The Financial Knowledge Scale: New Analyses, Findings, and Development of a Short Form

Carrie R. Houts and Melissa A. Z. Knoll

Journal of Consumer Affairs, 2020, vol. 54, issue 2, 775-800

Abstract: We use data from the Understanding America Study (UAS) internet panel to build upon the Knoll and Houts Financial Knowledge Scale (FKS). Specifically, we provide practitioners with a shorter 10‐item scale, describe additional analyses on both the full‐ and short‐form versions of the scales, and explore the relationship between FKS scores and a variety of retirement‐related outcome variables. Importantly, the full‐ and short‐form scales are developed using a statistical model that accounts for guessing, which allows us to provide more accurate estimates of financial knowledge than similar scales that do not account for guessing. The paper also provides conversion tables that can aid in the analysis and interpretation of FKS scores in practice. With the development of a 10‐item short form that accounts for guessing, we hope to provide practitioners and researchers with a tool that will enable them to reliably measure financial knowledge more parsimoniously and accurately than other measures currently in use.

Date: 2020
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