ACCI Conference 2024

Governments worldwide conceive financial education as a crucial tool for enhancing the financial well-being of families. However, the relationship between financial knowledge and financial behaviors remains inconclusive, particularly in developing countries where a limited number of studies have explored this connection. This study employed a subjective and an objective measure of financial knowledge and assessed 16 financial behaviors of participants from Argentina, Colombia, Ecuador, Mexico, and Peru. Out of these 16 financial behaviors, 14 have a relationship with at least one of the two measures. This study found positive correlations between financial knowledge and various financial behaviors, including planning behaviors, acquisition of formal financial products, willingness to assume risks, seeking financial advice, and cautious management of their financial products. The identification of causal relationships proved challenging and often yield inconclusive results due to identified endogeneity issues and the presence of weak instruments. In general, during the COVID-19 period, participants displayed increased prudence in their financial practices and managing their products. This relationship was stronger among participants with higher levels of objective financial knowledge.

Author(s): Juan Sandoval, Maria Collazos, Julio Sarmiento, Edgardo Cayon