

More recently, however, economic conditions have changed quickly due to both unexpected events and policy changes. The COVID-19 pandemic was not only a health shock, but also an economic shock that threatened many people’s job security. The pandemic was followed by a hike in inflation to levels unseen since the 1980s, followed by a subsequent increase in interest rates by the Federal Reserve to curb inflation. These disruptions to job security, income stability, inflation, and interest rates all brought new challenges to people’s financial well-being.

This paper uses data from the 2021 NFCS to examine financial literacy among Americans. We focus on three dimensions of financial knowledge: interest rates, inflation, and risk diversification. Our results show that financial literacy continues to be low in the US. In particular, people who are younger, female, less educated, and not employed have the lowest level of financial knowledge. Many respondents in the survey were ill-informed about their true level of financial knowledge and mistakenly overconfident about their ability.

Since inflation was a particular challenge for many American families in 2021–2023, we focus particularly on people’s understanding of inflation. Results show that those over 65 knew more about inflation than younger age groups. This could be attributed to the fact that they lived through the inflationary periods in the 1970s and 1980s.

The responses to the Big Three financial literacy questions help predict people’s financial behaviors and well-being. Those who answered those questions correctly were much more likely to have planned for retirement, remained financially resilient, and managed their debt better. In addition, exposure to financial education in school or at the workplace was linked to an increased level of financial well-being.

In recent years, academics and policymakers have advocated for improving financial literacy. Financial education in school is one key for many young people to gain a foundation in financial literacy. Meanwhile, we should not underestimate the value of alternative and continued forms of financial education, including in the workplace. This education should be more holistic and cover topics well beyond retirement savings.

Our results also show that Black Americans had the lowest financial literacy levels of all subgroups examined, implying a need for programs better targeted to the needs of specific groups. In addition, women were consistently found to have lower financial literacy, even after controlling for age, education, and socioeconomic status. Studies have found that women are more likely to encounter challenges in managing finances after a divorce or losing a spouse (Holden & Smock, Reference Holden and Smock 1991 ; Streeter, Reference Streeter 2020 ; Zick & Holden, Reference Zick and Holden 2000 ). Effective financial literacy programs are needed to help women take control of their financial lives and close the gender gap in financial knowledge.

Appendix A.

Table A1. Summary Statistics, NFCS 2021

Notes: (1) Figures are weighted.

(2) We define someone as financially fragile if they responded to the question “How confident are you that you could come up with $2,000 if an unexpected need arose within the next month” with either “I could probably not come up with $2,000" or “I am certain I could not come up with $2,000.”

(3) People were asked “How strongly do you agree or disagree with the following statement? – I have too much debt right now.” The response options include 1 (strongly disagree); 2; 3; 4 (neither agree nor disagree); 5; 6; and 7 (strongly agree). We define someone as having too much debt if they chose 5, 6, or 7.

Table A2. Survey questions on financial outcomes

Note: For all three measures, 98 and 99 are treated as missing.

Table A3. Financial literacy and financial well-being. National Financial Capability Study (%). Non-retirees age 25–65.

Note: Sample consists of 17,287 non-retired respondents age 25–65. DK indicates respondent doesn’t know.

Table A4. Financial literacy and financial well-being. National Financial Capability Study, 2021. OLS estimates. Full sample.

***for p  < .01. Full sample. Weights are used.

Table A5. Financial literacy and financial well-being. National Financial Capability Study, 2021. OLS estimates. Non-retirees age 25–65.

***for p  < .01. Data are for non-retirees age 25–65. Weights are used.

Table A6. Exposure to financial education and financial well-being. OLS estimates.

***for p  < .01. Weights are used.

1 The 2009 wave of NFCS was collected via the telephone and online, and all subsequent waves were done online.

Figure 1. Inflation in the US (%), 1960–2022. Source: FRED (2023).

Figure 2. Regression estimation for correct answers to inflation question. Full sample. Note: For specific coefficient estimates, see Table 2a.

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• Volume 1, Issue 2
• Annamaria Lusardi (a1) and Jialu L. Streeter (a2)
• DOI: https://doi.org/10.1017/flw.2023.13

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Angelita Williams  (202) 728-8988

New Research: Financial Literacy Is Significant Indicator of Positive Future Financial Outcomes and Behaviors

Varying levels of financial knowledge among americans may deepen inequality.

WASHINGTON – Financial literacy is a strong indicator of positive financial outcomes for the future, but differing levels of financial literacy among Americans may contribute to widening inequality among different segments of the population, according to a new study by the FINRA Investor Education Foundation (FINRA Foundation), the University of Southern California's Center for Economic and Social Research (CESR) and The George Washington University's Global Financial Literacy Excellence Center (GFLEC).

The research brief, The Stability and Predictive Power of Financial Literacy: Evidence From Longitudinal Data , was published today in recognition of World Investor Week 2020, a global weeklong campaign held Oct. 5-11, but celebrated throughout the entire month of October due to the ongoing pandemic. The campaign seeks to raise awareness about the importance of investor education and protection.

"This study represents one of the nation's first efforts to collect and analyze longitudinal data linking financial literacy to the financial outcomes of individual Americans over a multi-year period," said FINRA Foundation President Gerri Walsh. "These findings reinforce the importance of financial literacy and suggest that differing levels of financial knowledge may contribute to increasing disparities over the life course."

For example, answering one additional question correctly on a five-question financial literacy quiz administered in 2012 increased the likelihood that a respondent could meet a $2,000 unexpected expense in 2018 by eight percent. Answering two questions correctly increased the likelihood by 16%, and three by 24%.

"Such unique data allows us to examine the extent to which financial literacy changes over time and for which groups in the population. We also assess how levels of financial knowledge affect financial decisions in the short- and medium-run, a key research question that cannot be tackled in most available data sets," said CESR researchers Marco Angrisani and Jeremy Burke.

However, researchers noted that financial literacy in 2012 was not statistically related to any of the negative financial outcomes documented in 2018, such as costly credit card behaviors or the use of alternative financial services, including auto title or payday loans, rapid refunds, pawn shops or rent-to-own shops. This suggested that poor financial decision-making may not be driven primarily by differences in financial knowledge, but instead may be attributed mainly to other factors like negative financial shocks and resource scarcity.

Longitudinal studies track the same type of information on the same subjects at multiple points in time. During this six year study, researchers surveyed a panel of 1,500 Americans in 2012 and the same individuals again in 2018 using a five-question quiz from the FINRA Foundation National Financial Capability Study (NFCS) covering fundamental concepts of economics and finance. The quiz includes simple calculations of interest in a savings account, the workings of inflation, the relationship between interest rate and bond prices, the relationship between the length of a mortgage and the overall interest paid over the life of the loan, and the concept of risk diversification.

"We hope that our study findings will be incorporated into the policies and programs developed to help individuals and families navigate the current economic crisis and rebuild resilience," says Annamaria Lusardi, Academic Director of GFLEC and University Professor at the George Washington University. "We found that people with greater financial knowledge were more likely to plan for retirement and be able to cope with a $2,000 unexpected shock. Financial education and workplace financial wellness programs need to be fundamental pieces of rebuilding the financial well-being of Americans."

Center for Economic and Social Research (CESR) CESR is a center within the University of Southern California's Dana and David Dornsife School of Letters, Arts and Sciences. At CESR, our scientists, colleagues and staff pursue compelling, data-driven research in the social sciences and economics that further understanding, policy making and quality of life. Our research explores the impact of social services and public policy, shifting population trends and their implications, and how human behavior -- our attitudes, actions, and ability to make decisions -- affects our well-being now and as we age. For more information, visit https://cesr.usc.edu .

Global Financial Literacy Excellence Center

The Global Financial Literacy Excellence Center (GFLEC) is dedicated to advancing research and solutions that open the door to universal financial literacy. In working toward that mission, GFLEC has positioned itself as the world's leading incubator for financial literacy research, policy, and solutions. GFLEC launched in 2011 at the George Washington University School of Business in Washington, D.C. Since then, it has pioneered breakthrough tools to measure financial literacy, developed and advised on educational programs, and crafted policy guidelines aimed at advancing financial knowledge in the United States and around the world. For more information on GFLEC, visit www.gflec.org.

About the FINRA Investor Education Foundation The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills and tools to make sound financial decisions throughout life. For more information about FINRA Foundation initiatives, visit  www.finrafoundation.org .

About FINRA FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry—brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit  www.finra.org .

• Conference key note
• Open access
• Published: 24 January 2019

Financial literacy and the need for financial education: evidence and implications

• Annamaria Lusardi 1  

Swiss Journal of Economics and Statistics volume  155 , Article number:  1 ( 2019 ) Cite this article

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1 Introduction

Throughout their lifetime, individuals today are more responsible for their personal finances than ever before. With life expectancies rising, pension and social welfare systems are being strained. In many countries, employer-sponsored defined benefit (DB) pension plans are swiftly giving way to private defined contribution (DC) plans, shifting the responsibility for retirement saving and investing from employers to employees. Individuals have also experienced changes in labor markets. Skills are becoming more critical, leading to divergence in wages between those with a college education, or higher, and those with lower levels of education. Simultaneously, financial markets are rapidly changing, with developments in technology and new and more complex financial products. From student loans to mortgages, credit cards, mutual funds, and annuities, the range of financial products people have to choose from is very different from what it was in the past, and decisions relating to these financial products have implications for individual well-being. Moreover, the exponential growth in financial technology (fintech) is revolutionizing the way people make payments, decide about their financial investments, and seek financial advice. In this context, it is important to understand how financially knowledgeable people are and to what extent their knowledge of finance affects their financial decision-making.

An essential indicator of people’s ability to make financial decisions is their level of financial literacy. The Organisation for Economic Co-operation and Development (OECD) aptly defines financial literacy as not only the knowledge and understanding of financial concepts and risks but also the skills, motivation, and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life. Thus, financial literacy refers to both knowledge and financial behavior, and this paper will analyze research on both topics.

As I describe in more detail below, findings around the world are sobering. Financial literacy is low even in advanced economies with well-developed financial markets. On average, about one third of the global population has familiarity with the basic concepts that underlie everyday financial decisions (Lusardi and Mitchell, 2011c ). The average hides gaping vulnerabilities of certain population subgroups and even lower knowledge of specific financial topics. Furthermore, there is evidence of a lack of confidence, particularly among women, and this has implications for how people approach and make financial decisions. In the following sections, I describe how we measure financial literacy, the levels of literacy we find around the world, the implications of those findings for financial decision-making, and how we can improve financial literacy.

2 How financially literate are people?

2.1 measuring financial literacy: the big three.

In the context of rapid changes and constant developments in the financial sector and the broader economy, it is important to understand whether people are equipped to effectively navigate the maze of financial decisions that they face every day. To provide the tools for better financial decision-making, one must assess not only what people know but also what they need to know, and then evaluate the gap between those things. There are a few fundamental concepts at the basis of most financial decision-making. These concepts are universal, applying to every context and economic environment. Three such concepts are (1) numeracy as it relates to the capacity to do interest rate calculations and understand interest compounding; (2) understanding of inflation; and (3) understanding of risk diversification. Translating these concepts into easily measured financial literacy metrics is difficult, but Lusardi and Mitchell ( 2008 , 2011b , 2011c ) have designed a standard set of questions around these concepts and implemented them in numerous surveys in the USA and around the world.

Four principles informed the design of these questions, as described in detail by Lusardi and Mitchell ( 2014 ). The first is simplicity : the questions should measure knowledge of the building blocks fundamental to decision-making in an intertemporal setting. The second is relevance : the questions should relate to concepts pertinent to peoples’ day-to-day financial decisions over the life cycle; moreover, they must capture general rather than context-specific ideas. Third is brevity : the number of questions must be few enough to secure widespread adoption; and fourth is capacity to differentiate , meaning that questions should differentiate financial knowledge in such a way as to permit comparisons across people. Each of these principles is important in the context of face-to-face, telephone, and online surveys.

Three basic questions (since dubbed the “Big Three”) to measure financial literacy have been fielded in many surveys in the USA, including the National Financial Capability Study (NFCS) and, more recently, the Survey of Consumer Finances (SCF), and in many national surveys around the world. They have also become the standard way to measure financial literacy in surveys used by the private sector. For example, the Aegon Center for Longevity and Retirement included the Big Three questions in the 2018 Aegon Retirement Readiness Survey, covering around 16,000 people in 15 countries. Both ING and Allianz, but also investment funds, and pension funds have used the Big Three to measure financial literacy. The exact wording of the questions is provided in Table  1 .

2.2 Cross-country comparison

The first examination of financial literacy using the Big Three was possible due to a special module on financial literacy and retirement planning that Lusardi and Mitchell designed for the 2004 Health and Retirement Study (HRS), which is a survey of Americans over age 50. Astonishingly, the data showed that only half of older Americans—who presumably had made many financial decisions in their lives—could answer the two basic questions measuring understanding of interest rates and inflation (Lusardi and Mitchell, 2011b ). And just one third demonstrated understanding of these two concepts and answered the third question, measuring understanding of risk diversification, correctly. It is sobering that recent US surveys, such as the 2015 NFCS, the 2016 SCF, and the 2017 Survey of Household Economics and Financial Decisionmaking (SHED), show that financial knowledge has remained stubbornly low over time.

Over time, the Big Three have been added to other national surveys across countries and Lusardi and Mitchell have coordinated a project called Financial Literacy around the World (FLat World), which is an international comparison of financial literacy (Lusardi and Mitchell, 2011c ).

Findings from the FLat World project, which so far includes data from 15 countries, including Switzerland, highlight the urgent need to improve financial literacy (see Table  2 ). Across countries, financial literacy is at a crisis level, with the average rate of financial literacy, as measured by those answering correctly all three questions, at around 30%. Moreover, only around 50% of respondents in most countries are able to correctly answer the two financial literacy questions on interest rates and inflation correctly. A noteworthy point is that most countries included in the FLat World project have well-developed financial markets, which further highlights the cause for alarm over the demonstrated lack of the financial literacy. The fact that levels of financial literacy are so similar across countries with varying levels of economic development—indicating that in terms of financial knowledge, the world is indeed flat —shows that income levels or ubiquity of complex financial products do not by themselves equate to a more financially literate population.

Other noteworthy findings emerge in Table  2 . For instance, as expected, understanding of the effects of inflation (i.e., of real versus nominal values) among survey respondents is low in countries that have experienced deflation rather than inflation: in Japan, understanding of inflation is at 59%; in other countries, such as Germany, it is at 78% and, in the Netherlands, it is at 77%. Across countries, individuals have the lowest level of knowledge around the concept of risk, and the percentage of correct answers is particularly low when looking at knowledge of risk diversification. Here, we note the prevalence of “do not know” answers. While “do not know” responses hover around 15% on the topic of interest rates and 18% for inflation, about 30% of respondents—in some countries even more—are likely to respond “do not know” to the risk diversification question. In Switzerland, 74% answered the risk diversification question correctly and 13% reported not knowing the answer (compared to 3% and 4% responding “do not know” for the interest rates and inflation questions, respectively).

These findings are supported by many other surveys. For example, the 2014 Standard & Poor’s Global Financial Literacy Survey shows that, around the world, people know the least about risk and risk diversification (Klapper, Lusardi, and Van Oudheusden, 2015 ). Similarly, results from the 2016 Allianz survey, which collected evidence from ten European countries on money, financial literacy, and risk in the digital age, show very low-risk literacy in all countries covered by the survey. In Austria, Germany, and Switzerland, which are the three top-performing nations in term of financial knowledge, less than 20% of respondents can answer three questions related to knowledge of risk and risk diversification (Allianz, 2017 ).

Other surveys show that the findings about financial literacy correlate in an expected way with other data. For example, performance on the mathematics and science sections of the OECD Program for International Student Assessment (PISA) correlates with performance on the Big Three and, specifically, on the question relating to interest rates. Similarly, respondents in Sweden, which has experienced pension privatization, performed better on the risk diversification question (at 68%), than did respondents in Russia and East Germany, where people have had less exposure to the stock market. For researchers studying financial knowledge and its effects, these findings hint to the fact that financial literacy could be the result of choice and not an exogenous variable.

To summarize, financial literacy is low across the world and higher national income levels do not equate to a more financially literate population. The design of the Big Three questions enables a global comparison and allows for a deeper understanding of financial literacy. This enhances the measure’s utility because it helps to identify general and specific vulnerabilities across countries and within population subgroups, as will be explained in the next section.

2.3 Who knows the least?

Low financial literacy on average is exacerbated by patterns of vulnerability among specific population subgroups. For instance, as reported in Lusardi and Mitchell ( 2014 ), even though educational attainment is positively correlated with financial literacy, it is not sufficient. Even well-educated people are not necessarily savvy about money. Financial literacy is also low among the young. In the USA, less than 30% of respondents can correctly answer the Big Three by age 40, even though many consequential financial decisions are made well before that age (see Fig.  1 ). Similarly, in Switzerland, only 45% of those aged 35 or younger are able to correctly answer the Big Three questions. Footnote 1 And if people may learn from making financial decisions, that learning seems limited. As shown in Fig.  1 , many older individuals, who have already made decisions, cannot answer three basic financial literacy questions.

