FINANCIAL LITERACY LEVEL OF HIGH SCHOOL STUDENTS
AND ITS ECONOMIC PATTERNS REFLECTIONS
Yaakov Itach
D.A. Tsenov Academy of Economics ‒ Svishtov
Department Finance and Credit
e-mail: israelcenter.info@gmail.com
Abstract: This study contributes to the understanding of the level of financial literacy of high school students in Israel. The research purpose is to describe the level of financial literacy among high school students in Israel aged 15-18 and to examine the implications that financial literacy has on their economic behaviour patterns. The study examines the different relationships between financial knowledge, attitudes and economic behaviour of students with different demographic characteristics. The working thesis of the paper is that the low educational level of students in the field of personal finance poses risks in their effective management in the future. One of the conclusions drawn from this finding is that students may need to have an additional toolbox, knowledge, and basic skills to cope with the new economic environment of the day. In addition, it is clear from the findings that a student's attitudes and beliefs have
some influence on his / her financial knowledge and ability to solve financial issues, and have a greater impact on the adolescent's economic behaviour. The contribution is to the understanding that emphasis should be placed on financial education programs at school to provide tools to help students overcome psychological and emotional barriers, enhance a student's perception of competence, and teach him / her to avoid satisfaction and demonstrate self-discipline. This combination of providing cognitive and non cognitive tools may raise the level of financial literacy of high school students in Israel and remain with them for a period.
Introduction
In recent years, there have been a number of financial and economic crises in developed and developing countries around the world. In particular, it is noteworthy to mention the crisis that hit the United States in 2008, which brought the collapse of major banks, and even caused some of the economies in the world to spiral into recession. (Remund 2010) The impact of crises and changes in the financial markets on
households and the well-being of individuals has increased the fear of many countries that their citizens do not have the knowledge, tools and skills required to make informed economic and financial decisions. (Hastings, Madrian & Skimmyhorn, 2012; Lusardi & Mitchell, 2015)
Many countries have begun to grasp that their citizens have a duty to show personal responsibility for their financial future, but for this reason, the state has the duty to provide them with the basic knowledge and skills necessary to conduct and make informed financial decisions.
According to the International Financial Education Network (INFE, 2009), the lack of financial literacy was one of the factors that contributed to unsubstantiated financial decisions which, in the future, may have indirect negative consequences. There is also widespread recognition of financial
literacy as a necessary life skill, and an important element in economic and financial stability and development in these areas. (Pisa 2012, 2010)
In their study, researchers (Bernheim, Garret, & Maki, 2001; Cole, Sampson, & Zia, 2010) point out that adult citizens that have received financial education in both developed and developing countries are more likely to save and plan for retirement compared to the others. These testimonies show a direct
causal relationship between financial education and financial results. In addition, those with higher financial literacy are able to manage their money better, to take part in the stock market and achieve better performance in choosing their portfolios. In addition, according to researchers, (Hastings &
Tejeda-Ashton, 2008) it is more likely that those with higher financial literacy will join a mutual fund with lower commissions. (Pisa 2012, 2010)
Various factors influence the level of financial literacy observed among people. For example, financial literacy is influenced by information and skills in additional areas such as invoicing skills. A certain level of mathematical literacy is considered a necessary condition for financial literacy. Huston (2010)
argues that if a person has difficulty with arithmetic skills, this will certainly affect his financial literacy, as well as skills and knowledge such as reading and vocabulary essential to a particular level of financial literacy (Piza 2012)
As expected, mathematical knowledge affects the ability to measure quantitatively and numerically. In addition, religious belief negatively affects financial knowledge. Evidence for this can be found among Muslims. (Lusardi & Mitchell 2011)
Financial literacy is related to cognitive abilities, preferences, time, interest, background, and other characteristics of young people. It was also found that family background and parental education positively affect the child. (Curto, Lusardi & Mitchell, 2009)
In behavioural economics, Brooks and Byrne (2008) examined the financial decision-making process of the individual, and the behavioural economy holds that the factors of human psychology, as well as cognitive and affective factors influence individual financial decisions (Kim & Russell & Schroeder 2017) just as in 2011, Lusardu and Mitchell argued that age is of significant importance, and that middle-aged people have the highest level of financial literacy (Toth & Lancaric & Savov, 2015).
