Scientific Annals of Economics and Business

67 (2), 2020, 277-290

Financial Literacy Perception Scale for the Portuguese Population

Fernando Oliveira Tavares*, Eulália Santos**

Abstract
This study aims to propose and validate a financial literacy perception scale for the Portuguese
population. The utilized methodology was quantitative, based on a two-part questionnaire survey. The
first part studies the sociodemographic profile and the second part evaluates the respondent's
perception of financial literacy. The sample consisted of 830 Portuguese individuals, over 18 years
old. The main results of this study demonstrate that the financial literacy perception scale presents a
tri-factorial structure with satisfactory validity and reliability levels. The three obtained factors are 1-2
years financial planning and goals, long term savings and an affinity for numerical calculation. This
study contributes to the increase of scientific knowledge in the field of financial literacy, to the
assistance of financial education policymakers in the reformulation of their policies and to the creation
of tools to help consumer financial behavior.

Keywords: financial literacy; financial education; financial learning; financial decisions; financial welfare.

JEL classification: G02; G11; G20.

1. INTRODUCTION

Financial literacy has been gaining importance in people's daily lives and has entered
the debate of today's society.
There is no single and universal definition for financial literacy, but it can be explained
as a way that allows key financial concepts to be understood and that provides the ability
and confidence to individuals to manage their personal finances in a convenient manner.
Financial literacy allows individuals to make short-term solid decisions, long-term financial
planning and to be aware of the daily events and changes in the economic conditions. The
financial crisis brought attention and concerns on topics such as financial literacy and
financial innovation, referring to them as relevant factors in the outbreak of the US subprime
crisis.

*
ISCET - Higher Institute of Business and Tourism, Portugal; e-mail: ftavares@iscet.pt (corresponding author).
**
Polytechnic Institute of Leiria; Escola Superior de Tecnologia e Gestão do Instituto Politécnico de Leiria,
Portugal; e-mail: eulalia.santos@ipleiria.pt.
278 Tavares, F. O., Santos, E.

Following the economic and financial crisis, a new phase in financial literacy began as
global concerns increased and more attention was being paid by the nations to the levels of
financial education and to the training of its people. Financial literacy is now a daily subject
in most countries. The recent economic and financial crisis, the growth of banking and
insurance activity and the pressure of the consumer marketing have led the governments of
different countries to place financial education and literacy as a priority for their programs.
Financial literacy is characterized as the ability to read, analyze, manage and
communicate the numerous financial problems that arise daily in people's material well-
being. It is also considered as the understanding about the market principles, instruments,
organizations and its regulations and the competence and aptitude to use the acquired
knowledge in the financial area.
Huston (2010) understands that financial literacy has two dimensions: its
comprehension and its use. Comprehension refers to the knowledge of personal finance, and
the use refers to the application of personal finance. For the author, literacy is not the same
as financial knowledge. Financial literacy implies the ability to make financial decisions
with the knowledge you have.
Huston (2010) also states that financial education can be understood as the ability of an
individual to understand the financial information related to operational transactions. Abreu
and Mendes (2010) understand that financial literacy is transversal to the various types of
information to which the individual has access. Abreu and Mendes (2010) refer to three
information dimensions which are predominant in the financial literacy: (i) the financial
knowledge revealed in the answers to specific questions about the financial market; (ii)
school education, due to its positive influence on the development of the ability to manage
multiple sources of information; (iii) the access to and the selection of information sources
used for decision making.
Given the absence and subsequent ignorance of a framework for assessing the
perception of financial literacy, this study aims to propose and validate a financial literacy
scale for the Portuguese population. To achieve this goal, in addition to its introduction, the
article presents a review of the literature on the theme. Subsequently, the used methodology
in the study is presented, followed by the demonstration and analysis of the study results.
Finally, the conclusions will be presented.

2. LITERATURE REVIEW

Individuals with greater literacy and financial education make better financial
decisions for their families, thus experience greater economic stability and security, and
financial well-being. The literature demonstrates that financial literacy has a direct impact
on the level of indebtedness and financial default rate of households, being a variable that
contributes to the psychological, social and health effects of societies. Financial literacy has
gained importance through scientific studies that have shown that individuals with better
literacy and financial education make more reasonable decisions, plan their consumption
and savings better, and also do better financial planning throughout their lives. Table 1
presents the most important conclusions of some scientific studies of financial literacy.
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 279