Financial literacy across age in the USA. This figure shows the percentage of respondents who answered correctly all Big Three questions by age group (year 2015). Source: 2015 US National Financial Capability Study

A gender gap in financial literacy is also present across countries. Women are less likely than men to answer questions correctly. The gap is present not only on the overall scale but also within each topic, across countries of different income levels, and at different ages. Women are also disproportionately more likely to indicate that they do not know the answer to specific questions (Fig.  2 ), highlighting overconfidence among men and awareness of lack of knowledge among women. Even in Finland, which is a relatively equal society in terms of gender, 44% of men compared to 27% of women answer all three questions correctly and 18% of women give at least one “do not know” response versus less than 10% of men (Kalmi and Ruuskanen, 2017 ). These figures further reflect the universality of the Big Three questions. As reported in Fig.  2 , “do not know” responses among women are prevalent not only in European countries, for example, Switzerland, but also in North America (represented in the figure by the USA, though similar findings are reported in Canada) and in Asia (represented in the figure by Japan). Those interested in learning more about the differences in financial literacy across demographics and other characteristics can consult Lusardi and Mitchell ( 2011c , 2014 ).

Gender differences in the responses to the Big Three questions. Sources: USA—Lusardi and Mitchell, 2011c ; Japan—Sekita, 2011 ; Switzerland—Brown and Graf, 2013

3 Does financial literacy matter?

A growing number of financial instruments have gained importance, including alternative financial services such as payday loans, pawnshops, and rent to own stores that charge very high interest rates. Simultaneously, in the changing economic landscape, people are increasingly responsible for personal financial planning and for investing and spending their resources throughout their lifetime. We have witnessed changes not only in the asset side of household balance sheets but also in the liability side. For example, in the USA, many people arrive close to retirement carrying a lot more debt than previous generations did (Lusardi, Mitchell, and Oggero, 2018 ). Overall, individuals are making substantially more financial decisions over their lifetime, living longer, and gaining access to a range of new financial products. These trends, combined with low financial literacy levels around the world and, particularly, among vulnerable population groups, indicate that elevating financial literacy must become a priority for policy makers.

There is ample evidence of the impact of financial literacy on people’s decisions and financial behavior. For example, financial literacy has been proven to affect both saving and investment behavior and debt management and borrowing practices. Empirically, financially savvy people are more likely to accumulate wealth (Lusardi and Mitchell, 2014 ). There are several explanations for why higher financial literacy translates into greater wealth. Several studies have documented that those who have higher financial literacy are more likely to plan for retirement, probably because they are more likely to appreciate the power of interest compounding and are better able to do calculations. According to the findings of the FLat World project, answering one additional financial question correctly is associated with a 3–4 percentage point greater probability of planning for retirement; this finding is seen in Germany, the USA, Japan, and Sweden. Financial literacy is found to have the strongest impact in the Netherlands, where knowing the right answer to one additional financial literacy question is associated with a 10 percentage point higher probability of planning (Mitchell and Lusardi, 2015 ). Empirically, planning is a very strong predictor of wealth; those who plan arrive close to retirement with two to three times the amount of wealth as those who do not plan (Lusardi and Mitchell, 2011b ).

Financial literacy is also associated with higher returns on investments and investment in more complex assets, such as stocks, which normally offer higher rates of return. This finding has important consequences for wealth; according to the simulation by Lusardi, Michaud, and Mitchell ( 2017 ), in the context of a life-cycle model of saving with many sources of uncertainty, from 30 to 40% of US retirement wealth inequality can be accounted for by differences in financial knowledge. These results show that financial literacy is not a sideshow, but it plays a critical role in saving and wealth accumulation.

Financial literacy is also strongly correlated with a greater ability to cope with emergency expenses and weather income shocks. Those who are financially literate are more likely to report that they can come up with $2000 in 30 days or that they are able to cover an emergency expense of $400 with cash or savings (Hasler, Lusardi, and Oggero, 2018 ).

With regard to debt behavior, those who are more financially literate are less likely to have credit card debt and more likely to pay the full balance of their credit card each month rather than just paying the minimum due (Lusardi and Tufano, 2009 , 2015 ). Individuals with higher financial literacy levels also are more likely to refinance their mortgages when it makes sense to do so, tend not to borrow against their 401(k) plans, and are less likely to use high-cost borrowing methods, e.g., payday loans, pawn shops, auto title loans, and refund anticipation loans (Lusardi and de Bassa Scheresberg, 2013 ).

Several studies have documented poor debt behavior and its link to financial literacy. Moore ( 2003 ) reported that the least financially literate are also more likely to have costly mortgages. Lusardi and Tufano ( 2015 ) showed that the least financially savvy incurred high transaction costs, paying higher fees and using high-cost borrowing methods. In their study, the less knowledgeable also reported excessive debt loads and an inability to judge their debt positions. Similarly, Mottola ( 2013 ) found that those with low financial literacy were more likely to engage in costly credit card behavior, and Utkus and Young ( 2011 ) concluded that the least literate were more likely to borrow against their 401(k) and pension accounts.

Young people also struggle with debt, in particular with student loans. According to Lusardi, de Bassa Scheresberg, and Oggero ( 2016 ), Millennials know little about their student loans and many do not attempt to calculate the payment amounts that will later be associated with the loans they take. When asked what they would do, if given the chance to revisit their student loan borrowing decisions, about half of Millennials indicate that they would make a different decision.

Finally, a recent report on Millennials in the USA (18- to 34-year-olds) noted the impact of financial technology (fintech) on the financial behavior of young individuals. New and rapidly expanding mobile payment options have made transactions easier, quicker, and more convenient. The average user of mobile payments apps and technology in the USA is a high-income, well-educated male who works full time and is likely to belong to an ethnic minority group. Overall, users of mobile payments are busy individuals who are financially active (holding more assets and incurring more debt). However, mobile payment users display expensive financial behaviors, such as spending more than they earn, using alternative financial services, and occasionally overdrawing their checking accounts. Additionally, mobile payment users display lower levels of financial literacy (Lusardi, de Bassa Scheresberg, and Avery, 2018 ). The rapid growth in fintech around the world juxtaposed with expensive financial behavior means that more attention must be paid to the impact of mobile payment use on financial behavior. Fintech is not a substitute for financial literacy.

4 The way forward for financial literacy and what works

Overall, financial literacy affects everything from day-to-day to long-term financial decisions, and this has implications for both individuals and society. Low levels of financial literacy across countries are correlated with ineffective spending and financial planning, and expensive borrowing and debt management. These low levels of financial literacy worldwide and their widespread implications necessitate urgent efforts. Results from various surveys and research show that the Big Three questions are useful not only in assessing aggregate financial literacy but also in identifying vulnerable population subgroups and areas of financial decision-making that need improvement. Thus, these findings are relevant for policy makers and practitioners. Financial illiteracy has implications not only for the decisions that people make for themselves but also for society. The rapid spread of mobile payment technology and alternative financial services combined with lack of financial literacy can exacerbate wealth inequality.

To be effective, financial literacy initiatives need to be large and scalable. Schools, workplaces, and community platforms provide unique opportunities to deliver financial education to large and often diverse segments of the population. Furthermore, stark vulnerabilities across countries make it clear that specific subgroups, such as women and young people, are ideal targets for financial literacy programs. Given women’s awareness of their lack of financial knowledge, as indicated via their “do not know” responses to the Big Three questions, they are likely to be more receptive to financial education.

The near-crisis levels of financial illiteracy, the adverse impact that it has on financial behavior, and the vulnerabilities of certain groups speak of the need for and importance of financial education. Financial education is a crucial foundation for raising financial literacy and informing the next generations of consumers, workers, and citizens. Many countries have seen efforts in recent years to implement and provide financial education in schools, colleges, and workplaces. However, the continuously low levels of financial literacy across the world indicate that a piece of the puzzle is missing. A key lesson is that when it comes to providing financial education, one size does not fit all. In addition to the potential for large-scale implementation, the main components of any financial literacy program should be tailored content, targeted at specific audiences. An effective financial education program efficiently identifies the needs of its audience, accurately targets vulnerable groups, has clear objectives, and relies on rigorous evaluation metrics.

Using measures like the Big Three questions, it is imperative to recognize vulnerable groups and their specific needs in program designs. Upon identification, the next step is to incorporate this knowledge into financial education programs and solutions.

School-based education can be transformational by preparing young people for important financial decisions. The OECD’s Programme for International Student Assessment (PISA), in both 2012 and 2015, found that, on average, only 10% of 15-year-olds achieved maximum proficiency on a five-point financial literacy scale. As of 2015, about one in five of students did not have even basic financial skills (see OECD, 2017 ). Rigorous financial education programs, coupled with teacher training and high school financial education requirements, are found to be correlated with fewer defaults and higher credit scores among young adults in the USA (Urban, Schmeiser, Collins, and Brown, 2018 ). It is important to target students and young adults in schools and colleges to provide them with the necessary tools to make sound financial decisions as they graduate and take on responsibilities, such as buying cars and houses, or starting retirement accounts. Given the rising cost of education and student loan debt and the need of young people to start contributing as early as possible to retirement accounts, the importance of financial education in school cannot be overstated.

There are three compelling reasons for having financial education in school. First, it is important to expose young people to the basic concepts underlying financial decision-making before they make important and consequential financial decisions. As noted in Fig.  1 , financial literacy is very low among the young and it does not seem to increase a lot with age/generations. Second, school provides access to financial literacy to groups who may not be exposed to it (or may not be equally exposed to it), for example, women. Third, it is important to reduce the costs of acquiring financial literacy, if we want to promote higher financial literacy both among individuals and among society.

There are compelling reasons to have personal finance courses in college as well. In the same way in which colleges and university offer courses in corporate finance to teach how to manage the finances of firms, so today individuals need the knowledge to manage their own finances over the lifetime, which in present discounted value often amount to large values and are made larger by private pension accounts.

Financial education can also be efficiently provided in workplaces. An effective financial education program targeted to adults recognizes the socioeconomic context of employees and offers interventions tailored to their specific needs. A case study conducted in 2013 with employees of the US Federal Reserve System showed that completing a financial literacy learning module led to significant changes in retirement planning behavior and better-performing investment portfolios (Clark, Lusardi, and Mitchell, 2017 ). It is also important to note the delivery method of these programs, especially when targeted to adults. For instance, video formats have a significantly higher impact on financial behavior than simple narratives, and instruction is most effective when it is kept brief and relevant (Heinberg et al., 2014 ).

The Big Three also show that it is particularly important to make people familiar with the concepts of risk and risk diversification. Programs devoted to teaching risk via, for example, visual tools have shown great promise (Lusardi et al., 2017 ). The complexity of some of these concepts and the costs of providing education in the workplace, coupled with the fact that many older individuals may not work or work in firms that do not offer such education, provide other reasons why financial education in school is so important.

Finally, it is important to provide financial education in the community, in places where people go to learn. A recent example is the International Federation of Finance Museums, an innovative global collaboration that promotes financial knowledge through museum exhibits and the exchange of resources. Museums can be places where to provide financial literacy both among the young and the old.

There are a variety of other ways in which financial education can be offered and also targeted to specific groups. However, there are few evaluations of the effectiveness of such initiatives and this is an area where more research is urgently needed, given the statistics reported in the first part of this paper.

5 Concluding remarks

The lack of financial literacy, even in some of the world’s most well-developed financial markets, is of acute concern and needs immediate attention. The Big Three questions that were designed to measure financial literacy go a long way in identifying aggregate differences in financial knowledge and highlighting vulnerabilities within populations and across topics of interest, thereby facilitating the development of tailored programs. Many such programs to provide financial education in schools and colleges, workplaces, and the larger community have taken existing evidence into account to create rigorous solutions. It is important to continue making strides in promoting financial literacy, by achieving scale and efficiency in future programs as well.

In August 2017, I was appointed Director of the Italian Financial Education Committee, tasked with designing and implementing the national strategy for financial literacy. I will be able to apply my research to policy and program initiatives in Italy to promote financial literacy: it is an essential skill in the twenty-first century, one that individuals need if they are to thrive economically in today’s society. As the research discussed in this paper well documents, financial literacy is like a global passport that allows individuals to make the most of the plethora of financial products available in the market and to make sound financial decisions. Financial literacy should be seen as a fundamental right and universal need, rather than the privilege of the relatively few consumers who have special access to financial knowledge or financial advice. In today’s world, financial literacy should be considered as important as basic literacy, i.e., the ability to read and write. Without it, individuals and societies cannot reach their full potential.

See Brown and Graf ( 2013 ).

Abbreviations

Defined benefit (refers to pension plan)

Defined contribution (refers to pension plan)

Financial Literacy around the World

National Financial Capability Study

Organisation for Economic Co-operation and Development

Programme for International Student Assessment

Survey of Consumer Finances

Survey of Household Economics and Financial Decisionmaking

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Acknowledgements

This paper represents a summary of the keynote address I gave to the 2018 Annual Meeting of the Swiss Society of Economics and Statistics. I would like to thank Monika Butler, Rafael Lalive, anonymous reviewers, and participants of the Annual Meeting for useful discussions and comments, and Raveesha Gupta for editorial support. All errors are my responsibility.

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Lusardi, A. Financial literacy and the need for financial education: evidence and implications. Swiss J Economics Statistics 155 , 1 (2019). https://doi.org/10.1186/s41937-019-0027-5

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Financial Literacy and Financial Education: An Overview

This article provides a concise narrative overview of the rapidly growing empirical literature on financial literacy and financial education. We first discuss stylized facts on the demographic correlates of financial literacy. We next cover the evidence on the effects of financial literacy on financial behaviors and outcomes. Finally, we review the evidence on the causal effects of financial education programs focusing on randomized controlled trial evaluations. The article concludes with perspectives on future research priorities for both financial literacy and financial education.

We thank Luis Oberrauch for excellent research assistance and Allen N. Berger, Phil Molyneux, and John O.S. Wilson for helpful comments. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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• More to Learn About Crypto, Investing
• Education Needs Align With Life Stage
• Young Adults Have Their Eyes On Retirement
• Education Needs to Meet People Online

Methodology

• Cryptocurrency News

Top Financial Literacy Education Gaps Across Generations

The 2022 Investopedia Financial Literacy Survey polled 4,000 U.S. adults

Investopedia / Alice Morgan

Most U.S. adults have a beginner's understanding of cryptocurrency, but plan on using such assets as a key source of retirement funds, according to a new multigenerational financial literacy study from Investopedia. 

In the spirit of Financial Literacy Month this April, Investopedia asked 4,000 U.S. adults—1,000 each from the Generation Z (18-25), millennial (26-41), Generation X (42-57), and baby boomer (58-76) generations—about their financial know-how, habits, worries, and retirement plans. The 2022 Investopedia Financial Literacy Survey found Americans are simultaneously trying to grasp personal finance basics, thinking about retirement, and investing in crypto. They learn differently than older generations have, too.

Key Takeaways

• About 57% of U.S. adults are invested, but just one in three say they have advanced investing knowledge. 
• About half of all surveyed adults feel they have a deep understanding of consuming (managing spending and keeping a budget), paying taxes, and saving. 
• Cryptocurrency and stocks are the most popular assets held by Gen Z, millennial, and Gen X investors, but overall, many Americans (49%) have only a beginner-level understanding of digital currency. 
• More than half of each generation expects to retire, and 28% of millennials expect to use cryptocurrency to financially support themselves in retirement, and some Gen X and Gen Z respondents said the same (20% and 17%, respectively).
• The Internet is a go-to source for investing and financial education for the young generations: 45% of Gen Z use YouTube, and 30% turn to TikTok. Millennials prefer Internet searches (47%) but also lean on YouTube (40%).

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“Our relationship to money, investing, and financial planning has radically changed in the past few years as new asset classes like crypto and NFTs have emerged just as millions of people are taking their first steps into investing,” says Investopedia Editor-in-Chief Caleb Silver . “What hasn’t changed is the need for relevant financial education—but in a modernized curriculum that addresses these new financial products and services, designed to serve the people who are dependent on them to build their wealth.”

U.S. Adults Have More to Learn About Crypto and Investing

Though about half of Americans feel they have a strong grasp of financial literacy basics, such as spending, budgeting, paying taxes, and saving, far fewer have the same level of understanding when it comes to investing and digital currency.

Overall, 57% of adults Investopedia surveyed are invested, but just one in three say they have advanced investing knowledge. Even fewer (one in four) reported strong knowledge of digital currency, such as cryptocurrency, blockchain , and non-fungible tokens (NFTs). 

Millennials said they understand investing the most, as 44% reported advanced knowledge of the subject. Gen X follows closely behind (37%), followed by Gen Z (31%) and baby boomers (26%). 

