The role of financial literacy in economic development

Authors

DOI:

https://doi.org/10.56294/sctconf20251296

Keywords:

financial management, financial literacy, financial awareness, financial behaviour, economic well-being, sustainable economic development

Abstract

Introduction: The study of financial literacy has proven its role in ensuring the well-being of citizens of different countries. Financial knowledge and skills affect citizens' lives, such as managing expenses and income, investing in stocks or somewhat risky digital assets, retirement savings and retirement planning. Objective: This study focuses on the specifics of the impact of financial literacy on economic growth, stability and economic inequality. Methods: The article applies a systematic approach to highlighting financial literacy issues in the context of economic growth, stability, and inequality. The methodology includes structural and functional analysis, methods of synthesis, and comparison. Results: The article reveals a moderate direct positive correlation between financial literacy and the well-being of the population of countries, measured in GDP per capita at purchasing power parity. At the same time, the level of prosperity of a country's population has a lesser impact on the development of citizens' financial skills. A high level of awareness of macroeconomic indicators (inflation, purchasing power, interest rates) affects the ability of citizens to maintain a high level of financial well-being, plan savings, and avoid debt. Conclusions: Given the above, there is a need to develop the financial skills of the most vulnerable segments of the population. Financial knowledge and skills, such as using digital technologies in financial management, contribute to effectively managing financial resources.

References

1. Koskelainen T, Kalmi P, Scornavacca E, Vartiainen T. Financial literacy in the digital age - A research agenda. Journal of Consumer Affairs. [Internet] 2023 [cited: 15 October 2024];57(1):507-528. Available in: https://doi.org/10.1111/joca.12510

2. Lone UM, Bhat SA. The impact of financial literacy on financial well-being: a mediating role of financial self-efficacy. Journal of Financial Services Marketing. [Internet] 2024 [cited: 15 October 2024];29(1):122-137. Available in: https://doi.org/10.1057/s41264-022-00183-8

3. Lusardi A, Mitchell OS. The importance of financial literacy: Opening a new field. Journal of Economic Perspectives. [Internet] 2023 [cited: 15 October 2024];37(4):137-154. Available in: https://doi.org/10.1257/jep.37.4.137

4. Khan F, Siddiqui MA, Imtiaz S. The role of financial literacy in achieving financial inclusion: A review, synthesis and research agenda. Cogent Business & Management. [Internet] 2022 [cited: 15 October 2024];9(1):2034236. Available in: https://doi.org/10.1080/23311975.2022.2034236

5. Faulkner A. Financial literacy around the world: What we can learn from the national strategies and contexts of the top ten most financially literate nations. The Reference Librarian. [Internet] 2022 [cited: 15 October 2024];63(1-2):1-28. Available in: https://doi.org/10.1080/02763877.2021.2009955

6. Ingale KK, Paluri RA. Financial literacy and financial behaviour: A bibliometric analysis. Review of Behavioural Finance. [Internet] 2022 [cited: 15 October 2024];14(1):130-154. Available in: https://doi.org/10.1108/RBF-06-2020-0141

7. Nugraha RK, Eksanti AP, Haloho YO. The Influence of Financial Literacy and Financial Behaviour on Investment Decision. Jurnal Ilmiah Manajemen Dan Bisnis. [Internet] 2022 [cited: 15 October 2024];8(1):68. Available in: https://doi.org/10.22441/jimb.v8i1.13535

8. Mireku K, Appiah F, Agana JA. Is there a link between financial literacy and financial behaviour? Cogent Economics & Finance. [Internet] 2023 [cited: 15 October 2024];11(1):2188712. Available in: https://doi.org/10.1080/23322039.2023.2188712

9. Madeira C, Margaretic P. The impact of financial literacy on the quality of self-reported financial information. Journal of Behavioural and Experimental Finance. [Internet] 2022 [cited: 15 October 2024];34:100660. Available in: https://doi.org/10.1016/j.jbef.2022.100660

10. Lusardi A, Messy FA. The importance of financial literacy and its impact on financial well-being. Journal of Financial Literacy and Well-being. [Internet] 2023 [cited: 15 October 2024];1(1):1-11. Available in: https://doi.org/10.1017/flw.2023.8

11. Khan SU, Shah SI, Shafiq M. Effect of Financial Literacy and Financial Self-Efficacy on Individuals' Investment Intention: The Mediating Role of Risk-Taking Behaviour. Global Economics Review. 2023;VIII:42-55.

