Financial literacy and financial well-being: the case of Eastern, Central, and Northern Europe

Nowadays, financial literacy is an integral part of education in many countries because of its positive influence on financial inclusion, and financial well-being of households is supposed. In this study, attention is focused on finding out which components of financial literacy (knowledge, behaviour, and attitude) determine the financial well-being of individuals to a greater extent, as well as the link between subjective and objective financial well-being and financial literacy. The Global Findex Database of the World Bank correlation and regression analysis was used inline with the principal components method to process data samples for Ukraine, Georgia, Czechia, Hungary, Croatia, Poland, Austria, Lithuania, and Estonia from OECD/INFE. Cross-country differences indicate that the more economically developed a country is, the higher its financial literacy level can be observed. Also, countries with lower financial literacy levels have more significant growth potential, with Poland and Ukraine as examples. The contribution of knowledge, behaviour, and attitude, in general, can be considered as uniform in terms of financial literacy index formation that corresponds to the index logic. It should be noted that in economically developed countries higher correlation dependency between financial literacy and knowledge and attitudes can be spotted than behaviour. At the same time, behaviour determines households` financial well-being level. It was detected that subjective financial well-being and financial literacy level equally, by approximately 63%, are driven by savings and sound budgeting. The wartime experience of Ukraine shows that depositors' behaviour can be quite different and depending on a set of factors, such as banking system development level, level of trust in the banking system, and financial literacy level

How do savings and personal budgeting matter on financial literacy and well-being

Purpose – the well-being of individuals plays a vital role in fostering sustainable economic development. The differentiation between subjective and objective well-being in selected EU and selected non-EU countries, with a particular focus on financial literacy, as individuals’ assessments of their own well-being can significantly differ from objective economic indicators, emphasizing the subjective nature of well-being. The research objective is to investigate how savings and personal budgeting indicators affect both objective and subjective well-being and to examine the role of these indicators in promoting financial literacy. Research methodology – the research investigates the impact of savings and personal budgeting indicators on financial literacy (FLI), financial well-being (FWB), and gross domestic product at purchasing power parity per capita (GDP PPP per capita). We applied Pearson’s pairwise correlation between nine indicators of personal budgeting and savings and the method of principal components to identify the reasonable factors according to their statistical significance based on data from 22 countries included in the Organisation for Economic Cooperation and Development/International Network on Financial Education (OECD/INFE) survey data, Global Findex Database. The application of the Varimax procedure made it possible to identify factor groups of indicators. Findings – we identify two factors for the whole sample and a sample of selected EU-countries; for non-EU-countries were identified three factors. Our research reveals that subjective FWB across all countries and non-EU countries is under the significant influence of factor group 1 mainly represented by savings indicators, with no significance for EU countries. FLI also significantly depends on factor group 1 for the entire sample of countries and across EU and non-EU countries. GDP PPP per capita is under the significant influence of all factors both in the sample of countries and across EU and non-EU countries. Research limitations – FLI databases started to be gathered relatively recently and are not regularly updated. This can cause a situation when data for different countries are provided with time gaps. Moreover, due to the high cost involved, not all countries conduct such research, which hinders the creation of large datasets for more accurate country comparisons. Practical implications – the results of this study may have interest for policymakers since they focus on improvement of the financial literacy and FWB of individuals, that results in a higher level of financial stability. Originality/Value – this research is to address existing gaps in understanding of the interplay between subjective and objective FWB. Also, it proposes a novel approach that views savings as a factor that enhances financial literacy, in contrast to the conventional approach that considers savings as a consequence of improved FWB

Financial literacy and financial well-being: the case of Eastern, Central, and Northern Europe

Nowadays, financial literacy is an integral part of education in many countries because of its positive influence on financial inclusion, and financial well-being of households is supposed. In this study, attention is focused on finding out which components of financial literacy (knowledge, behaviour, and attitude) determine the financial well-being of individuals to a greater extent, as well as the link between subjective and objective financial well-being and financial literacy. The Global Findex Database of the World Bank correlation and regression analysis was used inline with the principal components method to process data samples for Ukraine, Georgia, Czechia, Hungary, Croatia, Poland, Austria, Lithuania, and Estonia from OECD/INFE. Cross-country differences indicate that the more economically developed a country is, the higher its financial literacy level can be observed. Also, countries with lower financial literacy levels have more significant growth potential, with Poland and Ukraine as examples. The contribution of knowledge, behaviour, and attitude, in general, can be considered as uniform in terms of financial literacy index formation that corresponds to the index logic. It should be noted that in economically developed countries higher correlation dependency between financial literacy and knowledge and attitudes can be spotted than behaviour. At the same time, behaviour determines households` financial well-being level. It was detected that subjective financial well-being and financial literacy level equally, by approximately 63%, are driven by savings and sound budgeting. The wartime experience of Ukraine shows that depositors' behaviour can be quite different and depending on a set of factors, such as banking system development level, level of trust in the banking system, and financial literacy level