Journal of

Risk and Financial

Management

Article
Financial Literacy: A Case Study for Portugal
Luís Almeida 1,2 , João Chanoca 1 and Fernando Tavares 3,4, *

1 Higher Institute of Accounting and Administration of Aveiro, Aveiro University, 3810-193 Aveiro, Portugal;
[email protected] (L.A.); [email protected] (J.C.)
2 GOVCOPP Unit Research, Aveiro University, 3810-193 Aveiro, Portugal
3 REMIT—Research on Economics, Management and Information Technologies, Department of Economics and
Management, Universidade Portucalense, 4200-027 Porto, Portugal
4 Instituto Superior Miguel Torga, Largo da Cruz de Celas No. 1, 3000-132 Coimbra, Portugal
* Correspondence: [email protected]

Abstract: This work aims at understanding the level of financial literacy in Portugal, identifying
the determinants of financial literacy in the Portuguese population, taking as an example certain
sociodemographic factors such as gender and age. The aim is to understand whether there is a high
level of adherence to financial literacy programs and initiatives, as well as the impact of financial
knowledge variables on the financial literacy of the Portuguese population. The methodology used
was quantitative and based on a questionnaire survey. The sample consisted of 600 individuals, all
over 18 years old. It was concluded that individuals in the 26 to 35 age group had the best knowledge
and that this sample showed better knowledge of interest rates compared to inflation and risk. The
exploratory factor analysis shows five factors that determine the financial literacy of the Portuguese
population and the way they manage their finances, which are (1) the perception of their current
financial situation; (2) planning and controlling personal finances; (3) the perception of risky financial
assets; (4) the perception of risk-free financial assets; and (5) savings. This research contributes to
expanding scientific understanding in the field of financial literacy and offering support to the review
of financial education policies by formulators, aiming to develop tools that help improve the financial
behavior of the Portuguese population.

Keywords: financial literacy; financial education; financial knowledge; financial assets; savings

Citation: Almeida, Luís, João

Chanoca, and Fernando Tavares. 2024.
Financial Literacy: A Case Study for
1. Introduction
Portugal. Journal of Risk and Financial
Management 17: 215. https://
We live in a world where the financial literacy of population is very beneficial for their
doi.org/10.3390/jrfm17050215 well-being (Gianakos et al. 2023; Grohmann et al. 2018). Individuals with high financial literacy
contribute to their financial well-being and to the societies in which they live; by making
Academic Editor: Thanasis Stengos
more informed and judicious economic and monetary decisions regarding the management
Received: 30 March 2024 of their finances, through behaviors that provide better use of their financial resources. (Miller
Revised: 15 May 2024 et al. 2015; Lusardi 2019). These behaviors contribute to a better quality of life, helping to
Accepted: 17 May 2024 reduce financial difficulties, both personal and social, to the point of providing a reduction in
Published: 20 May 2024 symptoms related to stress, anxiety, or depression (Islam et al. 2020).
The financial literature argues that an economically healthy country has a dynamic,
mature, regulated, and supervised capital market, since these markets are an irreplaceable
and increasingly important element in modern and competitive economies (Almeida et al.
Copyright: © 2024 by the authors. 2015; Almeida 2020). Among others, Almeida (2022) highlights the consensus that the
Licensee MDPI, Basel, Switzerland.
investor’s goal is to maximize profit and minimize risk; in this context, financial literacy
This article is an open access article
is crucial for economic stability and individual well-being. Authors such as Lusardi and
distributed under the terms and
Mitchell (2014) and Kaiser and Menkhoff (2020) stress the importance of education and
conditions of the Creative Commons
educational programs to increase this literacy. This makes it possible to understand the
Attribution (CC BY) license (https://
evolution of financial systems and the complexity of financial products (Tavares and
creativecommons.org/licenses/by/
4.0/).
Almeida 2020).

J. Risk Financial Manag. 2024, 17, 215. https://doi.org/10.3390/jrfm17050215 https://www.mdpi.com/journal/jrfm

J. Risk Financial Manag. 2024, 17, 215 2 of 18

Recent instabilities in the financial markets, driven by events such as pandemics or