Table no. 1 – Studies about the importance of financial literacy

Items Description Authors
Financial literacy is particularly important when financial Lusardi and Tufano (2015);
products are complex. Financial ignorance carries significant Calcagno and Monticone (2010)
costs.
Financial literacy avoids over-indebtedness of populations, Lewis and Messy (2012)
allows for financial security and contributes to the economic
development of societies. Individuals with financial literacy can
more easily withstand economic impacts without having to rely
on credit.
The ubiquity of the banking system and the increasing Lusardi and Mitchell (2011);
complexity of financial instruments are the basis of the growing Atkinson and Messy (2012); Messy
focus on financial education. and Monticone (2016)
The business world is constantly changing and has an Gouws and Shuttleworth (2009)
overabundance of information, only financial literacy can be the
balance between the relevance of information and the ability to
perceive and interpret it.
Consumers with financial literacy make better decisions for Rahmandoust, Shah, Norouzi,
their families and increase their economic security and well- Hakimpoor e Khani (2011)
being.
Individuals with strong financial skills can make better Mandell and Klein (2009); Grifoni
decisions. and Messy (2012)
Individuals with strong financial skills do a better job planning Klapper, Lusardi and Panos (2012);
and plan better for their retirement, have higher debt levels and Lusardi (2015)
save less. Households generally raise their savings levels in
times of economic recession.
Source: self-content

In financial literacy the most studied items are: gender, age, educational level, region
of study, marital status, employment status, level of indebtedness, economic and financial
education, experience and knowledge of financial products, employment and job title. Other
studies relate the level of financial literacy to financial education obtained throughout family
and school life, and individual perceptions of savings and the value of money. In the first
two decades of the 21st century, we have observed that studies have grown to other areas
such as: knowledge of short and long term interest rates, inflation rates, profitability and risk
analysis, the value of money over time, diversification, the stock market, the government
public bonds market and financial learning. Table 2 presents the most studied items/aspects
in financial literacy.

Table no. 2 – Items/aspects studied in financial literacy

Items Description Authors
Financial literacy studies are associated with various factors: Robb, Babiarz, and Woodyard
gender, age, educational level, region, marital status, (2012); Fonseca, Mullen, Zamarro
employment status, income level, economic/financial education, and Zissimopoulos (2012);
financial experience and knowledge, employment and job title. Monticone (2010)
Arguments responsible for low rates of financial literacy: Anthes (2004); Edwards, Allen,
banking deregulation and increasing global complexity of the and Hayhoe (2007); Fox,
economy, lack of approach to financial education in schools, Bartholomae and Lee (2005).
280 Tavares, F. O., Santos, E.

Items Description Authors

persuasive culture brought by the consumer marketing.
Knowledge of the financial investors. Abreu and Mendes (2010)
Educational standard of the country. Lusardi and Mitchell (2014)
Basic notion of stocks and risk diversification. Finke, Howe, and Huston (2016).
Factors that impact financial literacy are: (i) financial education Pacheco, Ribeiro, and Tavares
taught by family during childhood and adolescence, (2) (2016).
financial education taught at school during childhood and
adolescence, (iii) perceptions of savings, and (iv) the
comprehension of the value of money.
The levels of financial literacy impact the prospects of wealth Bernheim and Garrett (2003);
accumulation and retirement planning. Cutler and Delvin (2000).
Capability to analyze interest rates, inflation, risk Knoll and Houts (2012); Lusardi e
diversification and sales discount. Mitchell (2014)
Inflation rate, interest rate, value of money in time, risk, Potrich, Vieira and Kirch (2018)
diversification, stock market, credit and government public
bonds and financial literacy.
The level of financial literacy and financial education in a Tavares, Almeida, and Cunha
sample of college students. (2019)
Youth financial literacy, socioeconomic and demographic Garg and Singh (2018).
factors.
Source: self-content

3. METHODOLOGY

3.1. Sample and data gathering

The target population of this study is Portuguese citizens over 18 years. To obtain the
sample elements, the non-probabilistic convenience sampling method was used due to the
ease of access to the sample and the low associated cost.
The questionnaires surveys were distributed on a previously designated site for self-
completion from March to April 2019. These questionnaires were presented to participants
with a short introductory summary that outlines the study’s objectives and ensures that the
provided information is anonymous and confidential.
After the data gathering, a sample of 854 individuals was obtained, where a sample of
843 were validated, with respondents between 18 and 71 years old (11 presented
irregularities in the completing of the questionnaire). To validate this model, 13 respondents
were eliminated because they were considered outliers, and so the final sample consisted of
830 Portuguese individuals over 18 years old.

3.2. Instruments and measures

In order to know the different characteristics of the phenomenon under this study, a
quantitative methodological approach is used (Günther, 2006). This approach was based on
the application of a two-part self-administered questionnaire survey. The first part studies
the sociodemographic profile of respondents (gender, age, marital status, educational level,
area of education, employment status, gross annual income and if the respondent has a
household budget or not) and the second part comprehends an adaptation of the
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 281

questionnaire presented in the study made by Fernandes, Lynch and Netemeyer (2014) and
Ramalho (2017) which measures the respondent’s perception of financial literacy.

