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FINANCIAL LITERACY: FROM THEORY TO PRACTICE

Conference Paper · June 2018

DOI: 10.5593/sgem2018/5.4/S22.010

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 FINANCIAL LITERACY: FROM THEORY TO PRACTICE

SUDAKOVA Anastasia – Candidate of Economic Sciences, Senior Researcher of

Ural Federal University named after the first President of Russia B. N. Yeltsin, 19,
Miry st., Yekaterinburg, Russia (e-mail: [email protected], +7-902-87-46-839)

Date of submission: August 14, 2017

Abstract
The article discusses financial literacy-FL, the history of its development, and the
current research conducted in this sphere. The author carried out a survey that studied
the level of FL of the target audience and developed guidelines for the improvement of
FL among the population. The surveys were aimed at finding out how aware the target
audience is of the information that constitutes FL. The survey results show that the target
audience is less aware of the processes within the pension system, bank products and
services than of the processes of saving and accumulating capital and protection of their
rights.
Key words: financial literacy, financial capability, short-term survey

JEL Classification: G2 Financial Institutions and Services

1.1. Introduction

In today’s world, financial processes are becoming more and more

complicated, involving investment funds, a wide range of banking products,

insurance systems, reforms of pension systems and so on, which creates a pressing

need for educators to introduce financial literacy courses at all levels of modern

education.

1
 On the one hand, modern financial services improve our quality of life (bank

cards, mobile banking applications, insurance and so on); on the other, people are

generally not ready to use these services responsibly because they lack the necessary

knowledge and skills. This concerns, first of all, ‘high risk’ groups such as pensioners

and children and, secondly, people engaging in destructive (deviant) behaviour, that

is, those who are unwilling to delve into financial matters or expand the range of

financial services and tools with which they are familiar. Due to their financial

illiteracy and lack of understanding, these groups are most prone to ‘mob

psychology’ and can be susceptible to mass hysteria.

Financial illiteracy negatively affects not only people’s personal welfare but

also the financial sphere as a whole. For example, since people of ‘high-risk’ groups

are unable to manage their budgets: they tend to go deep into debt by taking loans.

Moreover, being gullible, they fall victims to pyramid schemes and other forms of

financial fraud. On the global scale, such behaviour can contribute to the country’s

economy falling into a recession, as happened when the housing bubble burst in the

US.

Therefore, enhancement of the general population’s financial literacy would

have a profound impact on the nation’s future financial health.

1.2. Concept of financial literacy

The concept of financial literacy can be used in its wider or narrower sense and

can be linked to other terms such as financial education, capability, awareness and

others. Olga Kuzina explains the differences between these terms, showing how they

2
put emphasis on different aspects of financial literacy (Kuzina 2005). Originally, the

analysis of these concepts was made by Sandra J. Huston (Huston 2010), who

selected 71 individual studies drawn from 52 different data sets and thus established

elements of a financial literacy measure. All the definitions analysed by Huston

emphasized that knowledge and skills (set of competencies) should belong to the

financial sphere.

The Organization for Economic Cooperation and Development (OECD)

defines financial literacy as ‘a combination of awareness, knowledge, skill, attitude

and behaviour necessary to make sound financial decisions and ultimately achieve

individual financial well-being’ (OECD 2011, 3).

We should also mention the studies of the project ‘The Russia Trust Fund for

Financial Literacy Education’, which measured financial literacy by conducting 74

focus group discussions in eight countries. These discussions brought to light the

qualities that characterize financially capable individuals. These qualities were

grouped into several major domains: planning ahead and making provisions for the

long term (54%); making choices and being able to prioritize (53%); self-discipline in

spending (51%); living within one’s means (45%); being able to save money even if

it means laying by small sums (31%); and so on (Kempson 2013).

Thus, financial literacy is a set of competencies that enable an individual to

take informed and effective decisions in order to improve their welfare and to

minimize their time and money losses.

1.3. International studies of financial literacy

3
 Recently, there have been a number of large-scale programmes studying the

financial literacy of students, such as the projects supported by the OECD and World

Bank.

