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Measurement of Financial Competence—Designing a Complex Framework Model for a Complex Assessment Instrument

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  • Andreas Kraitzek

    (School of Social Sciences and Technology, Technical University of Munich, 80333 München, Germany)

  • Manuel Förster

    (School of Social Sciences and Technology, Technical University of Munich, 80333 München, Germany)

Abstract

Financial competence is seen as a complex ability necessary for people to deal with personal financial issues on a daily basis. To foster young peoples’ financial competence via sophisticated and tailored educational programs, the identification of “competence gaps” through complex and authentic assessments is required. While a large number of assessment tools in the field of personal finance already exist, many of them suffer from different shortcomings concerning a competence-oriented approach. Therefore, we present an innovative way to assess students’ financial competence with a complex performance scenario about financial investment. The presented instrument is built on a specifically designed theoretical framework and addresses the need for holistic financial competence measurement. Results of pretesting trials indicate that the instrument is generally capable of measuring young learners’ financial competence, but challenges in scoring remain. Against this background, implications for the instrument’s iterative enhancement are presented and discussed with reference to validity and reliability properties, scoring issues, and statements about the overall feasibility of complex performance tasks in educational settings. The first draft of a scoring scheme is provided. The potential of the instrument in combination with modern technology-based measurement methods (eye tracking, emotion recognition) for competence assessment is described and suggestions for further research are outlined.

Suggested Citation

  • Andreas Kraitzek & Manuel Förster, 2023. "Measurement of Financial Competence—Designing a Complex Framework Model for a Complex Assessment Instrument," JRFM, MDPI, vol. 16(4), pages 1-28, April.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:4:p:223-:d:1114886
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    References listed on IDEAS

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    4. Annamaria Lusardi, 2012. "Numeracy, financial literacy, and financial decision-making," NBER Working Papers 17821, National Bureau of Economic Research, Inc.
    5. Annamaria Lusardi, 2019. "Financial literacy and the need for financial education: evidence and implications," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-8, December.
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