Synthesizing an Index of Financial Literacy Using Not‐For‐Purpose Survey Data. (12th December 2017)

• Record Type: Journal Article
• Authors: West, Tracey; Worthington, Andrew C.
• Editors: Bongini, Paola; Zia, Bilal
• Is Part Of: Economic notes. Volume 47:Number 2/3(2018)
• Page Start: 331
• Page End: 352
• Publication Date: 2017-12-12
• Subjects: Economics -- Periodicals; 330.9
• DOI: 10.1111/ecno.12107
• Languages: English
• ISSNs: 0391-5026

Abstract

Abstract : We use Australian household survey data to formulate a measure of financial literacy. First, we use household responses to questions regarding financial stress and savings habits to derive a factor variable that proxies as an index of financial literacy. Second, the sample is clustered into categories of financial literacy according to their financial literacy index and other household characteristics. Third, we test for the significance of household characteristics on the financial literacy index. We find the methodologies form similar groups and yield comparable estimates. Being young, female, a single parent, in poor health, unemployed and with low income and wealth increases the likelihood of low levels of financial literacy.