A metacognitive approach to financial literacy

Abstract

An emerging body of literature in the study of financial literacy highlights that information plays a little role in many financial decisions. Being informed about financial topics does not seem the key aspect to make efficient choices. Recent studies indicated that what is really crucial in order to prompt adequate attitudes towards financial issues is the way human mind processes information. Deliberation, intuition, and heuristics are three different modes of thinking which can be activated when individuals reason about financial issues. None of them is absolutely better than the others since they are qualitatively different types of information processing. Rather, the effectiveness of a financial decision depends on the individual ability to select the specific mode of thinking which best suits the situation at hand. Metacognition might be considered as a way to help people promoting their ability to identify the relevant strategies to be applied in a specific situation and to self-regulate their own behaviour in order to flexibly manage the three thinking systems and make effective financial decisions.