Even fewer people have a strong grasp on digital currency, such as cryptocurrency, blockchain, and NFTs, topics that Investopedia has already seen substantial interest in over the past year in particular. Half of all survey respondents (49%) said they only have a beginner's understanding of increasingly popular aspects of financial technology. 

Millennials are the most confident—41% said they have an advanced understanding of digital currency. Similarly, 39% of millennials said they could explain cryptocurrency to someone else, but only 25% said the same about NFTs . 

Members of Gen Z , who have grown up immersed in technology, and Gen X , are on about the same level with crypto (30% and 29%, respectively), and baby boomers ' knowledge trails behind at just 8%. 

Despite knowledge gaps, most generations hold crypto

Though most adults have more to learn about digital currency, that hasn’t stopped them from investing in related assets, which indicates more emerging technology education is needed to meet people where they are.

Crypto-enabled investments are popular among three of the four generations surveyed by Investopedia: Gen Z, millennials, and Gen X. A steep 38% of millennials said they have some kind of cryptocurrency investment in their name, making it the most common investment this generation holds and just as popular as investments in stocks. 

Gen Z and Gen X are not far behind, with cryptocurrency as their second most popular type of investment. Only 6% of the baby boomers Investopedia surveyed said they hold cryptocurrency. 

Millennials might be most keen on crypto, but Gen Z and Gen X are equally bullish. When asked what asset they expect to yield the greatest returns for them over the next decade, all three generations said cryptocurrency, followed by stocks . These predictions follow years of climbing Bitcoin return values and a flood of new investors during the pandemic, driven by easy-to-use online brokerage platforms, social media conversations, and an evolving tech industry.

Baby boomers think their stocks and mutual funds will produce the greatest 10-year returns, but cryptocurrency still surpassed more traditional investment vehicles such as index funds and ETFs.

Other Financial Literacy Needs Align With Life Stage

The 2022 Investopedia Financial Literacy Survey affirmed that younger generations feel like they have more to learn about personal finance fundamentals, while older generations are focused on planning for the future and maintaining wealth. Though this might be expected given life stage experiences, it reinforces the need for ongoing financial education.

Gen Z, the youngest adults surveyed, said they are the least educated when it comes to taxes, borrowing, insurance, and retirement. They are also the generation that wants to learn more about doing their taxes: 34% said that it's the most important financial skill they could learn today. 

Millennials, who have a few more years of life and work experience under their belt, feel more informed when it comes to savings, investing, and cryptocurrency than other generations. They also have their eyes on improving their credit scores , which is key for many common midlife financial moves such as buying a home or car. 

Members of Gen X, many of whom are nearing the average retirement age, are most interested in saving for retirement. Baby boomers, many of whom are already retired according to the survey, are most interested in learning how to better protect their wealth by securing their online personal financial information. 

Two personal finance topics all four generations agree on are some of the most important skills they could learn more about? Avoiding fees and reducing debt. 

Young Americans Have Their Eyes on Retirement

Despite navigating several periods of economic uncertainty over the past decade—namely the recent COVID-19 pandemic —younger generations are quite optimistic about their ability to retire.

When asked when they expect to stop working, Gen Z cited a median age of 57. Each successive generation expects to stop working at slightly later ages, but Gen X, who are up next for retirement, still say “64” as their median number, in line with the national average for both men and women.  

Overall, more than half of each generation fully expects to be able to retire, while an additional around one in four say they’re not sure, indicating there are still opportunities for more retirement planning education and wealth management guidance across generations.

Investopedia found each generation is thinking about retirement, but planning approaches vary. To learn more, read Multigenerational Survey Shows How Retirement Planning Is Changing .

Cryptocurrency is appearing in retirement strategies

Just as portfolios are evolving with technology, so are retirement plans. The 2022 Investopedia Financial Literacy Survey found that though most of each generation still expects to rely on traditional income sources such as 401(k)s and Social Security when they stop working, cryptocurrency has also made the shortlist. 

More than a quarter of millennials (28%) said they expect to use cryptocurrency to support themselves in retirement, on par with savings (25%) and stock market investments (27%). A notable portion of Gen X and Gen Z respondents said the same (20% and 17%, respectively).

“For younger investors, cryptocurrency is clearly not just a fun asset to trade in order to make fast money,” says Silver. “They are depending on generating returns from cryptocurrency to build wealth and fund their retirement, which is concerning given the lack of education around investing in crypto, and the fact it is still not regulated by the industry.”

Education Needs to Meet People Online 

When asked where they get their investing information, all four generations surveyed by Investopedia said friends, family, and the Internet are go-to education sources. Perhaps unsurprisingly, young adults that have grown up with social media and the Internet say they rely more on digital, often video-based content to learn about investing and personal finance.

A steep 39% of Gen Z investors said they get investing insights from YouTube, and another one in four turn to TikTok and Instagram . Millennial investors are keener on Internet searches (47%) but also rely on YouTube videos to learn about investing (40%).

The Internet is a go-to source of guidance for older generations, too. YouTube is just as popular among Gen X investors as it is for millennials. Baby boomers are the most likely generation to go directly to financial information websites like Investopedia for investing insights. 

The 2022 Investopedia Financial Literacy Survey quantifies U.S. adults’ understanding of their own financial literacy at the generational level. The survey was fielded via an opt-in, online self-administered questionnaire between Jan. 27 and Feb. 7, 2022, to 4,000 U.S. adults, 1,000 each of which were from the following generations: Gen Z (18-25), millennials (26-41), Generation X (42-57), and baby boomers (58-76). To ensure representation within each generation, sub-quotas within each generation served to ensure representation across gender, region, and race/ethnicity. To learn more, see the full methodology .  Survey research and data analysis led by  Amanda Morelli .

Center for Retirement Research at Boston College. " What Explains the Widening Gap in Retirement Ages by Education? " Page 1.

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• Published: 25 June 2024

The impact of religiosity and financial literacy on financial management behavior and well-being among Indonesian Muslims

• Haykal Rafif Wijaya 1 ,
• Sri Rahayu Hijrah Hati 1 ,
• Irwan Adi Ekaputra 1 &
• Salina Kassim 2  

Humanities and Social Sciences Communications volume  11 , Article number:  830 ( 2024 ) Cite this article

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This study examines the effects of religiosity and Islamic financial literacy on Muslims’ financial behavior and well-being. Additionally, it investigates the impact of sociodemographic variables on the centrality of religiosity, financial literacy, financial management behavior, and the well-being of Muslim consumers. This research integrates perspectives from Rational Choice Theory, the Rational Choice Theory of Religion, and Behavioral Finance to illuminate the mechanisms behind these relationships. Data were collected through a non-probability sampling method from 1141 Muslim individuals aged between 18 and 65 living in Indonesia. The results indicate that the centrality of religion in the lives of Muslim consumers and Islamic financial literacy significantly affects their financial management behavior and financial well-being. However, the empirical evidence suggests a more substantial effect of Islamic financial literacy than religiosity on both dependent variables.

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Introduction.

Understanding the dynamics of financial behavior and well-being among Muslims requires a nuanced analysis of religiosity and Islamic financial literacy. Recent statistics indicate a growing trend towards Islamic finance, with the global Islamic finance market valued at $3.96 trillion in 2022/2023 and projected to reach $5.94 trillion by 2024/2025, growing at a compound annual growth rate of 9% from 2020 (Dinar Standard, 2023 ). This surge underscores the significant role of religious principles in shaping financial decisions within Muslim communities, as shown by many scholars (e.g. Azmat et al., 2021 ). Moreover, studies reveal that religiosity can profoundly influence financial behavior, affecting everything from savings to investment choices (Alfi and Yusuf, 2022 ; Newaz et al., 2016 ; Sharma et al., 2017 ; Zainudin, Mahdzan, Che Hashim, et al., 2019 ). In addition, religiosity is also found to influence Muslims’ well-being significantly (Tiliouine, 2009 ; Tiliouine et al., 2009 ). Apart from religiosity, Islamic financial literacy is found to significantly influence Muslim financial behavior and well-being (Abdullah et al., 2019 ; Biplob and Abdullah, 2019 ).

The importance of Islamic principles to economics is emphasized by the maqasid al-shariah (the higher objectives of Islamic law). These goals aim to promote the well-being of all people, encompassing the preservation of faith, self, intellect, progeny, and wealth (Auda, 2008 ). The Sharia, the legal and ethical code of Islam, guides how scientific knowledge is applied within Muslim societies and cultures (Bakar, 2003 ; Chapra, 2000 ). This framework challenges findings from studies like Guiso et al. ( 2003 ), which documented a negative association between Islam and attitudes supportive of economic progress. This contradicts the Islamic economic principles embedded in the Qur’an that promote efficiency and growth (Bonner, 2005 ; Kuran, 1995 ). Such contradictions highlight the complexity of understanding the relationship between Islam and economic behaviors.

Despite the growing body of literature on Islamic finance and the acknowledged influence of religiosity on financial behavior, a critical research gap persists in understanding the nuanced interplay between religiosity, Islamic financial literacy, and their combined effects on financial behavior and well-being. This study aims to address this gap by examining the impacts of religiosity and Islamic financial literacy on Muslims’ financial behavior and well-being, also considering the role of sociodemographic variables.

The theoretical lens of Rational Choice Theory, the Rational Choice Theory of Religion, and Behavioral Finance offers invaluable insights into bridging this phenomenon to a broader understanding of Muslim financial behavior. Rational Choice Theory, with its emphasis on utility maximization and consistent preferences (Becker, 1976 ; Zafirovski, 2018 ), serves as a foundation for understanding how Muslims’ decisions in savings, investments, and expenditures may reflect efforts to optimize both personal and spiritual well-being within Islamic law’s confines. The Rational Choice Theory of Religion further illuminates how religiosity influences financial decisions, suggesting that individuals engage in religious practices based on rational evaluations aimed at maximizing personal spiritual and social rewards (Jerolmack and Porpora, 2004 ). Behavioral Finance complements these theories by addressing deviations from rational decision-making due to psychological or sociocultural biases (Kahneman and Tversky, 1982 ), offering a lens through which to view how Islamic values impact financial decisions.

Integrating these theories facilitates a comprehensive exploration of the intersection between Islamic financial literacy and religiosity in shaping financial behaviors, addressing the gap left by traditional financial theories that often overlook cultural and religious nuances. This research not only aims to shed light on the mechanisms driving financial decisions within Muslim communities but also seeks to contribute to the broader discourse on financial behavior. By offering insights that can inform financial education, policy-making, and the development of religiously tailored financial products, this study endeavors to provide a more holistic understanding of financial decision-making processes among Muslims.

Literature review

The rational choice theory, the rational choice theory of religion and behavioral finance theory.

Rational Choice Theory suggests that individuals make decisions by systematically evaluating the available options to maximize their utility, based on preferences that are stable, coherent, and transitive (Handfield, 2014 ). This theory assumes that individuals have full information, can process this information effectively, and are motivated purely by self-interest to achieve the most favorable outcomes (Becker, 1976 ). It embodies the classical economic view of humans as rational actors, consistently making choices that maximize their utility. In the context of Islamic financial literacy, Rational Choice Theory suggests that Muslims equipped with knowledge about Islamic finance principles would make rational decisions to engage with financial products and services that not only comply with Shariah law but also offer competitive returns or benefits, thereby maximizing their economic utility. The decision to acquire Islamic financial literacy and apply it in financial management behavior is viewed as a rational pursuit to align financial actions with religious values while seeking the best possible economic outcomes. Rational Choice Theory has been applied in relation to financial literacy and its influence on financial decision-making, including biases (Loerwald and Stemmann, 2016 ). Within the realm of Islamic financial literacy, it implies that Muslims with knowledge of Islamic finance or sufficient Islamic financial literacy are likely to make informed decisions favoring financial products and services that adhere to Shariah law while offering competitive returns, thus maximizing their economic utility.

The Rational Choice Theory of Religion posits that individuals approach religious practices and beliefs through a cost–benefit analysis, aiming to maximize personal spiritual and social rewards (Jerolmack and Porpora, 2004 ). Stark and Finke ( 2000 ) argue that this theory helps explain why people are drawn to certain religious practices over others, suggesting that individuals make rational choices based on the perceived benefits of their religious engagement. Iannaccone ( 2016 ) further explores how this theory can account for various religious phenomena, including conversion and the level of commitment to religious observances, by examining the costs and benefits associated with these actions. This framework challenges older perspectives of religion as merely a societal or cultural phenomenon, instead proposing that religious behaviors can be understood through the same rational processes that govern economic decisions, highlighting the strategic and often economically driven choices individuals make within their religious lives.

Behavioral Finance Theory challenges the classical assumption of Rational Choice Theory, asserting that financial decision-making is influenced by psychological factors and cognitive biases (Kahneman and Tversky, 1982 ). Quackenbush ( 2004 ) notes that Rational Choice Theory often overlooks how decision-makers’ rationality is constrained by institutional, cultural, and psychological factors, suggesting that the premise of rational behavior may be overly optimistic. Mansour and Jlassi ( 2014 ) found that religious beliefs can sometimes clash with the principles of financial theory when it comes to decisions related to finance and investment. Behavioral Finance acknowledges that financial decisions are often influenced by psychological biases and emotions rather than purely rational calculations (Kahneman and Tversky, 1982 ). Relating this to Islamic financial literacy and financial well-being, it can be argued that psychological factors such as identity, trust, and the desire for social cohesion play significant roles in Muslims’ financial decisions. For instance, even if conventional financial products offer higher returns, psychological biases towards conformity with Islamic principles and the emotional comfort of engaging in religiously permissible transactions might lead individuals to opt for Islamic financial products.

In sum, Rational Choice Theory and the Rational Choice Theory of Religion provide frameworks for understanding the deliberate, utility-maximizing choices behind the acquisition and application of Islamic financial literacy and engagement in Shariah-compliant financial behaviors. Behavioral Finance adds depth by highlighting the psychological and emotional dimensions that influence these decisions. Together, these theories offer a comprehensive view of how Islamic financial literacy, influenced by rational calculations and psychological factors, shapes financial management behavior and contributes to the financial well-being of Muslims, balancing economic objectives with religious adherence. Behavioral finance introduces the concept that psychological influences and cognitive biases can affect financial decision-making, acknowledging that emotional and psychological factors derived from religious beliefs significantly influence financial decisions beyond rational calculations. This approach is particularly relevant when examining the impact of religiosity and Islamic financial literacy on financial behavior and well-being, helping to explain how sociodemographic variables might affect financial behavior and well-being by influencing individuals’ perceptions, risk tolerance, and decision-making processes.

Centrality of religiosity

Beliefs and experiences of divine existence are universal components of human life (Luckmann, 1990 ). This belief is manifested in the concept what so-called religion. A belief system that relates humanity to spirituality gives meaning and purpose to human life. It reinforces social unity and stability; serves as an agent of social control; promotes psychological and physical well-being; motivates people to work for positive social change and other social behavior (Barkan, 2021 ; Renneboog and Spaenjers, 2012 ).

Theoretically, religion’s central position in one person’s life has been measured using the concept of the Centrality of Religiosity (Huber and Huber, 2012 ). The idea integrates the perspective of sociology and psychology in viewing the Centrality of Religiosity through five dimensions: intellectual, ideology, public practice, private practice, and religious experience (Esperandio et al., 2019 ; Huber and Huber, 2012 ; Łowicki et al., 2022 ). First, the intellectual dimension refers to the religious reflexivity and social expectation that religious people understand and can articulate their beliefs about religion, transcendence, and religiosity, as exhibited in how frequently one considers religious issues in life (Huber and Huber, 2012 ; Zarzycka et al., 2020 ). The second is the ideology dimension. It is defined as the social presumption that religious people hold ideas about the presence and nature of a transcendent reality (Fear of God) and the connection between that reality and humanity (Huber and Huber, 2012 ; Zarzycka et al., 2020 ). The third is a public practice which refers to the social expectation that members of religious communities be active in their communities, as seen by the public’s engagement in religious ceremonies and social gatherings (Huber & Huber, 2012 ). Fourth is a private practice that reflects the devotion of the religious people in spending their time to the transcendence in private rites and activities (Huber & Huber, 2012 ). Last is a religious experience. The dimension resembles the assumption that religious people have some close relationship (contentment) with a higher reality (Huber & Huber, 2012 ; Zarzycka et al., 2020 ).

Islam, in particular, places religion in a central position in Muslim life (Haneef, 1997 ). In line with the first intellectual dimension, Muslims are encouraged to remember Allah often and glorify him morning and evening (Surah Al-Ahzab—41-42, 2022 ). Regarding the ideology dimensions, Islam obliges its adherence to the belief of transcendence or what is called Iman (al-Faruqi, 1992 ). Islam declares that everyone should care for God’s transcendence. It claims that God created all people with the ability to know Him in His transcendence. This is a natural blessing that all people forbid discrimination as believing in transcendence reality is something innate to humanity (al-Faruqi, 1992 ).