The first studies of financial literacy were conducted before the international

programs. These studies, however, mostly focused on money management: for

example, Jelly measured the level of financial literacy among 20-year-old students

and found that they were highly aware of budgeting and management of personal

finance. Similar results were obtained by Furrer (Furrer 1960) and Larson (Larson

1970). There are other studies, however, which demonstrate that university and

school students have a low level of financial literacy in general or in some of its

aspects, such as personal earnings, consumer lending and investment (Langrehr

1979), (Thompson 1965). As for the earlier fundamental research in this sphere,

Danes and Hira (Danes, Hira, 1987) estimated that financial literacy among the

population was at the medium level and pointed out the importance of introducing

financial literacy as a separate discipline at all levels of education. Similar results

were obtained by the series of studies of Jumpstart Coalition (1997, 2000, 2009 гг.)

(Jumpstart Coalition 2009), and by Lusardi A., Mitchell O. (Lusardi, Mitchell, 2007).

These surveys mostly focused on testing the knowledge of financial

terminology, which prevented their authors from making any significant conclusions

about how financially literate and competent their respondents actually were.

Financial literacy started to be measured on the global scale when the OECD

administered a survey of financial literacy among students within the framework of

their international programme ‘PISA 2012’ (Programme for International Student

4
Assessment) (OECD, 2014). A similar survey has been conducted in Russia since

2011 by the project ‘Enhancement of Financial Literacy and Development of

Financial Education in the Russian Federation’, supported by the Russian Ministry of

Finance and with the World Bank.

While initially ‘PISA’ surveys focused on the competences of students in

mathematics and science, in 2012, a survey of financial survey was added. Since

then, it has been held once every three years, together with other tests. The first stage

of the financial literacy measurement was conducted in 2012 and the second, in 2015.

The study assessed the capability of 15-year-olds to find, understand and evaluate

relevant information for efficient decision-making and to predict the possible

financial consequences of their decisions; to make informed judgements; to manage

their financial resources; to apply their knowledge, skills and values when shopping

and in other financial contexts; and to adopt responsible behaviour towards

themselves and others, their communities and the environment.

‘PISA-2012’ surveyed approximately 29,000 students from 18 countries.

Shanghai-China scored highest with the mean score of 603; it was followed by

Belgium (541), Estonia (529), Australia (526), New Zealand (520), the Czech

Republic (513) and Poland (510) (OECD 2014, 15). Russia ranked 10th among the 18

participating countries with the mean score of 486, between the USA (492) and

France (486), and followed by Slovenia (485) and Spain (484) (OECD 2014, 84).

In Russia, the survey was carried out by the Centre for Assessment of the

Quality of Education (Institute of Educational Content and Methodology, Russian

Academy of Education). The survey featured data from 42 Russian regions, 227
5
educational institutions, and 1,187 students pursuing programs of basic general

education (7-9th grades), secondary general (10-11th grades), basic vocational and

secondary vocational education (1st year) (the data are provided by the official

website of the Russian Ministry of Finance).

Over 60% of Russian students were willing to apply their basic financial

knowledge and skills in practice. According to ‘PISA-2012’ scale of financial literacy

proficiency levels:

 In Russia, 4.3% of students demonstrated level 5 (mean score 625 and

more), while in OECD countries this level was demonstrated by 9.7% of

students. Level 5 means that students can apply their understanding of a wide

range of financial terms and concepts to unfamiliar contexts that may only

become relevant to their lives in the long term.

 Level 4 (mean score 550 to less than 625) was demonstrated by 24.8% of

students in Russia; in OECD, 31.6%. At level 4, students can apply their

understanding of less common financial concepts and terms to contexts that

will be relevant to them as they move towards adulthood, such as bank account

management. They can also interpret and evaluate a range of detailed financial

documents.

 Level 3 (mean score 475 to less than 550) was demonstrated by 57.9% of

students in Russia; in OECD, 61.8%. Students can apply their understanding of

commonly used financial concepts, terms and products to situations that are

relevant to them. They begin to consider the consequences of their financial

decisions and they can make simple financial plans in familiar contexts. They
6
 can also make straightforward interpretations of a range of financial

documents.

 Level 2 (baseline, mean score 400 to less than 475) in Russia was

demonstrated by 83.3%; in OECD, 84.7%. At this level students start applying

their knowledge of the basic financial products and the most commonly used

financial terms and concepts. They can use this information when taking

financial decisions in familiar situations, in contexts that are immediately

relevant to them.

 Level 1 (mean score 326 to less than 400) in Russia was demonstrated by

95.6% of students; in OECD, 95.2%. At this level, students can identify basic

financial products and situations and interpret information related to basic

financial concepts. They understand the difference between needs and wants

and can take simple decisions concerning their daily expenses [Kovaleva,

2013].

