Untangling the Terminology in the Context of Financial Literacy: Systematising Definitions and Constructs

Abstract

When looking at the German- and English-language literature on financial literacy, one is struck by the heterogeneity in terms and definitions used in different papers, such as financial literacy, financial knowledge, financial capability, financial competence or financial education. Often, different definitions describe the same construct, or definitions with the same content use different terminology. Sometimes, explicit definitions are missing completely. As a result, the constructs behind the terms and the definitions often remain vague. Studies based on these definitions and their findings are hardly comparable, the findings cannot be generalised, and it is difficult to derive educational measures from these findings. Despite all differences, however, the definitions have a common core: financial knowledge is assumed to be a central component of financial literacy in all definitions we encountered. Our chapter takes up definitions, terms and the description of the underlying constructs from studies focussing on financial literacy. Furthermore, we look at the content areas included in each case and analyse whether only personal finances or society-related aspects are taken into account. This is intended to systematically show which constructs are behind which terms and definitions, how broad the content areas are that are considered by the respective authors as an expression of financial literacy and which decisions (personal, societal) are included in each case. We also take a first look at whether the constructs include financial behaviour. Ultimately, the aim is to create a framework in which existing and future studies can also be located and which forms a basis for comparing different studies and deriving evidence-based support measures.