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(PDF) FINANCIAL LITERACY: FROM THEORY TO PRACTICE

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FINANCIAL LITERACY: FROM THEORY TO PRACTICE

June 2018 DOI: 10.5593/sgem2018/5.4/S22.010 Conference: 18th International Multidisciplinary Scientific GeoConference SGEM2018 Project: FINANCIAL LITERACY Authors: Anastasiya Sudakova Ural Federal University Download full-text PDF Read full-text Download full-text PDF Read full-text Download citation Copy link Link copied Read full-text Download citation Copy link Link copied References (21) Figures (2)

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Question 'Do you plan your personal budget? Do you record your income and expenses?', % (1st stage -252 people; 2nd stage -247; 3rd stage -217) …  Question 'Does a seller have a right not to refund a customer if the customer does not have a receipt?', % (1st stage -252 people; 2nd stage -247; 3rd stage -217) The next question asked which agency is responsible for protecting customers' …  Figures - uploaded by Anastasiya Sudakova Author content All figure content in this area was uploaded by Anastasiya Sudakova Content may be subject to copyright.

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19+ million members 135+ million publications 700k+ research projects Join for free Public Full-text 1 Content uploaded by Anastasiya Sudakova Author content All content in this area was uploaded by Anastasiya Sudakova on Apr 08, 2019 Content may be subject to copyright. 1 FINANCIAL LITERACY: FROM THEOR Y TO PRACTICE SUDAKOVA Anastasia Ca ndidate of Economic Sciences, Senior Researc her of Ural Federal University named after the first Preside nt of Russia B. N. Yeltsin, 19, Miry st., Yekaterinburg, Russia (e-mail: [email protected] ail.ru , +7-902- 87 - 46 -839) Date of submission: August 14, 2017 Abstract The article discusses financial literacy- FL , the history of its development, and the current research conducted in this sphere. The author carried out a survey that studied the level of FL of the target audience and developed guidelines for th e improvement of FL among the population. The surveys were aimed at finding out how aware the target audience is of the information that consti tutes FL . The survey results show that the target audience is less aware of the pro ce sses within the pension system, bank products and services than of the processes of saving and accumulating capital and protection of their rights. Key words: financial literacy, financial capabi lity, short-term survey JEL Classification: G2 Financial Instituti ons and Services 1.1. Introduction In today’s world, f inancial processes are becoming more and more complicated, involving investment funds, a wide range of banking p ro ducts, insurance systems, reforms of pension systems and so on , which creates a pressing need for educators to introduce financia l literacy courses at all levels of modern education. 2 On the one hand, moder n financial services improve our quality of life (bank cards, mobile banking applications, insurance and so on); on the other, people are generally not ready to use these services responsibly because they lack the necessary knowledge and skills. This concerns, first of all, high risk groups such as pensioners and children and, secondly, people engaging in destructive (deviant) behaviour, that is, those who are unwilling to delve into f inancial matters or expand the range of financial services and tools with w hich they are familiar. Due to their financial illiteracy and lack of understanding, t hese groups are m ost prone to mob psychology and can be susceptible to mass hysteria. Financial illiteracy negatively affects not only people’s personal welfare but also the financial sphere as a whole. For exam ple, s ince people of ‘high - risk’ groups are unable to manage their budgets: they tend to go deep into debt by taking loans. Moreover, being gullible, they fall victims to pyramid schemes and other forms of financial fraud. On the global scale, such behaviour can contribute to the country s economy falling into a recession, as happened when the housing bubble burst in the US. Therefore, enhancement of the general population s f inancial literacy would have a profound impact on the nation’s f uture financial health. 1.2. Concept of financial literacy The concept of financial literacy can be used in its wider or narrower sense and can be linked to other terms such as financial education, capability, awareness and others. Olga Kuzina explains the differences between these terms, showing how they 3 put em phasis on different aspects of financial literacy ( Kuz ina 2005) . Originally, the analysis of these concepts was made by Sandra J. Huston (Huston 2010), who selected 71 individual studies drawn from 52 different data sets and thus established elements of a financial literacy measure. All the definitions analysed by H uston emphasized that kno wledge and skills (set of competencies) should b elong to the financial sphere. The Organization for Economic Cooperation a nd Development (OECD) defines financial literacy as ‘a combination of awareness, knowledge, skill, attitude and behaviour necessary t o make sound financial decisions and ultimately achieve individual financial well-being (OECD 2011, 3). We should also mention the studies of the project ‘The Russia Trust Fund for Financial Literacy Education , which measured financial literacy by conducting 74 focus group d iscussions in ei ght countries. These discussion s brought to light the qualities that characterize financially capable individuals. These qualities were grouped into several major domains: planning ahead and making provisions for the long term (54%); making choices and being able to prioritize (53%); self-discipline in spending (51%); living within one s means (45%); being able to save money even if it means laying by small sum s (31%); and so on (Kempson 2013) . Thus, financial literacy is a set of competencies that enable an individual to take informed and