The level of Financial Literacy in Pakistan

Abstract

This study examines the level of financial literacy in Pakistan. Financial literacy (or financial knowledge) is typically an input to model the need for financial education and explain variation in financial outcomes. The study reveals that the persons who have more financial knowledge, usually save money. It is inevitable for investors and ordinary citizen that they possess sufficient knowledge and awareness about financial institutions and markets; risk and its return, that subsequently is fruitful for the growth of economy. The results show that 1) middle-aged and older people are careful in spending their money; 2) male respondents usually have better saving habits; 3) people with higher qualification and bigger family size advises their peers about managing the finances; and 4) respondents earning high salaries agree that financial literacy do help in leading a financially secure life. Further, evidence of this paper suggests that it is important for policy makers to increase financial literacy in order to avoid the problems of adverse selection and moral hazard.