Table no. 3 - Items that evaluate the perception of financial literacy

Items
I keep track of my money
I make a financial planning for the future.
I regularly save money for the future.
I am very cautious about money.
I save now to prepare myself for my old age
I follow a careful financial budget
I like to do calculations using numeric information
I like working with the use of numbers
It gives me satisfaction to solve daily problems involving numbers
Numerical information is very useful in my daily life
(**) I prefer not to pay attention to information involving numbers
(**) I don’t like to think about issues involving numbers
(**) I don’t think that numerical information is relevant
I think it is important to learn how to use numerical information
I like to consult my budget to check how much money I have for the next 1-2
I feel better having planned my finances over the next 1-2 years
I like to have a budget for the next 1-2 years and check to see if I'm fulfilling it
I establish financial goals for the next 1-2 years
I consider the steps I need to take to maintain my budget for the next 1-2 year
I decide beforehand how my money will be spent in the next 1-2 years
The items marked with (**) are stated in the negative - Source: self-content

Some items were translated and adapted from English to Portuguese by a translator and
revised by a Portuguese language expert who assessed the clarity of the issues, and then
made minor semantic adjustments.
To measure the 20 items that evaluate the perception of financial literacy (Table 3), a
5-point Likert concordance scale was used (1 - Strongly Disagree to 5 - Strongly Agree).
There are three items formulated in the negative, which are indicated in Table 3.
For the reference, before the questionnaire was applied to the individuals in the sample
under study, it was submitted to a pre-test conducted on 50 individuals with the
characteristics of the target population. After this pre-test, minor semantic adjustments were
made to improve the comprehension of the different items that evaluate the perception of
financial literacy.

3.3. Data Analysis

To characterize the profile of the individuals and to perform the descriptive analysis,
which is presented, the descriptive statistics technique was used with the assist of the IBM
SPSS Statistics 25 software.
According to the indications of Kline (2015) and Maroco (2014), before performing
the factorial validation of the model, the verification of the distribution of items, omitted
cases and outliers identification must be done. The sensitivity of the items was evaluated
using the asymmetry coefficients (|Sk| ≤ 3) and flatness (|Ku| ≤ 7) coefficients. The factor
282 Tavares, F. O., Santos, E.

validity of the model was evaluated using the exploratory and confirmatory factor analysis
techniques. To verify the suitability of the application of exploratory factor analysis (EFA)
to the study sample, the KMO (Kaiser-Meyer-Olkin) sample adequacy index and the Bartlett
sphericity test (p <0.05) were used (Pestana and Gageiro, 2014). KMO values higher than
0.9 reveal a very good suitability of the sample. In EFA, for factor extraction, the principal
components method was used (factor loadings with values above 0.50 are considered
satisfactory), followed by a varimax rotation, and to ascertain the minimum number of
factors to be retained, the Kaiser criterion was used (eigenvalues above 1) and to
complement the Scree plot graphic. In the confirmatory factor analysis (CFA), the adequacy
of the structure that emerged from the EFA was tested, and for this, the maximum of
accuracy estimation method was used, and, in order to obtain a good adjustment of the
model, the following index of quality of fit were used: Chi-square statistic ratio for degrees
of freedom (χ2 / df) below 3, GFI (Goodness of Fit Index), CFI (Comparative Fit Index)
above 0.9, RMSEA (Root Mean Square Error of Approximation) less than or equal to 0.05,
PCLOSE (comparative fit index) greater than or equal to 0.05 (Kline, 2015; Maroco, 2014).
To evaluate the parsimony of the models, the comparative fit index MECVI (modified
expected CROSS-validation index) and the chi-square fit difference test were used (Maroco,
2014).
The reliability of the factors was assessed with Cronbach's alpha (Maroco and Garcia-
Marques, 2006) and with the composite reliability (Fornell and Larcker, 1981). Both
measures to be considered as acceptable must have values above than 0.7. The convergent
validity was estimated by the value of AVE (Average variance extracted), which according
to Hair, Black, Babin and Anderson (2014) must have values greater than 0.5 to be an
indicator of adequate convergent validity.
To analyze the discriminant validity, three parameters were used: AVE (Average
variance extracted), MSV (Maximum shared variance) and ASV (Average shared
variance), and the following criteria were considered: i) the value of the AVE parameter
must be higher than the MSV parameter; ii) the value of parameter AVE must be higher
than the value of the ASV parameter; iii) the square root of the value of the AVE parameter
must be higher than the inter-factor correlations (Hair et al., 2014).