effective decisions in order to improve their welfare and to minimize their time and money losse s. 1.3. International studies of financial lit eracy 4 Recently, there have been a number of large-scale programmes studying the financial literacy of stude nts, such as the projects supported b y the OECD and World Bank. The first studies of financial literacy were conducted before the international programs. These studies, however, mostly focused on money management: for example, Jelly measured the level of financial literacy among 20 -year-old s tude nts and found that they were highly aware of budgeting and management of perso nal finance. Similar results were obtained by Furrer (Furrer 1960) and Larson (Larson 1970) . There are o ther studies, however, which demonstrate that university an d school s tudent s have a low level of financial literacy in general or in some of its aspects, such as personal earnings, consumer lending and investment (Langrehr 1979) , (Thompson 1965). As for the earlier fu ndamental research in this sphere, Danes and Hira (Danes , Hira, 1987) estim ated that financial literacy among the population was at the medium level and pointed out the importance of introducing financial literacy as a separate discipline at all levels of education. Similar results were obtained by the series of studies of Jumpstart Coalition (1997, 2000, 2009 гг.) (Jumpstart Coalition 2009) , and by Lusardi A., Mitc hell O. (Lusardi, Mitchell, 2007). These surveys mostly focused on t esting the knowledge of financial terminology, which prevented their authors from making any significant conclusions about how financially literate and com petent their respondents actual ly were. Financial literacy started to be measured on the global scale when the OECD administered a survey of financial literac y among students within the framew ork of their international programme PISA 2012 (Programme for International Stude nt 5 Assessment) (OECD, 2014). A similar survey has been conducted in R ussia since 2011 by the project Enhancement of Financial Literacy and Development of Financial Education in the Russ ian Federation , supported by the Russian Ministry of Finance and with the World Bank. While initially PISA surveys focused on the competences of students in mathematics and science, in 2012, a survey of financial su rvey was added. Since then, it has been held once every three years, together with other tests. The first stage of the financial literacy measurement was conducted in 2012 and the second, in 2015. The s tudy assessed the capability of 15 -year-olds to find, understand and evaluate relevant information for efficient decision-making and to predict the possible financial consequences of their decisions; to make i nform ed judgements; to m anage their financial resources; to apply their knowledge, skills and values when shopping and in other financial contexts; and to adopt responsible behaviour towards themselves and others, their comm unities and the environment. ‘ PISA-2012 surveyed approximately 29,000 students from 18 countries. Shanghai-China scored highest with the mean score of 603; it was followed by Belgium (541), Estonia (529), Australia (526), New Zealand (520), the Czech Republic (513) and Poland (510) (OECD 2014 , 15 ). Russia ranked 10 th among the 18 participating coun tries with the mean score of 486, between the USA (492) and France (486), and followed by Slovenia (485) a nd Spain (484) (OECD 2014, 84 ). In Ru ssia, the survey was carried out by the Ce ntre for Assessment o f the Quality of E ducation (Institute of Educational Content an d Methodology, Russian Academy of Education). The survey featured data from 42 Russian regions, 227 6 educational institutions, and 1,187 students pursuing programs of basic general education (7-9 th grades), secondary general (10- 11 th grades), basic vocational and secondary vocational education (1 st year) (the data are provided by the official website of the Russian Ministry of Finance ). Over 60% of Russian students were willing to apply their basic financial knowledge and skills in practice. According to PISA-2012 scale of financial literacy proficiency levels: In Russia, 4.3% of students demonstrated level 5 (mean score 625 and more), while in OECD countries this level was demonstrated by 9.7% of students. Level 5 means that students can apply their understanding of a wide range of financial terms and concepts to unfamiliar contexts that may onl y become relevant to their lives in the long term . Level 4 (m ean score 550 to less than 625) was demonstrated by 24.8% of students in Russia; in OECD, 31.6%. At level 4, students can apply their understanding of les s common financial concepts and terms to contexts that will be relevant to them as they move towards adulthood, such as bank account management. They can also interpret and evaluate a range of detailed financial documents.  Level 3 (m ean score 475 to less than 550) was demonstrated by 57.9% of students in Russia; in OECD, 61.8%. Students can apply their understanding of commonly used financial concepts, terms and products to situatio ns that are relevant to them. They begin to consider the consequences of their financial decisions and they can make simple financial plans in familiar contexts. They 7 can also make straightforward interpretations of a range of financia l documents.  Level 2 (baseline, mean score 400 to less than 475) in Russia was demonstrated by 83.3%; in OECD, 84.7%. At this level students start applying their knowledge of the basic financial products and the m ost commonly used financial terms and concepts. They can use this information when taking financial decisions in familiar situations, in contexts that are immediately relevant to them. Level 1 (mean score 326 to less than 400) in Russia was demonstrated b y 95.6% of students; in OECD, 95.2%. At this level, students can identify basic financial products and situations and interpret inform ation related to basic financial concepts. They understand the difference between needs and wants and can take simple d ecis ions concerning their daily expenses [Kovaleva, 2013]. It is particularly in teresting that alm ost 23% of Russian students demonstrated the baseline level of financial literacy, that is, their financial ca pability was jus t enough to survive in t he modern financial world. Only 4.3% of Russian students managed to answer the most difficult questions and 17% did not manage to demonstrate even the basic level of financial literacy (the data are provided by the official website of the Russian Ministry of Finance). 