Development and Determinants of Students' Financial Literacy. A Case of Slovakia

The dynamic and rapidly changing development on the financial markets, coupled with the global economic crisis's impact in recent years, makes the financial decisions and personal money management more challenging than ever before. The more complex the financial markets are, the more confused the consumers become, in order to detect the threats and opportunities, which the markets offer. Many times, we are the victims of wrong financial decisions of households and disability to use the finance in proper way. For this reason the attention has been paid to the financial literacy and necessity of financial education, as a tool for improvement the welfare through better decision-making. The financial literacy idea has been spread worldwide and consequently implemented into the national policy programmes in the majority of countries, as well as in Slovak republic. Numbers of studies highlight the importance of financial education as one of the most appropriate tools for avoiding the negative decision's consequences. The authors proved that people with low level of financial literacy are less likely to report regular saving, pay bills on time, maintain a budget, or diversify investments (Hilgert et al., 2003). Moreover, their poor financial education leads to negative credit behaviour resulting into the higher indebtedness and debt accumulation problems (Stango and Zinman, 2009), high-cost borrowings and loans (Lusardi and Tufano, 2009), and wrong choices of mortgages and other financial products (Moore, 2003). Oppositely, the high level of financial literacy refers to the actions of people such as appropriate financial planning for retirement, wealth accumulation and savings (Lusardi and Mitchell, 2007; Hung et al., 2009; Behrman et al., 2001), or the finance investing and participation on the stock markets (Graham et al., 2009). This paper examines the development of financial literacy and its selected determinants. The main objective of the paper is to evaluate the level of financial literacy on a sample of students in Slovak Republic, in order to compare the results with the results of the survey conducted by Slovak Banking Association in 2007. We also focus on the selected determinants affecting the level of financial literacy (gender, age, education level and education focus). Using Index of financial literacy and Mann-Whitney U test techniques we find that age, gender and education level are relevant determinants of financial literacy level while education focus is not. We conclude that the overall level of financial literacy in 2012 has risen in comparison to 2007.