armed conflicts, and the increasing digitalization of financial products as well as new
products, have underlined the critical importance of financial literacy as a socially relevant
tool (Ananda et al. 2024). These developments have revealed gaps in financial literacy, with
many individuals facing difficulties in understanding basic financial concepts or making
prudent financial decisions, leading them to face difficulties during these recent crises
(Mawad et al. 2022). Thus, the growing need for a current assessment of the level of literacy
is crucial and necessary to allow for greater investment in financial education.
Financial literacy is important at all stages of a human being’s life and should be measured
over time, with the literature pointing to an increase in efforts on the part of governments that
still show low financial literacy globally (Tavares et al. 2022; Lusardi 2019).
Literacy levels tend to be high among older men, and those who have higher incomes,
live in metropolitan areas, have advanced levels of education, pursue areas of study related
to finance, and exhibit a high level of self-perceived literacy (Tavares et al. 2023; Sebastião
et al. 2024). On the other hand, younger individuals have higher levels of overconfidence.
In general, women have lower levels of overconfidence compared to men; however, under
specific conditions, they tend to overestimate their knowledge. Individuals who hold
degrees, and those who pursue fields of study related to finance, tend to have high levels of
overconfidence (Mawad et al. 2022; Ananda et al. 2024). The gender gap in overconfidence
is observed predominantly among students, while the influence of academic specialization
and the possession of degrees on overconfidence decreases and intensifies, respectively,
within this group. These findings emphasize the critical role of financial education (Tavares
et al. 2023; Sebastião et al. 2024; Mushtaq et al. 2024).
Daily investment decisions are shaped by various factors, such as trends, motivations,
and social interactions, with investors basing their choices on available resources and
financial objectives. However, many are influenced by behavioral biases due to a lack of
technical knowledge and overconfidence in their decision-making abilities (Inghelbrecht
and Tedde 2024; Daud et al. 2024). Financial education plays a vital role in enabling
individuals to understand financial concepts, make informed decisions, and manage their
finances effectively. Those with greater financial knowledge tend to make more informed
choices, contributing to personal and collective financial stability. In addition, confidence is
intrinsically linked to financial education, providing a sense of security when dealing with
financial matters, promoting a healthy financial culture and driving sustainable economic
development (Daud et al. 2024; Mushtaq et al. 2024).
The work has two main objectives. The first objective is to assess the population’s
knowledge of three central issues: perception of interest rates, inflation, and risk. This
objective allowed for an analysis of the results by gender and age group, showing that
the male population in the 26–35 age group had the greatest knowledge of interest rates
compared to inflation or risk. The second objective was to identify the most relevant
factors in the sample using factor analysis. The most relevant factors were perception of
the current financial situation, planning and control of personal finances, perception of
financial assets with risk, perception of financial assets without risk, and savings. These
results have the potential to assist the National Plan for Financial Education (PNFF) and
provide information to central and local political authorities in the formulation of financial
education policies and programs for different target groups, recognizing the need for
specific approaches to reduce the gap between objectives and perceived financial literacy. A
quantitative methodology was used, using exploratory statistical analysis and exploratory
factor analysis, to extract evidence of the determinants of financial literacy in our sample.
To achieve the proposed objective, this work is divided into five sections. In addition to this
introduction, the next section reviews the literature. Then the methodology is presented
and in the fourth section the results are presented and discussed. Finally, the conclusions
are presented.
J. Risk Financial Manag. 2024, 17, 215 3 of 18

2. Literature Review
2.1. Concept of Financial Literacy
Financial literacy is not a simple concept that can be defined in agreement by many
different authors (Huston 2010). However, even from the oldest definitions, it is possible to
verify the persistence of the relationship between literacy and financial knowledge. It is pos-
sible to conclude that this knowledge is fundamental for the perception of current financial
issues, given the gradual increase in available financial instruments and their consequent
complexity (Tavares et al. 2022); namely, due to the evolution of the population’s standard
of living, the evolution of the economy and its respective impact on personal finances.
With a greater degree of importance, this knowledge stands out for being crucial
for the implementation of financial attitudes present in the various problems and daily
scenarios of a subject, so that they optimize their monetary savings, and contribute to
productivity, stability, and respective development of society (Emmons 2005; Lusardi and
Mitchell 2014).
It can, therefore, be seen that this knowledge is not uniform across the various definitions
of financial literacy. This is evident in a wide range of concepts related to finance, economics,
or currency (Sconti 2022). According to Tavares et al. (2022), this knowledge is defined in
broader concepts, identified as financially fundamental. From the simplest learning to the
most complex and advanced, such as loans, investments, or retirement plans, it should be
emphasized that, in general, knowledge in itself reflects all the financial instruction gained
during the different stages of a person’s life, which allows them to expand their vocabulary, to
which they can be stimulated in their values, attitudes, or in various practical matters, to be
observed in their society and in their day-to-day life (OECD 2021).
Thus, there is a relationship between literacy and respective financial competence and
skills. There is a need to understand and demonstrate the competence to apply knowledge
in everyday life, considering different scenarios and plans, regardless of their probability
(Orton 2007). The person must have the ability to make decisions with confidence or
conviction, in order to establish effective management of their personal finances and ensure
that they are not affected by financial crises or other events of convenience (Tavares et al.
2022; Korankye and Pearson 2022).
Literacy is also related to financial responsibility, whereby citizens are responsible
for putting their diverse financial knowledge into practice in order to understand the
far-reaching consequences of their financial decisions on the quality of life of their societies,
families, and individuals, with the aim of becoming an asset to the society to which they
belong (OECD 2021). Everyone should be able to judge sources of finance and investment
astutely, as well as the advice they provide (Skica et al. 2022).
Through the various studies and authors listed, financial literacy can be defined
as the financial knowledge provided and experienced during the various cycles of each
individual’s life that simultaneously stimulates their behaviors and values present in their
daily routines, so that they manifest the aptitude to make the most convenient decisions
regarding their financial position, with the aim of establishing a better management of
their monetary means. Financial literacy also implies that the individual is aware of all the
possible outcomes of their financial decisions.

2.2. Financial Literacy—Evidence

According to Lusardi and Mitchelli (2007), studies prior to 2007 highlight a low level of
financial literacy, despite the population of a society such as the United States recognizing
and expressing that knowledge about the economy is important. The low financial literacy
present in societies and the urgent and necessary implementation of measures and programs
to increase it are corroborated by Gedvilaite et al. (2022).
According to Schleicher (2019), financial literacy is becoming increasingly important,
as it is easier and easier to gain access to the wide range of financial information available on
the internet. This information does not always come across as truthful, to the point where it
J. Risk Financial Manag. 2024, 17, 215 4 of 18

is up to the users to be able to analyze and select, contributing to growth in financial terms
(Schleicher 2019).
More recent studies highlight that, in developed societies, such as Switzerland, finan-
cial literacy is high (Leippold et al. 2022). However, the level of financial literacy related
to sustainability, in this case, of Swiss families, is low, which allows us to conclude that
the possession of knowledge related to sustainability may not have a significant impact
on the assessment of literacy (Leippold et al. 2022). According to Hii et al. (2022), those
who invest in the financial market tend to have financial knowledge about the products
underlying the same investments.

