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Financial literacy scales are often used as a diagnostic tool to assess financial knowledge levels among various populations, although few of them have undergone empirical testing. This study utilized exploratory factor analysis (EFA) with a sample of Chinese rural migrant workers to identify the underlying structure of a financial literacy scale and its psychometric properties. EFA reduced the 23 items to 5 factors that explain for 69.08% of the variance in financial literacy. Five factors are identified that are daily money management, math skills, saving and borrowing, inflation, and long-term investment. Findings suggest that practitioners who work with migrant workers or groups with lower income, lower educational levels can use this instrument to assess financial literacy levels and explore interventions that improve specific areas of financial knowledge.

Many individuals learn financial knowledge and skills in school (namely formal financial education) and through friends and family (e.g., family financial socialization). While the two channels have distinctive merits and limitations, little is known about how formal financial education and family financial socialization differ and interact when it comes to helping people gain financial knowledge and skills. Using data from the 2015 National Financial Capability Study, we examined the association between formal financial education, family financial socialization, and financial knowledge. Results from regression estimates with interaction terms included indicated that both channels had positive associations with increased financial knowledge levels with different impact magnitudes, while together they seemed to have negative associations with increased financial knowledge. Our study suggests that each channel likely provides financial knowledge in different domains and has implications for future research and financial education policy.

Limited access to credit can cause financial vulnerability for a household and economic loss for a country. Previous studies have shown that only small portions of the population in developing countries had access to formal credit, and few of them focused on Chinese populations. Using data from 2011 China Household Financial Studies, this study explores Chinese households’ credit use. We found that over half of the sample (53.21%) used credit, and only 19.77% used formal credit. Use of formal credit was associated with socioeconomic characteristics of household heads (e.g., employment, education) and households (e.g., income, net worth). The findings suggest that promoting financial inclusion in China involves expanding access to formal credit among the socially and economically disadvantaged households.

When the COVID-19 pandemic caused businesses to close and triggered high unemployment in 2020, millions of unbanked U.S. households, those without a bank account, had to wait for weeks and months for their stimulus checks to arrive. The delayed delivery of stimulus checks issued by the Coronavirus Aid, Relief, and Economic Security (CARES) Act sheds light on the critical role that safe, affordable financial services and products play in people's ability to cope with financial shocks. Dialogues over banking practices have been framed with a banked-unbanked dichotomous framework that masks more nuanced understandings of households' financial realities, including the underbanked, who use a bank account and alternative financial services simultaneously. Using data from the 2015 National Financial Capability Study, this study identifies and compares predictors of being underbanked and unbanked, respectively. We found that the underbanked group is a sizable, distinctively different group. Income volatility and welfare benefit receipt are both associated with being underbanked rather than unbanked. Our findings call for expanding the current, limited framework to gain more complete, nuanced understandings of banking practices.

The Great Recession and the unfolding COVID-19 Pandemic Recession—two major disruptions to the economy that occurred just one decade apart—unequivocally confirm the importance of the economy and economic environments for understanding families’ financial stress and well-being. However, recent published literature places too little emphasis on the economy and economic environments and instead focuses on explanations rooted within individuals and families. In this article, we review research on families’ financial stress and well-being published in JFEI between 2010 and 2019, which analyzed data collected during the Great Recession and were subsequently published in the shadow of the economic downturn. We discuss the economy and economic environments as gaps in the literature and encourage future research to focus on these explanations of stress and well-being, especially in response to the pandemic recession.

Abstract The effects of gender and marital status on accrued debt in retirement planning becomes an urgent concern because unmarried women face greater financial challenges in retirement than their counterparts. This study used data from the National Financial Capability Study (NFCS), designed by FINRA. We identified debt that influences retirement planning among a sample of pre-retirees, aged 51 to 61 years, and consider the associations of gender, marital status, debt, and retirement planning. Our results indicated that mortgage debt and credit card debt were negatively associated with retirement planning for women. Having a retirement account is positively associated with retirement planning and it also mediates the relationship between credit card debt and retirement planning. We urge women and financial planning executives to take time during the pre-retirement years to assess their various forms of debt and determine how it affects retirement planning objectives given current marital status.