It is particularly interesting that almost 23% of Russian students demonstrated

the baseline level of financial literacy, that is, their financial capability was just

enough to ‘survive’ in the modern financial world. Only 4.3% of Russian students

managed to answer the most difficult questions and 17% did not manage to

demonstrate even the basic level of financial literacy (the data are provided by the

official website of the Russian Ministry of Finance).1

1
Data from the official website of the Russian Ministry of Finance: http://minfin.ru/ru/press-
center/?id_4=32991&area_id=4&page_id=2119&popup=Y#ixzz4K7fCFno2

7
 ‘PISA-2012’ identified four contexts for the assessment of financial literacy:

education and work (10-20% of score points); home and family (30-40%); individual

(35-45%); and societal (5-15%) (OECD 2013, 160).

The project ‘The Russia Trust Fund for Financial Literacy Education’ assessed

financial capability according to ten components. Russia scored below average in

such indices as achievement orientation - 69 while the mean value was 82.3 (further

shown as 69/82.3); avoiding overspending, 71/74.4; making informed decisions,

62/71.3; dealing with unexpected expenses, 61/62.7; long-term planning, 49/50.1;

and saving, 47/48. At the same time, Russia occupies the leading position in such

index as living within one’s means (88/76.7). As for indices such as budgeting

(70/65), avoiding impulsive spending (68/64) and monitoring expenses (61/50),

Russia’s score was also above average (Lundberg, Mulaj 2014, 49; Kuzina 2015а).

Apart from the studies of financial literacy levels, there is also research on the

impact of financial literacy on specific components of the financial system: for

example, Danes, Huddleston-Casas and Boyce (1990) and Bernheim, Garrett and

Mak (2001) found that students who completed a financial literacy course increased

their saving rate. According to Brown, Collins, Schmeiser and Urban (2001), people

who took specialized courses of financial literacy tended to have lower loan interests

and minimal loan delinquency, while Tennyson and Nguyen (2001) demonstrated

that financial literacy courses have a positive impact on people’s career progress.

Research on financial literacy has a rich history, which started from studies

conducted by separate research groups (predominantly American). Recently,

8
enhancement of financial literacy has begun to be considered as a major international

task, which significantly increased the scale of research in this sphere.

1.4. Research methodology

Our survey was targeted at estimating the level of financial literacy among

senior school students in the city of Yekaterinburg.

The target group consisted of secondary school students and students of

vocational schools. In contrast to the larger-scale surveys described above, this

survey can be considered short-term since it did not exceed one month.

The survey’s main objective was to find whether students were sufficiently

aware of the information necessary for sensible financial decision-making.

Survey overview. Our sociological experiment comprised three stages: a pre-

test, a lecture course to increase students’ financial literacy and two follow-up tests.

The data were collected through questionnaire forms. We also used the method of

exploratory questioning during the lectures. After the lecture course, the same

respondents were tested twice, which means that it was a panel study.

The methodology applied for assessment of financial literacy included a set of

questions. The testing time did not exceed 15 minutes since the project’s main aim

was to raise the financial awareness of the target group.

The questionnaire included ten questions, which enabled us to assess students’

financial knowledge, capability and attitude towards the main aspects of financial

literacy: pensions, taxes, banking products, expense tracking and budget planning,

investments and saving and protection of consumer rights.

9
 Testing procedure. After the pre-test, students were offered a lecture course.

Then, the instructor answered their questions about what seemed most challenging to

them - these were mostly questions about banking products and services. Then there

were two follow-up tests: one was conducted one to three days after the end of the

lecture course and the other, after 20 to 30 days. The pre-test was carried out in the

period between 23 May 2016 and 1 June 2016 and the follow-up tests, between 20

and 30 June 2016.

The lecture course on financial literacy comprised four sections of three

academic hours each. The first section focused on managing personal finance and

included such topics as personal income and its types (for instance, salary,

commercial profit, retirement pension); borrowed resources (financial services,

education loans, mortgage and consumer loans, types of bank cards); personal

spending (consumption expenditures, saving, cash and cashless payments); and

tracking one’s spending and budget planning. The second and third sections were

concerned with legal aspects, in particular, protection of consumer rights and

guidelines for consumers entering into financial relationships and agreements. The

fourth section contained practical tasks: students were asked to calculate interest for

loans, to plan personal investments and to participate in two role games (procedure of

consumer rights protection and analysis of agreements to find out provisions violating

consumers’ rights).

