AN EVALUATION OF THE IMPACT OF FINANCIAL LITERACY PROGRAMMES ON FINANCIAL DECISION-MAKING AND INVESTMENT DECISION-MAKING AMONG PARTICIPANTS
Abstract
The growing complexity of financial products, coupled with financial innovations, changes in labour markets, rising life expectancies, the shift from defined benefit to defined contribution pension schemes etc., have put financial burden on individuals for their future financial security. Financial literacy is widely seen as essential, and therefore as an indispensable part of education in this increasingly complex market. The current study has set the objective to measure the impact of financial literacy programmes (FLPs) on the financial decision-making and investment decision-making among participants. Primary data was collected from 542 participants of FLPs of Himachal Pradesh, Punjab, and Chandigarh. A post-then-pre test design survey was used for evaluating the impact of the workshop/seminars. The impact of the financial literacy workshops was assessed using a paired t-test. The study finds that there is a positive impact on the financial decision-making and investment decision-making scores of participants after attending FLPs. Thus, one could infer that financial literacy workshops conducted by various stakeholders, governments, regulators, etc., were helpful in improving the financial and investment planning of the participants who attended these programs, which in turn will improve the quality of their future financial and investment planning decisions. Policy implications, limitations and scope of further research have been indicated.
Keyword : Financial literacy programs, financial literacy, financial decision-making, investment decision-making, India.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
• AdFLAG (2000). Report to the Secretary of State for Education and Employment. o Department of Education and Skills. Adult Financial Literacy Advisory Group, London, available at: www.dfes.gov.uk/adflag/. • Agarwalla, S. K., Barua,S.K., Jacob, J., and Varma, J.R. (2015). Financial Literacy among Working Young in Urban India. World Development, Vol. 67, pp. 101–109. • Ahluwalia, M. S. (2006). Speech at launching of the book ―How India Earns, Spends and o Saves. Deputy Chairman, Planning Commission, Government of India, Montek Singh o Ahluwalia, February 6, 2006. New Delhi. • Ajzen, I. (1991). The theory of planned behavior. Organizational Behaviour and Human • Decision Processes. Vol. (50), pp.179-211. • Akca, N., Sonmez, S., Sener, T., and Akca, C. (2018). An Evaluation of the Effect of o Financial Literacy Education on Financial Literacy among College Students. o International Journal of Humanities and Social Science, Vol., 8 pp.152-160. • Alvarez-Farnco, P. B; Munoz-Murillo, M.; & Restrpo-Tobon, D. A. (2015). Financial o Education Programs in Colombia: Challenges in Assessing Their Effectiveness. Center for Research in Economics and Finance (CIEF), Working Papers, No. 15-22. pp. 1-26. • Anthes, W. L., & Most, B. W. (2000). Frozen in the headlights: The dynamics of women and o money. Journal of Financial Planning, Vol. 13(9), pp.130-142. • Atkinson, A. & Messy, F.A. (2012). Measuring Financial Literacy: Results of the OECD /International Network on Financial Education (INFE) Pilot Study. OECD Working Papers on Finance, Insurance and Private Pensions No. 15, pp. 1-73. • Behrman, J. R., Mitchell O.S. Soo C.K., Bravo D. (2012). How Financial Literacy Affects o Household Wealth Accumulation. American Economic Review: Papers and o Proceedings 1023:300-4. • Bell, C. J., Gorin, Dan. R. and Hogarth, J. M. (2009). Does Financial Education Affect o Soldiers’ Behaviour?. Networks Financial Institute Working Paper 2009-WP-08. o Available at http://dx.doi.org/10.2139/ssrn.1445635. • Bernheim, B. D.; Garrett, D. M.; and Maki, D. M. (1997). Education and Saving: The Long o Term Effects of