According to Kuran ( 1995 ), Islam has clearly outlined the norms and guidelines on how Muslims should manage their economic behavior by avoiding waste, excess, and ostentation. This fact shows that Islam as a religion holds the way it behaves economically. Islam forbids Muslims from engaging in extravagance and being spendthrift (Musadik and Azmi, 2019 ). For Muslims, Islam has a central position in their life and guides how they behave in any dimension of life, including their financial management behavior. Given this, it is hypothesized that:

H 1 : The Centrality of religion has a positive impact on financial management behavior .

The effect of religion in influencing individuals’ well-being has been a topic of discussion in the academic literature for a long time (St. George and McNamara, 1984 ). Previous studies have shown that religiosity has a positive impact on individual well-being (Green and Elliott, 2010 ), as evidenced by lower anxiety scores and a stronger sense of life direction (Phillips et al., 2022 ). A study conducted by Green and Elliott ( 2010 ) found that individuals who identify as being religious tend to express higher levels of health and happiness, more participation in religious activities, and better financial situation regardless of their specific religious denomination. A significant relationship between religiosity and well-being was also supported in the pandemic context (Hu and Cheng, 2022 ). In the context of finance, Renneboog and Spaenjers ( 2012 ) found that people’s perceptions of the importance of saving, risk, financial responsibility, and other critical economic concepts are influenced by their religious beliefs. Krause and Hayward ( 2015 ) found that individuals who faced financial hardship but had greater trust in god were reported to have higher self-rated health, lower depressed affect scores, and higher life satisfaction.

According to Abdellatef ( 2021 ), rationality, as central dogma in mainstream economics, has faced harsh criticism throughout the history of economic thought and the rise of modern economics due to the “homo-economicus” primary axiom’s inability to reflect reality. In contrast, Islamic economics views an Islamist rationalist as the utility and morality maximizer who balances his well-being to maximize utility in life here and hereafter (Abdellatef, 2021 ). Therefore, it is hypothesized that:

H 2 : Centrality of religion has a positive impact on financial well-being .

Islamic financial literacy

Financial literacy can be defined as the knowledge of fundamental economic and financial concepts and the ability to utilize that knowledge, along with other financial skills, to manage financial resources effectively for a lifetime of financial well-being (Stolper and Walter, 2017 ). Financial literacy is critical for individuals to make sound financial decisions (Dinc et al., 2021 ; Hamid and Loke, 2021 ). Numerous studies have found evidence that higher financial literacy leads to greater economic resilience (Lusardi et al., 2021 ), a higher probability of having emergency savings (Babiarz and Robb, 2014 ), better credit score (Huston, 2012 ), more responsible credit card usage (Kurowski, 2021 ; Robb, 2011 ) and prevents individuals from holding risky credit portfolios such as home-collected credit, mail order catalog debt, and payday loans (Disney and Gathergood, 2013 ; Kurowski, 2021 ).

Generally, Islamic financial literacy is discussed in the context of Islamic economics. It refers to a person’s ability to manage financial resources according to Islamic principles, using financial knowledge, skill, and attitude (Rahim et al., 2016 ). Islamic financial literacy has been driven by both the internal and external factors of the Muslim community. Internally, Muslims are required to obey Islamic teachings; externally, the presence of complex financial products leads the Muslim community to respond by making financial decisions based on Islamic financial literacy (Setiawati et al., 2018 ).

Islamic financial literacy also provides an understanding of the distinctions between Islamic and conventional financial products (Albaity and Rahman, 2019 ). It is crucial in appreciating the positive impact of Islamic financial literacy on financial management behavior. Islamic financial products are designed based on Shariah principles, which prohibit interest (riba), uncertainty (gharar), and investment in haram (forbidden) activities (Hassan and Lewis, 2009 ). This fundamental difference influences the structure of products, such as Islamic loans, which are based on profit-sharing (Mudarabah) or lease (Ijarah) principles, rather than interest payments, and Islamic investments that ensure compliance with ethical standards (Hassan and Lewis, 2009 ; Mansour et al., 2015 ). Consequently, Muslims equipped with Islamic financial literacy are more capable of making informed decisions that align with their religious beliefs and ethical considerations (Biplob and Abdullah, 2019 ; Muhamad et al., 2016 ). This knowledge empowers them to choose financial products that not only meet their economic needs but also adhere to Islamic teachings, contributing to responsible financial management and avoidance of prohibited transactions (I. Osman et al., 2023 ).

The increasing attention to the significant role of financial literacy is attributed to the rising level of indebtedness among young people. According to Zainudin et al. ( 2019 ), preferences for lavish lifestyles have led them to spend beyond their limits to the point that they are willing to incur debt. This is contrary to Islam’s teachings, which promote moderation in spending and limit the use of debt only for genuine needs. A hadith narrated by Imam Ahmad, where the Prophet Muhammad (Peace Be Upon Him) was reported to have said:

“Be wary of debts. Indeed, it is sadness at night and a disgrace during the day,” stresses that being in debt not only leads to an increase in financial burden but can also cause emotional burden. This explains why the concept of moderation in spending is highly encouraged in the Quran, as stated in chapter Al-Furqan verse 67, which means: “Those who, when they spend, are not extravagant and not niggardly, but hold a just (balance) between those (extremes).”

Based on the above discussion, the following hypothesis is developed:

H 3 : Islamic financial literacy has a positive impact on financial management behavior .

Many studies have shown the significant effect of financial literacy on individuals’ well-being (Z. Osman et al., 2018 ; Younas et al., 2019 ). It is important to note that the success of a financial education program should not only be assessed by financial outcomes such as obtaining a bank account, buying a home, or maintaining saving habits. It should also be evaluated in terms of the enhancement of life satisfaction, happiness, and a sense of financial security (Kozup and Hogarth, 2008 ). In the Islamic research context, Islamic financial literacy is also proven to significantly influence Muslim customers’ well-being (Abdullah et al., 2019 ). Therefore:

H 4 : Islamic financial literacy has a positive impact on financial well-being .

Based on the above hypotheses, the following research model is developed (see Fig. 1 ).

Research framework.

Research method

The study was administered using an online survey between May and June 2021. The data was collected from 1141 individuals who lived in Indonesia aged between 18- and 65 years old. The Centrality of religion was measured using The Centrality of Religiosity Scale (CRS) developed by (Huber and Huber, 2012 ). The measurement of the central position of religiosity has been primarily used in 100 studies in the sociology of religion, psychology of faith, and religious studies in 25 countries with a total of more than 100,000 participants (Huber and Huber, 2012 ). CRS consists of 5 dimensions: Intellect, ideology, public practice, private practice, and religious experience. Several items of questions were deleted as the financial products mentioned in the original articles were prohibited in Islam, e.g., Credit cards and contained riba (usury) issue. It is worth noting that the Centrality of religiosity instrument has been used in the Islamic economics research context, such as halal labeling (Maison et al., 2019 ). Islamic financial literacy was measured using basic Islamic financial literacy developed by (Antara et al., 2016 ). Basic Islamic financial literacy measures individuals’ knowledge related to the prohibition of Gharar (uncertainty, hazards, or risk), Riba (usury), and Maysir (gambling) in Islam (Antara and Musa, 2021 ). The study adopted the research instrument by Strömbäck et al. ( 2017 ) to measure financial management behavior, consisting of twelve items. Three items of financial management behavior were deleted as it measured the behavior related to the conventional credit card, which involves usury and is against the Islamic Sharia principles. Financial well-being represented by financial economics and financial security was also measured by the instrument used by Strömbäck et al. ( 2017 ). The instruments used the Likert scale, which consists of six items ranging from significantly disagree to very agree (See Table 1 ). The data were analyzed using structural equation modeling with AMOS. Additional analysis to compare means of the variable based on the sociodemographic status of the respondents by using SPSS.

The demographic of the study’s respondents can be seen in Table 2 . The majority of the respondents were female, with 688 responses (58.55%), while the total number of male respondents was 473 (41.45%). Table 2 further describes the cohort of respondents. Cohort denotes a set of individuals who share the same birth period (Zhang, 2017 ). Cohort effects relate to changes that occur among clusters of people who undergo a common experience. The table shows that 813 respondents (70.99%) fall into the Generation Z age (18–24 years). Millennial respondents (25–40 years) made up as many as 150 respondents (13.15%), and Generation X respondents (41–56 years) made up as many as 164 respondents (14.37%). Additionally, 17 respondents (1.49%) identified as Baby Boomers (57–75 years old). The majority of around 444 respondents (38.91%) lived in West Java, followed by responses from Jakarta Greater Area with 301 respondents (26.38%). Based on their educational background, the majority of 639 respondents (56.00%) had completed their tertiary education Table 2 .

The validity and reliability analyses were conducted to ensure the measurements’ validity and reliability (Table 3 ). Based on the above statistical analysis, the measures used in the study are valid and reliable. Even though some of the AVE is lower than 0.5, the CR is all above more than the acceptable threshold of 0.6 (Lam, 2012 ) or ranging between 0.757 and 0.858.

To assess the model fit, CMIN/df, CFI, TLI/NNFI, and RMSEA were used (Table 4 ). For CMIN/df, several cutoffs between 2 and 5 have been proposed (Marsh and Hocevar, 1985 ). The CMIN/df score for the current study is 4.559 showing a good fit index. If the CFI value is 0.9, the CFI can be regarded as a good model (a good fit). Meanwhile, an acceptable fit can be assumed if the CFI score is between 0.8 and 0.9 (Baumgartner and Homburg, 1996 ). The CFI of the current study is 0.865, which indicates a marginal fit of the model. If the TLI value is 0.9, the TLI can be regarded as a good model (a good fit). The TLI/NNFI value might be considered a marginal fit if it is between 0.8 and 0.9 (Hair, 2010 ). The TLI/NNFI indices of the study are 0.844, which indicates a marginal fit of the model. Based on the general agreement among experts in the field, a strict upper limit for the RMSEA cut value is 0.07 (Steiger, 2007 ). Thus, the RMSEA indices of the current study are accepted as the score is 0.056.

Path analysis was conducted to evaluate the significance of the proposed regression lines. Byrne ( 2001 ) suggests that the value of t -values/critical ratios (CR) should be greater than that of 1.96 to support the hypothesis. Table 4 also provides information about each path’s path coefficient, critical ratio, standard error, and significance value.

The result indicates that the Centrality of religiosity has a positive and significant impact on financial management behavior ( β  = 0.074, p  < 0.036) and financial well-being ( β  = 0.146, p  < 0.003). Islamic financial literacy also has a significant effect on financial management behavior ( β  = 0.211, p  < 0.000) and financial well-being ( β  = 0.286, p  < 0.000). Thus, hypotheses H 1 –H 4 are all supported.

The statistical analysis results explained above can be summarized in Fig. 2 .

Structural model.

Additional analyses were conducted to determine whether the socioeconomic status of the respondents had an impact on the investigated variables. A t -test analysis was conducted for the gender data, while one-way ANOVA was conducted for the age, education, and income data. The results of the t -test analysis can be seen in Table 5 . For financial well-being, the t -test was split based on the financial anxiety and financial security dimensions.

Based on t -test analysis, there are no significant differences between male and female customers in terms of centrality of religiosity ( p -value = 0.568 > 0.01) and financial management behavior ( p -value = 0.198 > 0.01). However, significant differences were found between males and females in terms of Islamic financial literacy ( p -value = 0.001), financial anxiety ( p -value = 0.001), and financial security ( p -value = 0.001). The t -test statistical analysis shows that male customers tend to have higher financial literacy (mean = 3.540) compared to female customers (mean = 3.050). Additionally, male customers have much higher well-being, as can be seen from their lower financial anxiety (mean = 2.916) compared to female customers (mean = 3.087), and a higher sense of financial security (mean = 3.396) in contrast to female customers (mean = 3.168).

As mentioned earlier, an ANOVA was conducted to compare the means of respondents in terms of centrality of religion, Islamic financial literacy, financial management behavior, and financial well-being (financial security and financial anxiety). For the cohort data, the Generation X data were integrated with the Baby Boomers, as the number of Baby Boomer respondents was very small ( n  = 17). The results of the ANOVA test can be seen in Table 6 .

The ANOVA test resulted in some very interesting findings. Significant differences among cohorts were found across all variables under investigation, based on the F -test statistics of centrality of religion ( F  = 21.225; p -value = 0.001 < 0.05), Islamic financial literacy ( F  = 3.213; p -value = 0.041 < 0.05), financial management behavior ( F  = 5.811; p -value = 0.003), as well as well-being, represented by financial anxiety ( F  = 33.659; p -value = 0.001 < 0.05), and financial security ( F  = 24.280; p -value = 0.001 < 0.05).

Further posthoc tests were conducted to examine the specific differences among cohorts. In terms of centrality of religion, the study shows no significant centrality of religion among Generation Z and millennials (sig = 0.166 > 0.05). Significant differences in the centrality of religion were found when both Generation Z and millennials were compared with the “Generation X and baby boomers” group. The mean difference between Generation Z and the Gen X plus baby boomers group (−0.254) was significant ( p -value = 0.01 < 0.05). The results show that Generation X has much lower centrality of religion compared to the later cohorts. The mean difference between millennials and the “Generation X plus baby boomers” group (mean difference/MD = −0.339) was also significant ( p -value = 0.001 < 0.05). The differences show that the older generation (Gen X plus baby boomers) is more religious as they have a much higher centrality of religion compared to the younger generation (Generation Z and millennials).

Similar to the comparison of cohorts in centrality of religion results, no significant differences were found between Generation Z and millennials in terms of Islamic financial literacy ( p -value = 0.989). Significant differences in Islamic financial literacy were found between the youngest (Generation Z) and the oldest generation (Gen X plus baby boomers group), with a p -value of 0.032. The results show that Generation Z has much higher Islamic financial literacy compared to the oldest group.

In the comparison of means of financial management behavior among cohorts, significant differences were found between Generation Z and Millennials (MD = −0.127, p -value = 0.024 < 0.05) and between Generation Z and “Generation X plus Baby Boomers” (MD = −0.116, p -value = 0.026 < 0.05). The results show that the older generations tend to have better financial management behaviors compared to the younger generations.

Similar to financial management behavior, the financial anxiety levels of Generation Z are significantly different compared to its older counterparts: Millennials (MD = 0.211, p -value = 0.013 < 0.05) and “Generation X plus Baby Boomers” (MD = 0.515, p -value = 0.001 < 0.05). The results indicate that the younger generation tends to have much higher financial anxiety levels.

In terms of financial security, “Generation X plus Baby Boomers” have a significant difference compared to Generation Z (MD = −0.520, p -value = 0.001 < 0.05) and Millennials (MD = −0.407, p -value = 0.001 < 0.05), indicating that the older generation has better financial security compared to their younger counterparts.

Based on the education comparisons, there is no significant difference between primary, secondary, and tertiary education in terms of centrality of religion ( F  = 2.276, p -value = 0.103 > 0.05) and Islamic financial literacy ( F  = 0.337, p -value = 0.714 > 0.05). However, differences in means were found between different levels of education in terms of financial management behavior ( F  = 17.391, p -value = 0.001 < 0.05), financial anxiety ( F  = 7.337, p -value = 0.001 < 0.05), and financial security ( F  = 21.344, p -value = 0.001 < 0.05). Nevertheless, the post-hoc test results only show a significant difference in financial management behavior between the secondary and tertiary education groups (MD = −0.182, p -value = 0.001 < 0.05). The results show that attainment of tertiary education improves customers’ financial management behavior. In terms of financial anxiety, tertiary education also reduces individuals’ financial anxiety compared to those who only have secondary education (MD = −0.181, p -value = 0.001 < 0.005). Regarding financial security, the attainment of tertiary education is proven to improve individuals’ financial security (MD = 0.181, p -value = 0.001 < 0.005).

No significant differences were found in terms of the centrality of religion among consumers with different incomes ( F  = 0.114; p -value = 0.892 > 0.05). However, significant differences were found among consumers with different income levels in terms of Islamic financial literacy ( F  = 18.902; p -value = 0.001 < 0.05), financial management behavior ( F  = 35.100; p -value = 0.001 < 0.05), financial anxiety ( F  = 33.127; p -value = 0.001 < 0.05), and financial security ( F  = 21.344; p -value = 0.001 < 0.05).

Based on Islamic financial literacy, the statistics show a significant improvement in financial literacy when income increases consistently across all income levels. The financial management behavior is also higher when income increases, and this pattern is consistent across different income levels. The significant differences in financial anxiety were found among the lowest income group compared to the moderate (MD = 0.347; p -value = 0.001 < 0.05) and highest income group (MD = 0.411; p -value = 0.001 < 0.05), reflecting that the lowest income group has much higher financial anxiety. Similar patterns were found in terms of financial security, where the lowest income group has the lowest financial security compared to the moderate-income group (MD = −0.368; p -value = 0.001 < 0.05) and the highest income group (MD = −0.063; p -value = 0.001 < 0.05)

The findings of the study are noteworthy, as they empirically demonstrate that Islamic financial literacy is the most significant factor influencing individual financial management behavior and financial well-being. These findings lend support to the research by Kozup and Hogarth ( 2008 ), which posits that financial literacy is vital not only for enhancing individual wealth but also for promoting greater financial security. Moreover, the centrality of religiosity also significantly impacts financial management behavior and well-being, albeit to a lesser extent than Islamic financial literacy. This observation is in harmony with the studies by Rinallo and Oliver ( 2019 ) and Agarwala et al. ( 2019 ), which highlighted the profound impact of religion on consumer behavior and decision-making. Similarly, the findings resonate with those of Green and Elliott ( 2010 ), who found that religious individuals generally enjoy higher well-being and better financial status.