12. Ansari Y, Albarrak MS, Sherfudeen N, Aman A. A study of financial literacy of investors – A bibliometric analysis. International Journal of Financial Studies. [Internet] 2022 [cited: 15 October 2024];10(2):36. Available in: https://doi.org/10.3390/ijfs10020036

13. Morris T, Maillet S, Koffi V. Financial knowledge, financial confidence and learning capacity on financial behaviour: a Canadian study. Cogent Social Sciences. [Internet] 2022 [cited: 15 October 2024];8(1):1996919. Available in: https://doi.org/10.1080/23311886.2021.1996919

14. Rapina R, Meythi M, Rahmatika DN, Mardiana M. The impact of financial literacy and financial behaviour in entrepreneurial motivation-evidence from Indonesia. Cogent Education. [Internet] 2023 [cited: 15 October 2024];10(2):2282827. Available in: https://doi.org/10.1080/2331186X.2023.2282827

15. Mudzingiri C, Muteba Mwamba JW, Keyser JN. Financial behaviour, confidence, risk preferences and financial literacy of university students. Cogent Economics & Finance. [Internet] 2018 [cited: 15 October 2024];6(1):1512366. Available in: https://doi.org/10.1080/23322039.2018.1512366

16. Shaik MB, Kethan M, Jaggaiah T, Khizerulla M. Financial literacy and investment behaviour of IT professional in India. East Asian Journal of Multidisciplinary Research. [Internet] 2022 [cited: 15 October 2024];1(5):777-788. Available in: https://doi.org/10.55927/eajmr.v1i5.514

17. Nugraha MAP, Violin V, Anantadjaya SP, Nurlia N, Lahiya A. Improving Financial Literacy Through Teaching Materials on Managing Finance for Millennials. Jurnal Ekonomi. [Internet] 2023 [cited: 15 October 2024];12(01):1028-1032. Available in: https://ejournal.seaninstitute.or.id/index.php/Ekonomi/article/view/1295

18. Mutlu Ü, Özer G. The moderator effect of financial literacy on the relationship between locus of control and financial behaviour. Kybernetes. [Internet] 2022 [cited: 15 October 2024];51(3):1114-1126. Available in: https://doi.org/10.1108/K-01-2021-0062

19. Anshika A, Singla A. Financial literacy of entrepreneurs: a systematic review. Managerial Finance. [Internet] 2022 [cited: 15 October 2024];48(9/10):1352-1371. Available in: https://doi.org/10.1108/MF-06-2021-0260

20. Ratnawati K, Soelton M. The Role of Digital Financial Literacy on Firm Performance in Micro Industry. In ICCD. 2022, December;4(1):95-101.

21. Tuffour JK, Amoako AA, Amartey EO. Assessing the effect of financial literacy among managers on the performance of small-scale enterprises. Global Business Review. [Internet] 2022 [cited: 15 October 2024];23(5):1200-1217. Available in: https://doi.org/10.1177/0972150919899753

22. Sekita S, Kakkar V, Ogaki M. Wealth, financial literacy and behavioural biases in Japan: the effects of different types of financial literacy. Journal of the Japanese and International Economies. [Internet] 2022 [cited: 15 October 2024];64:101190. Available in: https://doi.org/10.1016/j.jjie.2021.101190

23. Mitchell OS, Lusardi A. Financial literacy and financial behaviour at older ages. In The Routledge Handbook of the Economics of Ageing. (pp. 553-565). Routledge; [Internet] 2022 [cited: 15 October 2024]. Available in: http://doi.org/10.2139/ssrn.4006687

24. Gignac GE, Gerrans P, Andersen CB. Financial literacy mediates the effect between verbal intelligence and financial anxiety. Personality and Individual Differences. [Internet] 2023 [cited: 15 October 2024];203:112025. Available in: https://doi.org/10.1016/j.paid.2022.112025

