Financial Literacy as More than Knowledge: The Development of a Formative Scale through the Lens of Bloom's Domains of Knowledge

Abstract

For well over a decade, financial literacy has been a primary lens through which researchers approach financial education. Unfortunately, in most cases, this potentially rich construct is reduced to mere financial knowledge. This myopic conceptualization hampers the development of the concept and programs to build financial literacy. Despite research that reveals these limits, the field has either persisted with this narrow definition of financial literacy or abandoned the model altogether in favor of capability or similar constructs. Using Bloom's domains of knowledge, we redefine financial literacy as the combination of three different indicators reflecting three domains of knowledge: financial skill, self‐efficacy, and explicit knowledge. Using data from a national survey, we apply the methods of formative scale development to construct and validate a more robust conceptualization and measurement of financial literacy. We explore how this financial literacy index might inform development of innovative financial education programs.

Financial literacy: A systematic review and bibliometric analysis

“…The construct of financial knowledge seems to be a shortsighted way of defining financial literacy. Warmath and Zimmerman (2019) define financial literacy as a “combination of three domains of knowledge: financial skill, self‐efficacy, and explicit knowledge”. There is a pressing need for a more country‐specific measurement index for financial literacy in the absence of a standard measure.…”

Extreme exclusion and relative deprivation in subsistence marketplaces: A study in a refugee settlement in Nakivale, Uganda

“…Thus, access in all its forms needs to be incorporated into policy. In this regard, researchers have broadly construed financial resources, access to buy and sell (including capturing value in the value chain), and financial and marketplace literacy (covering skills and knowledge, as well as self‐confidence) as key elements for participation in the marketplace (Viswanathan et al ., 2008; Warmath and Zimmerman, 2019). Specifically, extant research (including a study from a Ghanaian context) suggests that knowledge regarding access to financial services should be taught to youth populations (Shim et al ., 2013; Despard and Chowa, 2014; Luukkanen and Uusitalo, 2019).…”

The Interplay of Financial Education, Financial Literacy, Financial Inclusion and Financial, Stability: Any Lessons for the Current Big Tech Era?

“…Hence, our definition of financial literacy also includes the actions people undertake that affect their individual financial well-being, such as thinking twice before making a purchase or paying bills on time. Our approach is in line with Warmath and Zimmerman (2019), who redefine financial literacy as the combination of explicit financial knowledge, financial skills and self-efficacy in making financial decisions. 6 So unlike others, such as Hannig and Jansen (2010) or the Committee of Financial Inclusion, our definition not only includes access but also the actual usage of formal financial services.…”