Financial Literacy and Household Behavior

Implications for Asia

Joanne Yoong
NUS/USC

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian
Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI
does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use.
Terminology used may not necessarily be consistent with ADB official terms.
 What is financial literacy?

A combination of awareness, knowledge, skills,

attitude and behaviour necessary to make sound
financial decisions and ultimately achieve individual
financial wellbeing – OECD
GFLEC/S&P Global FinLit Survey
 Focusing on Asia
% ADULTS FINANCIALLY LITERATE
70
(S&P GLOBAL FINLIT SURVEY)
64
61
60
59
54
52
50

43 43
41 41 40
40 37 36 36
35
33 32 33
30
30 28 27
26 25
24 24
21
20
19 19 18 18 18
17
14

10

0
OECD/INFE : Morgan and Trinh (2019)
Does It Matter?
 Financial Literacy and Behavior
• Early evidence showed consistently positive relationships
between financial literacy and longer-term outcomes
– Suggestive associations but lacking conclusive causal evidence
– US/European datasets

• More recent and more robust literature on causal effects

– Better data
• More standardized variables
• Wider range of behavioral outcomes
– Stronger methodology
• Behavior changes following randomized trials of financial literacy
interventions
• Instrumental variables analysis
– Increasing relevance to Asia with in-depth country analysis
What types of behavior?
Individual financial decisions
• Increased savings
• Better debt management
• Increased propensity to invest and insure
• Reduced use of alternative/informal services
• More likely to plan for long-term/retirement
• More appropriate responses to policy levers

Overall financial security/well-being

• More short-term liquidity
• Higher composite scores on financial savviness
• Better retirement security
• Greater long-term wealth

Broader aspects of well-being

• Educational attainment
• Healthcare utilization
• Employment choices
• Marriage and family decisions
Old Disparities, New Risks
Age
Gender
Human Nature
Uncharted (Time) Horizons
Expanding (Product) Universe
FinLit x Digital Literacy
FinLit x Information Literacy
OECD/INFE Financial Attitudes
Inclusion Requires Literacy

Quality
Expand
Better products, increased
range of
consumer protection
services

Expand to
excluded Fintech
consumers

Access
 New Horizons For Financial Literacy

Building
Sustaining
Optimizing models of
school-and employer- Partnering
based financial Reinforcing financial
education literacy in a highly
dynamic environment Developing relationships
Expanding opportunities for learning and
for experiential and Addressing diverse collaboration across
community-based needs equitably and public, private and non-
learning cost-effectively profit sector