High School Financial Curriculum Mandates. NBER Working Paper o Series No. 6085. • Bernheim, B. D; Garrett, D. M; & Maki, D. M. (2001). Education and saving: The long-term o effects of high school financial curriculum mandates. Journal of Public Economics, Vol. 80, pp. 435-465. • Berry, J., Karlan, D., & Pradhan, M. (2018). The Impact of Financial Education for Youth in o Ghana. World Development, Vol. 102, pp. 71–89. • Blue, L., Brimble, M. (2014b). Financial literacy education and its role in vocational education and technology. (Working paper). • Calderone, M.; Fiala, N.; Mulaj, F.; Sadhu, S.; & Sarr, L.(2013). Does Financial Education o Affect Saving Behaviour? Evidence from a Randomized Experiment among Low o Income Clients of Branchless banking in India. Financial Literacy and Education o Russia Trust Fund, June 2013, pp.1-48. • Carly, U., Schmeiser, M., Brown, A., and Collins, J.M. (2018). The Effects of High School o Personal Financial Education Policies on Financial Behavior. Economics of Education o Review Forthcoming (2018). • CFPB (2019). A review of youth Financial Education: Effects and Evidence. Available at o https://files.consumerfinance.gov/f/documents/cfpb_youth-financial-education_lit-review.pdf • Collins, J.M. (2012). The Impact of Mandatory Financial Education: Evidence from a o Randomized Field Study. Journal of Economic Behaviour & Organization, pp.1-13. • Cunningham, A. (2018). Financial Literacy: Impact on Student Success. Senior Capstone o Project.https://pdfs.semanticscholar.org/8c5e/fb3f7ff3cffa9d8cf4106c42c727ce35c0cc.pdf • CYFI (2013). Research evidence on the CYFI model of children and youth as economic o citizens. CSD Research Review No.13-04. Available at: o http://www.bu.edu/bucflp/files/2014/06/CYFI-Research-BriefResearch-Evidence-on- o the-child-and-youth-finance-model-of-economic-citizenship-2.pdf (accessed 21 July o 2019). • Danes, S. M., Casas, C.H., & Boyce, L. (1999). Financial Planning Curriculum for Teens: o Impact Evaluation. Journal of Financial Counseling and Planning, Vol. 10, pp.25-37. • Garg, N., and Singh, S. (2018). Financial Literacy among Youth. International Journal of Social Economics, Vol. 45 Issue: 1, pp.173-186. • Grable, J. E., Park, J.Y., and Joo, S. H. (2009). Explaining financial management behavior for o Koreans living in the United States. The Journal of Consumer Affairs, Vol. 43, pp. 80-107. • Grohmann, A., & Klühs, T., & Menkhoff, L.(2018). Does financial literacy improve financial inclusion? Cross country evidence,. World Development, vol. 111(C), pages 84-96. • Guiso, L. and Jappelli, T. (2008). Financial Literacy and Portfolio Choice. EUI Working o Papers, ECO2008/31. • Harter, C. L., & Harter, J. F. R. (2007). Assessing the effectiveness of financial fitness for life o in eastern Kentucky. Annual Meeting of the American Economic Association. • Hastings, J. S., Madrian, B. C., and Skimmyhorn, W. L. (2013). Financial Literacy, Financial Education and Economic Outcomes. Annual Review of Economics, Vol. 5, pp.347–373. • Hasan, M., Le, T., & Hoque, A. (2021). How does financial literacy impact on inclusive o finance. Financ Innov 7, 40, 1-9. • Hensley, B.J. (2020). With this crisis does financial literacy even matter?. National o Endowment For Financial education. Retrieved from :- o https://www.nefe.org/news/2020/04/with-this-crisis-does-financial-literacy- o matter.aspx • Hira T.K. & Mugenda O.M. (1999). The relationships between self-worth and financial beliefs, o behavior, and satisfaction. Journal of Family and Consumer Sciences Education, 91(4): 76–82 • Hilgert, M.A, Hogarth, J.M.,& Beverly, S.G. (2003). Household Financial o Management: The Connection between Knowledge and Behavior. Federal Reserve o Bulletin, 89 (7), 309–322. • Huang, J., Nam, Y., and Sherraden, M.S. (2013). Financial Knowledge and Child Development Account Policy: A Test of Financial Capability. The