2.3. Determinants of Financial Literacy and Financial Education

According to the OECD (2021), financial education can be described as the process of
learning about the financial market by its consumers and investors, so that they are more
capable and confident during their daily lives to make more rigorous, accurate, and better
informed decisions, with the aim of improving their financial situation.
General financial education is seen as relevant to the population, given that it allows
access to available financial means, the respective accumulation of assets obtained through
investments made, and, more importantly, describes a person’s future work, as well as
their consequent remuneration, which influences the habits, hobbies, or respective financial
decisions made during a respective individual’s day-to-day life (Vitt et al. 2000). For Vitt
et al. (2000), the use of money has a huge impact on people’s feelings, contributing to
personal and family well-being to the point that it should not be undervalued.
Several authors test students’ financial literacy and several express the high impor-
tance of financial education. Financial education, in Huston’s (2010) view, is an essential
tool available to a human being to improve their monetary wisdom, so that they can success-
fully implement this knowledge in their respective financial lives. and adopt appropriate
behaviors given their monetary situation.
Miller et al. (2015) found evidence about the importance of financial education,
concluding that it has a huge impact on the financial behavior of a family or even a
population. The author also concludes that the place and the way in which knowledge is
transmitted is not significant. For Kaiser and Menkhoff (2020), financial education present
in schools can stand out as one of the ways to combat low participation by the population in
non-school initiatives, with the aim of guiding them in more informed financial decisions.
The authors point to financial education in schools as vital to improving the financial
knowledge of students and populations.
The previous conclusions are in line with evidence highlighted by other authors, in-
cluding Huston (2010), who points out financial education as the main factor that influences
financial literacy, arguing that it is essential to understand the variation in financial results.
This perspective was reinforced by Klapper et al. (2012), which highlights that financial
literacy increases proportionally with the level of education.
In line with this idea, the OECD (2021) highlighted financial education policy as essen-
tial to empower individuals, increase financial resilience, and promote financial stability.
Lührmann et al. (2018) argues that an intervention in financial literacy in adolescence has
significant impacts with some consistency, not only on students, but also on the future of
the society to which they belong.
According to Vitt et al. (2000), a subject must express confidence, but not excessively,
when confronted with their financial education, as confidence increases the probability
of financial education being successful in converting it into literacy. However, too much
self-esteem can lead to not correctly estimating financial decisions. Still, on the effect of
overconfidence, Merkle (2017) adds that the respective investors expect more beneficial
interest rates of return and more favorable investment returns, as well as underestimating
the volatility of the financial market, when subject to the effect itself. However, trust is
essential for consumers and investors to be more perceptive in the way they deal with
J. Risk Financial Manag. 2024, 17, 215 5 of 18

variable everyday financial problems and situations (Vitt et al. 2000), and it is also as a
determinant for greater investor participation in the financial market (Xia et al. 2014).
Gavurova et al. (2017) concluded that university students in Slovakia who focused on
studying economics or finance did not show a significant increase in financial literacy when
compared to students from other areas. The authors concluded that financial knowledge
was not dependent on the area of study, corroborating the evidence found by Lusardi (2019)
that increasing financial knowledge is only achieved through systematic and methodical
financial education.
According to Shim et al. (2015), young people learn both in formal (schools) and
non-formal (internet or other sources of information) environments, in such a way that
both environments contribute to the development of healthy financial practices.
Other factors such as gender, age, income, or education determine financial literacy
according to authors such as Lučić et al. (2020), Dundure and Sloka (2021), and Siegfried
and Wuttke (2021). Table 1 summarizes some of the conclusions from several studies on the
determinants of literacy in various investigations. Authors such as Wieliczko et al. (2020)
and Chen and Chen (2023) emphasize the importance of savings as a crucial factor for
economic development. They argue that saving boosts investments and promotes financial
stability at personal and national levels. Furthermore, studies such as Bialowolski et al.
(2022) demonstrate that financial literacy is essential for responsible financial behavior.
Conversely, the lack of financial literacy is associated with problems such as high-cost loans,
as highlighted by Lusardi (2019). This competence enables individuals to make smart and
timely financial decisions, driving the accumulation of wealth and savings. To mitigate
the risk of financial crises, authors such as Johri et al. (2023) and Sinnewe and Nicholson
(2023) point to financial planning and budgeting as crucial tools of financial literacy in
this context.

Table 1. Conclusions and variables from studies on financial literacy.

Variable Author(s); Year Conclusion

Where the transmission of financial knowledge
(Miller et al. 2015).
takes place is irrelevant.
A poor education is insufficient to understand
(Lusardi and Mitchell 2014; Mitchell et al. 2011).
more complex concepts such as risk diversification.
(Lusardi and Mitchelli 2007; Shim et al. 2015; There is a severe concern about gaining financial
Gianakos et al. 2023). knowledge among the population.

Education The acquisition of financial knowledge is not

dependent on the degree or level of education of
(Gavurova et al. 2017; Almeida et al. 2022).
the associated courses designed to obtain
this insight.
Courses associated with financial management,
both in secondary and university education, do not
(Gavurova et al. 2017; Almeida et al. 2022). demonstrate significant effectiveness in
disseminating financial knowledge when
compared to courses at a similar level of education.
Those who demonstrate high professional
(Beal and Delpachitra 2003; Bucher-Koenen and
Professional Experience experience will tend to demonstrate superior
Lusardi 2011; Vitt et al. 2000).
financial literacy.
Low levels of literacy are normally associated with
Income (Mashumi et al. 2023).
low levels of pay.
J. Risk Financial Manag. 2024, 17, 215 6 of 18

Table 1. Cont.

