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Level of financial education: a study of high school
students
Nivel de educaciĂłn financiera: estudio en estudiantes de
bachillerato
Natalia Lizbeth Chimbo Cabrera
*
Jorge Luis LĂłpez-Lapo
*
ABSTRACT
Financial education is becoming increasingly
important given the growing number of products
offered by financial markets and their impact on the
economic development of a country and the quality
of life of its citizens. The objective of this work is
focused on to measure the level of financial
knowledge of the students of the "Elvia Jiménez de
González" Educational Unit ; for this purpose, an
exploratory-descriptive research was carried out, in
which 56 students were surveyed. For the analysis
and processing of the information collected, the tools
PSPP and spreadsheets were used for subsequent
interpretation. The results revealed that the students
are at level 4 in relation to knowledge of financial
education. The research concludes the need to
continue providing financial education programs that
will allow in the medium and long term to strengthen
students' financial skills and knowledge.
Keywords: financial literacy, financial decisions,
students, personal finance, skills
RESUMEN
La educación financiera cobra cada vez más
importancia dado el creciente nĂşmero de productos
que ofrecen los mercados financieros y su impacto
en el desarrollo econĂłmico de un paĂ­s y la calidad de
* Bachelor's Degree in Finance, Universidad Nacional de Loja,
natalia.chimbo@unl.edu.ec, https://orcid.org/0000-0003-0946-5528
* Master's Degree in Business Management, Universidad Nacional de Loja,
jorge.lopez@unl.edu.ec, https://orcid.org/0000-0003-0341-9723
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vida de los ciudadanos. El objetivo del presente
trabajo se centra en medir el nivel de conocimiento
financiero que poseen los estudiantes de la Unidad
Educativa “Elvia Jiménez de González”; para ello se
realiza una investigación de carácter exploratorio -
descriptivo, en el cual fueron encuestados 56
estudiantes. Para el análisis y procesamiento de la
informaciĂłn recopilada se utilizĂł las herramientas
PSPP y hojas de cálculo para su posterior
interpretaciĂłn. Los resultados revelaron que los
estudiantes se ubican en un nivel 4 en relaciĂłn a
conocimientos de educaciĂłn financiera. La
investigaciĂłn concluye la necesidad de seguir
impartiendo programas de educaciĂłn financiera que
permita en el mediano y largo plazo fortalecer la
habilidades y conocimientos financieros en los
estudiantes.
Palabras clave: conocimiento financiero,
decisiones financieras, estudiantes, finanzas
personales, habilidades
INTRODUCTION
Financial education is defined as the process through which people better understand
financial products and risks, developing skills to make more informed decisions with the
risks that these decisions entail. The main characteristic of financial education and
personal finance is to enable people to make coherent decisions in their daily activities,
due to the accelerated growth of financial products that are becoming more complex
every day; within this scenario, financial education has the power to provide information
and tools on the functioning of the economy at a general level, giving priority in daily life.
To analyze the topic in question, it is essential to know that today's world is increasingly
demanding in the various aspects in which we interact with other actors in our
economies, in addition to the great development of information and communication
technologies, finance is no exception, which leads to a sea of new knowledge that
requires greater preparation and development of specific skills to achieve the success
desired by each individual.
The World Bank presented a report in 2015, and gives an overview of the level of
financial literacy of citizens worldwide. The report is based on a survey conducted by
telephone in 2014 to more than 140,000 adults (over 15 years old) of 140 nationalities,
consisting of four basic questions on risk diversification, inflation, and simple and
compound interest rate; according to the results obtained, only 33% of the world
population exceeds this threshold (Lopez, 2015). In 2015 Standard and PoorĘľs with the
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collaboration of the World Bank conducted a study with issues related to financial
education from which it could be determined that only 1% of the world population would
have received financial education, based on these results it can be verified that illiteracy
in the matter of finance is really alarming (Haba et al., 2018).