1 1 Data from the official website of the Russian Ministry of Finance: http://minfin.ru/ru/press- center/?id_4=32991&area_id=4&page_id=2119&a m p;popup=Y#ixzz4K7fCFno2 8 ‘PISA - 2012’ id entified four contexts for the assessment of financial literacy : education and work ( 10 -20% of score points); home and family ( 30 -40%) ; individual ( 35 -45%) ; and societal (5-15%) (O ECD 2013, 160 ). The project ‘The Russia Tr ust Fund for Financial Literacy Education assessed financial capability according to ten components. Russia sc ored below average in such indices as achievement orientation - 69 while the m ean value was 82.3 (further shown as 69/82.3); avoiding overspending, 71/74. 4; making informed decisions, 62/71.3; deali ng with unexpected e xpenses, 61/62.7; long-term planning, 49/50.1; and saving, 47/48. At the same t im e, Rus sia occupies the leading position in such index as living within one s means (88/76.7). As for indices such as budgeting (70/65), avoiding impulsive spending (68/64) and monitoring expenses (61/50), Russia ’s score was also above average (Lundberg, M ulaj 2014, 49; Kuzina 2015а ). Apart from the studies of financial literacy levels, there is also research on the impact of financial literacy on specific components of the financial system: for example, Danes, Huddleston-Casas and Boyce (1990) and Bernheim, Garrett and Mak (2001) found that students who completed a financial literacy course incr eased their saving rate. Accordi ng t o Brown, Collins, Schmeiser and Urban (2001), people who took specialized courses of financial literacy t ended to have lower loan interests and minimal loan delinquency, while Tennyson and Nguy en (2001) demonstrated that financial literacy courses have a p ositive impact on people s career progress. Research on financ ial literacy has a rich history, which started from studies conducted by separate research groups (predom inantly American). Recently, 9 enhancement of financial l iteracy has begun to be considered as a major international task, which significantly increased the scale of research in this sphere. 1.4. Research methodology Our survey w as targeted at estimating th e level of financial literacy among senior school students in the city of Yekaterinbur g . The target group consisted of secondary school students and students of vocational schools. In contrast to the larger-scale surveys described above, this survey can be considered short-term since it did no t exceed one month. The survey s m ain objective was to find whether students w ere sufficiently aware of the information necessary for sensible financial decision-making. Survey overview. Our sociological experiment comprised three stages : a pre- test, a lecture course to i ncrea se students’ financial literacy and two follow -up tests. The data were collected through questionnaire forms. W e also used the method of exploratory qu estion ing during the l ect ures. After the lecture course, the same respondents were tested twice, which m eans that it was a panel study. The metho dology applied for assessment of financial literacy include d a set of questions. The testing time did not exceed 15 minutes since the project s main aim was to raise the financial awareness of the target group . The questionnaire included ten questions, which enabled us to assess students financial knowledge, capability and attitude towards the main aspects of financial literacy: pensions , taxes, banking products, expense tracking and bu dget planning, investments and saving and protection of co nsumer rights. 10 Testing procedure . After the pre-test, students were offered a lecture course. Then, the instr uctor answered their questions about what seemed most challenging to them - these were mostly questions about banking products and services. Then there were two follow-up tests : one was conducted one to three days after the end of the lecture course and the other, after 20 to 30 days. The pre-test was carried out in the period between 23 May 2016 and 1 June 2016 and the follow-up tests, between 20 and 30 June 2016. The lecture course o n financial literacy comprised four sections of three academic hours eac h. The first section focused on managing personal finance and included such topics as personal income and its types (for instance, salary, commercial profit, retirement pension); borrowed resources (financial services, education loans, mortgage and consumer loans, types of bank cards); personal spending (consumption expenditures, saving, cash and cashless payments); and tracking one s spending and budget planning. The second and third sec tions wer e concerned with legal aspects, in particular, protection of consumer rights and guidelines for consumers entering into financial relationships and agreements. The fourth section contained practical tasks: students were asked to calculate interest for loans, to plan personal investments and to participate in tw o role games (procedure of consumer rights protection and analysis of agreements to find out provisions violat ing consumers rights). The key feature of the course is that it explains why it is essential to be financially literate in the modern world and, therefore, directly addresses students immediate needs in managing their financial resources and the problems they might 11 face in the nearest future. These needs are identified on the basis of students age. It is remarkable that studen ts took an acti ve interest in t he Russian pension system, especially in how their future pension is fo