We review journal publications from 2007 to 2023 that specifically study or consider racial/ethnic and gender differences in financial knowledge. Of the 32 papers we review, 12 focus on racial/ethnic differences, 7 focus on gender differences, and 13 consider racial/ethnic and gender differences. From these studies, we estimate that, on average White adults score 17 percentage points higher than Black adults on objective financial knowledge, 14 percentage points higher than Hispanic adults, and 2 percentage points lower than Asian adults. We also estimate that, on average, men score 13 percentage points higher than women on objective financial knowledge. We also provide average racial/ethnic and gender differences in subjective financial, knowledge, and these differences across groups seem much smaller. We provide an overview of possible determinants for these racial/ethnic and gender gaps in financial knowledge. We discuss how stakeholders should leverage research on financial knowledge and directions for future research with the purpose to address racial/ethnic and gender gaps in financial knowledge in the United States.

We provide a brief history of administering financial literacy questions in probability-based Internet panels. After financial literacy questions were asked in the Centerpanel in the Netherlands and the RAND American Life Panel, the Understanding America Study (UAS) has been administering 14 financial literacy questions in its biannual core surveys since 2014. Due to its longitudinal nature and the vast amount of available information on its panel members, the UAS provides unique opportunities for analyzing patterns of financial literacy over time and its associations with financial outcomes, cognition, health, personality, and economic preferences, among others. The UAS survey-based dataset is further enriched with administrative records from consenting respondents. Importantly, researchers can incorporate additional questions and modules to gather specific data, which can then be linked to both existing and forthcoming information on panel members. In this paper, we describe the UAS financial literacy measures and offer descriptive analyses, highlighting the patterns of financial knowledge over time and by individuals’ background characteristics. We also show how financial outcomes, such as financial wealth and retirement preparedness, relate to financial literacy scores.

This paper surveys what we have learned on financial literacy and its relation to financial behavior from data collected in the Dutch Central Bank (DNB) Household Survey, a project done in collaboration with academics. A pioneering survey fielded in 2005 included an extensive set of financial literacy questions and questions that can serve as instruments for financial literacy in regression analyses to assess the causal effect of financial literacy on behavior. We describe how this survey spurred a series of research papers demonstrating the crucial role of financial literacy in stock market participation, retirement planning, and wealth accumulation. This inspired various follow-up studies and experiments based on new data collections in the DNB Household Survey. Researchers worldwide have used these data for innovative studies, and other surveys have included similar questions. This case study exemplifies the essential role of data in empirical research, showing how innovative data collections can inspire new research initiatives and significantly contribute to our understanding of household financial decision-making.

This study gauges Finnish people’s knowledge about pensions and their trust in the pension system. A further aim is to see if knowledge and trust are related and to explore the role of sociodemographic factors in that relationship. We examine both self-assessed and objective knowledge of pension system details and look at how age, gender, education, income, and socioeconomic status are reflected in pension knowledge and trust. The results reveal that the relationship between pension knowledge and trust is driven by sociodemographic factors. However, for those with a primary education, there is a positive association between pension knowledge and trust.

We use the 529 college savings plan setting to investigate whether and why households make suboptimal choices to invest in local assets. We estimate that 67% of open accounts between 2010 and 2020 were located suboptimally due to the plans’ tax inefficiencies and high expenses. Over the accounts’ projected lifetimes, such investments yielded expected losses of 8% on average or $15.6 billion in 2020 alone. We then investigate why suboptimal investment is so prevalent. Consistent with households’ lack of understanding of state-level tax benefits, we find that a meaningful proportion of households does not account for the potential tax benefits and costs of local versus nonlocal 529 investment. Household financial literacy and plan disclosure complexity appear to explain suboptimal investment patterns, which further supports the role of information-processing frictions. Our study presents novel evidence on individuals’ preferences for local assets and how information-processing frictions shape their investment decisions, reducing their financial well-being.

For the very first time, in the Spring of 2023, the European Commission (EC) carried out a survey across all member states to assess their level of financial literacy. This survey complements other national surveys and fills an important gap because it provides a consistent metric that allows comparisons among the European Union (EU) countries. The motivation behind the EC’s survey stems from the need to advance the state of financial literacy to safeguard financial stability and promote important projects, such as the creation of a Capital Markets Union. In this paper, we analyze these new data and confirm findings in the literature about the importance of being financially knowledgeable to achieve good financial outcomes. Unfortunately, the survey also confirms that barely one in two individuals, on average in the EU, is financially literate.

Since 2012, the Programme for International Student Assessment (PISA), an initiative of the Organisation for Economic Co-operation and Development (OECD), has been collecting data to evaluate the financial literacy of 15-year-old students in various countries. The triennial assessments provide an opportunity to study the determinants of financial literacy among the young and how it evolves over time. This article looks back at a decade of PISA financial literacy data and examines the four waves of student-level data collected so far (2012, 2015, 2018, and 2022). We document stylized facts across waves and provide guidance on using the test scores estimated from psychometric models.

A crucial first step in helping consumers improve their financial lives is understanding their financial circumstances and well-being. The Financial Well-Being (FWB) scale measures a consumer’s subjective well-being related to aspects of their financial circumstances. It is available in standard-length (10-item) and abbreviated (5-item) versions, but no research has compared how completing either version may alter consumers’ responses. Notably, the 5-item scale includes a higher share of reverse-coded (i.e., negatively framed) items. We hypothesize that the difference in item framing between scale versions influences participants’ feelings about their financial situation, predicting that completing the 5-item FWB scale will result in more negative responses compared to completing the 10-item FWB scale. To test this hypothesis, we implement a randomized survey experiment using the Understanding America Study. In our experiment with nearly 6,000 participants, we find that completing the 5-item versus the 10-item FWB scale reduces FWB scores (average decline in the 5-item FWB score of 0.9 points, 95% CI [–1.552, –0.249]), and increases the share with a “low” 5-item FWB score by 5.0 percentage points, 95% CI [0.028, 0.071]), responses to individual scale items, and self-rated FWB. This pattern is strongest among lower-income respondents (average decline in FWB score of 2.3 points, 95% CI [–3.385, –1.171] and increases the share with a “low” 5-item FWB score by 8.1 percentage points, 95% CI [0.041, 0.121]). These findings highlight that FWB scale choice can have unexpected consequences. We discuss the implications for research on FWB and on the measurement of well-being more broadly.

The National Financial Capability Study (NFCS) is a large-scale, ongoing research project of the FINRA Foundation that provides a broad range of stakeholders the ability to examine and better understand the financial capability of U.S. adults. First introduced in 2009, the NFCS has dozens of publicly available reports and data sets that are free to download. Data from the NFCS contain information on people’s ability to make ends meet, their management of financial products and services, the extent to which they plan ahead, their financial knowledge and decision-making, and numerous other topics. This paper provides an overview of the history, methodology, and some insights gained from the NFCS over the years. In addition, given the NFCS’ unique role as the birthplace of the Big 5 financial literacy questions that are present in all waves of the NFCS, we discuss the role of the NFCS in aiding our understanding of financial knowledge in the United States. The paper concludes with a look toward the future of the NFCS.