In developing countries, especially in Latin America, the young population (between 15
and 24 years old) represents about one fifth of them, and its impact can be even more
significant due to the greater ease with which young people learn and innovate, which
makes this segment of the population very attractive for faster and more effective
bankarization. However, one challenge facing financial education aimed at young people
is that this segment is characterized by a high degree of impatience. Regarding the means
of dissemination, there are those who propose that the most effective way to educate
financially is through a subject in the curricula of schools (GĂłmez, 2009).
In this way, the importance of educational preparation that allows the individual to
acquire financial knowledge and skills is evident, considering that people begin to be
linked to the economic reality almost always from the everyday life of the home, based
on family economic activities and experiences.
In the Ecuadorian context, the result of the I Financial Education Day organized by the
Association of Private Banks of Ecuador (ABPE) in 2016 stands out, in which the results
of the report of the Development Bank of Latin America (CAF) with 1200 people
surveyed were presented, from which it was highlighted that 41% of the population does
not have a savings culture or does so with methods that do not involve financial
institutions (MĂ©ndez & Quimis, 2018)..
Financial education is now recognized as a fundamental economic issue by international
organizations such as the World Bank, the United Nations (UNICEF) and UNESCO,
which have warned about the need to develop and deepen the financial capacity of the
world's population. As a result, financial education has begun to be recognized by public
policy makers in Latin American countries as an important part of the dynamics of
economic growth (LĂłpez et al., 2022).
The BAC-Credomatic Financial Network (2008) states that financial education has
become important for all people and not only for those who have a high participation in
the financial markets or are engaged in investment tasks. Financial education contributes
to improving the quality of life and is an educational process through which people
become aware of the importance of developing skills, abilities and knowledge in the
management of personal and family finances, through the knowledge and use of the basic
tools and instruments of financial life.
Under the concepts mentioned above by different authors, it can be considered that
financial education has become a basic pillar to promote national development, because
it allows the acquisition of knowledge, skills and abilities to understand how money
works and how to invest to improve their quality of life through the development of
financial competencies that enable autonomous and conscious decision making, with the
help of the appropriate and responsible use of financial products and services.
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From the point of view of Estrada et al., (2017) define personal finance as: "all financial
decisions and activities that include household income and expenditure budgeting,
savings, investments, mortgages, insurance and all other decisions that require money,
establishing short-term and long-term objectives". Personal finance is largely related to
the family economy and the consumer economy, because the family economy maintains
close links with the economy of the individuals that make up the family unit, as well as,
in the economy, consumption dynamizes the market.
For their part, Rojas et al., (2017) state that personal finance is a set of concepts, tools
and skills required to solve problems and for the correct management of family and
personal economic resources, therefore, personal finance represents the financial
situation of a person, and is related to the problems faced by each individual to manage
their resources and decide the most appropriate way to manage them.
According to GarcĂ­a et al. (2013), they recognize that the insertion of financial education
in schools is one of the fundamental elements of a national strategy and the most
effective way to impact an entire generation. Furthermore, financial education in schools
is the most efficient method of spreading financial literacy and creating the conditions to
have a positive impact on the community at large, including parents.
In view of this perspective, it is of utmost importance that this topic includes a broad
approach in educational institutions; likewise, the family environment plays a crucial role
as it is where values are managed on a daily basis, with the purpose of covering the debts
that are acquired to solve the economy of a household; that is why talking about financial
education with young people somehow fosters in them a prosperous financial culture so
that later on they manage their money and do not get into debt beyond their ability to
pay.
The research has been organized under the main objective of measuring the level of
financial knowledge possessed by high school students of the "Elvia Jiménez de González"
Educational Unit, because many times the lack of knowledge or the so-called financial
illiteracy leads young people to make incorrect decisions about their personal finances.
Finally, this work proposes the following research question: What is the level of financial
knowledge and personal finances that high school students of the "Elvia Jiménez de
González" Educational Unit have?
