Synthesizing an Index of Financial Literacy Using Not‐For‐Purpose Survey Data

22 Pages Posted: 12 Jun 2018

Date Written: July‐November 2018

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.

Suggested Citation

West, Tracey and Worthington, Andrew C., Synthesizing an Index of Financial Literacy Using Not‐For‐Purpose Survey Data (July‐November 2018). Economic Notes, Vol. 47, Issue 2-3, pp. 331-352, 2018, Available at SSRN: https://ssrn.com/abstract=3192193 or http://dx.doi.org/10.1111/ecno.12107

Tracey West (Contact Author)

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Andrew C. Worthington

Griffith University ( email )

170 Kessels Road
Nathan, Queensland 4111
Australia
+61 (0)7 3735 4273 (Phone)
+61 (0)7 3735 3719 (Fax)

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