4. RESULTS

4.1 Sample Characterization

The study sample consisted of 830 individuals, most of them male (59.3%). The age of
the respondents is between 18 and 71 years old, with an average of 37 years old (SD =
12.04). Regarding their marital status, 50.1% of the respondents are single or separated or
divorced; 49.6% are married or living together, and 0.2% are widowers. Regarding the level
of education, 1.9% have a level of education lower or equal to the 9th grade, 22.7% have
studied until the 12th grade, 50.0% have a bachelor’s degree and 25.4% have a master's or
doctorate degree. Regarding to the area of the degree, 56.7% of the respondents have a
degree in Economics, Management, Finance, Accounting or similar. Regarding to
employment status, most of the respondents are employees, which means that they work for
other people (62.3%). About the gross annual household income, 14.5% have an annual
income of less than 10 000.00€; 29.9% have an income between 10 001.00€ and 20
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 283

000.00€; 20.8% between 20 001.00€ and 30 000.00€; 17.8% between 30 001.00 € and 45
000.00€; 9.0% between 45 001.00€ and 60 000.00€ and 8.0% have an annual gross income
over 60 000.00€. Of the 830 individuals analyzed, the majority (61.1%) has a domestic
household or a family household budget in their homes, with the purpose of deciding which
part of the income will be spent and which will be used for savings.

4.2 Validation of the Financial Literacy Perception Scale

This section has the purpose of studying the reliability and theoretical validity of the
Financial Literacy Perception scale. The content validity was performed through literature
review. To study the theoretical validity of the scale, the analysis of the factorial validity,
convergent validity and discriminant validity were used. According to Maroco (2014), the
application of factor validity is intended to specify the factorial structure of the items, the
convergent validity is intended to demonstrate that the items that constitute the factors have
positive and high correlations with each other, and the discriminant validity evaluates
whether the items corresponding to one factor are or are not correlated with other factors.

4.2.1 Exploratory Factor Analysis

The 20 items do not reveal severe violations of univariate and multivariate normality.
The authors proceeded to reverse the items formulated in the negative and, after
applying the EFA technique to the 20 items related to the perception of financial literacy, 5
items were eliminated (“Numerical information is very useful in my daily life”, “I think it is
important to learn how to use numerical information'', “I prefer not to pay attention to
information involving numbers”, “I don't like to think about issues involving numbers” and
“I don't think numerical information is relevant”) because they have commonality values
lower than 0.5. Bartlett's sphericity test and KMO index for the 15 items (𝜒2 (105) =
8955,865, p <0.001, KMO = 0.903) presented a very good suitability of the sample for AFE
application (Pestana and Gageiro, 2014).
Table 4 displays the matrix of factor loadings and commonalities of the Financial
Literacy Perception scale. According to Kaiser's criterion, four factors were retained, which
together explain 71.93% of the total variance.
The first factor is the 1-2 years financial planning and goals (items FP1, FP2, FP3,
FP4, FP5 and FP6) and explains 30.64% of variance, the second factor is the long-term
savings (items LS1, LS2, LS3, LS4, LS5 and LS6) and explain 24.52% of variance, and the
third factor is the affinity for numerical calculation (items ANC1, ANC2 and ANC3) and
explains 16.77% of variance.

Table no. 4 –Matrix of Factor Loadings and Commonalities of the Financial Literacy Perception scale
Factor
𝒉𝟐
1 2 3
FP1- I consider the steps I need to take to maintain my 0.857 0.803
budget for the next 1-2 years
FP2- I like to have a budget for the next 1-2 years and 0.860 0.823
check to see if I'm fulfilling it
FP3- I like to consult my budget to check how much 0.837 0.795
284 Tavares, F. O., Santos, E.

Factor
𝒉𝟐
1 2 3
money I have for the next 1-2 years
FP4- I decide beforehand how my money will be spent 0.817 0.740
in the next 1-2 years
FP5- I feel better having planned my finances over the 0.828 0.770
next 1-2 years
FP6- I establish financial goals for the next 1-2 years 0.787 0.697
LS1- I regularly save money for the future 0.783 0.668
LS2- I am very cautious about the money 0.735 0.620
LS3- I follow a careful financial budget 0.713 0.638
LS4- I make a financial planning for the future 0.716 0.640
LS5- I save now to prepare myself for my old age. 0.718 0.564
LS6- I keep track of my money 0.724 0.575
ANC1- It gives me satisfaction to solve daily problems 0.913 0.852
involving numbers
ANC2- I like working with the use of numbers 0.893 0.821
ANC3- I like to do calculations using numeric 0.871 0.782
information
eigenvalues 4.596 3.678 2.515
% Explained Variance (71.93%) 30.64% 24.52% 16.77%
Source: self-content