Huston's paper argues that arithmetic capabilities affect financial literacy. It was also explained that the use of calculators could compensate for this shortfall. Psychological, environmental, behavioural and other aspects also influence decisions. (Huston 2010) A survey of Mexican high school students aged 18 to 15 examined the impact of mathematical skills on financial literacy The survey was based on the principles of Lusardi and Mitchell and the OECD.
There was a direct and positive correlation between the level of mathematical skills and financial literacy (Amezcua & Everardo 2017).
Financial literacy of youths in schools and its importance
The focus on financial education in schools and among youths is not new. As noted above, financial literacy is increasingly regarded as a vital life skill, and already in 2005 the OECD recommendations emphasized that financial education should begin at school. It is important to educate people
about financial matters at an early age. This recommendation is based on two main reasons: the importance of focusing on youths, and the effectiveness of providing for financial education in schools. Many children are consumers of financial services from an early age. It is not uncommon for them to have
accounts that include access to online payment methods, and many of them use cell phones before their teens, and it is clear that financial literacy skills can be of benefit to them. In addition, before they graduate from high school, they may also need to make decisions related to getting a car insurance, savings products, or overdraft. (Pisa 2012, 2010)
According to Australian Government Financial Literacy Board (2009), providing for financial education to youths, even from younger ages, can be essential in fostering well-established financial knowledge and behaviour among students, knowledge, and behaviour that they can use later. (Pisa 2012,
2010)
It is important to equip people, especially young people, with financial knowledge. Studies show that young people are unable to plan their future and effectively manage their money. It is important to provide for financial education at school because some children will not receive it from their parents,
so parents should also be involved in financial education programs, so that they paid more attention to their children's economic behaviour (Lusardi & Mitchell & Curto 2009)
A study conducted by Chen & Volpe (1998), finds that the education system does not offer financial education programs, and this lack of educationleads to poor financial management of people, which ultimately affects their functioning, fertility, and health. Another study conducted at the University of Bürz in Bosnia finds out that most students are interested in educational programs that will increase their
knowledge of money management. It is important for students to be aware of their financial situation before making a simple investment or purchase (Hadzic & Poturak 2014).
Few researchers (Bandura, 1977; Perry, Baranowski & Parcel, 1990) argue that social learning theory, the focus of which is to indentify how people develop financial values, attitudes, knowledge, and behaviours postulates that people learn through social interaction. In particular socialization agents such as family, colleagues, media and schools are identified as factors that shape the financial literacy of the individual (Kim & Russell & Schroeder 2017).
The Department of Financial Education at the Ministry of Finance of Israel has compiled a document that defines the core competencies children and youths are required to acquire in financial education programs in the State of Israel. The core competencies described formulate specific objectives in
developing programs, workshops and lesson plans in financial education for educators and program developers. The core competency list was built as a subject and age matrix from kindergarten to high school graduation ( Ministry of finance, 2013).
There are many arguments and findings that contradict the efficiency of financial literacy. For example, in 2005, the National Council of Economic Education (NCEE) conducted a survey aiming to measure the
financial literacy of children and adults, but the results from it were not supportive of the hypothesis for financial literacy effect on financial behaviour (Lusardi & Mitchell 2011).
A survey of households in Germany showed that the evidence about the effectiveness of the existing programs is disappointing. (Willis, 2008) questions the potential of financial literacy programs to improve consumers' financial knowledge in the light of the complexity of new financial products, especially
in view of the assumption that the early financial literacy education is effective is lacking empirical support and is particularly difficult to examine and evaluate. In the light of the fast changes in the financial markets, Willis is also concerned that individuals' perception of their financial capacity may be
hindered by financial education and will not result in a significant improvement in actual capacity but in making worse financial decisions. She also fears that financial education will transfer exclusive responsibility to consumers and will hamper legislative and state regulation thus causing harm to consumers. Finally, she is in favour of consulting with experts in the field and not independently
(Stolper & Walter, 2017).
A mega-study conducted in 2013 examined the impact of financial knowledge and financial literacy on financial behaviour in 188 studies. It found that financial literacy accounts for only 0.1% of financial behaviour. According to it, there are many variables and factors that influence financial behaviour
such as psychological, demographic and other effects. Therefore, it argues that financial literacy may not necessarily improve financial results and financial behaviour. The article questions whether it is worthwhile investing in financial literacy, on the assumption that the contribution to effective financial decisions
is dubious. (Fernandes, Lynch & Netemeyer 2013)