MATERIALS AND METHODS
The methodology applied in this research work was exploratory and descriptive, with
the collection of information on the level of financial knowledge of high school students
of the "Elvia Jimenez de Gonzalez" Educational Unit. In order to obtain the data, a
structured questionnaire was developed, divided into categories: general data and
financial knowledge, structured in 10 questions related to financial education and
personal finances.
The total population under study consisted of 56 students specifically comprised of first,
second and third year students of the Unified General High School of the Educational
Unit "Elvia Jiménez de González", located in the Rumishitana neighborhood, belonging
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to the Malacatos parish, canton and province of Loja, which works in the morning and
offers the educational levels of Initial Education, General Basic Education (EGB) and
Unified General High School (BGU). The application of the instrument was carried out
in person; and with respect to data processing, the PSPP tool and spreadsheets were
used to tabulate the information for later interpretation.
For the assignment of the score to each question of the survey applied, a matrix was
used in which 4 components were considered , the distributions are expressed with a
determined weight, the weights and the components were considered based on the
weighting applied by the (Organization for Economic Cooperation and Development,
2016)..
Table 1.
Score distribution according to content.
Components
Weight
Description
Money and transactions
30%
This content area includes understanding the different forms and
uses of money and the management of foreign exchange
transactions, which may include spending or payments,
considering value for money, and the use of bank cards, checks,
bank accounts and foreign currency.
Financial planning and
management
25%
Income, expenses and wealth must be planned and managed in
the short and long term. The content reflects the process and
understanding of managing, planning and monitoring income and
expenses.
Risk and benefit
25%
They are a key area of financial education and include the ability
to identify methods to balance and hedge risk, and the ability to
manage financial uncertainty with an understanding of the
probability of economic gain or loss in different financial
environments.
Financial overview
20%
This content area is relevant to the nature and characteristics of
the financial world.
Total
100%
Source: Organization for Economic Cooperation and Development (2016).
Likewise, a matrix was used in which the different levels of financial education are
detailed based on the PISA 2015 scale.
Table 2. Standardization of financial education levels
Level of financial
education
Description
Level 5
81% - 100%
Students can analyze complex financial products and can take into account
features of financial documents that are significant, but not stated or not
immediately apparent. They can work with a high degree of accuracy, solve
unconventional financial problems, demonstrating a broad understanding of
the financial situation.
Level 4
61% - 80%
Students can interpret and evaluate a range of detailed financial documents,
such as bank documents, and explain the functions of less commonly used
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financial products. They can make decisions for long-term financial products,
such as a loan over a longer period.
Level 3
41% - 60%
Students begin to consider the consequences of financial decisions and can
make simple financial plans in familiar contexts. They can make straightforward
interpretations of a range of financial documents and can apply a range of basic
numerical operations.
Level 2
21% - 40%
Students can use the information given to make financial decisions in familiar
contexts. They recognize the value of a simple budget and interpret the
essential characteristics of everyday financial documents. They can apply basic
numerical operations to answer financial questions.
Demonstrate an understanding of the relationships between some financial
elements, such as the amount spent and the expenses incurred.
Level 1
0% - 20%
Students are able to recognize the difference between needs and wants and
can make simple decisions about daily spending. They can also recognize the
purpose of everyday financial documents such as an invoice and apply simple,
basic numerical operations (addition, subtraction, or multiplication) in financial
contexts that they are likely to have experienced personally.
Source: Blas & Cariaga (2020).
RESULTS
First, the results obtained related to the demographic characteristics of the population
under study are presented.
Table 3. Demographic characteristics of the study population
Frequency
Percentage
30
53,57%
26
46,43%
4
7,15%
18
32,14%
14
25,00%
11
19,64%
9
16,07%
21
37,50%
17
30,36%
18
32,14%
Source: Own elaboration based on the surveys applied.
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The total number of participants was 56 students, of whom 53.57% were men and the
remaining percentage were women, with a predominance of 32.14% aged 15 years.