Journal of Consumer Affairs, Vol. 47, No. 1, pp.1-26. • Jariwala, H., & Sharma, M. (2011). Financial Literacy: A call for an Attention” Conference o on Inclusive & Sustainable Growth Role of Industry. Government and Society Conference Proceedings. • Klapper, L., Lusardi, A., and Panos, G.A. (2012). Financial Literacy and the financial crisis. Working Paper, NBER 17930. Available at https://www.nber.org/papers/w17930 • Klapper, L., Lusardi, A., and Oudheusden, P.V. (2019). Financial Literacy Around the o World. Standard & Poor’s Ratings Services Global Finlit Survey, Available at o http://www.FinLit.MHFI.com. • Kaiser, T., and Menkhoff, L. (2018). Financial Education in Schools: A Meta-Analysis of o Experimental Studies. CESIFO Working Papers No. 7395. • Kurowski, Ł. (2021). Household’s Over indebtedness during the COVID-19 Crisis: The Role of Debt and o Financial Literacy. Risks 9: 62. https://doi.org/10.3390/ risks9040062 • Kou., G, Xu., Y, Peng., Y, Shen., F, Chen., Y, Chang., K, & Kou., S (2021). o Bankruptcy prediction for SMEs using transactional data and two-stage multi objective feature selection. Decision Support System 140:113429. https://doi.org/10.1016/j.dss.2020.113429 • Lusardi, A., Mitchell, O.S. (2007). Baby Boomer Retirement Security: The Roles of Planning, o Financial Literacy, and Housing Wealth. Journal of Monetary Economics, 541, 205–244. • Lusardi, A., Mitchell, O.S. and Curto, V. (2009). Financial literacy among the young: o Evidence and implications for consumer policy. National Bureau of Economic Research No. w15352. • Lusardi, A., and Tufano, P.(2009). Debt Literacy, Financial Experiences, and Over o indebtedness. NBER Working Paper no. 14808. • Lusardi, A; & Mitchell, O. S. (2011). Financial Literacy Around the World: an Overview”, o Journal of Pension Economics and Finance. Vol. 10 (4), pp. 497-508. • Lusardi, A. and Mitchell, O. S. (2014). The Economic Importance of Financial Literacy: o Theory and Evidence. Journal of Economic Literature, 52(1), 5–44. • Lusardi, A.( 2019). Financial Literacy: An Essential Tool for Informed Consumer Choice? o Harvard Business School, and NBER, Retrieved from: o http://www.dartmouth.edu/~alusardi/Papers/Literacy_ConsumerChoice.pdf • Lyons, A. C., and Chang, Y. (2007). Are Financial Education Programs Meeting the needs of o Financially Disadvantaged Consumers? Available at SSRN; http://ssrn.com/abstract=985652.. • Mahdzan, N.S., & Tabiani, S.(2013) . The Impact of Financial Literacy on Individual Saving: o An Exploratory Study in the Malaysian Context. Transformation in Business & Economics, Vol.12, No.1 (28),pp.41-55. • Mahapatra, M.S., Alok, S., and Raveendran, J. (2016). Financial Literacy of Indian Youth: A o Study on the Twins Cities of Hyderabad-Secunderabad. IIM Kozhikode Society & Management Review, Vol. 6(2), pp.1-16. • Mandell, L. (2004). Financial literacy: Are we improving? Results of the 2004 national o Jump$tart survey. Washington, DC: Jumpstart Coalition. • MasterCard Worldwide. (2013). Hong Kong leads Greater China in money management skills: o MasterCard Survey. Retrieved April 14, 2016, from https://www.mastercard.com/ hk/consumer/_assets/press-center/HK_Index_of_Financial_ Literacy_E_v2_wshk.pdf • MasterCard (2021). Retrieved from:- https://www.statista.com/statistics/1203267/india- o number-of-credit-cards/ • NCFE (2019). Financial literacy and financial Inclusion Survey 2019. Available at o https://www.ncfe.org.in/survey • NCFE (2020). National Strategy for financial Education (2020-2025). Retrieved from:- o https://www.ncfe.org.in/nsfe. • Noctor, M., Stoney, S., & Stradling, S. (1992). Financial Literacy: A Discussion of Concepts and Competences of Financial Literacy and Opportunities for its Introduction into Young People’s Learning. National Foundation for Educational Research commissioned by NatWest. • Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric