Assessment of the financial literacy scale on key financial decisions for Latin America

Abstract

The measurement of financial literacy is of great interest to both academics and public policy designers. Despite this, few Latin American researchers have undertaken studies proposing scales with the necessary methodological qualities. In this context, this study aims to evaluate the Financial Literacy on Key Financial Decisions (FLKD) scale in three samples from three Latin American countries, with the purpose of identifying whether the instrument is suitable for use as a tool that validly and reliably calibrates among young adults.

To achieve this, reliability analysis, correlations, and confirmatory factor analysis are conducted, employing Structural Equation Modeling (SEM). It is important to note that this process is confirmatory, not semi- confirmatory.

The results indicate that the model fit in each sample approximates the expected values, with better results in the overall sample, although falling below stricter cutoff parameters. Despite this, the findings support the assertion that the FLKD scale constitutes an appropriate starting point to be refined and applied to young university students in Latin American countries.

Furthermore, the findings suggest the possibility of exploring new relationships and analyses that enhance the understanding of how the financial behavior variable is interconnected. This holistic approach can enrich the comprehension of financial literacy and its impact on individuals' financial well-being in the region.