rmed and how its amount depends on their earnings. They were also curious about plastic card fraud and investment opportunities. The l ectu res were attended by 260 people, out of whom 98 were secondary school students (10- 11 th grades) and 162, vocational school students (1 st year). The testing and lectures were conducted in four secondary schools and four voca tional schools in Ekaterinburg. (See Table 1 for th e main parameters o f the sample). We processed 252 questionnaire forms at the fir st stage; 247 forms at the sec ond stage; and 217 forms at the third stage. The confidence probability was 89% at the first stage; 88%, at the second stage ; and 86% at the third stage. T he confidence interval was ± 5%. Table 1 Survey indicators Indicators Values Number of respondents (sample) 260 Including: senior students (10-11 th grades) of secondary schools in Ekaterinburg , 2015/2016, people 98 first-year students of vocational schools in Ekate rinburg, 2015/2016, people 162 Number of processed questionnaire form s, items 1 st stage 2 nd stage 3 rd stage 252 247 217 Population, people 24,300 Including: senior students (10-11 th grades) of secondary schools in Ekaterinburg , 2015/2016, people 11,500 first- and second-year students of vocational schools in Ekaterinburg, 12,800 12 2015/2016, people Confidence probability, % 1 st stage 2 nd stage 3 rd stage 89 88 86 Confidence interval (sampling error), % ± 5 1.5. Research results Our research results have shown that students were i ll-informed about the pension s y stem and banking p r oducts and services (except for mobile banking applications and the electronic wallet), but were aware of saving practices and consumer rights protection. On average, 35% of students answered the questions of the pre-test correctly and 63% of students successfully completed the follow-up tests. The pre-test results have also shown that 7.5% o f students (19 out of 252) could not answer correctly more than two questions, while at the third stage, thi s figure dropped to 3% (7 students out of 252). The first set of questions dealt with the Russian pension system (see Figure 1 for test results) and demonstrated that students’ knowledge of this subject was insufficient, although some of them adm itted thinking about pension savings. 13 Note: 1 - Have you ev er thought about mak ing pension savings? 2 - Do you know how the insurance component of a retirement pens ion is formed? 3 - Do you agree that a retirement pension should include savings from your pre-retirement income? 4 - Do you agree that a retirement pension is a guaranteed income? Figure 1. Test ‘Russian Pension System’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217) At the first stage, 12% o f respondents said that they knew how the retirement pension is formed and 3% could even write the formula (8 out of 252). The pre-test has also r evealed students’ lack of trust in the pension system. At the third stage, students performance improved and their t rust in the p ension system increased (the percentage of respondents who were distrustful of the pension system fell from 44% at the first stage to 35%) . We can explain the lack of trust if we analyse students’ answers : they think that the retirement pension is not formed through savings made during one s working life (at the first stage, 30% of students; at the third stage, 19 %) and that the retirement 56 12 70 53 44 88 30 47 0% 20% 40% 60% 80% 100% 1 2 3 4 1st stage Yes No 62 69 80 59 38 31 20 41 0% 20% 40% 60% 80% 100% 1 2 3 4 2nd stage Yes No 65 70 81 57 35 30 19 43 0% 20% 40% 60% 80% 100% 1 2 3 4 3nd stage Yes No 3 28 17 0 5 10 15 20 25 30 1st stage 2nd stage 3rd stage Students who wrote the pension formula 14 pension is not a guaranteed income (at the first stage, 47% of students and at the third stage, 43%). Therefore, the young generation s attitudes ar e likely to be influenced by their families and communities and also by the ideas they have about the financial and pension reforms in Russia. The second set of questions focused on the Russian taxation system. Students were asked to tick the taxes which a physical person is liable to pay (see Fi gure 2). At the first stage, 8% of students (3 out of 252) ticked all the taxes correct ly; at the th ird stage, 37% (15 out of 252). Note: 1 - personal income tax; 2 - water tax; 3 - transport tax; 4 - mineral extraction tax; 5 - value added tax; 6- personal property tax; 7 - land tax. Figure 2. Task ‘Tick the taxes that physical persons are liable to pay’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217) The third set of questions was targeted at testing students knowledge of banking terminology, products and services (see Figure 3). Students were asked to assess their knowledge of banking services and products according to the scale ranging from I know it very well to I have never heard of it . If the answer was positive, they were asked to provide appropriate definitions. As the results have 54 25 64 12 16 65 66 84 15 76 3 5 69 68 85 14 78 3 5 72 65 0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 1st stage 2nd stage 3rd stage 8 41 37 92 59 63 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Students who ticked some of the options correctly, % Students who ticked all of the options correctly, % 15 shown, students were well aware of mobile banking and electronic wallet services but did not know much about capitalization of intere st and refinancing of loans. Note: 1 - credit card; 2 - debit card; 3 - prepaid card; 4 - mobile banking application; 5 - electronic wallet; 6 - capitalization of interest; 7 - refinancing of loans. Figure 3. Test ‘Awareness of Banking and Financial Services’, % (1st sta ge - 252 people; 2nd stage - 247; 3rd stage - 217) At the pre-test, some students wrote that they knew well what credit, debit and prepaid cards are but they also tende d to confuse their definitions (8 2% of students provided inaccurate definitions). These data show that in reality students could not differentiate between different types of c ards. However, t he majority of students (65%) used prepaid cards ( e-card s ) and held ba nk cards (51%). 