The key feature of the course is that it explains why it is essential to be

financially literate in the modern world and, therefore, directly addresses students’

immediate needs in managing their financial resources and the problems they might
10
face in the nearest future. These needs are identified on the basis of students’ age. It

is remarkable that students took an active interest in the Russian pension system,

especially in how their future pension is formed and how its amount depends on their

earnings. They were also curious about plastic card fraud and investment

opportunities.

The lectures were attended by 260 people, out of whom 98 were secondary

school students (10-11th grades) and 162, vocational school students (1 st year). The

testing and lectures were conducted in four secondary schools and four vocational

schools in Ekaterinburg. (See Table 1 for the main parameters of the sample).

We processed 252 questionnaire forms at the first stage; 247 forms at the second

stage; and 217 forms at the third stage. The confidence probability was 89% at the

first stage; 88%, at the second stage; and 86% at the third stage. The confidence

interval was ± 5%.

Table 1
Survey indicators
Indicators Values
Number of respondents (sample) 260
Including:
senior students (10-11th grades) of secondary schools in Ekaterinburg, 98
2015/2016, people
first-year students of vocational schools in Ekaterinburg, 2015/2016, people 162
1st 2nd 3rd
Number of processed questionnaire forms, items stage stage stage
252 247 217
Population, people 24,300
Including:
senior students (10-11th grades) of secondary schools in Ekaterinburg, 11,500
2015/2016, people
first- and second-year students of vocational schools in Ekaterinburg, 12,800

11
2015/2016, people
1st 2nd 3rd
Confidence probability, % stage stage stage
89 88 86
Confidence interval (sampling error), % ±5

1.5. Research results

Our research results have shown that students were ill-informed about the

pension system and banking products and services (except for mobile banking

applications and the electronic wallet), but were aware of saving practices and

consumer rights protection.

On average, 35% of students answered the questions of the pre-test correctly

and 63% of students successfully completed the follow-up tests. The pre-test results

have also shown that 7.5% of students (19 out of 252) could not answer correctly

more than two questions, while at the third stage, this figure dropped to 3% (7

students out of 252).

The first set of questions dealt with the Russian pension system (see Figure 1

for test results) and demonstrated that students’ knowledge of this subject was

insufficient, although some of them admitted thinking about pension savings.

12
 100% 100%
20
30 38 31
80% 44 47 80% 41

60% 88 60%

40% 40% 80
70 62 69
56 53 59
20% 20%
12
0% 0%
1 2 3 4 1 2 3 4

Yes No Yes No
1st stage 2nd stage
100% 30
19
Students who wrote the pension
35 30 formula
80% 43 25

60% 20

40% 81 15 28
65 70
57
20% 10
17
0% 5
1 2 3 4 3
0
3nd stage Yes No 1st stage 2nd stage 3rd stage

Note: 1 - Have you ever thought about making pension savings? 2 - Do you know how the insurance
component of a retirement pension is formed? 3 - Do you agree that a retirement pension should include
savings from your pre-retirement income? 4 - Do you agree that a retirement pension is a guaranteed
income?
Figure 1. Test ‘Russian Pension System’, % (1st stage - 252 people; 2nd stage - 247;
3rd stage - 217)
At the first stage, 12% of respondents said that they knew how the retirement

pension is formed and 3% could even write the formula (8 out of 252). The pre-test

has also revealed students’ lack of trust in the pension system. At the third stage,

students’ performance improved and their trust in the pension system increased (the

percentage of respondents who were distrustful of the pension system fell from 44%

at the first stage to 35%).

We can explain the lack of trust if we analyse students’ answers: they think that

the retirement pension is not formed through savings made during one’s working life

(at the first stage, 30% of students; at the third stage, 19%) and that the retirement

13
pension is not a guaranteed income (at the first stage, 47% of students and at the third

stage, 43%). Therefore, the young generation’s attitudes are likely to be influenced by

their families and communities and also by the ideas they have about the financial

and pension reforms in Russia.

The second set of questions focused on the Russian taxation system. Students

were asked to ‘tick the taxes which a physical person is liable to pay’ (see Figure 2).

