Measuring financial literacy with a Situational Judgement Test: do some groups really perform worse or is it the measuring instrument?

Abstract

Due to current trends in society and economy, financial literacy is often considered as an important twenty-first century skill. However, regardless of the postulated relevance, studies suggest that financial illiteracy seems to be a widespread phenomenon in the population of many nations. Some studies also show that some groups perform particularly poorly (e.g. women, persons with migration background and/or low level of education). These differences are often attributed to different individual characteristics such as abilities, dispositions or socialisation patterns. However, available research also suggests that even after controlling for them, a quite large portion of the performance differences between the various groups of test-takers remains unexplained. One explanation for performance gaps in financial literacy might be that differences in test scores could also be evoked by the test instruments itself and may thus, at least in part, be interpreted as testing bias. In this paper, we present a newly developed Situational Judgement Test, which is focused on financial competence. For this test, we examine whether differences between groups are attributable to individual differences or due to a test bias. To analyse a possible test bias, we tested one facet of financial literacy (with three factors: control of one’s financial situation, budgeting and handling of money) related to everyday money management for measuring invariance for different groups. If measuring invariance could be assumed, we analysed group differences by calculating t-tests. Results show that two factors of the test show measurement invariance for all groups considered (gender, migration and educational background, opportunities to learn). Group comparisons are thus possible and potential differences are not due to a test bias. For one factor, we can only assume measurement invariance for the group with/without migration background and with/without opportunities to learn in financial topics. When we look at group differences, we find that in contrast to the findings of many previous studies, the analysis of the mean differences does not show any systematic deficits in financial literacy for specific groups.

What Influences the Financial Literacy of Young Adults? A Combined Analysis of Socio-Demographic Characteristics and Delay of Gratification

“…With reference to the previous analyses by Wuttke et al (2020) , who show that the third facet – “sensitive handling of money” – does not achieve partial strict measurement invariance, only the first two facets of the test are considered in the following. To answer research question 1, the relationship between the independent variables, namely, age, gender, educational background, migration background, opportunities to learn about finance, and delay of gratification, and the dependent variables, specifically the facets control and budgeting , is investigated using a structural equation model.…”

“…Most studies indicate that men perform better than women in financial literacy tests (e.g., Lusardi and Mitchell, 2014;Schürkmann and Schuhen, 2014;Ergün, 2017;Gramațki, 2017;OECD, 2017;Strömbäck et al, 2017;Förster et al, 2018). Only a few studies show no gender differences, and this is only true for some facets of financial literacy (e.g., Hill and Asarta, 2016;Strömbäck et al, 2017;Greimel-Fuhrmann and Silgoner, 2018;OECD, 2018;Rudeloff et al, 2019;Santini et al, 2019;Wuttke et al, 2020). One explanation for the often-found gender gap is that men are more likely to be part of groups with finance-related interests and therefore achieve higher levels of financial literacy (e.g., Lusardi and Mitchell, 2011).…”

“…Studies also show that some groups tend to perform particularly poorly. This is primarily the case for women as well as for persons with a migrant background and/or low levels of education (e.g., Bucher-Koenen et al, 2017;Happ and Förster, 2019), although the recent study by Wuttke et al (2020) reports different results. These results are usually attributed to different individual dispositions, such as an interest in financial issues (e.g., Brown and Graf, 2013;Lührmann et al, 2013), or different socialization patterns and learning opportunities (e.g., Rinaldi, 2017;Rudeloff, 2019).…”

Research of senior high school students’ economic culture formation in the conditions of development of the digital education environment

“…A economia pode ser ensinada gerando novos conhecimentos por meio da familiarização dos alunos em uma combinação de ambientes e experiências reais de aprendizado. Os alunos que não têm a oportunidade de estudar economia e aprofundar sua compreensão econômica provavelmente nunca demonstrarão muito interesse no assunto ou em seu mundo econômico (WUTTKE et al, 2020;International Encyclopedia of Social and Behavioral Sciences, 2020;JÜTTLER et al, 2020).…”