19 13 55 61 61 5 3 49 64 44 36 36 42 48 2 24 2 3 3 54 50 0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 1st stage ‘I have never heard of it’ ‘I have heard something about it’ ‘I know very well’ 69 67 65 75 68 56 40 31 27 35 25 32 29 43 0 6 0 0 0 15 17 0% 20% 40% 60% 80% 100% 1 2 3 4 5 6 7 2nd stage ‘I have never heard of it’ ‘I have heard something about it’ ‘I know very well’ 16 The fourth set of questions assessed students financial capability, in particular, budget planning and management (see Figure 4). The majority of respondents (67% at the first stage and 75% at the second stage) said that they planned their budgets; 7% kept track of their daily expenses in a notebook; and 4-5% used special software. 67% of respondents chose not to record their expens es, which can be explained by the fact that they did not have much money and, therefore, found this m ethod of planning and budget management satisfactory . Figure 4. Question ‘Do you plan your personal budget? Do you record your income and expenses?’, % ( 1st stage - 252 people; 2nd stage - 247; 3rd stage - 217) The National Agency for Financial Studies provided interesting data about Russian practices of budget managem ent (see Figure 5). If we tried to compare our data with their results, it would probably turn out that those students who did n ot write down their expenses would be classified as those who did not keep t rack of their spend ing at all, al thoug h this group of people usually knew the amount of their monthly income and the overall am ount of t heir expenses. A mong students, s uch 23 67 7 4 14 67 9 10 13 75 7 5 - 20% 10% 40% 70% 100% ‘No’ ‘I plan my budget but I don’t write anything’ ‘Yes, I use a notebook to plan my budget and record my expenses’ ‘Yes, I use a special application to plan my budget and record my expenses’ 3rd stage 2nd stage 1st stage 17 people account ed for 67-75%; they also constituted the majority of the Rus sian population (from 45% to 59%) . Figure 5. Question ‘In your family, do y ou keep the record of the family’s inc ome and expenses?’, % [Imaeva, 2016] Experts and scholars studying budget management skills of Russians point out a number of reasons explaining w hy so many people choose not to keep track of their spending. Some experts believe that since people s general income is low and is hardly enough to cover the ir necessary expenses, they consider expenditure records useless. Others think t hat the reason lies not in the low incomes but in the lack of long-term financial objectives, which discourages people from using budget-planning tools. If the majority of the population earns enough money to balance their income and expenses without keeping them under strict control, then detailed recording does not make sense and is perceived as a simple waste of time (Kuzina 2015, 144). The fifth set of questions focus ed on saving and investment (see F igure 6). According to our res ults, students had lim ited knowledge of these p roce sses . At the pre-test most of them found difficult the question ‘Is it right to say that the process of 20 13 15 14 19 13 16 45 59 57 59 53 58 56 9 14 12 14 15 22 16 0% 20% 40% 60% 80% 100% 2008 2009 2010 2011 2013 2015 2016 ‘I don’t know’ ‘No, we do not control our financial flow’ ‘No, but we control our financial flow’ ‘Yes, but not everything’ ‘Yes, we record everything’ 18 savin g implies preservation of m oney but not its accum ulation?’ (only 34 % answered correctly). It should be noted that the majority of students (75-91%) were aware of the risks entailed in investm ent. Figure 6. Test ‘Saving and Investment’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217) The last set of questions tested students knowledge of consumer rights protection and studied their attitude towards this problem. The majority of students (76-91%) answered correctly the first question ‘Who are participants of relationships regulated by consumer protection laws ?’ (see Figure 7). Figure 7. Q uestion ‘Who are participant s of relat ionships regulated by consumer protection laws?’, % (1st stage - 252 people; 2nd s tage - 247; 3rd stage - 217) 75 88 91 34 69 63 55 85 71 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Is it possible that the real value of your money will decrease in the process of saving? Is it right to say that the process of saving implies preservation of money but not its accumulation? Do you always get a profit when you invest your funds? 16 10 6 9 5 3 76 85 91 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Who are participants of relationships regulated by consumer protection laws? Consumers and organizations Organizations Consumers 19 Other questions were targeted at testing students knowledge of their rights and the ways of protecting them . The question Does a seller have a right not to refund a customer if the customer d oes not have a receipt?’ (Fi gure 8) was answered correctly by 36% of students at the first stage and 54% at the third. Figure 8. Question ‘Does a seller have a right not to refund a customer if the customer does not have a receipt? , % (1st stage - 25 2 people; 2nd stage - 247; 3rd stage - 217) The next question asked which agency is responsible for protecting customers rights if the product is faulty and the seller refuses a refund. 78% of students answered this question correctly at the first stage and 87% at the third (the correct answer was Rospotrebnadzor or the Federal Service for Protection of C onsumer Rights and Public Welfare). The next question dealt with loan agreement s. The majority of students (58 - 74%) knew that it is prohibited to penalize a borrower for rep aying their loans early. 