Remarkably, the study reveals that private practice, akin to the devotion exhibited by religious individuals through private rites and activities (Huber and Huber, 2012 ), stands out as the most critical dimension of religiosity in an individual’s life. This is followed by ideology and experiential dimensions. The study illustrates that for Muslims, personal activities such as prayer, fear of God, and maintaining a close relationship with God are of paramount importance in their lives. Moreover, the study suggests that centering one’s life around religion contributes to enhanced well-being by diminishing financial anxiety and fortifying financial security. These insights align with Phillips et al. ( 2022 ), which found a negative correlation between religiosity and anxiety, further underscoring the protective role of faith against financial anxiety.

Further examination indicates notable variations among different cohorts in relation to religiosity, Islamic financial literacy, financial management behavior, and well-being. Based on the cohort analysis, the older generation or Gen X plus baby boomers have a much higher level of centrality of religion, better financial management behavior, lower financial anxiety, and higher financial security compared to the younger generation, even though the results show the younger generation to have much higher Islamic financial literacy. The study supports the findings of Voas and Doebler ( 2011 ) and Gay and Lynxwiler ( 2013 ), who found that the older cohorts have much higher religiosity compared to the younger generation. In regards to financial literacy and financial management behavior, Henager and Cude ( 2016 ) that improved financial knowledge among older cohorts substantially improved their financial management behavior.

The current study only partially supported the findings of Henager and Cude ( 2016 ), as the results show that even though the younger generation has much better financial literacy, the older cohorts have much better financial management behavior. As explained earlier, the current study examined well-being from two dimensions: financial anxiety and financial security. Based on the nonfinancial study, the level of anxiety tends to increase among the younger cohorts compared to the older cohorts (Twenge, 2000 ). The study consistently supports the findings as the financial anxiety of the younger cohorts tends to be higher compared to the older cohorts. A previous study found that the more recent cohorts tend to feel much higher financial insecurity (Brown et al., 2019 ). The current study support the findings as the “Generation X plus baby boomers” has significantly higher financial security compare to the Generation Z and Millenials.

With respect to education, the research reveals the favorable influence of educational on financial management behavior and well-being, Specifically, the results show that attainment of tertiary education improves customers’ financial management behavior. The results, in general, support a previous study that shows how education positively influences individuals' financial management behavior (Haynes-Bordas et al., 2008 ). In terms of financial anxiety, tertiary education also reduces individuals’ financial anxiety compared to those who only have secondary education. Regarding financial security, the attainment of tertiary education is proven to improve individuals’ financial security. The study supports a previous study that shows how education reduces financial anxiety (Sachin et al., 2021 ). In the context of technology-based educational interventions, studies have found that improving individuals’ financial knowledge, skills, and behaviors leads to better financial well-being (Way and Wong, 2010 ). This aligns with research showing that higher levels of education are associated with greater financial security.

Regarding income, the less affluent category exhibits significantly lower Islamic financial literacy, inadequate financial management skills, higher levels of financial anxiety, and lower levels of financial security. The results of the study support the research of Potrich et al. ( 2015 ), who found a low level of financial literacy among low-income groups. The study also supports the findings from Perry and Morris ( 2005 ) that show the higher income group has a tendency to perform responsible financial management behavior.

In terms of theory, Rational Choice Theory posits that individuals make decisions that maximize their utility (Becker, 1976 ). The significant impact of Islamic financial literacy on financial management behavior and well-being aligns with this theory, suggesting that Muslims who are more knowledgeable about Islamic financial principles make informed decisions that align with their financial and religious goals, thereby maximizing their utility. This decision-making process reflects a rational evaluation of financial products and behaviors based on their compatibility with Islamic law and potential for financial return or security. The differences observed in financial management behavior and well-being across different levels of education and income further support this theory, indicating that increased resources and knowledge contribute to more effective and utility-maximizing financial decisions.

The Rational Choice Theory of Religion extends the utility-maximization framework to religious behavior, arguing that individuals engage in religious practices based on a rational analysis of costs and benefits, seeking to maximize spiritual and social rewards (Stark and Finke, 2000 ). The positive correlation between the centrality of religiosity and financial well-being could be interpreted within this framework as individuals deriving both spiritual satisfaction and social benefits from aligning their financial behaviors with Islamic principles. This alignment may offer a sense of community belonging and approval, enhancing one’s social capital and contributing to overall well-being. Moreover, the significant impact of religiosity across different generations suggests that for older generations, the spiritual and social rewards gained from religious adherence and its manifestation in financial behavior may be more pronounced, reflecting a rational choice to maintain or enhance their spiritual and social well-being through religiously informed financial practices.

Behavioral Finance, with its emphasis on psychological influences and cognitive biases in financial decision-making (Kahneman and Tversky, 1982 ), offers insights into the nuanced ways individuals’ financial behaviors and well-being are shaped by their beliefs and identities. The absence of significant gender differences in the centrality of religiosity and financial management behavior, coupled with significant differences in Islamic financial literacy and financial well-being indicators, suggests that psychological factors and societal norms related to gender roles may influence how financial knowledge is acquired and applied. Furthermore, the generational differences in financial anxiety and security could be attributed to varying risk perceptions and financial priorities influenced by psychological factors, such as optimism or pessimism about the future, which Behavioral Finance theory helps clarify.

The findings of this study underscore the significant and positive influence that the centrality of religiosity and Islamic financial literacy have on financial management behavior and the financial well-being of Muslims. The evidence suggests that a stronger religious commitment and an enhanced comprehension of Islamic financial principles are linked to more prudent financial behaviors and improved financial well-being. Furthermore, the study highlights the role of socioeconomic factors such as gender, age, education, and income in determining these outcomes. Gender differences are observed in Islamic financial literacy and various aspects of financial well-being, while analyses based on age cohorts reveal differences in religiosity, financial literacy, financial management behavior, and financial well-being across generations. The impact of education level is particularly noteworthy, significantly influencing financial management behavior, anxiety, and security, which stresses the critical role of financial education. Similarly, income levels are found to be associated with Islamic financial literacy, financial behavior, and well-being, pointing to the economic underpinnings of financial decisions. Additionally, while Rational Choice Theory and the Rational Choice Theory of Religion emphasize the importance of informed, utility-maximizing decisions within a religious framework, Behavioral Finance explores the psychological intricacies that influence these decisions. Collectively, these theories provide a nuanced understanding of the complex factors that affect financial behavior in the realm of Islamic finance.

Contributions

The study makes several theoretical contributions to the literature. First, This study contributes to the broader discourse on financial behavior in Muslim communities by integrating Rational Choice Theory, the Rational Choice Theory of Religion, and Behavioral Finance. It emphasizes the importance of religiosity and Islamic financial literacy in shaping financial decisions and outcomes, providing empirical evidence that religious commitment and financial literacy are critical determinants of financial behavior and well-being. Second, it addresses the concept of financial management from the unique perspective of Muslim consumers, whose paradigm differs from that of non-Muslim consumers, thus challenging the universal applicability of financial management principles rooted in Western capitalism.

From the managerial standpoint, the results suggest, religious teachers, Islamic economics scholars and Islamic financial institutions to educate Muslim consumers more about Islamic financial literacy, as the evidence shows a strong relationship between Islamic financial literacy and the consumers’ well-being. Islamic financial education is essential as education generally can improve individual adaptability and problem-solving to deal with increasingly complex issues (Pavlovich, 2010 ).

Limitation and future research direction

While this study provides valuable insights, it has limitations that should be acknowledged. First, the cross-sectional design limits the ability to infer causality between the variables studied. Second, the sample may not fully represent the diversity within Muslim communities, potentially limiting the generalizability of the findings. Third, the study’s reliance on self-reported measures for financial behavior and well-being could also introduce response biases. Fourth, the analysis of socioeconomic factors, while comprehensive, may not capture all relevant variables that could influence financial decisions and outcomes in these communities. Fifth, the study only measures basic Islamic financial literacy. Prospective researchers are encouraged to conduct a similar study by using more advanced Islamic financial literacy as developed by (Antara et al., 2016 ; Antara and Musa, 2021 ).

Future research should address these limitations by employing longitudinal designs to better understand the causal relationships between religiosity, Islamic financial literacy, financial behavior, and well-being. Expanding the sample to include a wider range of Muslim communities would enhance the generalizability of the findings. Further studies could also explore additional variables, such as specific religious practices or deeper aspects of financial literacy, to gain a more detailed understanding of their impact on financial behavior. Investigating the mechanisms through which religiosity and financial literacy influence financial decisions and outcomes could provide deeper insights into the complex interplay of psychological, cultural, and economic factors in financial behavior. Additionally, exploring interventions aimed at enhancing Islamic financial literacy and understanding their effects on financial behavior and well-being could offer practical implications for policymakers and financial educators.

Data availability

The data are available at: https://figshare.com/articles/dataset/Data_Financial_Literacy_xlsx/25837177 .

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This research is funded by the Hibah Riset Kolaborasi Internasional World Class University (WCU) 2021 program of Direktorat Riset dan Pengembangan (Risbang) Universitas Indonesia.

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Wijaya, H.R., Hati, S.R.H., Ekaputra, I.A. et al. The impact of religiosity and financial literacy on financial management behavior and well-being among Indonesian Muslims. Humanit Soc Sci Commun 11 , 830 (2024). https://doi.org/10.1057/s41599-024-03309-6

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Stress or Education: The Relationship Between Financial Literacy and Financial Stress

36 Pages Posted: 26 Jun 2024

Anna Ploszaj

Griffith University, Australia

Griffith University

Tarlok Singh

Griffith University - Department of Accounting, Finance and Economics

Robert J. Bianchi

Griffith University; Griffith University

Date Written: August 3, 2022

This paper bridges the research gap between financial literacy and financial stress by investigating the nature of this relationship. Our framework includes various proxies of financial stress, which allows us to determine how these measures are affected by different levels of financial literacy. We observe the relationship between financial literacy and financial stress is non-linear and displays an inverted U-shape pattern. Individuals with the highest level of financial literacy exhibit the lowest levels of financial stress. At the opposite end of the spectrum, respondents with the lowest levels of financial literacy also exhibit low levels of financial stress due to their high risk aversion. Individuals with the lowest financial literacy are characterized as respondents with a maximum Year-12 education qualification. Our research findings point towards policy initiatives that support financial literacy as an investment in human capital, leading to overall benefits for society.

Keywords: D14, E21, G11, I30, R20

JEL Classification: Financial stress, Financial literacy, Australia, HILDA

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Griffith university, australia ( email ).

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This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign

Teenagers in rich countries lack the financial literacy and maths skills needed to prepare them for the digital economy, according to an OECD report.

Despite growing numbers opening bank accounts and showing an interest in cryptocurrencies, the majority of 15-year-olds in the Pisa study, published on Thursday , struggled to understand key financial terms and a fifth found it difficult to calculate percentages.

Experts say this underlines a persistent gap between young people’s financial knowledge and the increasingly vast range of products that they are being exposed to online.

“There is a moving target in terms of the skills that are needed to achieve basic financial literacy,” said Carmine Di Noia, OECD director for financial and enterprise affairs. “These are uncharted territories. Ten years ago we wouldn’t have talked about crypto or AI or finfluencers [financial influencers].”

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The study explored the links between teenagers’ financial literacy and their competency in maths and reading, as well as their money experiences, habits and exposure to financial literacy at home and in school.

Across the 14 OECD countries within the 20 nations surveyed — including the US, Italy and the Netherlands — an average of 18 per cent of teens had difficulties using division to handle their finances.

These low-performing students struggled with everyday spending decisions, such as calculating whether buying tomatoes by the box or kilogramme was better value.

The report also found that although about two-thirds of teens in the 14 OECD nations were financially active and had opened bank accounts, just 36 per cent of those surveyed were confident about reading bank statements.

There has been limited improvement in financial literacy in the four countries — the US, Italy, Spain and Poland — that have taken part in the Pisa test since it first began in 2012.

In each of the four countries, more than one in seven students still lacks basic money skills, based on the 2022 findings.

Meanwhile, just 11 per cent of students from all the 20 nations involved could solve complex money problems, spot transaction costs, or understand the differences in types of investments.

The report urged countries to implement a financial literacy strategy and improve education in schools, highlighting the importance of strong consumer protection frameworks and educating parents.

Only a third of adults are financially literate, according to research published by the OECD last year.

Karen Holland, a teacher and founder of the Gifting Sense financial literacy programme, said parents had an important role in teaching children “powerful and therefore sticky life skills” such as thinking before they buy. “The gold standard is a combination of parents and schools developing their money habits and beliefs,” she added.

Find out more and support the Financial Literacy and Inclusion Campaign

Only 14 of the 38 OECD countries that take part in the headline Pisa tests on maths, reading and science participate in the financial literacy assessments.

The UK is one of the countries that has opted out, with policymakers arguing it has limited value as most of the variation in pupil performance is explained by maths attainment.

Charities such as the FT’s Financial Literacy and Inclusion Campaign (Flic) and parliamentary groups such as England’s education committee have said financial education needs to be improved and recommended the UK take part in the 2025 assessments.

John Jerrim, professor of education and social statistics at University College London, said the UK had opted out of the financial literacy assessment to reduce the burden on reluctant schools, creating a “big data gap”.

“We really don’t know enough about financial literacy in this country,” he added. “These are absolutely key skills that kids need to know about.”

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Rebuilding investor confidence: The importance of financial literacy [Article]

In the twenty-first century, financial literacy has become a cornerstone for individual and collective well-being. The complex economic, political, and societal trends that characterise our times necessitate a comprehensive approach to financial education, extending beyond family and peer socialisation to encompass political and educational actions at national and global levels. This article underscores the significance of financial literacy and calls upon key stakeholders, including the Ministry of Education, Ghana Education Service, Securities and Exchange Commission, Bank of Ghana, Ghana Stock Exchange, National Insurance Commission and others, to collaborate in fostering a financially literate society.

Lessons from Recent Financial Crises in Ghana

The urgency for financial literacy becomes even more pronounced considering a study by Standard and Poor, which revealed that 68% of Ghanaians are financially illiterate. This staggering statistic highlights a fundamental gap in the population’s ability to understand and manage financial products and risks. The recent financial sector crises demonstrated the real-world consequences of this knowledge gap, as many individuals were blindsided by the sudden devaluation of their investments. Without a solid foundation in financial literacy, these investors were ill-prepared to comprehend the complexities of mutual funds, government bonds, and other financial instruments, leading to confusion and distress when the crisis hit. This scenario underlines the necessity for comprehensive financial education initiatives that can empower citizens to make informed decisions, recognise potential risks, and understand the broader economic forces at play. Addressing this educational deficit is crucial for fostering a more resilient and financially savvy populace capable of weathering future economic storms.

Impact on Investor Confidence

The financial crises have significantly shaken investor confidence in Ghana. The abrupt devaluation of mutual funds and the losses incurred by individual investors have created a sense of distrust towards financial institutions and government policies. Many investors, particularly those who were less financially literate, now view the financial market with scepticism, fearing further losses. This erosion of confidence can have long-term repercussions, as wary investors may withdraw their funds from the market, reducing liquidity and hindering economic growth. Restoring confidence requires not only policy reforms and financial stability but also a concerted effort to improve financial literacy. By educating the population about the risks and opportunities in financial markets, stakeholders can help rebuild trust and encourage informed participation in the economy, thereby fostering a more resilient and vibrant financial ecosystem.

Building Economic Resilience Through Financial Literacy

Financial literacy plays a pivotal role in enhancing the overall financial resilience of the economy, particularly in a country where a significant portion of the population works in the informal sector. By equipping individuals with a better understanding of financial principles and products, financial literacy can lead to more prudent savings and investment behaviours. Educated individuals are more likely to diversify their investments, utilise formal financial services, and contribute consistently to pension schemes, thereby ensuring long-term financial stability. Moreover, increased financial literacy can drive higher rates of formal savings, which in turn can be channeled into productive investments that fuel economic growth. For the informal sector, where income can be unpredictable, financial literacy helps workers manage their finances more effectively, plan for future needs, and mitigate risks through better financial planning and insurance coverage. As a result, a financially literate population contributes to a more robust and resilient economy, with individuals better prepared to handle financial shocks and uncertainties.

