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Measuring Financial Literacy with the Big Three: Why It Works

Author

Listed:
  • Tim Kaiser
  • Annamaria Lusardi
  • Olivia S. Mitchell
  • Luis Oberrauch

Abstract

This paper investigates why the widely-used Big Three financial literacy index provides a reliable measure of financial literacy. Using an Item Response Theory framework, we estimate item difficulty and discrimination parameters and conduct a meta analysis to assess the stability of these properties across datasets and countries. Results confirm the scale's validity and reliability, with item characteristics that remain stable across populations and settings. We find no evidence of measurement differences across demographic subgroups or countries. Compared to the longer Big Five scale, the Big Three index performs similarly in measuring financial literacy and predicting financial behaviors.

Suggested Citation

  • Tim Kaiser & Annamaria Lusardi & Olivia S. Mitchell & Luis Oberrauch, 2026. "Measuring Financial Literacy with the Big Three: Why It Works," NBER Working Papers 35342, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35342
    Note: AG ED LS
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    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • I20 - Health, Education, and Welfare - - Education - - - General

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