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

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  • Tracey West
  • Andrew C. Worthington

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

  • Tracey West & Andrew C. Worthington, 2018. "Synthesizing an Index of Financial Literacy Using Not†For†Purpose Survey Data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(2-3), pages 331-352, July.
    • Handle: RePEc:bla:ecnote:v:47:y:2018:i:2-3:p:331-352
    DOI: 10.1111/ecno.12107
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    References listed on IDEAS

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    1. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2007. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 707-747, October.
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    Cited by:

    1. Tracey West & Michelle Cull, 2020. "Future Expectations and Financial Satisfaction," Economic Papers, The Economic Society of Australia, vol. 39(4), pages 318-335, December.
    2. Thomas A. Hanson, 2022. "Family Communication, Privacy Orientation, & Financial Literacy: A Survey of U.S. College Students," JRFM, MDPI, vol. 15(11), pages 1-13, November.
    3. Aaron Elkhishina & Tracey West & Kirsten MacDonald, 2019. "Understanding the retirement savings of self-employed tradespeople in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 22(2), pages 75-92.

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