However, it was found that 37.50% of the students were in the first year of the Unified
General Baccalaureate, 30.36% in the second year and the remaining 32.14% in the third
year.
Table 4. Knowledge of financial terms (correct answers).
Knowledge of
terms
Description
Frequency
Percentage
Investment
Placing a certain amount of money in
some activities to obtain profits in the
future
43
76,79%
Credit
A loan at a fixed interest rate
44
78,57%
Budget
Instrument to help measure household
income and expenses
39
69,64%
Savings
Saving part of the proceeds for use at
an appropriate time
46
82,14%
Personal Finance
They refer to the management and
administration of money and assets of
an individual or family.
36
64,29%
Source: Own elaboration based on the surveys applied.
Table 4 shows the most important and relevant terms presented in the survey; however,
it is important to recognize that in this segment of the population the percentages of
each item are higher than 50%, which could be considered a positive element and is
detailed as follows:
76.79% are clear about the concept of investment and therefore affirm that the term
means placing a certain amount of money in some activities to obtain profits in the future;
78.57% of the population state that credit is a loan at an established interest rate; 69.64%
have a clear and complete idea about the term budget, this being the instrument that
helps to measure household expenses and income. The 82.14% indicate that saving
means saving part of the income to use it at an appropriate time and 64.29% of young
people respond that the term personal finances refers to the management and
administration of money and goods of an individual or family.
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Table 5. Matrix of weights to measure the level of general financial literacy of high school
students.
Component
Ask
Weight
Weight
per
question
Total
hits
Hit
ratio
% of
hits
Money and transactions
question 1
30,00%
15,00%
43
76,79%
11,52%
question 2
15,00%
44
78,57%
11,79%
Planning and management
of finance
question 3
25,00%
8,33%
39
69,64%
5,80%
question 4
8,33%
44
78,57%
6,55%
question 5
8,33%
18
32,14%
2,68%
Risk and benefit
question 6
25,00%
6,25%
46
82,14%
5,13%
question 7
6,25%
19
33,93%
2,12%
question 8
6,25%
10
17,86%
1,12%
question 9
6,25%
53
94,64%
5,92%
Financial overview
question 10
20,00%
20,00%
36
64,29%
12,86%
TOTAL
100%
100,00%
65,48%
Source: Own elaboration based on the matrix of financial education components.
Based on the weighting matrix, the level of financial knowledge of the students of first,
second and third year of General Unified High School of the "Elvia Jiménez de González"
Educational Unit is evidenced, obtaining as a result 65.48%, which shows that the
students are located at Level 4 of financial knowledge according to the standardization
matrix of financial education levels according to the methodology of the Organization
for Economic Cooperation and Development (2016).
In this context, it is reflected that students are able to understand less common financial
concepts and terms, as well as interpret and evaluate a range of financial documents,
such as bank documents. They can make decisions on financial products, such as a long-
term loan.
Table 6. Level of financial knowledge of the population by level
Level of Education
Financial
Population
Percentage
Level 1
2
3,57%
Level 2
6
10,71%
Level 3
10
17,86%
Level 4
24
42,86%
Level 5
14
25,00%
Total
56
100,00%
Source: Own elaboration based on the matrix of financial education levels.
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Based on the table of the level of financial knowledge of the population by level it is
concluded that: 42.86% of the students are at learning level 4, which implies that they
understand financial concepts and terms less common to contexts that will be relevant
to them as they move towards adulthood; 25.00% are located at the highest level which
evidences that students analyze complex financial products, likewise they manage to take
into account characteristics of financial documents that are significant but not stated
such as transaction costs and describe the potential outcomes of financial decisions,
showing a broad understanding of the financial landscape.
At knowledge level 3, 17.86% of students consider the consequences of financial
decisions and can develop simple financial plans in a familiar environment. They are also
able to interpret a variety of financial documents directly and apply some basic numerical
operations, including the calculation of percentages.
