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RESEARCH PRODUCT

Factors that influence the financial literacy of young Spanish consumers

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This study examines the development of mathematical and financial literacy skills amongst 471 students in Spain. Most studies on this topic have looked at either one or the other skill but they have not examined the relationship between the two. The use of simultaneous equations has enabled us to do so. The aim of the paper is to disentangle the factors determining the financial skills of young consumers in Spain. To do this, the PISA Financial Literacy Assessment conducted by the OECD in 2012 is used. Our paper's main contribution lies in the methodological way to deal with the empirical challenges overshadowing our study. Particularly, our methodological strategy is defined by the application of a multi-level model of simultaneous equations (MSiEM). This method allows us to take into account the simultaneous determination of math and financial skills at school and the nested structure of the database. The development of the empirical model is performed in two sequential stages. Firstly, simultaneity in the production of financial and math competencies is evaluated via a simultaneous equations model at student level. Secondly, and based on the conclusions of the first stage, a model of these characteristics is recalculated at two levels (student and school). This multi-level model of simultaneous equations permits the identification of the determinants of financial skills, differentiating between the influences operating at school level from those at student level. A first conclusion is that the development of financial abilities of young consumers is mediated by their mathematical skills. This result suggests that an improvement in financial skills might be attained by improving the population's math knowledge, thereby questioning whether it is really necessary to increase the supply of specific financial subjects in the official curriculum for primary and secondary school education. A second conclusion, in accordance with those of other international studies, is the importance of the family on the financial literacy of 15-year-old Spanish students. The family, a first-order determinant in reading, science and math scores, is also a key variable in the development of financial skills. Our results show that its influence is produced dualistically. On one side, the educational level of the mother positively conditions adolescents’ math skills. On the other side, the parents’ professional status influences the financial skills of their children. Finally, school type (public versus private) does not display any effect on either the financial or math performance of Spanish young people.