Financial Literacy and Financial Behavior: Bad Education or Black Mark?

Financial Literacy is a specific component of human capital which allows individual to deal with fundamental financial issues so as to take adequate financial decisions. After presenting the theoretical foundations of this notion, establishing its definition and reviewing the empirical literature, this paper presents recent studies about the link between financial literacy and financial decisions of the population in France using an original survey. The results suggest that financial literacy varies across the population. It is correlated with education but also with gender, age and political affiliation. This last point could reflect differences in opinion regarding the role of welfare state and individual responsibility. Finally, the link between financial literacy and some financial behaviors (the propensity to formulate a specific financial plan in the long run on the one hand and the propensity to own stocks on the other hand) is evaluated: in both cases positive correlations with financial literacy variables are found. We conclude with a reflection on the relative status of financial education to explain the investments of households and judge the effectiveness of training programs in the economic culture.