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The perception-reality gap in financial literacy: Evidence from the most literate state in India

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  • Kiliyanni, Abdul Latheef
  • Sivaraman, Sunitha

Abstract

This study measures the level of financial literacy and evaluates the impact of demographic and socio-economic attributes on financial literacy among the educated young adults in Kerala, the most literate state in India, during the year 2015. The study also analyses the perception‐reality gap in financial literacy and the attitude of young adults towards financial education. Primary data collected using a structured questionnaire from 736 young adults is used in this study. Statistical techniques such as analysis of variance and chi-square test are employed to analyse the data. The findings reveal that the financial literacy in Kerala is low, with an average young adult answering only 44% of the questions correctly. The study finds that gender, marital status, age, religion, education, the discipline of study, occupation, work experience, income, and parents’ education and their occupation influence financial literacy. It is also observed that respondents tend to overrate their financial literacy by around 50%, indicating their over-confidence in the knowledge of matters related to personal finance. However, a majority of the respondents (89%) expressed the need for financial education for young adults. This study, hence calls for initiatives to improve financial literacy among young adults in Kerala and for further research in this direction.

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  • Kiliyanni, Abdul Latheef & Sivaraman, Sunitha, 2016. "The perception-reality gap in financial literacy: Evidence from the most literate state in India," International Review of Economics Education, Elsevier, vol. 23(C), pages 47-64.
    • Handle: RePEc:eee:ireced:v:23:y:2016:i:c:p:47-64
    DOI: 10.1016/j.iree.2016.07.001
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    2. Paraboni, Ana Luiza & da Costa, Newton, 2021. "Improving the level of financial literacy and the influence of the cognitive ability in this process," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
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    4. Silvia Mariela Méndez-Prado & Vanessa Rodriguez & Kevin Peralta-Rizzo & Patricia Everaert & Martin Valcke, 2023. "An Assessment Tool to Identify the Financial Literacy Level of Financial Education Programs Participants’ Executed by Ecuadorian Financial Institutions," Sustainability, MDPI, vol. 15(2), pages 1-24, January.
    5. Emma Liliana Merino González, 2023. "Factores que influyen en la educación financiera de los jóvenes de Celaya, Guanajuato, México," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(3), pages 1-21, Julio - S.
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    More about this item

    Keywords

    Financial literacy; Financial behaviour; Self-reported financial literacy; Kerala; India;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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