Research shows that U.S. racial minority groups have lower levels of financial knowledge than whites, yet an explanation for the knowledge gap remains elusive. Financial knowledge measures are generally constructed by summing respondents’ correct answers on a series of factual items and collapsing incorrect answers and “don’t know” (DK) responses into a single category. However, studies demonstrate that DK responses and incorrect answers have different antecedents and may not reflect absence of knowledge in the same way, and racial minorities are more likely to choose DK responses. In addition, questions on commonly used knowledge tests ignore the underlying racialization of the current financial market regarding financial experience, which shapes financial knowledge. This study investigates the roles of financial experience and DK response in shaping the racial difference in financial knowledge. Based on multinomial logit models of data from the 2018 National Financial Capability Study, we find that racial minorities were more likely to provide both DK and incorrect responses than whites across financial knowledge questions. Ownership of a savings account, a home, and investment products is negatively associated with giving DK and incorrect responses. Findings suggest that the financial knowledge of racial minorities can be substantially higher than previous studies suggest. Levels of financial knowledge assessed by current measures are shaped by financial experiences that racial minorities are less likely to have. Findings imply that the content validity of financial knowledge measures is problematic, and financial knowledge based on these measures likely yields less return for racial minorities than whites.

Objectives Past studies have consistently shown that women have lower levels of financial knowledge than men, and hence there is a noticeable gender gap in financial knowledge. We reconsider the conventional measures of financial knowledge by disentangling don't know (DK) responses and incorrect answers and comparing the effect of these two disparate responses’ on the gender gap in financial knowledge. Methods Using data from the 2012 National Financial Capability Studies data set, we estimate a series of ordinary least squares regression and multinomial logit models of the gender gap in DK and incorrect responses. Results We find a strong gender gap in financial knowledge, but with a twist: (1) men are more likely to offer correct answers; (2) women are slightly more likely to offer incorrect answers; but (3) women are considerably more likely to provide DK responses. Hence women may exhibit lower levels of financial knowledge because they lose the opportunity to hazard a guess and arrive at a correct answer based either on partial knowledge or on random chance. We consider the possibility that there are psychological processes at work involving risk acceptance and confidence in financial knowledge that prompt women to give DK responses at a rate higher than men. Conclusion We suggest that future research should consider the relative roles of DK and incorrect responses in measuring financial knowledge.

Payday loans are one of the most controversial alternative financial services due to their staggeringly high interest rates and the potential for users to become heavily indebted. Findings regarding the relationship between payday loan use (PLU) and financial well-being are mixed and inconclusive. As the pervasive use of payday loans continues, empirical knowledge remains limited regarding how PLU affects daily money management and long-term financial outcomes among U.S. households. Using a nationally-representative sample, the current study investigates the relationship between PLU and household financial well-being. A propensity score matching analytical approach was used to address selection bias. Results suggest that PLU can be harmful to daily money management such as paying bills and making ends meet, but also serves as a cash flow alternative on which households rely to cope with emergencies. Findings indicate a complex relationship between use of payday loans and financial security, calling for more nuanced investigations focused on the impacts of the fringe economy on family well-being.

Nearly 40 percent of Americans approaching retirement felt heavily indebted. Understanding the role of secured and unsecured debt in retirement planning becomes an urgent concern for researchers and policymakers alike. Using data from the 2015 National Financial Capability Study (NFCS), the current study identified secured debt (mortgage and auto loan) and unsecured debt (medical debt and credit card debt) among a national sample of pre-retirees aged 51–61 years. Logit regression models were estimated to examine and compare each debt’s relationship retirement planning among pre-retirees. We found a relatively large portion of the pre-retiree sample approached retirement in debt, and having debt was negatively associated with retirement planning. We also found that secured debt does not seem to facilitate retirement planning, and unsecured debt had a strong negative association with retirement planning. Our findings highlight differential impact that debt from different sources can have on retirement security, calling for closer examination on the role of debt in retirement security across income groups and those without retirement plans. Findings of this study yield policy implications on access to retirement accounts and financial education provision towards financial health and solvency of older Americans.