Understanding Financial Literacy

Financial literacy encompasses the knowledge and skills necessary to make informed and effective financial decisions. As highlighted in the “International Handbook of Financial Literacy,” a well-founded framework for financial literacy is essential. This framework should be informed by a diverse and critical discussion on the definition and understanding of financial literacy, leading to a consensus or at least an awareness of differing perspectives.

The scope, aims, contents, and dispositions advocated through financial literacy interventions define the quality of life on both local and global scales. Such interventions should avoid ideological biases that may hinder sustainable learning and responsible teaching. The contributions to the “International Handbook of Financial Literacy” offer various approaches to defining and understanding financial literacy, incorporating insights from economics, education, behavioural science, philosophy, psychology, and sociology.

Key Components of Financial Literacy

• Decision Making and Rationality: Financial literacy includes the ability to make rational financial decisions. This involves understanding economic concepts, evaluating financial products, and assessing risks and benefits. Educational programmes should aim to enhance individuals’ decision-making capabilities.
• Relationships and Interactions: Financial literacy is not only about individual knowledge but also about understanding financial relationships and interactions within a social context. It includes recognising the impact of one’s financial decisions on others and society at large.
• Systemic Understanding: A comprehensive financial literacy framework should encompass an understanding of the broader economic and financial systems. This includes knowledge of market operations, regulatory environments, and the interconnectedness of global financial systems.

Psychological and Social Dimensions

The psychological aspects of financial literacy highlight the role of cognitive and metacognitive abilities in financial decision-making. Effective financial education should support individuals in developing these abilities to select appropriate modes of thinking for different financial situations.

Moreover, financial literacy extends beyond individual capabilities to include financial capability, a concept that integrates individual abilities with opportunities provided by social institutions. Financial capability emphasises the relationship between individuals and social structures, advocating for educational programs that address the social embeddedness of financial activities.

A Call to Action for Stakeholders

To achieve widespread financial literacy, collaboration among key stakeholders is imperative. Here are some specific actions that various stakeholders can undertake:

• Ministry of Education and Ghana Education Service: Integrate financial literacy into the national curriculum at all educational levels. Develop teacher training programmes to equip educators with the necessary skills to teach financial literacy effectively.
• Securities and Exchange Commission (SEC): Collaborate with educational institutions to provide resources and expertise. Promote public awareness campaigns on financial literacy and its importance for economic stability.
• Bank of Ghana: Firstly, the BoG can allocate funding towards financial literacy programs and initiatives. This funding can be used to develop educational materials, organise workshops and seminars, and support research on financial education. By investing in these initiatives, the BoG can help improve the overall financial literacy levels in Ghana, which can lead to better financial decision-making and increased financial inclusion.

Secondly, the BoG can provide resources such as expertise and technical support to organizations and institutions involved in financial literacy efforts. This can include collaborating with educational institutions, non-profit organizations, and government agencies to develop and implement effective financial education programs. The BoG’s expertise in financial matters can also be leveraged to create targeted and impactful financial literacy campaigns.

• Ghana Stock Exchange: Facilitate programmes that educate the public about investing and the stock market. Create partnerships with schools and universities to offer practical financial education experiences.
• Financial Institutions and NGOs: Develop community-based financial literacy programs that address the needs of diverse populations. Offer workshops, seminars, and online resources to promote financial literacy.

Financial literacy is crucial for navigating the complexities of modern financial systems and achieving economic well-being. By fostering a collaborative approach among key stakeholders, we can create a robust framework for financial literacy that empowers individuals and communities. The collective effort of the Ministry of Education, Ghana Education Service, SEC, Bank of Ghana, Ghana Stock Exchange, and other stakeholders will ensure that financial literacy becomes an integral part of our educational and social systems, paving the way for a more informed and financially capable society.

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What Exactly Is the Science of Reading?

• Posted June 25, 2024
• By Elizabeth M. Ross
• Language and Literacy Development

Last summer Nonie Lesaux , a professor at the Harvard Graduate School of Education who leads a research program that seeks to improve literacy outcomes for children and youth, was approached with a problem. The New York State Education Department (NYSED) needed to help the 600-plus school districts that the state agency serves better understand what scientific research had to say about how children learn strong reading and writing skills. Their query came at a time when powerful public advocacy for bringing the science of reading to classrooms, which had been steadily gaining momentum, had reached a fever pitch.

Over roughly the past decade, 38 states and the District of Columbia have passed laws or introduced policies that aim to bring literacy instruction in line with decades of interdisciplinary research on the science of reading. In New York, in fact, Governor Kathy Hochul introduced a plan earlier this year to have schools in the state adopt science-based methods to improve reading instruction by September 2025.

When they approached her last summer, administrators at NYSED told Lesaux that many school district leaders and educators across the state felt “angst, confusion, and worry about the science of reading.” They weren’t sure what the term meant exactly — they had lots of questions, and they needed clarity and resources, she says, to help them “cut through a lot of noise,” including some misconceptions. 

So Lesaux produced a series of seven briefs to help the educators better understand the research, as well as the work that is needed. The briefs explore key ideas and myths about the science of reading, and leadership strategies for those in New York’s preK–12 systems who are working to improve literacy and provide professional learning supports.

Lesaux recently discussed the briefs, as well as how they have been received.

You worked with NYSED on a series of literacy briefs back in 2017. How did you build on that previous work with this new set of briefs?

Literacy is still the multifaceted, complex construct that it always has been, and the demands on the learner and the citizen today, in this global knowledge-based economy, are significant. You have to develop literacy skills to a level that is much higher than might have been necessary even 25 years ago, for entry into the workforce and for a good wage and income and lifestyle — that hasn't changed. … There is some overlap [in the briefs] because the knowledge base didn't change much. I think what changed, which was super important for the field, is the public became much clearer that there are effective and ineffective ways to teach early word reading.

In your first brief, you say that the science of reading reflects more than 50 years of research across multiple disciplines about how children successfully learn to read and write. If there is so much research and evidence, why has there been so much confusion about effective literacy instruction?

I think what has created some of the confusion is that there are a couple curricula and approaches that took hold at large scale — this kind of “leveled reader” approach, “balanced literacy” —  and the field took that up and the research was not there. In fact, it's deleterious for some kids because it's not the right approach. It's true that phonics instruction should be very explicit and direct, and that is not the same as teaching language and comprehension. And we need the language and comprehension teaching, but we can't confuse the two. And I think for far too long there was sort of this text-based approach to teaching phonics that wasn't actually the explicit direct instruction that a very significant number of children both need and respond so well to. But I think the danger is that we then swing the pendulum and pit the two ideas against each other, ideologically, and create this thing called “the reading wars,” when in fact we know we need a strong plan for phonics, and we need a strong plan for language and comprehension. It sounds so basic, and yet the politics and some of the ideologies of what it feels like to educate in developmentally appropriate ways got in the way of all of this. You know, rote explicit phonics instruction only needs to be about 20 minutes a day, but if you overdo it and it becomes synonymous with your reading instruction, you don't have a very engaging academic environment. When you do it really well and in the short burst that every first and second grader needs, it becomes very reinforcing and exciting because kids see their growth.

In one of your briefs, you set out to debunk common myths about the science of reading and you point out that learning to read and reading to learn should not be two distinct stages. You say effective teaching aims to teach all skills simultaneously from the earliest years?

Yeah, we need to stop pitting the two and we need to do both really well…. [and be] honest about the fact that there are lots of kids who don't have a vulnerability in the phonics area and don’t need more than the standard foundational instruction in this area, but who have very underdeveloped vocabulary and comprehension skills, you know, à la achievement opportunity gaps, and need a lot of content building knowledge. So, if we turn around and only do structured rote phonics programs, ad nauseum, they’re no better off for the long run.

What you mentioned about building up students’ background knowledge, to assist with reading comprehension, makes me think about the work of HGSE’s Jimmy Kim , correct?

Definitely. Jimmy’s portfolio of research has shed light on the effective strategies and the complexity of building up knowledge and comprehension skills. The same is true for Meredith Rowe's vocabulary work . There are others at HGSE, like Nadine Gaab with her [dyslexia] screening work , whose research is equally important. We’re all in the same fight together, contributing in specific ways for the same outcomes, but we're all looking at different pieces.

Regardless of which pieces we’re each focused on, some of the feedback that I get repeatedly [from school districts] is that it's so helpful that we step back and look at the policy and practice landscape and look at what the research really tells us about where we are, and then craft guidance in the form of resources and tools.

Additional resources

• American Public Radio's Sold a Story podcast

Separating Fact from Fiction About the Science of Reading

• The Science of Reading Literacy Briefs, NYSED
• Harvard Ed. magazine explores the next phase of the Reach Every Reader initiative
• Professor Catherine Snow puts the "literacy crisis" in context on the Harvard EdCast

Usable Knowledge

Connecting education research to practice — with timely insights for educators, families, and communities

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New literacy briefs correct common myths and misconceptions 

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McNeese Reports Successful Financial Literacy Project 

The AccessLex Financial Education Research Grant on “Enhancing Financial Literacy–Individual and Group Financial Decision-Making Effects” was awarded McNeese State University through Dr. Shuming Bai, College of Business dean and professor of finance. 

The primary goal of the project was to help students to decrease debt and increase income and wealth through a series of financial seminars and hands-on trading and investing. Each participant was given $100 to open a live TD-Ameritrade account and participated in both individual and group phases of trading. The project began in the fall of 2021 and was completed in the spring of 2024 with three groups of students 

Participants learned personal finance skills, practiced live trading, changed their behavior by reducing debt and increasing income and took control of their financial well-being. 

The financial professionals who hosted the financial seminars for the students included Michael Eason, former senior vice president of Merrill Lynch, Jason Martinez, senior vice president for First Horizon Bank in Southwest Louisiana, and Denise Rau, former president at Rau Financial Group.  

The three McNeese College of Business faculty members who mentored the student groups with hands-on trading and practices were Bai, Dr. Lonnie Turpin, McNeese professor of business administration and Dr. Akm Rahman, McNeese professor of finance. 

The first two years the project focused on 100 incoming freshmen in underserved populations and the last session was open to all McNeese students. Students came from all six colleges at McNeese. 

“I learned about how important patience and discipline are when investing, because it definitely pays out in the long run,” said Braylon Fuselier, a freshman from Lafayette. 

Students were grateful for the opportunity to master wealth generation at a young age. They are empowered with skills that will benefit them for a long time, according to Bai.  

“It changed their financial lives, by teaching them about debt management and the power of compounding interest,” explained Bai. “All the participants said they plan on sharing the knowledge with family and friends and that McNeese should continue this meaningful project.” 

The biggest surprise came from the impact the project had on the students. Kristina McCaskill, a radiologic sciences major from Sulphur, is the child of a broker who, previously, had no interest in wealth management. This project changed her attitude towards her parents’ profession and now she is interested in financial investment. William Calhoun, an accounting major from Baton Rouge, is a student with a disability and he feels empowered with financial skills that can help him to generate wealth and be financially independent as he graduates from college. 

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Women's financial literacy: A bibliometric study on current research and future directions

Sheela sundarasen.

a Department of Accounting, Prince Sultan University,P.O.Box No. 66833 Rafha Street, Riyadh,11586,Saudi Arabia

Usha Rajagopalan

Malathi kanapathy.

b School of Business and Management, Quest International University, No.227, Jalan Raja Permaisuri Bainun, 30250, Ipoh, Perak, Malaysia

Kamilah Kamaludin

This study undertakes a bibliometric and content analysis on women's financial literacy. The purpose of a bibliometric research on financial literacy and women is to carefully evaluate and quantify the body of literature on this subject. It attempts to identify trends, research gaps, significant authors, and essential ideas, offering a thorough overview that might direct future research and policy activities to increase women's financial literacy and well-being. The data extraction commenced in January 2023 with a thorough criteria search for articles, which includes inclusion and exclusion criteria using Web of Science Core database, resulting in 312 articles, published between 1998 and 2022. Biblioshiny application as well as the VOSviewer software for network visualization of keywords and bibliographic coupling is used. Based on the outcomes of the scientific bibliographic coupling, dominant themes were identified – “Global Financial Literacy: Addressing Disparities and Enhancing Education”, “Addressing gender gap in financial inclusion and personal finance behaviour”, “Empowerment through Financial Literacy: Overcoming the Manacles of Domestic Violence” and “Women's retirement planning and preparedness”. Future research in this area could examine global gender differences in financial literacy, implement targeted financial education interventions, incorporate financial literacy and economic empowerment into domestic violence policies, investigate factors influencing women's retirement planning, and advance gender equality and financial well-being globally. The outcome from the future research is anticipated to assist regulatory bodies, government agencies and non-profit organization in enhancing existing regulations (specifically for women) and provide the platform for a sustainable wealth management and well-being program for women.

1. Introduction

Financial literacy refers to the diverse knowledge and skills on financial matters, such as managing money, setting budgets, and investing [ 1 , 2 ]. However, due to socioeconomic issues, cultural standards, and gender-based expectations, women face mounting challenges in financial literacy, money management and retirement planning. According to a recent study by Ref. [ 3 ]; women and girls are more likely to be financially literate in nations where there was more gender equality. This highlights the urgent need to provide women worldwide with opportunities to enhance their financial education and knowledge, which can have a significant impact on their financial planning, inclusion, and empowerment [ [4] , [5] , [6] ]. [ 6 , 7 ] also documented that women exhibit a relatively lower level of debt literacy and financial management ability. Thus, knowledge on financial literacy and money management should aid women in overcoming challenges in retirement planning [ [8] , [9] , [10] ], in addition to enhancing their quality of life and feeling of financial security and independence [ 11 ]. In that regard, the purpose of this study is to examine and shed further light on the academic discourse around women's financial literacy and well-being. This research intends to highlight the socioeconomic realities, cultural norms, and gender-related presumptions that make financial management, retirement planning, and economic literacy challenging for women. Subsequently, the study will identify knowledge gaps through thematic analysis, thereby providing a roadmap for future research that could potentially enhance the financial welfare of women.

This study is critical because women encounter numerous gender-based inequalities in terms of economic prospects, including restricted access to economic resources, lower wages, and biased practices [ 12 ]. Thus, advocating financial literacy among women [ 13 ] is instrumental in imparting knowledge and comprehension of intricate financial concepts and practices, such as cashflows, saving, investing, and debt management [ [14] , [15] , [16] ]. Holistic financial planning could lead to the establishment of prudent financial goals, formulation of meticulous budgets, and development of strategies to accomplish those goals [ 17 ]. These goals could be achieved through financial education, financial inclusion [ 18 , 19 ] and financial capability [ 20 , 21 ]. Additionally, encouraging ongoing interdisciplinary research on women's retirement policies will aid in refining educational programs through robust financial literacy initiatives and technological integration. Thus, it is the responsibility of policymakers, financial institutions, NGOs, employers, and other stakeholders to work alongside effectively and execute holistic and comprehensive intervention strategies [ 22 ] to accelerate the creation of a more equitable society.

The results of this research may have important ramifications for practice and policy, eventually boosting women's financial security and advancing the overarching objective of gender equality. It could further assist regulatory bodies, government agencies and non-profit organization in enhancing existing regulations (specifically for women) and provide the needs and platform for a sustainable wealth management and well-being program for women. Immediate actions are pivotal to solving these problems and providing women with the tools they need to handle difficult financial situations. In essence, this research holds the potential for substantial contributions across societal, academic, governmental, and industrial dimensions, thereby enhancing women's financial well-being and retirement preparedness.

The rest of the paper is organized as follows. Section 2 develops the methodology and discusses the software integrated for the data analysis. Section 3 discusses the bibliometric findings, a critical analysis of the themes based on bibliographic coupling and content analysis, identifies the gaps and meticulously articulates future research. Section 4 concludes.

2. Literature review

According to the Organization for Economic Co-operation and Development (OECD), 2020, the comprehensive notion of financial literacy encompasses a convergence of awareness, knowledge, skills, attitude, and behavior. The factors mentioned above, when considered collectively, assume a crucial role in enabling the ability to develop insightful and judicious financial assessments, ultimately leading to the achievement of financial success. In light of the unique barriers that women face in the realm of financial planning and security, it is imperative to recognize and understand the consequential implications that these challenges impose upon women. Numerous scholarly inquiries have been undertaken to delve into the gender disparities in financial literacy, resulting in a consistent body of evidence indicating that women tend to demonstrate a relatively lower level of financial literacy in comparison to their male counterparts [ 23 ]; Grigion Potrich et al., 2018; [ 24 , 25 ]. Moreover, it has been noted that within the demographic of elderly households in both the United States and China, with a particular emphasis on women, there exists a distinct disposition towards insufficiently allocating resources for their post-employment years [ [26] , [27] , [28] ]. This phenomenon can be attributed, in part, to their comparatively weak levels of acumen in matters pertaining to financial knowledge and understanding (Mitchell, O. S., & Lusardi, A., 2008). Numerous studies have also explored gender disparities and the importance of women's financial literacy for retirement planning and preparedness [ 27 , [29] , [30] , [31] ]; Mitchell, O. S., & Lusardi, A., 2008). These research findings underscore the importance of recognizing and addressing gender-specific obstacles within the realm of financial literacy.