Variable Author(s); Year Conclusion

Self-confidence in a non-excessive way is essential
(Bannier and Schwarz 2018; Vitt et al. 2000). for gaining financial literacy, in order to manifest
Self-confidence benefits for the financial health of families.
Self-confidence increases the population’s
(Xia et al. 2014).
participation in the financial market.
Mathematical skills give rise to better financial
Numeracy (He and Ahunov 2022; Skagerlund et al. 2018). literacy—those who present it emphasize good
financial literacy.
(Amonhaemanon 2022; Bucher-Koenen et al.
Males, at any age, have greater financial literacy
Gender 2017; Karakurum-Ozdemir et al. 2019; Leippold
than females.
et al. 2022; Yeh 2022).
Young adults highlight low literacy compared to
(Lusardi 2019).
other adult ages.
Age
The financial literacy present in different age
(Mitchell et al. 2011).
groups shows a decline after the age of 50.
Source: Own elaboration.

2.4. Level of Financial Literacy in Portugal Measured by Bank of Portugal

In Portugal, through the National Financial Education Plan, surveys on this topic have
been carried out among the Portuguese population over the age of 16; they are carried out
every 5 years. The first was carried out in 2010, for which the objectives relating to the
questionnaire were defined at the time. These are based on measuring the population’s
perception, knowledge, and understanding of the banking system (Banco de Portugal 2011).
In 2020 (the last survey carried out to date), respondents’ savings habits were high-
lighted, as well as a widespread concern about maintaining some level of savings to cover
unexpected expenses. Compared to 2015, in 2020, Portuguese society is more informed
about the wide range of existing financial products, and is more involved within the bank-
ing system and shows greater confidence in the over-the-counter services offered by banks
and their respective boards. Respondents also show a greater interest in news about the
real estate market and, for those who are within the banking system, it appears that they
are more up to date with the financial information made available about them.
Regarding financial knowledge, the conclusions of studies carried out in Portu-
gal are in line with the conclusions already established by other studies—males have
greater knowledge, in financial terms—corroborating the conclusions of other authors
(Amonhaemanon 2022; Leippold et al. 2022; Yeh 2022). The population’s financial knowl-
edge increases with income, as well as with the level of education (a precarious level of
education is shown to be insufficient), with the older population, aged over 70, also being the
least knowledgeable age group (Centeno et al. 2021; Tavares et al. 2022). The same authors
also conclude that the population between the ages of 25 and 54 years old has better literacy.
In terms of income, respondents who have a monthly net income above EUR 1000 have better
financial literacy (Centeno et al. 2021). The study by Banco de Portugal (2020) concludes that
the general financial knowledge of the Portuguese population, comparatively between 2015
and 2020, does not show significant evolution (Centeno et al. 2021).
Finally, in an international approach, in comparative terms, Portugal ranks higher
than the OECD average in terms of the overall indicator of financial literacy, and negatively
in terms of both the general financial knowledge of the population and their financial
well-being (Centeno et al. 2021).

2.5. Three Central Questions in Financial Literacy

As previously mentioned, the measurement of financial literacy has been a prominent
topic in several academic and practical studies, especially in the context of personal finances
J. Risk Financial Manag. 2024, 17, 215 7 of 18

and resource management. Authors aiming to adequately understand the level of financial
competence of individuals, or populations, have essentially resorted to a series of questions
that address different critical areas.
In the various works, there is an almost unanimous use among researchers of three
central questions and areas, among others we point out Lusardi and Mitchell (2011), Skager-
lund et al. (2018), Leippold et al. (2022), Tavares et al. (2022), and He and Ahunov (2022).
Researchers point to numeracy, savings, and investment decisions as the three central
and most important areas of financial literacy. These are measured by three fundamental
concepts, which are (i) numeracy measured by the ability to calculate interest rates, (ii) un-
derstanding what inflation is and its impact, and (iii) the perception of risk diversification.
By including these areas and recurring questions in studies on financial numeracy, it is
possible to obtain a comprehensive and accurate view of individuals’ financial skills.
In this sense, the inclusion of questions related to interest rates makes it possible to
assess participants’ understanding of how these rates influence the cost of credit and invest-
ment returns. Knowledge of the impact of inflation is crucial to assess participants’ aware-
ness of how currency devaluation can affect purchasing power over time. Finally, issues
related to risk and diversification are fundamental to determine the ability of individuals
to understand and manage the different types of risk associated with financial decisions.
In that regard, we included and analyzed three questions proposed by Lusardi and
Mitchell (2011), Lusardi (2019), Amonhaemanon (2022), Yeh (2022), and Zaimovic et al. (2023).
Q. I Numeracy and the ability to calculate interest rates
Suppose you had USD 100 in a savings account and the interest rate was 2% per year.
After 5 years, how much do you think you would have in the account if you left the money
to grow? More than USD 102; exactly USD 102; less than USD 102; do not know; refuse
to answer.
Q. II Understanding what inflation is
Understanding of inflation “Imagine that the interest rate on your savings account
was 1% per year and inflation was 2% per year. After 1 year, how much would you be
able to buy with the money in this account?” More than today; Exactly the same; Less than
today; Do not know; Refuse to answer.
Q. III The perception of what risk diversification is
“Please tell me whether this statement is true or false. “Buying a single company’s
stock usually provides a safer return than a stock mutual fund”. True; False; Do not know;
Refuse to answer”.
Numerous studies spanning from the earliest investigations, exemplified by Hilgert
et al. (2003), to contemporary research such as that documented by Leippold et al. (2022),
employ questionnaires as a fundamental tool for subsequent analysis. This approach’s
main objective is to find evidence that allows us to provide insights and conclusions about
the financial literacy of populations.

