Identifying financially illiterate groups: An international comparison

Targeted policy interventions are more effective than one-size-fits-all initiatives. This paper proposes the use of k-means cluster analysis to identify vulnerable groups with respect to financial literacy. Using a rich sample of 12 countries, we distinguish 4 groups with varying financial literacy levels, and examine their socio-economic characteristics. The results suggest that individuals in the most vulnerable financially illiterate groups are on average, single, less-educated and unemployed with low incomes. This contrasts with those in the strongest group: individuals with the highest financial knowledge, financial behaviour and financial attitudes scores are on average highly educated males who live together with a partner. They earn a high income and hold several financial products. Integrating these insights into national strategies which promote financial literacy will not only lead to more effective but also to more efficient policy initiatives by focusing on the particular weaknesses of certain subgroups and using the appropriate transmission channels.