25. Prete AL. Digital and financial literacy as determinants of digital payments and personal finance. Economics Letters. [Internet] 2022 [cited: 15 October 2024];213:110378. Available in: https://doi.org/10.1016/j.econlet.2022.110378

26. Xu S, Yang Z, Ali ST, Li Y, Cui J. Does financial literacy affect household financial behaviour? The role of limited attention. Frontiers in psychology. [Internet] 2022 [cited: 15 October 2024];13:906153. Available in: https://doi.org/10.3389/fpsyg.2022.906153

27. Kumar P, Pillai R, Kumar N, Tabash MI. The interplay of skills, digital financial literacy, capability, and autonomy in financial decision-making and well-being. Borsa Istanbul Review. [Internet] 2023 [cited: 15 October 2024];23(1):169-183. Available in: https://doi.org/10.1016/j.bir.2022.09.012

28. Dewi VI. How do demographic and socio-economic factors affect financial literacy and its variables? Cogent Business & Management. [Internet] 2022 [cited: 15 October 2024];9(1):2077640. Available in: https://doi.org/10.1080/23311975.2022.2077640

29. Baranyi A, Csernák J, Csiszárik-Kocsi Á. Methods for Developing Financial Literacy. Online journal modelling the new Europe. [Internet] 2022 [cited: 15 October 2024];(39). Available in: https://doi.org/10.55549/epess.1413361

30. Financial literacy in Germany: Supporting financial resilience and well-being. OECD Business and Finance Policy Papers. No. 43. Paris: OECD Publishing; [Internet] 2024 [cited: 15 October 2024]. Available in: https://doi.org/10.1787/c7a28393-en

31. Strengthening Financial Literacy in Germany: Proposal for a National Financial Literacy Strategy. Paris: OECD Publishing; [Internet] 2024 [cited: 15 October 2024]. Available in: https://doi.org/10.1787/81e95597-en

32. OECD/INFE 2023 international survey of adult financial literacy. Organisation for Economic Co-operation and Development; [Internet] 2023 [cited: 15 October 2024]. Available in: https://doi.org/10.1787/56003a32-en

33. National Financial Literacy Strategy for Greece. Paris: OECD Publishing; [Internet] 2024 [cited: 15 October 2024]. Available in: https://doi.org/10.1787/f30914d7-en

34. Financial Literacy in Greece: Evidence on Adults and Young People. Paris: OECD Publishing; [Internet] 2024 [cited: 15 October 2024]. Available in: https://doi.org/10.1787/07e4fbd9-en

35. Financial well-being in Ireland: Financial literacy and inclusion in 2023. CCPC; [Internet] 2023 [cited: 15 October 2024]. Available in: https://www.ccpc.ie/business/wp-content/uploads/sites/3/2023/07/2023.07.05-CCPC-Financial-Wellbeing-Report-2023.pdf

36. Podolchak NY, Prokopyshyn-Rashkevych LM, Karkovska VJ. Coaching as the art of increasing effective implementation of enterprise's managerial potential. Actual Problems of Economics. [Internet] 2014 [cited: 15 October 2024];158(8):147-1531. Available in: http://www.irbis-nbuv.gov.ua/cgi-bin/irbis_nbuv/cgiirbis_64.exe?C21COM=2&I21DBN=UJRN&P21DBN=UJRN&IMAGE_FILE_DOWNLOAD=1&Image_file_name=PDF/ape_2014_8_19.pdf

37. World Bank Group; [Internet] 2024 [cited: 15 October 2024]. GDP per capita, PPP (current international $). Available in: https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD

Downloads

Published

2025-01-01

How to Cite

1.
Serhiichuk S, Grebeniuk N, Nazarenko T, Parshakov V, Chasnikova O. The role of financial literacy in economic development. Salud, Ciencia y Tecnología - Serie de Conferencias [Internet]. 2025 Jan. 1 [cited 2024 Dec. 1];4:1296. Available from: https://conferencias.ageditor.ar/index.php/sctconf/article/view/1296