3. Methodology and Sample

Like Greener (2008) and Osei-Kyei and Chan (2017), the work uses a quantitative
analysis, where observations will be made on responses obtained through a questionnaire
survey. To process and analyze the questionnaire, two tools were used—Microsoft Excel
and SPSS 26.
In the first phase, the correlations between the different variables under study were
analyzed, based on the central questions used in Lusardi’s work. To study the survey,
the principal component analysis of factor analysis (PCA) is used. In the opinion of Hair
et al. (2010), factor analysis is a set of multivariate statistical techniques that analyze the
patterns of complex relationships simultaneously, to define the structure underlying a set
of variables.
J. Risk Financial Manag. 2024, 17, 215 8 of 18

For Malhotra (2001), PCA is an interdependence technique, as it simultaneously

examines a set of interdependent relationships. For the author, these variables must be
specified based on previous investigations or the investigator’s judgment. PCA was used
to extract the preponderant factors when choosing apartments. Pestana and Gageiro (2014)
and Marôco (2018) understand that it is an exploratory analysis technique that aims at
discovering and analyzing a set of interrelated variables to constitute a measurement scale
for factors that, in some way, control the original variables. Therefore, we intend to use PCA
to reduce the large number of variables considered into a much smaller number of factors.
Considering the Kaiser–Meyer–Olkin (KMO) test, it is analyzed to see whether it
allows for a good factor analysis and the Bartlett’s test is used to see its significance level; if
this is 0.000, it leads us to reject the hypothesis that the correlation matrix in the population
is the identity matrix. Thus, we can conclude that factor analysis is suitable. If this is not
the case, the use of this factorial model should be reconsidered. Thus, for KMO values
between ]0.9–1.0] the suitability rating is excellent; between ]0.8–0.9] it presents excellent
suitability; between ]0.7–0.8] is classified as good suitability; between ]0.6–0.7] regular;
between ]0.5–0.6] mediocre suitability; and KMO <= 0.5 an inadequate suitability.
Once the correlation between the variables in both previous tests has been verified,
we can proceed with the factor analysis, where we will analyze Cronbach’s alpha to verify
the internal consistency of the factors (George and Mallery 2003). Thus, for Cronbach’s
alpha intervals between ]0.9–1.0] the internal consistency of the factors can be considered
excellent; between ]0.8–0.9] is good; between ]0.7–0.8] is acceptable; between ]0.6–0.7] is
doubtful; between ]0.5–0.6] is considered poor; and for Cronbach’s alpha values <= 0.5, it is
considered unacceptable.
The number of components extracted did not always follow the precepts presented by
Norusis (2006), which state that only components with an eigenvalue greater than 1 should
be considered, as this rule is not always generally applicable (Sharma and Rojek 2020).
The orthogonal factor rotation model was used due to its greater simplicity, as in
orthogonal rotation the original orientation between factors is preserved; that is, the factors
after rotation remain orthogonal. To rotate the factor axes, we used the varimax orthogonal
method with Kaiser normalization, whose objective, according to Marôco (2018), is to
obtain a factor structure in which one and only one of the original variables is strongly
associated with a single factor, being, however, little associated with the other factors,
eliminating intermediate values, which make the interpretation of the results difficult.
The varimax rotation method maximizes the sum of the squared variances of the
loadings of each factor (Manly 1986). For Pestana and Gageiro (2014), this type of rotation
minimizes the number of variables with high loadings on a factor, obtaining a solution in
which each main component approaches ±1, in the case of association between both; or
zero, in the case of no association. The same authors state that orthogonal rotation aims to
extreme the values of the loadings, so that each variable is only associated with one factor
(Pestana and Gageiro 2014), which makes this method of orthogonal rotation preferred by
many analysts.
Taking into account the problem of the work, as already highlighted, a questionnaire
was written using the “LimeSurvey” platform, ensuring data protection. To ensure that
respondents were responsible for their answers, and did not require authorization when
collecting data, only adult individuals who had access to a technological device with
internet access and capable of responding to the survey were approached. A sample
of people with Portuguese nationality was aggregated, bringing together a final sample
of 600 individuals who responded to the entire questionnaire and 410 who responded
incompletely, not being included in the sample.
Finally, the influence of factors resulting from factor analysis on pertinent aspects
of financial literacy was assessed using multiple linear regression. The regression model
was estimated by considering the coefficient of correlation (R), coefficient of determination
(R2 ), Durbin–Watson statistic, Kolmogorov–Smirnov normality, and collinearity test. A
J. Risk Financial Manag. 2024, 17, 215 9 of 18

significance level of 5% was applied when analyzing the regression, based on the p-value
(observed significance level).
The coefficient of determination, denoted as R2 , quantifies the extent of the effect of
independent variables on the dependent variable, as delineated by the regression model
(Marôco 2018). R2 signifies the proportion of total variability explained by the regression
(0 ≤ R2 ≤ 1), or alternatively, the proportion of total variability of Y attributed to the
dependence of Y on all Xi as defined by the regression model’s fit to the data. An R² value
of 0 indicates a poor fit, while 1 denotes a perfect fit. The threshold considered adequate
for characterizing a fit is subjective (Marôco 2018). In exact sciences, R2 values exceeding
0.9 are generally deemed indicative of a strong fit, whereas in social sciences, a value
surpassing 0.5 suggests a favorable fit.
Multicollinearity among explanatory variables was absent, as evidenced by variance
inflation factor (VIF) values being less than 2 for all models in the empirical analysis
(Marôco 2018).

4. Presentation and Analysis of Results

At this point in the work, a sociodemographic analysis is initially addressed, followed
by both an assessment of financial knowledge and an examination of the various hypotheses
discussed in the previous chapter. Subsequently, an analysis of financial knowledge is
carried out, followed by a study of the respondents’ financial awareness. Finally, an
interpretation of the financial attitudes and behaviors expressed during the course of the
survey is presented, in which a factor analysis is included, so that an in-depth investigation
of the effect of financial knowledge on these certain behaviors can be carried out.

4.1. Sociodemographic Characterization

In order to explore sociodemographic data about the sample, Table 2, presented below,
was created.