64 44 46 36 56 54 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Does a seller have a right not to refund a customer if the customer does not have a receipt? No Yes 20 Fewer students were aware that it is illegal to charge commission for arranging a loan (see Figure 9). Note: 1 - loan period; 2 - loan arrangement fees and commissions; 3 - interest rate; 4 - early repayment penalty. Figure 9. Question ‘Which conditions ca nnot be imposed on the customer by the creditor when they sign a loan agreeme nt?’, % (1st stage - 252 people; 2nd stage - 247; 3rd stag e - 217) The last question explored students attitude to their consumer rights protection. The question asked students if they felt that they really could protect their rights if their rights were violated. Secondary school students (10- 11 th grades) were more optimistic about this, p ointing out that people only have to know the l aws and that courts and law enforcement agencies act in accordance wit h the law. Students of vocational schools were more pessimistic, responding that cour ts and the police were corrupt and that it required considera ble financial resources to protect one s rights. In general, t he pre-test showed that 7 5% of students believed that their consumer rights c ould be pro tected, while in the follow-up tests 83% of students answered this question in the affirm ative (Figure 10). 21 14 16 35 45 44 17 5 4 58 72 74 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Which conditions cannot be imposed on the customer by the creditor when they sign a loan agreement? 4 3 2 1 21 Figure 10. Question ‘Is it possible to protect your consumer rights in present -day conditions, do you think?’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217) The survey results have demonstrated that students were ill -informed about the pension s y stem and banking products and services (except for mobile banking applications and the electr onic wallet), but that they were aware of saving practices and consumer rights protection. On average, 3 5% of students answered the questions correctly at the first stage and 63% at the third stage. 1.6. Conclusion The large-scale projects organized by the OECD and W orld Bank have made a significant contribution to the study of financial literacy worldwide. The first such project was realized as a part of OECD s PISA-2012 programme. In Russia this research has been conducted since 2011 as a part of the project Enhancem ent of Financial Literacy and Development of Financia l Education in the Russia n Federation , supported by the Russian Ministry of Finance and the World Bank. 75 85 83 25 15 17 0% 20% 40% 60% 80% 100% 1st stage 2nd stage 3rd stage Is it possible to protect your consumer rights in present- day conditions, do you think? No Yes 22 The author of the subproject (№ FEFLP/FGI -2-1- 8 Educational Measures to Enhance Financial Literacy Among Students of Secondary Schools and Vocational Schools of E katerinburg: Development and Implementation ) designed a course of lectures and conducted a financial literacy survey among senior school students . The lecture course was attended by 260 students from Ekaterinburg, 98 of whom were secondary school students (10 - 11 th grades) and 162 were vocational school students (1 st year). The tests and lectures were conducted in four secondary schools and four vocational schools. The survey results have shown that students were poorly informed about the pension s y stem and banking products and services (except for mobile banking applications and the electronic wallet), but that they were aware of saving p ractices and consumer rights protection . On average, at the pre-test, 35% of students answered the questions correctly and in the follow-up tests, 63%. The results of the first stage have demonstrated that 7.5% of students (19 out of 252) could not give accurate answers to more than two questions, while, at the third stage results, this number dropped to 3% (7 students our of 252). Our experience of conducting lectures on financial literacy has allowed us to draw conclusions and elaborate guidelines for enhancing financial literacy of senior school students . During the lectures, students e ngaged actively with the material and asked questions about the Russian pension system. They were parti cularly interested in how their future pension is formed and how its amount varies depending on different ty pes 23 of income. Other topics that aroused a l ot of their interest were plastic card fraud and ways of investment, about which students had only a vague idea. At the second lecture, the lecturer spoke about loan agreements and protection of consumer rights. Students had a chance to a sk the invited legal practitioners questions that referred to their individual experience about how they could protect their interests in cases of their violation. Th us , it can be concluded that students lack financial knowledge and are in need of communication with experts in this field. We believe that such communication can be organized in the form of optional regular lectures. It is also important that such lectures should focus on practical matters, in particular, instructing students how to understand a nd evaluate the information ne cessary to make sensible decisi ons and how to predict possible consequences of such decisions. Students should also be taught how to make inform ed judgements and manage their financial resources; how to apply their knowledge, skills and values when shopping and in other financi al contexts; and how to take responsible decisions which will affect their lives, the lives of other people, their communities and the environm ent. It is also essent ial to raise financ ial literacy among secondary school students of junior grades up to and including the 8 th grade. This could be done, for example, in the form of lectures conducted once a m onth or once every two months. For senior students of secondary schools and first- or second-y ear students of vocational schools, such lectures should be conducted more frequently. Students should be given more opportunities of real-life contact with financial experts such as bankers, company managers, legal prac titioners and so on. 24 As practice has shown, instead of the traditional lecture format, the engaged lecture format is more suitable for this target group because students are more interested in