In terms of enhancing financial inclusion and empowerment among women, studies indicate that it is crucial to implement focused interventions and educational initiatives. Sarah [ 32 , 33 ] underscored the significance of initiatives promoting financial inclusion to enhance women's economic empowerment and address the disparity in financial literacy between genders. In fact, new prospects for financial inclusion are provided by the development of digital financial services, but women's digital financial literacy is still a problem (Opoku Asuming et al., 2019). Thus, women's access to formal financial services can be facilitated by addressing the digital gender gap and offering digital financial literacy training [ 34 ]. Additionally, socioeconomic circumstances also play an important role in women's financial literacy; Kamer [ 35 ] observed that women in the middle-income countries exhibit lower levels of financial literacy. This finding suggests that education plays a crucial role in enhancing financial literacy. By effectively addressing these challenges, society has the potential to cultivate a greater degree of fairness and sustainability in economic opportunities for women, thereby augmenting their overall financial welfare. Within the realms of socioeconomic issues, women are also victims of economic abuse. Economic abuse has a remarkable impact on the economic self-sufficiency of women who had experienced abuse [ 36 , 37 ]. This finding implies that curricula aimed at enhancing financial literacy should prioritize the empowerment of individuals who have survived intimate partner violence (IPV). The level of confidence an individual holds in their capability to efficiently handle their money is a significant factor in shaping their financial decision-making and actions. Lisa [ 23 , 38 ] concluded that women revealed a stronger tendency to own investment and savings products when their ability to manage money increases. Thus, developing effective policies to increase self-efficacy in handling money can give positive outcomes for women's financial literacy.

In summary, this research explores how women's financial literacy, gender variations in financial literacy, and socioeconomic factors affect women economically. Future studies should focus on enhancing targeted financial education programs, comprehending how financial literacy affects financial behavior, and researching the long-term effects of increased financial literacy on women's financial stability. To close the gender gap in financial inclusion and promote better retirement planning outcomes, governments and policymakers should prioritize financial education and initiatives that accommodate the special needs of women, particularly those in vulnerable groups. Section 4.9 further elaborates on the scholarly discussion of women's financial literacy from a thematic angle.

3. Methodology

This study employs bibliometric analysis to examine the existing scholarly literature and discourse pertaining to women's financial literacy. In line with other studies [ 39 , 40 ], this study uses both numerical and graphical methodologies. Web of Science (WoS) is used for this research, though other databases including Scopus, Google Scholar, SSRN, and EconLit are all viable options for bibliometric analysis. The selection of WoS is based on its extensive coverage of reputable journals and the exclusion of non-scientific sources, which aligns with the study's objective to ensure rigor and quality [ 41 ]; Huang et al., 2019). Bibliometrix and VOSviewer are employed in this investigation, while Latent Dirichlet Allocation (LDA) is acknowledged as an alternative statistical method for topic modeling, uncovering latent themes within a text corpus through the analysis of word co-occurrence patterns. By utilizing Bibliometrix, descriptive analysis, publication trend exploration, author and source identification, collaboration pattern analysis, quantitative insights, and statistical summaries can be conducted ( RQ1 and RQ2 ). Additionally, VOSviewer provides valuable network visualization and bibliographic coupling analysis capabilities ( RQ3 and RQ4 ). Its strengths lie in robust network visualizations, clustering analysis, collaboration analysis, and comprehensive summary functionalities, all of which contribute to understanding relationships and thematic clusters. Thus, the combined use of Bibliometrix and VOSviewer is implemented as methodological tools to achieve the study's stated objectives.

The following research questions (RQs) will be addressed in this study.

What are the publications trends, most prominent sources, documents, and authors on women's financial literacy?

Which are the major contributing institutions and countries yielding research related to women's financial literacy?

What are the major themes on women's financial literacy?

What are the potential future areas of research on women's financial literacy?

The proceeding section delineates data extraction and analysis.

3.1. Data extraction, inclusion and exclusion criteria

As stated in the previous section, to ensure the highest level of rigor and quality, we sourced our data exclusively from the Web of Science (WoS) database [ 41 ]; Huang et al., 2019). The data extraction commenced in January 2023 with a thorough criteria search for articles, using Web of Science Core database in the title, abstract, or in the keyword list; “financial literacy” OR “financial inclusion” OR “financial education” OR “financial capacity” which turned up 6946 scholarly works. These results were further filtered to only include the field “Women”, which resulted in 670 scholarly works. Strict inclusion and exclusion criteria were applied; a citation topic search was carried out with the use of the keywords “Economics,” “Gender & Sexuality Studies,” and “Management,” which narrowed the results to 402 scholarly works. Thereafter, limiting our scope to articles published in the English language from the domains of Economics, Business, Business Finance, Management, Women's Studies, Family studies, Social issues, Social work, and Psychology multidisciplinary, a total of 383 scholarly works were identified. The search results were further filtered by selecting the document types “Article” or “Early access,” published between 1998 and 2022, thus resulting in the final corpus of 312 articles. These articles serve as the foundation for this bibliometric study.

3.2. Data analysis

To analyze the data, we employed the Bibliometrix R-package (Biblioshiny) application [ 42 ] for descriptive analysis [ 43 ], as well as the VOSviewer software [ 44 ] for network visualization of keywords and bibliographic coupling [ 39 , 40 , 45 ]. In the bibliometric section, we examined the summary of main information, publication trend, most relevant authors, sources, affiliation, document and country collaboration analysis. VOSviewer was used for clustering of the network – ‘keyword analysis’ and ‘bibliographic coupling’ [ 44 ]. Based on the bibliographic coupling, this study performed a Content Analysis, and identified the themes and future research for financial literacy and women. Fig. 1 delineates the search criteria (keywords, inclusion, and exclusion) and the subsequent analysis.

Dataset search and analysis criteria.

4. Findings and discussion

5.1. main information.

Table 1 provides a summary of the scholarly work included in this study, which consists of, predominantly “articles” (285), and “early access” (27), published between 1998 and 2022. The analysis of authors' keywords (808) reveals a noticeable clustering of co-occurring keywords and strong links between concepts and terms within this extensive bibliographic dataset. This will be discussed in further detail in the proceeding section. In terms of citation, the average number of citations per document is 16.04, suggesting moderately significant impact on the research. The existence of 755 authors in this dataset is a good indication that the research area is of significant interest to a sizable number of researchers and is an active area of investigation. This may be due to the potential practical applications of the research as it addresses women's financial literacy. It is also worth noting that most of the documents (699) are authored by multiple authors. Collaborative authorship is encouraged in academic work as it enhances creativity, brings diverse ideas together, and fosters shared responsibility, leading to improved outcomes and innovation.

Summary of main information related to the 312 articles downloaded from Web of Science, based on the inclusion and exclusion criteria mentioned.

5.2. Publication trend

The trajectory of articles published within this dataset indicates an upward trend, with a remarkable surge in the number of scholarly contributions in recent years ( Fig. 2 ). In the emerging years of this collection, spanning from 1998 to 2009, only a handful of articles were published. However, the year 2011 marked an important turning point, with six papers, signifying a significant leap in scholarly output. In the years that ensued, the publication of scholarly articles on financial literacy and women experienced a consistent and exponential increase, exhibiting a peak in 2022, with a staggering fifty-five articles. The progressive increase in scholarly articles on women's financial literacy between 2011 and 2022 can be attributed to several factors. First, the surge in publication reflects the rising recognition of the critical role that financial literacy plays in the contemporary world. Additionally, as cultural paradigms change and awareness is increased about the persisting disadvantages encountered by women in different fields, including finance, it reflects the focus on gender equality and women's equality. Furthermore, this publication trend could be driven by policies and educational initiatives aimed at enhancing financial literacy, as policymakers and institutions recognize its vital significance in fostering economic well-being and resilience among individuals and communities. Additionally, the evolving landscape of research and academia has been a driving force, with scholars and researchers investigating the complex nuances of women's financial literacy research through robust empirical investigations, innovative methodologies, and interdisciplinary collaborations. In sum, the upward trajectory of articles published in this collection over the years is a testament to the growing recognition of the significance of financial literacy and gender equality, underpinned by a several factors such as awareness, policy initiatives, research advancements, and demand for evidence-based solutions.

Publication trend for the 312 articles from Web of Science from 1998 to 2022.

5.3. Most relevant source and source dynamics

Table 2 shows the most relevant sources for articles on women's financial literacy, while Fig. 3 shows the trajectory of publication in the relevant sources. Top sources include Journal of Family and Economic Issues, Journal of Pension Economics & Finance, Journal of Consumer Affairs, Journal of Women & Ageing, and Journal of Behavioural and Experimental Finance. All sources indicate a significant increase in their publications over the years ( Fig. 3 ), with the Journal of Pension Economics & Finance and the Journal of Family and Economic Issues having a total of 9 publications over the said period. These are prominent scholarly periodicals, with a proliferation of articles focused on pensions and retirement savings, and family economic issues. This may be attributed to the increasing significance of these topics within the fields of economics and finance. Additionally, scholars, policymakers, and practitioners are also showing increased interest in the intersection of women and ageing.

Most relevant source (based on number of articles published).

Source document.

The Journal of Women & Ageing is among the prominent academic publications that focus on women's health and ageing. It is undeniable that financial literacy plays a critical role in promoting the health and wellbeing of women in the context of ageing and retirement. Thus, it is reasonable for scholars to examine the impact of financial literacy on the health and overall welfare of women, particularly with respect to the ageing process and retirement. Further scrutiny of the other journals indicates that the topics covered in these sources include family and financial issues, finance, consumer affairs, gender and aging, behavioral and experimental finance. The recent trend in this area of research on women's financial literacy, as evident from the journal publications, demonstrates an increasing focus on the relationship between gender and finance. It signifies the recognition of the significance of addressing women's specific financial concerns and their distinct encounters in domains like family, pensions, consumer affairs, and aging.

These journals are published by prestigious publishers including Springer, Cambridge University Press, Wiley-Blackwell, Routledge, and Elsevier, which are renowned for their rigorous peer-review processes and superior publishing standards. This reflects the quality, impact, and relevance of the published articles in the realms of women's financial literacy. To assess the scholarly impact, visibility, and influence of these journals, the ABDC, ABS and SJR rankings are used, and the ranks are as displayed in Table 2 .

5.4. Most relevant authors

Table 3 lists the most prolific women's financial literacy authors, hailing from prominent institutions around the world. With nine articles, Lusardi Annamaria demonstrates her exceptional knowledge in the realm of financial literacy. Her expertise spans across various domains and complexities of financial literacy, financial decision making, retirement planning and its influence on financial outcomes. Olivia S. Mitchell is another authority in financial literacy; has five publications in this collection, and her research expertise has led to in-depth investigations on financial literacy, education, and pensions, further solidifying her position as a leader in the industry. Adding to the list of esteemed authors, Kumar S has contributed four articles, demonstrating firm dedication to research in the domain of financial literacy. The author has examined various facets of financial literacy, inclusion, and decision-making. His research has shown the complex relationship between financial literacy, financial behaviour, and economic consequences, emphasising the role of financial literacy in enabling underprivileged communities to improve their financial situations. In conclusion, these prominent writers' intellectual contributions in financial literacy are outstanding, demonstrating their strong dedication to developing this essential topic.

Most relevant authors (Based on their number of publications).

NA* - not available.

5.5. Most relevant affiliation

Table 4 shows the affiliation and publication counts in women's financial literacy research. The University of Turin leads the field with ten publications. George Washington University and Linkoping University, with nine and eight publications, respectively. Rutgers State University and the University of Massachusetts exhibit a commendable level with eight and seven publications. From a national standpoint, there exists a geographic disparity in research productivity, with a clustering of scholarly publications originating from universities located in the Western nations. These differences could be due to several factors, including governmental funding, research infrastructure, and academic culture. Countries with a stronger research-oriented culture and availability of research data may have higher publication rates. Moreover, cultural attitudes towards women and money may also impact publication rates. Patriarchal societies, for example, may exhibit lower financial literacy rates among women, which could translate into less interest in researching this domain. Conversely, countries with robust gender equality traditions may prioritize research in this field and allocate more resources towards studying the financial literacy of women. Despite these differences, greater collaboration is necessary to bridge the gap and promote the sharing of research findings from universities across Asia, Africa, and the Middle East in the domain of women's financial literacy.

Most relevant affiliation (based on number of articles published).

5.6. Most global cited documents

Table 5 summarizes authors' intellectual output, focused on financial literacy, retirement planning, and gender-related aspects in various countries. Lusardi Annamaria and Mitchell are leading research authorities in financial literacy, with their article published in the Journal of Pension Economics and Finance – “Financial literacy around the world: an overview” (citation: 2375 as of 23 rd May 2023). This honour instantaneously recognizes Lusardi Annamaria & Mitchell's pension economics and financial skills. The article provides evidence that there exists a disparity in financial literacy between genders, with women exhibiting lower levels of financial literacy compared to their male counterparts. Additionally, the research suggests that individuals who fall within the younger and older age brackets tend to exhibit lower levels of financial literacy compared to those in the middle-aged group. The findings also indicate that individuals with higher levels of education tend to be more financially literate. Most importantly, the articles reiterate that having financial literacy increases retirement planning and the fact that financial literacy's impact on retirement planning is underestimated by instrumental factors.

Most global cited documents.

Lusardi Annamaria and Mitchell's scholarly contribution extends beyond the aforementioned work, with 1999 citations (as at 23 rd May 2023) for their publication titled “Planning and Financial Literacy: How Do Women Fare?”, published in the American Economic Review. The article discusses that one-size-fits-all programmes are unlikely to be effective in addressing saving deficiencies across different levels of population. Particularly, given the high prevalence of financial illiteracy among women, it seems unlikely that a single financial education session would have a significant impact on long-term planning and saving choices. The research instead emphasized the significance of programmes particularly designed for women since they may be more suited to address the basic difficulties that women confront.

[ 46 ]; with 812 citations for the Journal of Pension Economics and Finance publication, and the rest of the authors demonstrate a commendable level of research output and intellectual engagement, signifying the rich landscape of knowledge production and dissemination in economics and finance. In conclusion, the research papers shed light on the present state of retirement planning, financial literacy, and gender-related factors in multiple countries, offering insightful information for policymakers, researchers, and practitioners who are studying these fields.

5.7. Country collaboration map

Fig. 4 shows the international collaboration in financial literacy, inclusion, retirement, and pension. The United States (USA) is among the nations with the greatest frequency of partnerships and collaborates with nations like India, France, Germany, and the Netherlands. Other prominent partnerships include those between Australia and Bangladesh, Ghana, Malaysia, and South Africa, as well as between the UK and Malaysia, France, Germany, and Australia. With nations from many continents working together on scientific and scholarly endeavours, these partnerships underscore the global aspect of research and publishing. These collaborations signify valuable partnership in the field of financial literacy and women-related research. Similarly, Germany has collaborated with Denmark, UK with France and Malaysia, but the number of collaborations is relatively small (two collaborations each). Increased collaboration across countries and continents is necessary, as research partnerships among nations facilitate and foster the exchange of knowledge. The integration of diverse perspectives, methodologies, and data through collaborative research facilitates the development of comprehensive, detailed, and in-depth studies. It also allows scholars from different nations to understand how cultural, economic, and social aspects influence financial literacy. Additionally, it could assist in identifying best practices and can serve as a road map for financial education programs, policies and the creation of global standards and recommendations for financial literacy.

Country collaboration map.

5.8. Co-occurrence network

Fig. 5 and Appendix provides a list of keywords related to various topics in the field of women's financial literacy, along with their occurrences and total link strength. “Link strength” ( Appendix A ) refers to the intensity of relationships between keywords in the literature. Higher values indicate stronger associations, while lower values suggest weaker connections in this field of research. Fig. 5 shows the keyword network, highlighting financial literacy (Green), financial inclusion (Red), women (Blue), and savings (Yellow). Financial literacy is a prominent topic, with high occurrences (121) and total link strength (421). Financial inclusion is another significant area of research, with 78 occurrences and a total link strength of 277. Gender is also a central theme, with keywords such as gender differences, gender gap, and gender inequality having high occurrences and total link strength. The high frequency of phrases like gender-differences, gender gap, and women empowerment indicates the need to address gender-based inequities. Other important keywords include education, empowerment, entrepreneurship, savings, and wealth, all of which are relevant to the discussion of financial literacy and gender. Some keywords have relatively lower occurrences and link strength, such as adoption, crisis, debt, and poverty, indicating they may be less frequently studied in this context. Overall, both Fig. 5 and Appendix A provide a snapshot of the research landscape on ‘financial literacy and women’, highlighting key themes and topics of interest in the field.

Keyword Co-occurrence network.