Table 2. Sociodemographic characterization.

Gender n %
Female 304 50.67%
Male 293 48.83%
Nonbinary? 3 0.50%
Total 600
Age n %
18 to 25 145 24.17%
26 to 35 207 34.50%
36 to 45 111 18.50%
46 to 55 92 15.33%
56 to 65 37 6.17%
66 or over 8 1.33%
Total 600
School Background n %
Academic background in economics, management, finance, accounting, or similar 157 26.17%
School background in other areas 443 73.83%
Total 600
J. Risk Financial Manag. 2024, 17, 215 10 of 18

Table 2. Cont.

Professional Experience n %
No experience to report 55 9.17%
1–3 years 126 21.00%
3–5 years 46 7.67%
5–10 years 121 20.17%
+10 years 252 42.00%
Total 600
Monthly salary of the household to which the respondent belongs n %
Up to EUR 750 58 9.67%
EUR 751–1000 102 17.00%
EUR 1001–1500 170 28.33%
EUR 1501–2000 99 16.50%
EUR 2001–2500 58 9.67%
Above EUR 2501 64 10.67%
Did not answer 49 8.17%
Total 600
Source: Own elaboration.

Table 2 shows that the sample was made up of a very similar percentage in terms of
gender, female (50.07%), male (48.83%) and 0.50% of nonbinary respondents.
The sample consists of 34.50% of respondents aged between 26 and 35 years old,
and 73.83% of respondents have backgrounds in academic areas that are not linked to
economics, management, finance, or accounting. Another characteristic of the sample that
we consider interesting is that 42% of respondents have more than 10 years of professional
experience, and 28.33% have an income between EUR 1001 and EUR 1500.

4.2. Financial Knowledge (Lusardi’s Three Big Questions)

The survey includes three major questions: interest rates, inflation, and risk diversifi-
cation. The three fundamental concepts about savings and investment decisions include
(I) numeracy measured by the ability to calculate interest rates, (II) understanding what
inflation is, and (III) the perception of risk diversification.
Below is a table summarizing the responses to the three major questions that will be
used for comparison with international results.
Table 3 shows that 74.75% of respondents have a high level of knowledge about
interest rates and their impact on income. When asked about inflation and risk, and the
impact of these variables on profitability and personal finances, approximately 50% of
respondents have an understanding of these variables, but a lower level of knowledge
compared to interest rates. Inflation is understood by 56% of the population and risk by
49.67%. When the answers are analyzed together, only 31.33% of the surveyed population
responds correctly, showing understanding of the three variables together.
Table 4 describes the correct answers to the three central questions used in works with
similar objectives and described above, analyzed by gender and age group.
Table 4 shows that the male gender has greater financial knowledge and perception
when assessed by the three questions—interest, inflation, and risk—compared to the female
gender. Of the male respondents (n = 293), 49.15% got all three questions right, while for
females (n = 304), 13.81% of the total population got all three questions right, with 77%
of the total sample who got all three questions right (n = 188) being male. This allows
us to corroborate the evidence found, among others, by Bucher-Koenen et al. (2017);
Amonhaemanon (2022); and Yeh (2022).
J. Risk Financial Manag. 2024, 17, 215 11 of 18

Table 3. Literacy measured by three questions.

Total Sample (n = 600)

Central Questions
Correct Incorrect
Q. I 74.75% 25.25%
Q. II 56.00% 44.00%
Q. III 49.67% 50.33%
Set of three questions 31.33% 68.67%
Source: Own elaboration.

Table 4. Gender and age in literacy.

Questions Gender (n = 600) Age

They answered the M F

18 to 25 26 to 35 36 to 45 46 to 55 56 to 65 66+
three central (n = 293) (n = 304)
questions correctly. 49.15% (n = 144) 13.81% (n = 42) 23% 35.83% 20.32% 14.97% 4.28% 1.60%
Source: Own elaboration.

The age group that demonstrates the best knowledge, when measured by the three
questions, are the respondents aged between 26 and 35 years old, with the age groups
55 years old and older having the lowest knowledge, corroborating results described,
among others, by Lusardi (2019) and Lusardi and Mitchell (2011).

4.3. Factor Analysis

Factor analysis presupposes the existence of a smaller number of unobservable vari-
ables; as a form of validation and robustness analysis of the model, we calculated the
KMO statistic and performed the Bartlett test. Considering the value of KMO (0.839),
which according to Pestana and Gageiro (2014) and Marôco (2018) allows for a good factor
analysis, and since the Bartlett test has an associated significance level of 0.000, it leads
us to reject the hypothesis that the matrix of correlations in the population is the identity
matrix, thus, showing that the correlation between some variables is statistically significant.
We can conclude that the factor analysis is appropriate.
We also see in Table 5 that the eigenvalues of the five factors are all greater than 1
(Kaiser criterion). Several attempts were made to ensure that the loading of each variable
was greater than 0.5; that is, variables with loading lower than 0.5 were successively
removed (Table 6).
Factor analysis resulted in the extraction of five factors responsible for 62.046% of the
total variance (Table 6). The unexplained variance, of 37.954%, may be related to other less
relevant factors, resulting from other combinations of variables.
Once the correlation between the variables in both previous tests has been verified,
we can proceed with the factor analysis, where we will analyze Cronbach’s alpha to check
the internal consistency of the factors.
This factor analysis aims to understand the determining factors of financial literacy
in the Portuguese population, and the way people manage their personal finances. We
will now describe how the factors selected from the analysis of the main components were
named and interpreted (Table 6).
Regarding factor 1, observing the variables that contribute to explaining this factor
allows us to conclude that we are dealing with variables related to the perception of
the current financial situation. Thus, this factor is explained by the fact that the current
financial situation may limit the ability to obtain goods and services, the concern about
paying current bills and the fact that money does not last forever. This factor presents
good consistency.
J. Risk Financial Manag. 2024, 17, 215 12 of 18

Table 5. Total variance explained.