practical questions associated with managing their personal finan cial resources rather than in theoretical m atters. As for university students , they should be taught the theoretical basics of financial literacy (in particular students maj oring in engi neering and natural sciences): such courses must cover not only management of personal budget but also financial processes in the public and private sectors. Higher education ought to provide studen ts with a more in -dep th understan ding of this subject. It is recommended that designers of financial lit eracy courses should differentiate between the disciplines Economics an d Financial Literacy ’, even though they are closely connected with each other. Funding: This research was supported by the project 'Enhan cement of Financial Literacy and Development of Financial Education in the Russian Federation' of the Ministry of Finance of the Russian Fede ration, subproject 'Educational Measures to Enhance Financial Literacy Among Students of Secondary Schools and Vocational Schools of Yekaterinburg: Developm ent and Implementation'. REFERENCES 1. Bernheim B. D., Garrett D. M., Mak, D. M. 2011. Education and Saving: The Long-term Effects of H igh School Financial Curriculum Mandates. Journal of Public Economics, vol. 80, no. 3, pp. 435-465. 25 2. Brown A. M., Collins J. M., Schmeiser M. D., Urban C. 2014. State Mandated Financial Education and the Credit Behavior of Young Adults. Divisions o f Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, Finance and Economics Di scussion Series, 42 p. 3. Danes S. M., Hi ra T. K. 1987. Money Management Knowledge of Co llege Students. Journal of Student Financial A id, vol. 17, no. 1, pp. 4-16. 4. Danes S. M., Huddleston-Casas C., Boyce L. 1999. Financial Planning Curriculum for Teens: Impact Evaluation. Financial Counseling and Planning, vol. 10, no. 1, pp. 25- 37. 5. Furrer E.C. 1960. An evaluation of a partially illustrated test of certain competencies in personal and family financial management possessed by selected senior high school students. Unpublished doctoral d isser tation, Pennsylvania State University, 342 p. 6. Huston S. J. 2010. Measuring Financial Literacy // The Journal of Consumer Affairs. 44(2): 296-316. URL: http://onlinelibrary.wiley.com/doi/10.1 111/j.1745-6606.2010.01170.x/epdf (last accessed: 15.09.2016). 7. Imaeva G. 2016. Fi nanso vaya Gramotnost' Naseleniya: Tochki Rosta. [Financial Literacy: Points of Growth]. Moscow: Analytical Center NAFI . URL: http://nacfin.ru/finansovaya-gramotnost-naseleniy a-tochki-rosta/#_ftn1 (last accessed: 15.09.2016) 26 8. Jelly H.M. 1958. A Measurement and Interpretation of Money Management Understandings of Twelfth-grade Students, Cincinnati, University of Cincinnati. 562 p. 9. Jump$tart Coalition. 2009. The Financial Literacy of You ng American Adults: Results of the 2008 National Jump$tart Coalition Survey of High School Seniors and College Students. Washing ton. D.C.: Jumpstart Coalition. 10. Kempson E.; Perotti V.; Scott K. 2013. Measuring Financial Capability: a New Instrument and Re sults from Low- and Middle-Income Countries. Financial Literacy and Education Russia Trust Fund. Washington DC: World Bank..URL: http://documents.worldbank.org/curate d/en/391291468152086725/Measuring- financial-capability-a-new-instrument-and-results-from - low -and-middle- income-countries (last accessed: 15.09.2016). 11. Kovaleva G.S. 2013. Finansovaya Gram otnost' Rossiyskikh Uchashchikhsya (Po Rezul'tatam Mezhdunarodnoy Programmy PISA -2012). [Financial Literacy of Russian Students (According to the Results of PISA-2012 Programs)]. URL: http://www.centeroko.ru/public.htm (last accessed: 15.09.2016). 12. Kuzina O.E. 2015. Financial Literacy and Financial Capability: Def initions, Measurement Methods, and Analysis in the Case of Russia. Voprosy Ekonomiki. 2015. No 8. P. 129-148. URL: http://dlib.eastview.com/browse/doc/4511 7851 (last accessed: 15.09.2016). 27 13. Kuzina O.E. 2015a. Finansovaya Kompetentnost' Rossiyan: Rezul'taty Mezhdunarodnogo Sravnitel'nogo Issledovaniya [Financial Capability of Russians: Results of t he International C omparative Study] . Money and Credit. No 5. P. 64 68. 14. Langrehr F.W. 1979. Consumer Education: Does it Change S tuden ts’ Competencies and Attitudes? The Journal of Consum er Affairs, vol. 13, no. 1, 41 -53. 15. Larson E.B. 1970. A Comparison o f Personal Finance Under standings of High school Students. Business Education Forum , vol. 25, pp. 40- 41. 16. Lundberg M., Mulaj F. (ed.) 2014. Enhancing Financial Capability and Behavior in Low- and Middle-Income Countries World Bank. Financial Literacy and Education Russia Trust Fund, Washington DC: World Bank Group. 17. Lusardi A., Mitchell O. 2007. Financial Literacy and Retirement Planning: New Evidence from t he Rand American Life P anel. MRRC University of Michigan Working Paper. 18. OECD INFE. 2011. Measuring Financial Literacy: Core Questionnaire in Measuring Financial Literacy: Questionnaire and Guidance Notes for Conducting an Internationally Comparable Survey of Financial Literacy. Paris: OECD. 19. OECD. PISA 2012. 2013. Assessment and Analytical Framework: Mathematics, Reading, Science, Problem Solving and Financial Literacy, 28 OECD Publishing. URL: http://dx.doi.org/10.1787/9789264190511- en (last accessed: 15.09.2016). 20. OECD. PISA 2012. 2014. Results: Students and Money: Financial Literacy Skills for the 21st Century (Volume VI), PISA, OECD Publishing. URL: http://www.oecd.org/pisa/keyfindings/ pisa-2012-results-volume-vi.htm (last accessed: 15.09.2016). 21. Tennyson S., Nguyen C. 2001. State Curriculum Mandates and Student Knowledge of Personal Finance. Journal of Consumer Affairs, vol. 35, no. 2 , pp. 241-262. 22. The Financial Literacy of Young American Adults: Results of the 2008 National JumpStart Coalitio n Survey of High School Seniors and College Students, Washington, Jumpstart Coalitio n, 2009, 120 pp. 23. Thompson N.D. 1965. The measurem ent of consumer knowledge. Unpublished doctoral dissertation, Colorado State co llege. 237 p.

