Measuring financial literacy and its correlates: A study of fifteen-year-olds in Oxfordshire and Greater London

Financial literacy refers to one’s ability to apply knowledge and skills in order to make informed financial decisions. Both internationally and within the UK, there have been many initiatives designed to improve people’s financial literacy.

In particular, there has been much emphasis placed on providing financial education for young people at school. However, there has been a lack of research evidence from the UK about the levels of young people’s financial knowledge, skills and attitudes. In this study, an instrument was designed to measure these key aspects. There is a personal finan ce test within the instrument which can produce a combined measure of financial knowledge and skills. There is also a separate section to measure levels of desired financial attitudes towards various personal finance topics. Background information was also collected from respondents in order to allow us to examine the correlates of financial literacy. The initial instrument was piloted on a group of students and validated by some subject matter experts. The final instrument was used to assess the financial literacy of a convenience sample of 3115 fifteen-year-olds from 28 schools in Oxfordshire and Greater London. The results of the personal finance test illuminated the specific topics that young people were weak in, such as understanding the workings of credit cards and compound interest. In terms of financial attitudes, the majority indicated that they were very confident about managing their own money; there was a high propensity to save money and to want to become financially independent. However, levels of desired attitudes towards spending and debt were found to be relatively low. The main correlates of financial knowledge and skills were literacy and numeracy levels, whilst financial attitudes were more strongly associated with personal characteristics. The relationships between the personal finance test scores and financial attitudes were mostly positive.