The relationship between everyday practices and financial literacy. an empirical analysis

The global financial crisis has drawn the attention of both scholars and supervisors to the issue of financial education as an instrument for the development of efficient markets. The aim of this paper is to test the hypothesis that financial experience, gained with the daily use of different products and services, has a relevant effect on the acquisition of financial capabilities. Data are drawn by the 2008 Bank of Italy Survey on Household Income and Wealth, collecting a wide set of information on respondents and including 9 multiple-choice quizzes to measure financial literacy. A regression model was performed to assess the impact on financial literacy of four different groups of variables: socio-demographic features; income, consumption and household wealth; formal education and the experience resulting from the active participation in the capital market through the holding of financial assets and the use of specific products. The contribution of each group of regressors was measured with the Bonferroni index. Our results are consistent with previous literature, confirming a higher level of financial literacy for middle-aged adults, men, white collars, teachers, officials and managers, increasing with the years of schooling, household income and wealth. As for the financial experience, the Bonferroni index provided a strong evidence of its crucial role in explaining financial literacy, also with respect to a model already accounting for general education. This finding suggests to policymakers the adoption of incentives on the use of financial instruments or wealth accumulation, other than on educational programs.