At the first stage, 8% of students (3 out of 252) ticked all the taxes correctly; at the

third stage, 37% (15 out of 252).

100% 100%
3 5
14
85 78 72 65 80%
80%
3 59 63
5
60%
60% 15 92
69 68 40%
76
40% 84
12 16 20% 41 37
20% 25
65 66 8
64 0%
54
1st stage 2nd stage 3rd stage
0%
1 2 3 4 5 6 7 Students who ticked some of the options correctly,
%
1st stage 2nd stage 3rd stage Students who ticked all of the options correctly, %

Note: 1 - personal income tax; 2 - water tax; 3 - transport tax; 4 - mineral extraction tax; 5 - value
added tax; 6- personal property tax; 7 - land tax.
Figure 2. Task ‘Tick the taxes that physical persons are liable to pay’, % (1st stage -
252 people; 2nd stage - 247; 3rd stage - 217)

The third set of questions was targeted at testing students’ knowledge of

banking terminology, products and services (see Figure 3). Students were asked to

assess their knowledge of banking services and products according to the scale

ranging from ‘I know it very well’ to ‘I have never heard of it’. If the answer was

positive, they were asked to provide appropriate definitions. As the results have

14
shown, students were well aware of mobile banking and electronic wallet services but

did not know much about capitalization of interest and refinancing of loans.

100% 2 2 3 3
24
1st stage
80% 36 36
44 50
54

60% 49
‘I have never heard of it’

64
40% ‘I have heard something
about it’
61 61
55 42 48 ‘I know very well’
20%
19
13
0% 5 3
1 2 3 4 5 6 7

100% 0 0 0 0
6
25
15 17 2nd stage
31 35 32
80% 27
29
60% 43
‘I have never heard of it’

40% ‘I have heard something

75
69 67 65 68 about it’
56
‘I know very well’
20% 40

0%
1 2 3 4 5 6 7
Note: 1 - credit card; 2 - debit card; 3 - prepaid card; 4 - mobile banking application; 5 - electronic wallet; 6 -
capitalization of interest; 7 - refinancing of loans.
Figure 3. Test ‘Awareness of Banking and Financial Services’, % (1st stage - 252
people; 2nd stage - 247; 3rd stage - 217)

At the pre-test, some students wrote that they knew well what credit, debit and

prepaid cards are but they also tended to confuse their definitions (82% of students

provided inaccurate definitions). These data show that in reality students could not

differentiate between different types of cards. However, the majority of students

(65%) used prepaid cards (‘e-cards’) and held bank cards (51%).

15
 The fourth set of questions assessed students’ financial capability, in particular,

budget planning and management (see Figure 4). The majority of respondents (67%

at the first stage and 75% at the second stage) said that they planned their budgets;

7% kept track of their daily expenses in a notebook; and 4-5% used special software.

67% of respondents chose not to record their expenses, which can be explained by the

fact that they did not have much money and, therefore, found this method of planning

and budget management satisfactory.

100%
13 7 5
75
70%
14 3rd stage
67 9 10 2nd stage
40%
1st stage
23
67 7
10% 4

‘No’ ‘I plan my budget ‘Yes, I use a ‘Yes, I use a special

-20% but I don’t write notebook to plan application to plan
anything’ my budget and my budget and
record my record my
expenses’ expenses’

Figure 4. Question ‘Do you plan your personal budget? Do you record your income
and expenses?’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217)

The National Agency for Financial Studies provided interesting data about

Russian practices of budget management (see Figure 5). If we tried to compare our

data with their results, it would probably turn out that those students who did not

write down their expenses would be classified as those who did not keep track of

their spending at all, although this group of people usually knew the amount of their

monthly income and the overall amount of their expenses. Among students, such

16
people accounted for 67-75%; they also constituted the majority of the Russian

population (from 45% to 59%).

100%
9 14 12 14 15 22 16
80% ‘I don’t know’

45 ‘No, we do not control our

60% financial flow’
57 59 53
59 56
58 ‘No, but we control our
financial flow’
40%
20 ‘Yes, but not everything’

20% 15 19 ‘Yes, we record

13 14 16
13 everything’

0%
2008 2009 2010 2011 2013 2015 2016

Figure 5. Question ‘In your family, do you keep the record of the family’s income and
expenses?’, % [Imaeva, 2016]

Experts and scholars studying budget management skills of Russians point out

a number of reasons explaining why so many people choose not to keep track of their

spending. Some experts believe that since people’s general income is low and is

hardly enough to cover their necessary expenses, they consider expenditure records

useless. Others think that the reason lies not in the low incomes but in the lack of

long-term financial objectives, which discourages people from using budget-planning

tools. If the majority of the population earns enough money to balance their income

and expenses without keeping them under strict control, then detailed recording does

not make sense and is perceived as a simple waste of time (Kuzina 2015, 144).