10.71% of the target population are at level 2 of financial literacy which represents that
they recognize the value of a simple budget and interpret the basic characteristics of
everyday financial documents. They apply basic numerical operations to answer financial
questions and demonstrate an understanding of the relationships between some financial
elements, such as the amount spent and the expenses incurred.
Finally, the remaining 3.57% are at level 1, at this level students are able to identify the
difference between needs and wants and manage to make simple decisions about daily
spending. Similarly, they identify the purpose of everyday financial documents such as an
invoice and apply simple and basic numerical operations (addition, subtraction or
multiplication) in financial contexts that they may have experienced firsthand.
Financial education according to author LĂłpez (2016) covers a wide range of topics that
are important to become a conscious and responsible citizen in making financial
decisions. Today, young people from high school onwards make important financial
decisions that affect their future, as they face complex financial products and markets on
a daily basis, which, if they do not understand their potential and risks, can lead to a
significant deterioration in their quality of life and their future. For his part, DomĂ­nguez
(2013) points out that financial education is necessary for citizens of any age, given that
it is a continuous process throughout life and the best way to assimilate it is gradually,
from an early age, so that they can satisfy their current priorities and preferences
without having to sacrifice them in the future.
In this context, financial education and personal finance have a great impact and incidence
on the life of each individual. Limited financial literacy is reflected in poor planning,
organization, management and control of income and expenses. Financial education can
be defined as the set of tools and practical knowledge that allow to make a good use of
financial services, as well as to manage, increase and protect the patrimony, in addition
to making better economic decisions in the different stages of life.
According to the survey applied to the students of the "Elvia Jiménez de González"
Educational Unit, it can be summarized that the target population is located at level 4 of
financial knowledge, so the students are able to understand a wide range of financial
terms and concepts, mainly because the students receive the subject of entrepreneurship
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and management within their study plan; This result is similar to the study conducted by
Blas & Cariaga (2020) where it was found that students belonging to Generation Z are
at level 4 of financial knowledge due to the fact that the population studies a career
related to finance.
In the present study, students reported having knowledge about some financial terms
such as: investment (76.79%), credit (78.57%), budget (69.64%), savings (82.14%) and
personal finances (64.29%), percentages that show that they are higher than 50%, which
could be considered as a positive element because students with higher levels of financial
education are able to make better responsible decisions regarding financial products and
services. For his part, author Portillo (2021) concludes that students have knowledge
about saving: saving money for the future (55.17%); saving money for emergencies
(17.24%); not spending money unnecessarily (17.24%) and saving money for investments
(8.62%); he also states that an important element in financial education is saving and its
implications, both at the informal and formal levels. In relation to budgeting, 54.4% of
the students said that they do not prepare a budget in their homes, while 45.6% of them
do.
Financial education has a well-defined purpose: to improve personal financial well-being.
Therefore, financial education should focus on personal finance, i.e., training to
understand, manage and plan financial affairs, both their own and their families' or
households'. However, proper understanding, management and planning at the personal
or family level requires an understanding of broader aspects of the financial system and
the economic system whose development impacts the lives of individuals and families, in
many cases considerably.
It is necessary for young people to know about financial terms so that they can plan the
possible use of their resources in the short and long term and strengthen their capacity
to respond to uncertainty, and thus make appropriate decisions about personal finances,
be it investments, insurance, real estate, basic payments, educational payments, budgets,
retirement, among others, that arise in daily life and that deserve proper financial
management.
CONCLUSIONS
Financial education has become more relevant in recent times, because adequate
financial education is imperative to improve the standard of living of individuals. Financial
education provides people with the tools to make effective decisions to improve their
economic well-being. The present research concludes that the students of the Unified
General High School of the "Elvia Jiménez de González" Educational Unit are at level 4
of financial knowledge, which means that they possess financial competencies, for
example: interpreting and evaluating a series of detailed financial documents and
explaining the functions of the least used financial products. Make financial decisions with
long-term consequences in mind, such as understanding the overall cost of repaying a
long-term loan.
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