Extraction Sums of Rotation Sums of

Initial Eigenvalues
Squared Loads Squared Loads
% in % % in % % in %
Total Total Total
Variance Cumulative Variance Cumulative Variance Cumulative
1 4.819 24.093 24.093 4.819 24.093 24.093 3.208 16.041 16.041
2 2.608 13.039 37.132 2.608 13.039 37.132 2.480 12.400 28.441
3 2.411 12.056 49.188 2.411 12.056 49.188 2.269 11.343 39.784
4 1.546 7.731 56.919 1.546 7.731 56.919 2.266 11.331 51.115
5 1.025 5.127 62.046 1.025 5.127 62.046 2.186 10.930 62.046
Extraction method: principal component analysis.

Table 6. Rotating component array.

1 2 3 4 5
My financial situation limits my ability to obtain the goods and
0.786
services I want
My personal finances control my life 0.786
My financial situation limits my ability to do things that are Perception of the
0.721 current financial
important to me
situation
Paying my current expenses usually worries me 0.703
I feel like financially I am just getting by 0.648
I worry that my money will not last forever 0.626
I personally and systematically control my personal finances 0.741
I set long-term goals and do everything I can to achieve them 0.727 Planning and
controlling
I follow a careful financial budget 0.727 personal finances
I keep track of my money 0.661
Derivative financial instruments (e.g., CFD, warrants, forex, swaps) 0.816
Investment funds 0.745 Perception of
risky financial
Stocks 0.697
assets
Obligations 0.646
Term deposits 0.851
Perception of
Retirement savings plans 0.833 risk-free financial
Savings certificates/treasury certificates 0.772 assets

I save now to prepare for old age 0.852

I regularly put money aside for the future 0.744 Savings
I carry out planning for the future 0.699
Cronbach’s alpha 0.822 0.726 0.741 0.820 0.794
Extraction method: principal component analysis.

In factor 2, the observation of the variables that contribute to explaining this factor
allows us to conclude that we are dealing with variables related to the planning and control
of personal finances. This factor presents as variables the definition of long-term objec-
tives, monitoring money and following a strict budget, and personally and systematically
controlling personal finances. This factor presents an acceptable consistency.
J. Risk Financial Manag. 2024, 17, 215 13 of 18

Factor 3 gives us insight into the perception of risky financial assets. Hence, there is a
perception of risk related to derivative financial instruments, investment funds, shares, and
bonds. This factor has an acceptable consistency.
Factor 4 presents the factors related to the perception of risk-free financial assets. Thus,
the base products for risk-free (or very low risk) assets are term deposits, retirement savings
plans, and savings certificates. This factor presents good consistency.
Regarding factor 5, the observation of variables that contribute to explaining this factor
allows us to conclude that we are dealing with variables related to savings. Thus, this
factor is explained by the concern with saving for old age, putting money aside on a regular
basis to safeguard the future, and carry out planning for the future. This factor presents
good consistency.

4.4. Multiple Linear Regression

To perform the analysis of the multiple linear regression, the following three questions
in the questionnaire were taken as independent variables: (1) I follow a strict financial
budget; (2) carry out planning for the future; and (3) I regularly put aside money for the
future. As explanatory variables, the factors that resulted from the exploratory factor
analysis were tested (see Table 7).

Table 7. Dependent variable according to the statement in the model.

Model 1—I Follow a Strict Model 2—Carry Out Model 3—I Regularly Put
Financial Budget Planning for the Future Money aside for the Future
(Constant) 3.404 *** 4.167 *** 4.178 ***
Factor 1—Perception of the current
0.112 *** −0.131 *** −0.196 ***
financial situation
Factor 2—Planning and controlling
0.796 *** 0.426 *** 0.384 ***
personal finances
Factor 3—Perception of risky financial
−0.131 *** −0.110 *** −0.105 ***
assets
Factor 5—Savings 0.237 *** 0.455 *** 0.674 ***
R 0.788 0.723 0.845
R2 0.621 0.523 0.713
R2 a 0.619 0.520 0.711
DW 2.044 1.961 2.095
F 325,577 *** 163,397 *** 370,518 ***
Source: Own elaboration. Note: H0 = equality of variances/means; * p < 0.05; ** p < 0.01, and *** p < 0.001.

In all three models, every variable demonstrates statistical significance at the 0.001
level, indicating the robustness of standard deviations through the ordinary least squares
(OLS) approach. This methodology proves effective in addressing potential heteroscedas-
ticity issues commonly encountered in cross-sectional sampling.
Across these models, the F statistic, following a Snedecor’s F-distribution, yields a
p-value of 0.000, signifying statistical significance at the 0.001 level. Consequently, the null
hypothesis (H0 ) is rejected in favor of the alternative hypothesis (H1 ), affirming the model’s
overall significance.
After estimating the regression, it appears that it has the following explanatory capac-
ity: (1) I follow a strict financial budget, 78.8%; (2) carry out planning for the future, 72.3%;
and (3) I regularly put money aside for the future, 84.5%.
In the analysis, multicollinearity was assessed using variance inflation factors (VIF).
The examination confirmed the absence of multicollinearity issues within the model. Fur-
thermore, examination of the Pearson’s correlation matrix revealed negligible correlations
among the variables. Concerning the assumption of residual independence, the Durbin–
J. Risk Financial Manag. 2024, 17, 215 14 of 18

Watson test was employed, with the observed values not surpassing the critical thresholds,
indicating non-rejection of the null hypothesis (H0 ), thereby suggesting absence of autocor-
relation in the residuals. Evaluation of the absolute magnitudes of standardized regression
coefficients reveals that the independent variables derived from the exploratory factor
analysis exert a positive influence on explaining the dependent variable.