The fifth set of questions focused on saving and investment (see Figure 6).

According to our results, students had limited knowledge of these processes. At the

pre-test most of them found difficult the question ‘Is it right to say that the process of

17
saving implies preservation of money but not its accumulation?’ (only 34% answered

correctly). It should be noted that the majority of students (75-91%) were aware of

the risks entailed in investment.

100%
Is it possible that the real
55 71 value of your money will
80% 85
decrease in the process of
saving?

60%
34 63 Is it right to say that the
69 process of saving implies
preservation of money but
40% not its accumulation?

20% 75 91 Do you always get a profit

88 when you invest your
funds?
0%
1st stage 2nd stage 3rd stage

Figure 6. Test ‘Saving and Investment’, % (1st stage - 252 people; 2nd stage -
247; 3rd stage - 217)
The last set of questions tested students’ knowledge of consumer rights

protection and studied their attitude towards this problem. The majority of students

(76-91%) answered correctly the first question ‘Who are participants of relationships

regulated by consumer protection laws?’ (see Figure 7).

Who are participants of relationships regulated by

consumer protection laws?
100%
Consumers and
80% organizations

60% 76 Organizations
85 91
40%
Consumers
20% 9
5
16 10 3
0% 6
1st stage 2nd stage 3rd stage

Figure 7. Question ‘Who are participants of relationships regulated by consumer

protection laws?’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage - 217)
18
 Other questions were targeted at testing students’ knowledge of their rights and

the ways of protecting them.

The question ‘Does a seller have a right not to refund a customer if the

customer does not have a receipt?’ (Figure 8) was answered correctly by 36% of

students at the first stage and 54% at the third.

Does a seller have a right not to refund a customer if the

customer does not have a receipt?
100%

80% 36
56 54
60%
No
40% Yes
64
20% 44 46

0%
1st stage 2nd stage 3rd stage

Figure 8. Question ‘Does a seller have a right not to refund a customer if the
customer does not have a receipt?’, % (1st stage - 252 people; 2nd stage - 247; 3rd
stage - 217)
The next question asked which agency is responsible for protecting customers’

rights if the product is faulty and the seller refuses a refund. 78% of students

answered this question correctly at the first stage and 87% at the third (the correct

answer was ‘Rospotrebnadzor’ or the Federal Service for Protection of Consumer

Rights and Public Welfare).

The next question dealt with loan agreements. The majority of students (58-

74%) knew that it is prohibited to penalize a borrower for repaying their loans early.

19
Fewer students were aware that it is illegal to charge commission for arranging a loan

(see Figure 9).

Which conditions cannot be imposed on the customer by

the creditor when they sign a loan agreement?
100%

80% 58
72 74
60% 4

17 3
5 4
40% 2
35 45 44 1
20%
21 14 16
0%
1st stage 2nd stage 3rd stage

Note: 1 - loan period; 2 - loan arrangement fees and commissions; 3 - interest rate; 4 -
early repayment penalty.
Figure 9. Question ‘Which conditions cannot be imposed on the customer by the
creditor when they sign a loan agreement?’, % (1st stage - 252 people; 2nd stage -
247; 3rd stage - 217)

The last question explored students’ attitude to their consumer rights

protection. The question asked students if they felt that they really could protect their

rights if their rights were violated. Secondary school students (10-11th grades) were

more optimistic about this, pointing out that people only have to know the laws and

that courts and law enforcement agencies act in accordance with the law. Students of

vocational schools were more pessimistic, responding that courts and the police were

corrupt and that it required considerable financial resources to protect one’s rights.

In general, the pre-test showed that 75% of students believed that their

consumer rights could be protected, while in the follow-up tests 83% of students

answered this question in the affirmative (Figure 10).

