Financial Literacy and Management of Personal Finance: A Review of Recent Literatures

Abstract

The objective of this paper is to present a review and synthesis of recent studies on financial literacy and related issues. Starting with review of prior literature surveys, the current study advances personal finance literature by presenting recent studies on financial literacy, the link between financial literacy and financial management behavior, and financial inclusion. And showed that people, even in developed world, lacks basic knowledge, skill and attitude for optimal personal financial management decisions. As a result enhancing financial literacy and personal finance education becomes relevant policy in developed and high income countries since the mid-1900s. A recent academic and policy interest in developing countries, albeit large scale surveys are lacking, show increasing global relevance financial literacy and savvy financial behavior for socio economic health of a nation. Recent studies from emerging and developing countries confirmed low level of financial literacy and it’s correlation with being female, young or old, unemployed, having low educational attainment, low income, and living in rural area however few studies found some demographic variables insignificant. These studies suggested furthering of financial education to different cohorts of population, especially targeting those with low financial literacy level. Nevertheless, empirical evidences on the impact of financial literacy on financial behavior, and financial inclusion remained mixed, but suggesting positive outcomes of well-designed and targeted financial education, sometimes coupled with other interventions.

Keywords: Financial literacy, financial behavior, financial inclusion, literatures review.