4.2.2 Confirmatory Factor Analysis

Applying the confirmatory factor analysis to the model resulting from the application
of EFA, the fit index revealed a poor fit (χ2 = 819.854, df = 87, χ2 / df = 9.424, p <0.001,
GFI = 0.868, CFI = 0.918, RMSEA = 0.101, PCLOSE = 0.000, MECVI = 1.070).
Following, the modification index was analyzed and the trajectories between residues were
added because they correlate, obtaining the model presented in Figure 1. The trajectories
inserted between residues are theoretically justified by the similarity of the items. The
structure of the model is the same as that obtained through EFA: 1-2-Years Financial
Planning and Goals (FP), consisting of 6 items (FP1, FP2, FP3, FP4, FP5 and FP6), Long-
Term Savings (LS), consisting of 6 items (LS1, LS2, LS3, LS4, LS5 and LS6) and Affinity
for Numerical Calculation (ANC) consisting of 3 items (ANC1, ANC2 and ANC3). All
standardized factor weights are found to be greater than 0.5 (λ > 0.64) and all individual
reliability are above 0.25 (R2 > 0.41). The fit indexes of the model in Figure 1 presented a
good fit (χ2 = 234.832, df = 80, χ2 / df = 2.935, p <0.001, GFI = 0.963, CFI = 0.983,
RMSEA = 0.048, PCLOSE = 0.638, MECVI = 0.382). Additionally, the modified model
presented a significantly higher quality of fit than the model initially applied to the sample
2
(Δχ2 = 585.022 > 𝜒0.95,(7) = 14.067) as well as the considerably better MECVI value (0.382
< 1.070). The items that most contribute to the FP factor are item FP1 (I consider the steps I
need to take to maintain my budget for the next 1-2 year) and FP4 (I decide beforehand how
my money will be spent in the next 1-2 years). The items that most contribute to the LS
factor are items LS4 (I make a financial planning for the future) and LS3 (I follow a careful
financial budget) and the item that most contributes to the ANC factor is item ANC2 (I like
working with the use of numbers).
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 285

Figure no. 1 - Financial Literacy Perception Measurement Model

Source: self-content

In Factor 1 (1-2-Years Financial Planning and Goals), it is noticeable that there is a

strong positive correlation (Pallant, 2013) between the residuals for items FP2 (I like to have
a budget for the next 1-2 years) and FP3 (I like to check my budget to see how much money
I have for 1-2 years) and FP2 and FP5 (I feel better having planned finances over the next 1-
2 years). The correlation between items FP3 and FP5 is classified as moderate according to
Cohen's criteria (Pallant, 2013). This is explained by the fact that the items represent the
same intrinsic decision but are presented in different ways.
In Factor 2 (Long-term Savings) there is a moderate and positive correlation (Pallant,
2013) between the residuals of items LS1 (I regularly save money for the future) and LS5 (I
save now to prepare for my old age) and a low positive correlation (Pallant, 2013) between
the residuals of LS1 and LS4 (I make a financial planning for the future). This is explained
by the fact that those who regularly save money for their future do financial planning and
put aside (save) money to prepare for old age. Also, in this Factor 2, there is a moderate and
positive correlation (Pallant, 2013) between the residuals of the LS2 (I am very careful with
money) and LS3 (I follow a careful financial budget) items. It can be concluded that there is
a correlation between being careful with money and following a careful financial budget.
286 Tavares, F. O., Santos, E.

Also in Factor 3 (I have affinity for numerical calculation), there is a low positive
correlation (Pallant, 2013) between the residues of items ANC1 (It gives me satisfaction to
solve everyday problems involving numbers) and ANC3 (I like to do calculations using
numerical information). This is explained by the fact that the two items refer to the same
object but are presented differently.

4.2.3 Reliability, Convergent Validity and Discriminant

Through the analysis of Table 5, it can be observed that the factors of the Financial
Literacy Perception scale demonstrate Cronbach's alpha and composite reliability (CR)
values higher than 0.85, and the Cronbach's alpha value of the entire scale (15 items) is
0.910, which indicates good reliability, so it can be assumed that the 15 used items
consistently and reproducibly measure the factors of interest on the Financial Literacy
Perception scale. The AVE values in the three scale factors demonstrate values greater than
0.5, which according to Hair et al. (2014), is a suitable convergent validity indicator.
Based on the AVE, MSV and ASV parameters presented in Table 5, it is found that in
all factors, the value of the AVE parameter is higher than the value of the MSV parameter,
and the value of the AVE parameter is also higher than the value of the ASV parameter, and
the square root of the value of the AVE parameter (shown in bold in Table 5) is always
higher than the inter-factor correlations. Thus, there is evidence of convergent and
discriminant validity.