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ResearchGate has not been able to resolve any citations for this publication. Measuring financial capability: a new instrument and results from low- and middle-income countries Book Full-text available Aug 2018 Elaine Kempson Valeria Perotti A major study involving 12 low- and middle-income countries to develop and implement a survey to measures levels of financial capability http://www.bristol.ac.uk/geography/research/pfrc/themes/fincap/measuring-levels-of-financial-capability-and-the-effectiveness-of-financial-education/ View Show abstract State Curriculum Mandates and Student Knowledge of Personal Finance Article Full-text available Jan 2005 J Consum Aff Sharon Tennyson C. Chau Nguyen This study analyzes the relationship between high school students’ scores on a test of personal financial literacy and their state's personal finance curriculum mandate. At the time of the testing, twenty of the thirty-one states included in the study had some kind of educational policy in the area of personal financial management. The results of the study show that curriculum mandates, broadly defined, are not generally associated with higher students’ scores. However, students in states that required specific financial education course work scored significantly higher than those in states with either a general mandate or with no mandate. View Show abstract Financial literacy and financial capability: Definitions, measurement methods, and analysis in the case of Russia Article Aug 2015 Olga Kuzina The main purpose of the study is to assess the level of financial capability of Russians by using the methodology of cross country comparison developed by the Russia Financial Literacy and Education Trust Fund. The paper gives a brief description of the methodology of financial literacy and financial capability measurements, as well as the results of the survey in Russia. From the analysis of the survey data, it is concluded that the weak areas of the financial capability of Russians concern issues related to planning of expenses and keeping these plans completed, creating reserves to pay for major planned or unexpected expenditures, lack of control over money spent using written records of incomes and expenses, developing regular saving habits, and lengthening time horizons. View Show abstract State Mandated Financial Education and the Credit Behavior of Young Adults Article Jan 2014 Alexandra Brown J. Michael Collins Maximilian D. Schmeiser Carly Urban In the U.S., a number of states have mandated personal finance classes in public school curricula to address perceived deficiencies in financial decision-making competency. Despite the growth of financial and economic education provided in public schools, little is known about the effect of these programs on the credit behaviors of young adults. Using a panel of credit report data, we examine young adults in three states where personal financial education mandates were implemented in 2007: Georgia, Idaho, and Texas. We compare the credit scores and delinquency rates of young adults in each of these states pre- and post-implementation of the education to those of students in a synthetic control state and then bordering states without financial education. We find that young people who are in school after the implementation of a financial education requirement have higher relative credit scores and lower relative delinquency rates than those in control states. View Show abstract PISA 2012 Assessment and Analytical Framework: Mathematics, Reading, Science, Problem Solving and Financial Literacy Book Jan 2010 OECD View Money Management Knowledge of College Students Article Jan 1987 Sharon M. Danes Tahira K. Hira A study of college students' money management knowledge examined student understanding of credit cards, insurance, personal loans, recordkeeping, and overall financial management. Student characteristics associated with differences in knowledge level were identifed. (MSE) View Show abstract Consumer Education: Does It Change Students' Competencies and Attitudes? Article Mar 2005 J Consum Aff FREDERICK W. LANGREHR A number of states require or are considering the required teaching of consumer education in secondary schools. However, almost all previous research has found no difference in consumer economic competency between students who had taken a consumer education/economics course and students who had not taken the course. This research was conducted in a state that requires consumer education of all students to see if there was a change in competency level and attitudes toward business. Potential differences in types of courses used to meet the state requirements were also investigated. The basic finding is that students who took a course specifically designed to present consumer education topics did improve their consumer economics competency and developed a more positive attitude toward business. View Show abstract A comparison of personal finance understandings of high school students [microform] / Article Larson Evelyn Ruth Thesis (Ph. D.)--University of Minnesota, 1969. Includes bibliographical references (leaves [64]-69). Microfilm of typescript. s View Show abstract Financial Literacy and Retirement Planning: New Evidence From the RAND American Life Panel Article Nov 2007 Annamaria Lusardi Olivia Mitchell The present paper introduces a new dataset, the Rand American Life Panel (ALP), which offers several appealing features for an analysis of financial literacy and retirement planning. It allows us to evaluate financial knowledge during workers’ prime earning years when they are making key financial decisions, and it offers detailed financial literacy and retirement planning questions, permitting a finer assessment of respondents’ financial literacy than heretofore feasible. We can also compare respondents’ selfassessed financial knowledge levels with objective measures of financial literacy, and most valuably, we can investigate prior financial training which permits us to identify key causal links. By every measure, and in every sample we examine, financial literacy proves to be a key determinant of retirement planning. We also find that respondent literacy is higher when they were exposed to economics in school and to company-based financial education programs. View Show abstract Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates Article Jun 2001 J PUBLIC ECON B. Douglas Bernheim Daniel M. Garrett Dean M. Maki International migration of people is a momentous and complex phenomenon. Research on its causes and consequences, requires sufficient data. While some datasets are available, the nature of migration complicates their scientific use. Virtually no existing dataset captures international migration trajectories. To alleviate these difficulties, we suggest: (i) the international coordination of data collection methodologies and standardization of immigrant identifiers; (ii) a longitudinal approach to data collection; (iii) the inclusion of adequate information about relevant characteristics of migrants, including retrospective information, in surveys; (iv) minimal anonymization; (v) immigrant boosters in existing surveys; (vi) the use of modern technologies and facilitation of data service centers; and (vii) making data access a priority of data collection. View Show abstract Show more Advertisement

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