Financial Literacy Explicated: The Case for a Clearer Definition in an Increasingly Complex Economy

TLDR

Scholars, policy officials, financial experts and consumer advocates have used the term loosely to describe the knowledge, skills, confidence and motivation needed to manage money, leading to varying conceptual and operational definitions in research. This study explicates financial literacy and dissects its varying definitions and measures, urging researchers toward common ground. The study analyzes and compares existing definitions and measures of financial literacy to identify common ground. A clearer definition should improve future research, in turn helping consumers better understand and adapt to changing life events and an increasingly complex economy.

Abstract

This study explicates the concept of financial literacy, which has blossomed in use this century. Scholars, policy officials, financial experts and consumer advocates have used the phrase loosely to describe the knowledge, skills, confidence and motivation necessary to effectively manage money. As a result, financial literacy has varying conceptual definitions in existing research, as well as diverse operational definitions and values. This study dissects the differing financial literacy definitions and measures, urging researchers toward common ground. A clearer definition should improve future research, in turn helping consumers better understand and adapt to changing life events and an increasingly complex economy.