Table no. 5 – Reliability, Convergent Validity a Discriminant

Correlations
Cronbach’s
CR AVE MSV ASV FP LS ANC
Alpha
FP 0.940 0.931 0.692 0.461 0.260 0.832
LS 0.868 0.858 0.503 0.461 0.276 0.679*** 0.709
ANC 0.890 0.884 0.718 0.092 0.076 0.244 *** 0. 303*** 0.847
***
p < 0.001
Source: self-content

It is noteworthy that the correlations between the various factors of the Financial Literacy
Perception scale (Table 5) are statistically positive and significant (p <0.001), which justifies
the existence of a second order hierarchical factor, called Financial Literacy Perception (FLP)
whose model is presented in Figure 2. The highest correlation (0.679) occurs between the
factors FP and LS, and according to Cohen's criteria, is classified as high magnitude (Pallant,
2013), which means that the higher the level of 1-2-years financial planning and goals
accordance, the higher the levels associated with the perception of long-term savings.
Figure 2 presents a structural model for the perception of financial literacy whose fit
quality values are considered to be good (χ2 = 234.832, df = 80, χ2 / df = 2.935, p <0.001,
GFI = 0.963, CFI = 0.983, RMSEA = 0.048, PCLOSE = 0.638, MECVI = 0.382), being the
same as those obtained in the first order model. The value of AVE for the financial literacy
perception variable is 0.501, which is higher than 0.5, and according to Hair et al. (2014) is
an appropriate convergent validity indicator. Perception of financial literacy is most strongly
manifested in long-term savings (β = 0.92), followed by 1-2 years financial planning and
goals (β = 0.74).
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 287

Figure no. 2 - Financial Literacy Perception Measurement Model

Source: self-content

4.2.4 Descriptive Analysis of Financial Literacy Perception Scale Factors

The variables representing the three factors and the Financial Literacy Perception scale
were calculated using the scores obtained in the Factor Score Weights Matrix, and then the
descriptive measures were presented in Table 6. It can be observed that the items with the
highest average levels of correspondence are “I keep track of my money” (M = 4.16, SD =
0.78), “I make a financial planning for the future” (M = 3.99, SD = 0.89) and “I save my
money for the future” (M = 3.94, SD = 0.93) and belong to the Long Term Savings factor.
But in general, individuals perceive financial planning and goals at 1-2 years better (M =
3.62, SD = 0.83). To summarize, individuals perceive the existence of financial literacy,
because the average level of concordance on the scale is 3.24 (SD = 0.56) on a 5-point scale.

Table no. 6 – Descriptive Statistics of Financial Literacy Perception Scale Factors

Items M SD
Factor 1: 1-2 years financial planning and goals 3.62 0.83
FP1- I consider the steps I need to take to maintain my budget for 3.48 0.96
the next 1-2 years
FP2- I like to have a budget for the next 1-2 years and check to see 3.65 0.94
if I'm fulfilling it
288 Tavares, F. O., Santos, E.

Items M SD
FP3- I like to consult my budget to check how much money I have 3.68 0.94
for the next 1-2
FP4- I decide beforehand how my money will be spent in the next 3.39 0.99
1-2 years
FP5- I feel better having planned my finances over the next 1-2 3.76 0.93
years
FP6- I establish financial goals for the next 1-2 years 3.56 0.99
Fator 2: Long-term Savings 3.41 0.60
LS1- I regularly save money for the future 3.94 0.93
LS2- I am very cautious about the money 3.82 0.92
LS3- I follow a careful financial budget 3.66 0.98
LS4- I make a financial planning for the future 3.99 0.89
LS5- I save now to prepare myself for my old age. 3.59 1.09
LS6- I keep track of my money 4.16 0.78
Factor 3: Affinity for the Numerical Calculation 3.49 0.81
ANC1- It gives me satisfaction to solve daily problems involving 3.76 0.98
numbers
ANC2- I like working with the use of numbers 3.82 1.03
ANC3- I like to do calculations using numeric information 3.82 0.98
Financial Literacy Perception Scale 3.24 0.56
Source: self-content