20
 Is it possible to protect your consumer rights in present-
day conditions, do you think?
100%
15 17
25
80%

No
60%
Yes
40% 85 83
75

20%

0%
1st stage 2nd stage 3rd stage

Figure 10. Question ‘Is it possible to protect your consumer rights in present-day
conditions, do you think?’, % (1st stage - 252 people; 2nd stage - 247; 3rd stage -
217)
The survey results have demonstrated that students were ill-informed about the

pension system and banking products and services (except for mobile banking

applications and the electronic wallet), but that they were aware of saving practices

and consumer rights protection.

On average, 35% of students answered the questions correctly at the first stage

and 63% at the third stage.

1.6. Conclusion

The large-scale projects organized by the OECD and World Bank have made a

significant contribution to the study of financial literacy worldwide. The first such

project was realized as a part of OECD’s ‘PISA-2012’ programme. In Russia this

research has been conducted since 2011 as a part of the project ‘Enhancement of

Financial Literacy and Development of Financial Education in the Russian

Federation’, supported by the Russian Ministry of Finance and the World Bank.

21
 The author of the subproject (№ FEFLP/FGI-2-1-8 ‘Educational Measures to

Enhance Financial Literacy Among Students of Secondary Schools and Vocational

Schools of Ekaterinburg: Development and Implementation’) designed a course of

lectures and conducted a financial literacy survey among senior school students. The

lecture course was attended by 260 students from Ekaterinburg, 98 of whom were

secondary school students (10-11th grades) and 162 were vocational school students

(1st year). The tests and lectures were conducted in four secondary schools and four

vocational schools.

The survey results have shown that students were poorly informed about the

pension system and banking products and services (except for mobile banking

applications and the electronic wallet), but that they were aware of saving practices

and consumer rights protection.

On average, at the pre-test, 35% of students answered the questions correctly

and in the follow-up tests, 63%. The results of the first stage have demonstrated that

7.5% of students (19 out of 252) could not give accurate answers to more than two

questions, while, at the third stage results, this number dropped to 3% (7 students our

of 252).

Our experience of conducting lectures on financial literacy has allowed us to

draw conclusions and elaborate guidelines for enhancing financial literacy of senior

school students.

During the lectures, students engaged actively with the material and asked

questions about the Russian pension system. They were particularly interested in how

their future pension is formed and how its amount varies depending on different types
22
of income. Other topics that aroused a lot of their interest were plastic card fraud and

ways of investment, about which students had only a vague idea.

At the second lecture, the lecturer spoke about loan agreements and protection

of consumer rights. Students had a chance to ask the invited legal practitioners

questions that referred to their individual experience about how they could protect

their interests in cases of their violation.

Thus, it can be concluded that students lack financial knowledge and are in

need of communication with experts in this field. We believe that such

communication can be organized in the form of optional regular lectures. It is also

important that such lectures should focus on practical matters, in particular,

instructing students how to understand and evaluate the information necessary to

make sensible decisions and how to predict possible consequences of such decisions.

Students should also be taught how to make informed judgements and manage their

financial resources; how to apply their knowledge, skills and values when shopping

and in other financial contexts; and how to take responsible decisions which will

affect their lives, the lives of other people, their communities and the environment.

It is also essential to raise financial literacy among secondary school students

of junior grades up to and including the 8th grade. This could be done, for example, in

the form of lectures conducted once a month or once every two months.

For senior students of secondary schools and first- or second-year students of

vocational schools, such lectures should be conducted more frequently. Students

should be given more opportunities of real-life contact with financial experts such as

bankers, company managers, legal practitioners and so on.

23
 As practice has shown, instead of the traditional lecture format, the engaged

lecture format is more suitable for this target group because students are more

interested in practical questions associated with managing their personal financial

resources rather than in theoretical matters.

As for university students, they should be taught the theoretical basics of

financial literacy (in particular students majoring in engineering and natural

sciences): such courses must cover not only management of personal budget but also

financial processes in the public and private sectors. Higher education ought to

provide students with a more in-depth understanding of this subject. It is

recommended that designers of financial literacy courses should differentiate between

the disciplines ‘Economics’ and ‘Financial Literacy’, even though they are closely

connected with each other.

Funding: This research was supported by the project 'Enhancement of Financial

Literacy and Development of Financial Education in the Russian Federation' of the

Ministry of Finance of the Russian Federation, subproject 'Educational Measures to

Enhance Financial Literacy Among Students of Secondary Schools and Vocational

Schools of Yekaterinburg: Development and Implementation'.

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