5.9. Bibliographic-coupling

To further discover the themes and the associations among the citing publications, we performed a bibliographic coupling using VOSviewer. A total of 312 articles were used in this exercise, and the citations were adjusted to 20 citations. Nevertheless, only 54 articles were captured in this bibliographic analysis. This analysis forms clusters based on the convergence of citing publications. Clustering supports a thematic assessment of the co-citation network [ 47 ]. It is a subjective method, requiring a review by knowledgeable parties to refine and generate meaningful clusters [ 41 ]. The bibliographic-coupling using VosViewer identified seven themes, based on 54 articles, as displayed in Fig. 6 . Further manual review and analysis of all the articles indicated some similarities and thus the themes were merged to form four themes as shown below.

Global Financial Literacy: Addressing Disparities and Enhancing Education.

Addressing gender gap in financial inclusion and personal finance behaviour.

Empowerment through Financial Literacy: Overcoming the Manacles of Domestic Violence.

Women's retirement planning and preparedness.

Bibliographic-coupling.

5.9.1. Theme 1 “Global financial literacy: Addressing Disparities and enhancing financial education"

Theme 1 examines the scholarly discourse surrounding global financial literacy, which is of considerable importance. Research in this domain indicates significant discrepancies in financial literacy levels among different countries and demographic groups. For instance, research conducted by Refs. [ 48 , 49 ] has shown that certain countries, such as Canada and Germany, display a greater level of financial literacy on average than other nations. Furthermore, significant differences in financial literacy across various demographic factors such as age, gender, race/ethnicity, and educational attainment have also been observed [ 50 , 51 ]. Lusardi et al. (2014) and Boisclair (2017) further indicated that individuals belonging to demographic groups such as women, people from diverse backgrounds, and those aged over 75 years exhibit a worrisome weakness in financial literacy in both the United States and Canada. The said research highlights financial literacy disparities, particularly among marginalized communities, giving rise to concerns regarding reduced financial welfare, heightened economic inequality, and suboptimal financial decision-making.

In that context, the complex and versatile nature of financial literacy underlines the need for targeted interventions and financial education to enhance financial literacy levels among different demographic groups worldwide [ 50 , 51 ]; Lusardi et al., 2014 [ 48 , 49 ]. [ [52] , [53] , [54] ]; and Ozdemir et al. (2019) argue that financial education plan is a critical policy instrument that can be implemented relatively easily to enhance financial well-being. These scholars found that financial education was low across different countries, cultures, and age groups, with low levels particularly pronounced among women, younger adults, and individuals with lower levels of education and income [ 52 ]; Hassan and Kalli, 2009; Ozdemir et al., 2019). Moreover, they noted a significant relationship between financial education and investment decisions [ 53 ]. The scholars further observed that financial education programs should reflect social and personal psychological factors to enhance program effectiveness [ 54 ]. They also highlighted the importance of adopting personalized financial education programs tailored to suit gender and other demographic variances to improve program efficiency [ 54 ]; Ozdemir et al., 2018), particularly among women, younger adults, and low-income individuals [ 52 ]; Ozdemir et al., 2018). In conclusion, theme 1 emphasizes the disparities in financial literacy across countries and demographic groups, highlighting the need for targeted financial education interventions to resolve these disparities and enhance financial well-being.

5.9.2. Theme 2 “Addressing gender gap in financial inclusion and personal finance behaviour "

Theme 2 discusses a thorough and detailed knowledge of the nuances of gender inequality in financial inclusion and personal finance behavior, which has been a focal point of extensive academic inquiry across various nations. Scholars have examined this issue in Nigeria [ 55 ], Sub-Saharan Africa [ 56 ], West Africa [ 57 ], Peru [ 58 ], India [ 59 ], and internationally [ 28 ]. This body of research has shed light on the negative impacts of gender inequality on underrepresented groups including women, the less educated, and the poor. It has also highlighted the complex link among financial inclusion, gender, and technology. Socioeconomic, sociocultural, institutional, legal, and regulatory issues are identified as the primary causes of the gender gap in financial inclusion. In addition, age, education, income, institutional trust, and ease of doing business [ 60 ] have a significant influence in advancing financial inclusion. Studies in this domain also highlighted the significance of financial inclusion's role in improving women's equality and promoting advancement on gender equality (Sarah Hendriks, 2019). Ignoring these issues could negatively impact economic growth, social protection, and welfare.

In addition to financial inclusion, research on the interaction between gender, financial literacy and personal finance behavior has shown that financial literacy is a significant predictor of an individual's financial well-being [ 23 ]. Women's educational levels were also found to magnify the impact of financial literacy on their financial affluence. Moreover, financial self-efficacy, or a person's self-confidence in their financial planning competence, also played a crucial role in determining the financial behavior of women (Farrell et al., 2015). Gender inequality in over-indebtedness was reported [ 61 ], but gender disparities in capital market involvement decreased when financial literacy was controlled for [ 5 , 62 ], highlighting the importance of financial literacy in addressing gender inequality and financial behaviour. Gender disparities in financial literacy were found to be most pronounced in industrialized countries, attributed to personal traits, economic, and social factors (Cupak et al., 2018). Research in this domain also indicates that financial literacy training primarily benefited male counterparts, perpetuating gender inequality (Brixiova et al., 2020). Therefore, it is necessary to promote greater financial literacy, particularly among women, to enhance their personal finance behavior and overall economic well-being.

5.9.3. Theme 3 “Overcoming the Manacles of Domestic Violence and intimate partner violence (IPV) through financial literacy"

Theme 3 examines the pervasiveness of intimate partner violence (IPV) and domestic violence in the realms of financial literacy as they have garnered worldwide attention, and multiple studies have examined the underlying factors contributing to this phenomenon. For low-income women, financial reliance has emerged as a major element that fosters IPV and domestic violence. Financial instability and reliance on abusers for economic assistance are common challenges for survivors of domestic violence [ 63 ]. The authors postulated that the abuser is able to exercise more control over the victim when the victim is financially dependent on the abuser. Financial illiteracy, lack of economic independence, and lack of self-sufficiency have all been linked to the persistence of intimate partner violence (IPV). To combat this issue, multiple studies have suggested that financial literacy and economic empowerment could be key to reducing IPV and domestic violence. For instance Ref. [ 37 ], found that financial literacy programs were associated with lower rates of IPV perpetration and victimization. Similarly [ 64 ], noted that financial empowerment, which includes strategies for achieving financial stability and security, could help survivors of domestic violence break free from abusive relationships. Furthermore, Sanders (2006) emphasized that the provision of economic resources and financial education could aid survivors in achieving economic independence. These studies stress the need for IPV and domestic abuse policies, programs, and practices to emphasize financial literacy, economic empowerment, and self-sufficiency. The chance of IPV and domestic violence being perpetuated might be lowered if survivors were given the means to become economically self-sufficient. In conclusion, Theme 3 discusses the interplay between financial literacy, economic empowerment, and self-sufficiency in IPV and domestic violence. These are effective ways to counteract intimate partner violence (IPV) and domestic abuse and simultaneously empower survivors.

5.9.4. Theme 4 - Women's retirement planning and preparedness

Theme 4 discusses retirement planning and preparedness as essential factors in achieving a secure and fulfilling retirement. Research studies have shown that women face several unique challenges that impact their retirement planning and preparedness, such as lower lifetime earnings, caregiving responsibilities, and longer life expectancies. Scholarly discussion under this theme has examined on how retirement planning and preparation affects women [ 65 ];, [ 66 , 67 ]; Knoll & Tamborini, 2012; Lee, 2008 [ 68 ]; and Niu & Gan, 2020). Planning for and being ready for retirement are essential factors for a fulfilled retirement. There are a number of factors, such as lower lifetime earnings, caregiving duties, and longer life expectancies, that make it more difficult for women to save for retirement. These studies have found that working women had higher levels of financial education [ 67 ] and tend to have better retirement planning and preparedness. Similarly, financially literate women also plan and prepare for retirement more effectively [ 69 ] and women who had access to workplace retirement plans [ 68 ] or financial advisors [ 66 ] have higher retirement savings, planning, and preparedness, emphasising the importance of these resources.

The scholarly discussion in this area also revolves around women's priorities in their retirement planning, such as healthcare and wellness [ 70 ], which underscores the importance of healthcare planning in retirement. Niu and Gan (2020) on the other hand, found that women tend to have a lower risk tolerance than men, which could impact their investment decisions, retirement plannings and savings. Thus, financial education and literacy programs may help women become more financially risk-tolerant and reduce these inequities. In summation, the scholarly research conducted in Theme 4 elucidates the distinctive obstacles encountered by women in the realm of retirement strategizing and readiness. This statement underscores the significance of fostering financial literacy, facilitating access to retirement vehicles, and prioritizing healthcare considerations as pivotal factors in attaining enhanced retirement prospects for women. By attending to these pertinent factors, one can effectively mitigate gender disparities and enhance the prospects of women's retirement preparation and financial reserves.

5. Discussion

Based on the outcomes of the scientific bibliographic coupling, dominant themes were identified – “Global Financial Literacy: Addressing Disparities and Enhancing Education”, “Addressing gender gap in financial inclusion and personal finance behaviour”, “Empowerment through Financial Literacy: Overcoming the Manacles of Domestic Violence” and “Women's retirement planning and preparedness”.

Theme 1 predominantly highlights the disparities in financial literacy among different demographic groups, specifically women and how education could assist in bridging the gap. Targeted financial education interventions that reflect social and psychological factors are crucial for enhancing the financial well-being of individuals, particularly women, across the globe. Therefore, policymakers and educators must use their sagacity and foresight to collaborate, create and implement decisive and effective targeted interventions that serve this vulnerable and marginalized population. The empirical evidence suggests that potential research under this domain includes further investigation of the global gender disparities in financial literacy across borders and targeted intervention strategies, mainly through financial education. Studies comparing gender disparities in financial literacy, inclusion, capability, and retirement planning in developed and developing countries can shed light on the causes and effects of these inequalities. Policymakers can use these insights to devise effective strategies for promoting financial literacy and well-being among women. Tailored financial education programs in developing nations, especially through remote learning, can empower women in making financial decisions and achieving independence and wealth growth. Studies that explore the influence of cultural and socioeconomic factors on women's financial literacy can help create culturally responsive education programs. Investigating the impact of financial technology on women's financial literacy can also bridge the digital divide and increase inclusion. Exploring a comprehensive “cradle to grave” financial literacy program (Sundarasen et al., 2013) involving schools, parents, businesses, and government can empower women throughout their lives and foster financial independence. These studies pave the way for gender equality and improve women's well-being globally.

Theme 2 emphasizes gender disparity in financial inclusion and personal finance behaviour. Therefore, policymakers must prioritize financial inclusion for marginalized populations and promote financial literacy, particularly among women, to enhance their personal finance behavior and overall economic well-being. These strategies are critical in bridging the gap between genders and promoting financial inclusion. Potential future research on gender disparities in financial inclusion and personal financial behavior could have significant impacts. By examining factors such as societal and cultural barriers, digital illiteracy and lack of technology [ [71] , [72] , [73] , [74] , [75] , [76] , [77] , [78] , [79] , [80] , [81] , [82] , [83] , [84] , [85] , [86] , [87] , [88] , [89] , [90] , [91] , [92] , [93] , [94] , [95] ], policymakers can design effective strategies to bridge gender disparities in financial inclusion across nations and regions. Investigating the role of Artificial Intelligence (AI) and financial technologies can open new pathways to overcome restrictions in developing nations, promoting financial inclusion. Analyzing microfinance's role in closing the gender gap in access to credit and services can also lead to improved regulations, policies, and initiatives, ultimately enhancing the financial well-being of women. Overall, to address gender disparities across nations, the literature recommends comprehensive policy interventions, including inclusive financial policies, regulations, digital financial inclusion initiatives, and tailored financial literacy programs, targeting vulnerable populations. These studies have the potential to drive positive change in gender equality and financial inclusion.

Theme 3 explores the critical relationship between financial literacy, economic empowerment, and self-sufficiency in the context of domestic abuse and intimate partner violence (IPV). This subject stresses the possibility of financial education and empowerment to break the cycle of abuse and encourage survivor independence by shedding awareness on the effect of financial dependency on abusive relationships. It is a complex issue that requires comprehensive policy interventions. The studies recommend the inclusion of financial literacy and economic empowerment in IPV and domestic violence policies, programs, and research to combat financial dependence, financial stressors and aid survivors in achieving financial independence. By addressing these factors, support could be extended to the survivors in breaking the cycle of violence and achieving economic security and self-sufficiency. Potential future research on financial literacy, economic empowerment, and domestic abuse includes comprehensive studies on the effectiveness of programs in minimizing intimate partner violence and domestic abuse across diverse cultural and socio-economic contexts. Additionally, investigating the impact of cultural and societal standards on victims' financial literacy and empowerment can provide valuable insights. Research exploring the association between financial literacy, economic empowerment, self-sufficiency, and re-victimization among domestic abuse survivors can contribute to understanding their mental health and well-being. Furthermore, studying the causes and effects of financial literacy and empowerment programs for male perpetrators of domestic abuse can inform tailored intervention strategies. These studies have the potential to optimize program techniques, support survivors' well-being and stability, and facilitate the development of effective policies promoting independence and mental health among domestic violence survivors.

Theme 4 examines the importance of retirement planning and preparation in attaining a secure and satisfying retirement. Gender-specific policies, tailored strategies, and financial education initiatives that account for women's diverse life circumstances and priorities can help bridge the retirement savings gap and promote greater retirement readiness among women. Women from diverse socioeconomic origins may encounter different problems and need specific measures to improve their retirement planning and preparation. Lower-income women may benefit from financial education programs that concentrate on budgeting and saving, whereas higher-income women may need more complex investing and tax planning tactics. Older women may face challenges in retirement due to lesser financial resources, while married young individuals may view retirement as a financial goal and require retirement planning. In fact, research indicates that financial literacy is generally low among elderly, hence, promoting financial literacy at a younger age may improve women's retirement preparedness. In that regard, potential future research in the area of women's retirement planning and financial well-being could involve studying factors influencing low participation rates in pension schemes, inequalities in access to financial services, and cultural/societal standards. Customized financial literacy programs, workplace policies, and the role of social security systems can also be investigated. The findings can contribute to promoting gender equality, reducing financial insecurity in retirement, and enhancing women's economic well-being globally. This research can inform intervention strategies, policy development, and program implementation to address the unique financial literacy needs of women and promote their economic independence and retirement security, ultimately closing the retirement gap between genders.

6. Conclusion

This study employed a bibliometric and content analysis to explore the scholarly discussion in different domains of women's financial literacy. Using a dataset of 312 articles that were published between 1998 and 2022, the study identified the publication trends, the main sources, articles, authors, countries and affiliation. Additionally, four main themes and the related potential areas of research were discussed. In a nutshell, it can be concluded that financial literacy for women is an extremely vital and significant area of study as the outcome could immensely support regulatory bodies and agencies, non-profit organizations and all stakeholders in planning and executing regulations and programs. This would further enhance the financial literacy level of women, subsequently empowering them to be financially independent and having the competency for their own wealth management and to face any adverse repercussions.

Planning and executing regulations and programs, specifically for women is pivotal in today's fast-paced but indeterminate post-pandemic financial environment. In modern times, women are contributing just as much as men, if not more, to the financial stability of their families by serving as primary or secondary breadwinners and sharing the burden of financial responsibilities. As the global landscape is becoming more unstable and complex, making good investment decisions, ability to access financial services, and building resilience are becoming dominant. Gender inequalities, social and cultural effects on marginalized women's financial literacy should be better understood as it is currently tacit and unspoken. Financial literacy and knowledge give women the skills and experience to maneuver the ever-changing economic landscape and to take control on their future financial well-beings, while financial inclusion allows users to access the financial services and products needed to develop and expand businesses, accumulate wealth, and safeguard themselves and their families from financial instability.

An inclusive understanding of these matters could facilitate and lead regulators and policymakers to design policies and programs that enable women to make wise financial decisions, safeguard their future, and ultimately contribute to strengthening an economy. Governments, private sectors, non-profits, and financial institutions must collaborate to bridge women's financial literacy, inclusion, education, and capability gaps. Government-funded financial education programs, mandatory financial education in schools, public education campaigns, mentoring programs, and networking opportunities can positively impact financial decision-making, gender inequality in the financial sector, and financial inclusion policies. In conclusion, financial literacy, inclusion, education, and capability are extremely important for women's financial well-being in today's rapidly changing world and it could empower women with a sustainable financial management and retirement planning.

CRediT authorship contribution statement

Sheela Sundarasen: Conceptualization, Data curation, Formal analysis, Funding acquisition, Investigation, Methodology, Project administration, Resources, Software, Writing – original draft, Writing – review & editing. Usha Rajagopalan: Funding acquisition, Project administration, Writing – review & editing. Malathi Kanapathy: Methodology, Writing – original draft, Writing – review & editing. Kamilah Kamaludin: Writing – review & editing.

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgments

The authors would like to acknowledge the support of Prince Sultan University for paying the Article Processing Charges (APC) for this publication.

APPENDIX. Keyword co-occurrence