5. CONCLUSION

The purpose of this scientific study is to propose and to validate the financial literacy
perception scale for the Portuguese population. The present study demonstrates the content
validity of the financial literacy perception scale that was evaluated through the literature
review and the theoretical validity of the same scale that was evaluated using the application
of factorial validity, convergent validity and discriminant validity.
The used instrument was adequate to measure the perception of financial literacy of the
Portuguese population, presenting a tri-factorial structure with adequate validity and
reliability levels. The three obtained factors are 1-2 years financial planning and goals, long
term savings and a affinity for numerical calculation.
In general, individuals perceive the existence of financial literacy and this manifests
itself most strongly in long-term savings and 1-2-years financial planning and goals. This
research may help academics, researchers and professionals to understand the perceptions of
financial literacy of the Portuguese population better. It can also help financial education
policymakers to retire their policies and create tools to improve the consumer’s financial
behaviour.
In a future study, it is intended to submit the scale to a second and independent
validation sample, to compare the Portuguese population perception with the population of
another country which characteristics are similar to Portugal. It is also intended to analyze if
the levels of perception of financial literacy coincide with the level of knowledge of
financial literacy, being the knowledge evaluated with answers to specific questions about
the financial market.
 Scientific Annals of Economics and Business, 2020, Volume 67, Issue 2, pp. 277-290 289

References

Abreu, M., and Mendes, V., 2010. Financial Literacy and Portfolio Diversification. Quantitative Finance,
10, 515-528. https://doi.org/10.1080/14697680902878105
Anthes, W., 2004. Financial Literacy in America: A perfect storm, a perfect opportunity. Journal of
Financial Sevice Professionals, 8 (6), 49-56. https://www.jstor.org/stable/23859792
Atkinson, A., and Messy, F., 2012. Measuring financial literacy. Results of the OECD / International
Network on Financial Education (INFE) Pilot Study. OECD Working Papers on Finance, Insurance
and Private Pensions, No. 15, OECD Publishing. http://dx.doi.org/10.1787/5k9csfs90fr4-en.
Bernheim, B., and Garrett, D., 2003. The Effects of Financial Education in the Workplace: Evidence from
a Survey of Households. Journal of Public Economics, 87, 1487–1519.
https://doi.org/10.1016/S0047-2727(01)00184-0
Calcagno, R., and Monticone, C., 2015. Financial literacy and the demand for financial advice. Journal of
Banking & Finance, 50, 363-380. https://doi.org/10.1016/j.jbankfin.2014.03.013
Cutler, N., and Devlin, S., 2000. Financial Literacy 2000. Journal of the American Society of CLU &
ChFC. 50(32), 4.
Edwards, R., Allen, M., and Hayhoe, C., 2007. Financial attitudes and family communication about
students' finances: The role of sex differences. Communication Reports, 3 (2), 90-100.
https://doi.org/10.1080/08934210701643719
Fernandes, D., Lynch Jr, J., and Netemeyer, R., 2014. Financial literacy, financial education, and
downstream financial behaviors. Management Science, 60(8), 1861-1883.
https://doi.org/10.1287/mnsc.2013.1849
Finke, M., Howe, J., and Huston, S., 2016. Old age and the decline in financial literacy. Management
Science, 63(1), 213-230. https://doi.org/10.1287/mnsc.2015.2293
Fonseca, R., Mullen, K., Zamarro, G., and Zissimopoulos, J., 2012. What explains the gender gap in
financial literacy? The role of household decision making. Journal of Consumer Affairs, 46(1), 90-
106. doi: 10.1111/j.1745-6606.2011.01221.x
Fornell, C., and Larcker, D. F., 1981. Evaluating structural equation models with unobservable variables
and measurement error. Journal of Marketing Research, 18, 39-50.
https://www.jstor.org/stable/3151312
Fox, J., Bartholomae, S., and Lee, J., 2005. Building the Case for Financial Education. Journal of
Consumer Affairs, 39. 195– 214. . https://doi.org/10.1111/j.1745-6606.2005.00009.x
Garg, N., and Singh, S., 2018. Financial literacy among youth. International Journal of Social Economics,
45(1), 173-186. https://doi.org/10.1108/IJSE-11-2016-0303
Gouws, D., and Shuttleworth, C., 2009. Financial literacy: an interface between financial information and
decision-makers in organisations. Southern African Business Review, 13(2), 141-165.
Grifoni, A., and Messy, F., 2012. Current status of national strategies for financial education. A
Comparative Analysis and Relevant Practices, OECD Working Papers on Finance, Insurance and
Private Pensions, No. 16, OECD Publishing. doi:10.1787/5k9bcwct7xmn-en
Günther, H., 2006. Pesquisa qualitativa versus pesquisa quantitativa: Esta é a questão?. Psicologia: Teoria
e Pesquisa, 22(2), 201-209. doi: 10.1590/S0102-37722006000200010
Hair, J. F., Black, W. C., Babin, B. J., and Anderson, R. E., 2014. Multivariate Data Analysis. 7th edition.
Edinburgh, Pearson.
Huston, S., 2010. Measuring Financial Literacy. Journal of Consumer Affairs, 44 (2), 296-316.
https://doi.org/10.1111/j.1745-6606.2010.01170.x
Klapper, L., Lusardi, A., and Panos, G., 2012. Financial literacy and the financial crisis. NBER Working
Paper No. 17930, National Bureau of Economic Research, Inc.
Kline, R. B., 2015. Principles and Practice of Structural Equation Modeling. 4th edition. New York:
Guilford Press.
290 Tavares, F. O., Santos, E.