Theory. New York; Sydney: o McGrawHill. • O’Connell, A. (2007). Measuring the Effectiveness of Financial Education. Wellington: o Retirement Commission, Available at www.retirement.org.nz/ o retirement_income_research_centre_home.html. • OECD INFE (2011). Measuring Financial Literacy Questionnaire and Guidance Notes for Conducting an Internationally Comparable Survey of Financial Literacy. Retrieved from: https://www.oecd.org/finance/ financial- education/49319977.pdf . • OECD (2014). PISA 2012 results: Students and money: Financial literacy skills for the 21st o century. Available at: http://dx.doi.org/10.1787/9789264208094-en (accessed 21 October 2014. • OECD (2015). National Strategies for Financial Education. OECD/INFE Policy Handbook, o https://www.oecd.org/finance/National-Strategies-Financial-Education-Policy-Handbook.pdf. • OECD (2020). OECD Business and Finance Outlook 2020. Retrieved from :- o https://www.oecd.org/daf/oecd-business-and-finance-outlook-26172577.htm • OECD (2021). OECD-NFE International Survey of Adult Financial Literacy. Retrieved o from:- https://www.oecd.org/financial/education/oecd-infe-2020-international-survey- of-adult-financial-literacy.pdf • Peng, T. C. M., Bartholomae, S., Fox, J. J., & Cravener, G. (2007). The Impact of Personal o Finance Education Delivered in High School and College Courses. Journal of Family and Economic, Vol.28 (2), pp.265-284. • Perry, V. G., & Morris, M.D.(2005). Who Is in Control? The Role of Self-Perception, o Knowledge and Income in Explaining Consumer Financial Behavior. Journal of Consumer Affairs, 39 (2): 299 – 313. • Rajamohan, R.R., and Sathish, P. (2018). Effectiveness of Financial Education Workshops o among University Faculty Members. International Journal of Mechanical Engineering and Technology, Vol. (9), Issue 7, pp. 127-134. • RBI (2008). Retrieved from : http://www.rbi.org.in/scripts/ PublicationsDraftReports.aspx. • RBI (2021). Annual Report 2021. Retrieved from https://rbi.org.in/Scripts/AnnualReportMainDisplay.aspx • Rockwell, S. K., & Kohn, H. (1989). Post-then-Pre Evaluation: Measuring Behavior Change o more Accurately. Journal of Extension, Vol. 27, pp. 19-21. • Sherraden, M. S., Johnson, L., Guo, B., & Elliott, W. (2010). Financial capability in children: o effects of participation in a school-based financial education and savings program. Journal of Family and Economic, Issues, 32(3), 385–399. • Shih, T.Y., & Ke, S.C. (2014). Determinants of financial behavior: Insights into consumer o money attitudes and financial literacy. Service Business, 8(2), 217-238. • S&P Global Fin lit Survey (2014), Retrieved from: http://gflec.org/initiatives/sp-global-finlit- o survey. • Thilakam, C. (2012). Financial Literacy Among Rural Masses in India. Paper presented at • The 2012 International Conference on Business and Management 6 – 7 September 2012, Phuket – Thailand. • Tustin, D.H. (2010). An Impact Assessment of a Prototype Financial Literacy Flagship • Programme in a Rural South African Setting. African Journal of Business Management, Vol. 4(9), pp.1894-1902. • UNDP (2020). Annual Report. Retrieved from:- https://annualreport.undp.org/assets/UNDP-Annual-Report-2020-en.pdf • vanRooil M., Lusardi A., Alessie R. (2012). Financial Literacy, Retirement Planning and o Household Wealth. Economic Journal, 122560:449-78. • Visa. (2012). India Lags in Financial Literacy with Women and Young People Most at Risk. o Retrieved October 25, 2016, from http://www.visa.co.in/aboutvisa/mediacenter/NR_INDIA_ 120612.html • Xu, L., & Zia, B. (2012). Financial Literacy Around the World: An Overview of the Evidence with Practical Suggestions for the Way Forward. World Bank Policy Research Working Paper No. 6107. • Yu, K.M., Wu, A.M.,Chan, W.S., and Chou, K.L. (2015). Gender Differences in Financial Literacy among Hong Kong Workers. Educational Gerontology, Vol. 41, No. 4, pp. 315-326.