5. Conclusions
The objective of this study is, therefore, related to recognizing the level of financial
literacy in Portugal, also identifying the determinants of financial literacy in the Portuguese
population, taking as an example certain sociodemographic factors such as gender, age, or
remuneration. The aim is to understand, across several aspects, whether there is a high
adherence to financial literacy programs and initiatives, as well as the impact of the various
sources of financial knowledge on the financial literacy of the Portuguese population. More
and more societies are becoming aware of the importance of empowering individuals
with financial knowledge and capabilities, as to make informed decisions, where they can
overcome the various financial challenges caused by market volatility and financial crises.
The individual must also be aware of the impact that their financial decisions have, both on
society and on themselves.
It is concluded that male respondents have greater financial knowledge than female
respondents, similar to the conclusions, among others, by authors such as Karakurum-
Ozdemir et al. (2019), Yeh (2022), or Leippold et al. (2022).
It is concluded that respondents aged 26 to 35 are those with the best knowledge,
when measured by the three central questions, corroborating the conclusions of Lusardi
(2019) and Gavurova et al. (2017).
For the entire sample as a whole, when measured by the same questions, it revealed
low knowledge (31.33%), corroborating the conclusions of Hii et al. (2022) and those found
in the study by Centeno et al. (2021). It is also concluded that respondents demonstrate
better knowledge about interest rates compared to inflation and risk.
Another conclusion, taking into account the concept of financial literacy, is that respon-
dents with financial knowledge show greater concern and attention in the way they behave
in financial terms compared to the rest. However, it became clear that there is much work to
be performed to achieve an environment where all respondents demonstrate a solid finan-
cial understanding, which includes the ability for them to obtain knowledge from someone
experienced in important financial areas, to the point of exercising with greater prudence
the management of their monetary resources, in order to create, for example, more detailed
financial budgets. In that event, there is also work to be performed to improve the financial
knowledge and consequent financial literacy of the respective respondents.
Factor analysis allows us to extract five distinct factors, allowing us to conclude each of
them. The first factor relates to the perception of the current financial situation. The second
factor allows us to conclude that respondents are generally concerned with planning
and controlling personal finances and tend to make budgets as a form of control. The
third factor refers to the perception of risk associated with different financial instruments,
such as derivatives, investment funds, shares, and bonds. The fourth factor deals with
the perception of risk-free financial assets, highlighting products such as term deposits,
retirement savings plans, and savings certificates, as the most common and most widely
known. Finally, the fifth factor is related to the awareness shown by respondents about
the importance of saving for the future, including concern about saving for old age and
carrying out long-term planning.
Regarding the carried out multiple linear regressions, it was fully explained that the
dependent variables (1) I follow a strict financial budget; (2) carry out planning for the
future; and (3) I regularly put aside money for the future, are explained by the independent
variables represented by the factors of the exploratory factor analysis: (1) perception of the
current financial situation; (2) planning and controlling personal finances; (3) perception of
J. Risk Financial Manag. 2024, 17, 215 15 of 18

risky financial assets; and (4) savings. These independent variables add robustness to the
three models that were presented.
These results provide valuable insights into participants’ attitudes and perceptions
regarding personal finances, contributing to a broader understanding of financial behaviors,
serving as a basis for formulating public policies and designing training as instruments
for increasing financial literacy, an important tool in improving the quality of life of the
population and the economic development of the country.
A study on financial literacy centered on demographic data and explanatory factors
has several practical implications and relevant insights for Portugal. The first is to provide
and identify gaps in the financial literacy of the Portuguese population, highlighting specific
population groups with lower financial literacy. This allows targeting educational policies
and programs at these groups, adapting these programs to achieve more effective results.
It provides insights for the development of awareness-raising strategies. It contributes
knowledge to the design of specific policy interventions to promote financial literacy in
specific demographic groups. For example, personalized financial education courses can
be offered to meet the needs of different age groups or income brackets. The study, thus,
contributes by providing insights for increasing the population’s literacy, leading to better
financial decision-making, reducing financial vulnerability, and promoting individual and
collective financial well-being in Portugal.
The limitations of this study are the size of the sample, which could have been more
representative of the elderly population, and the difficulties in obtaining complete answers
to the questionnaire. The successive crises and low economic growth in Portugal may be
factors influencing the preparation of the population’s financial education.
For future work, a differentiated statistical analysis with different econometric studies
on the same area will be interesting. It will also be interesting to carry out a similar study
in a later year considering similar hypotheses with a larger sample to understand any
differences that may exist. In our opinion, it will be interesting to carry out a study related
to pensions and the impact of variables on pension planning, as well as approaches to
tax literacy with financial literacy. A study that makes it possible to see more clearly the
financial literacy of pensioners or those who do not have compulsory education equivalent
to a full secondary education, by making comparisons between these two different ages
(younger people who are still studying in compulsory education and older people) would
also have value.

Author Contributions: Conceptualization L.A. and J.C.; methodology, L.A., J.C. and F.T.; software,
L.A., J.C. and F.T.; validation, L.A., J.C. and F.T.; formal analysis, L.A. and F.T.; investigation, L.A.,
J.C. and F.T.; resources, L.A., J.C. and F.T.; data curation, L.A., J.C. and F.T.; writing—original draft
preparation, L.A. and J.C.; writing—review and editing, L.A., J.C. and F.T.; visualization, L.A., J.C.
and F.T.; supervision, L.A. and F.T. All authors have read and agreed to the published version of
the manuscript.
Funding: This research received no external funding.
Data Availability Statement: Data available upon request.
Conflicts of Interest: The authors declare no conflict of interest.

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