Knoll, M., and Houts, C., 2012. The financial knowledge scale: An application of item response theory to
the assessment of financial literacy. Journal of Consumer Affairs, 46(3), 381-410.
https://doi.org/10.1111/j.1745-6606.2012.01241.x
Lewis, S., and Messy, F., 2012. Financial Education, Savings and Investments: Na literate manager.
Accounting Forum, 30, 179-191.
Lusardi, A., and Mitchell, O., 2011. Financial literacy and retirement planning in the United States. Journal
of Pension Economics & Finance, 10(4), 509-525. https://doi.org/10.1017/S147474721100045X
Lusardi, A., and Mitchell, O., 2014. The economic importance of financial literacy: Theory and evidence.
Journal of economic literature, 52(1), 5-44. . https://doi.org/10.1257/jel.52.1.5
Lusardi, A., and Tufano, P., 2015. Debt literacy, financial experiences, and overindebtedness. Journal of
Pension Economics & Finance, 14(4), 332-368. https://doi.org/10.1017/S1474747215000232
Lusardi, A., 2015. Financial literacy: Do people know the ABCs of finance?. Public understanding of
science, 24(3), 260-271. https://doi.org/10.1177/0963662514564516
Mandell, L., and Klein, L., 2009. The impact of financial literacy education on subsequent financial
behavior. Journal of Financial Counseling and Planning, 20(1), 15-24.
Maroco, J., 2014. Análise de equações estruturais: Fundamentos teóricos, Software & Aplicações. 2nd
edition. Lisboa, Portugal: ReportNumber.
Maroco, J., and Garcia-Marques, T., 2006. Qual a fiabilidade do alfa de Cronbach? Questões antigas e
soluções modernas?. Laboratório de Psicologia, 4(1), 65-90.
Messy, F., and Monticone, C., 2016. Financial education policies in Asia and the Pacific. OECD Working
Papers on Finance, Insurance and Private Pensions, Paris, n. 40.
http://dx.doi.org/10.1787/5jm5b32v5vvc-en
Monticone, C., 2010. How Much Does Wealth Matter in the Acquisition of Financial Literacy? The
Journal of Consumer Affairs, 44(2), 403-422. https://doi.org/10.1111/j.1745-6606.2010.01175.x
Pacheco, L., Ribeiro, E., and Tavares, F., 2016. Literacia financeira: estudo aplicado a uma amostra de
alunos de uma escola do 3. º ciclo do Ensino Básico e Secundário português. Revista População e
Sociedade, 26 (2), 154-169.
Pallant, J., 2013. SPSS survival manual: A step by step guide to data analysis using SPSS for Windows. 5th
edition. Maidenhead: Open University Press.
Pestana, M. H., and Gageiro J. N., 2014. Análise de dados em Ciências Sociais - A complementaridade do
SPSS. 6th edition. Lisboa: Sílabo.
Potrich, A., Vieira, K., and Kirch, G., 2018. How well do women do when it comes to financial literacy?
Proposition of an indicator and analysis of gender differences. Journal of Behavioral and
Experimental Finance, 17, 28-41. https://doi.org/10.1016/j.jbef.2017.12.005
Rahmandoust, M., Shah, I., Norouzi, M., Hakimpoor, H., and Khani, N., 2011. Teaching financial literacy
to entrepreneurs for sustainable development. OIDA International Journal of Sustainable
Development, 2(12), 61–66.
Ramalho, T. B., 2017. Modelo estrutural de literácia financeira: um estudo sobre o comportamento
financeiro de brasileiros considerando grupos com diferentes níveis de conhecimento financeiro e
autoconfiança. Tese de Doutoramento em Administração de Empresas, Universidade Presbiteriana
Mackenzie, 119.
Robb, C., Babiarz, P., and Woodyard, A., 2012. The demand for financial professionals' advice: The role
of financial knowledge, satisfaction, and confidence. Financial Services Review, 21(4), 291-305.
Tavares, F., Almeida, L. and Cunha, M. N., 2019. Financial Literacy: Study of a University Students
Sample. International Journal of Environmental & Science Education, 14(9), 499-510.

Copyright
This article is an open access article distributed under the terms and conditions of the
Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.