Lusardi, AnnamariaKlapper, LeoraPanos, Georgios A.2012-03-192012-03-192012-02-01https://hdl.handle.net/10986/3266The ability of consumers to make informed financial decisions improves their chances of having sound personal finance. This paper uses a panel dataset from Russia, where consumer loans grew at an astounding rate -- from about US$10 billion in 2003 to over US$170 billion in 2008 -- to examine the importance of financial literacy and its relationship with behavior. The survey asked questions on financial literacy, consumer borrowing (formal and informal), and spending behavior. The paper studies the consequences of greater financial literacy on the use of financial products and financial planning. Even though consumer borrowing rose rapidly in Russia, only 41 percent of the survey respondents understood how interest compounding worked and only 46 percent could answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Individuals with higher rates of financial literacy are significantly more likely to report having more unspent income at the end of the month and higher spending capacity. The relationship between financial literacy and the availability of unspent income is more evident during the financial crisis, suggesting that better financial literacy may better equip individuals to deal with macroeconomic shocks.CC BY 3.0 IGOABILITY OF CONSUMERSACCOUNT CREDITORACCOUNT OWNERSHIPACCOUNTINGADMINISTRATIVE DATAANNUAL INTEREST RATEASSET MARKETSAVAILABILITY OF CREDITBALANCE SHEETBANK ACCOUNTBANK ACCOUNTSBANK CREDITBANK LOANSBANKING PRODUCTSBANKING RELATIONSHIPSBANKING SECTORBANKING SERVICESBANKING SUPERVISIONSBANKING SYSTEMBASIC FINANCIAL LITERACYBORROWERBORROWER BEHAVIORBORROWINGBUSINESS SCHOOLCALCULATIONCALCULATIONSCAPITAL FORMATIONCENTRAL BANKCHECKING ACCOUNTCHECKSCOGNITIVE FUNCTIONSCONSUMERCONSUMER CREDITCONSUMER DEBTCONSUMER FINANCECONSUMER LOANSCONTRIBUTIONCREDIT CARDCREDIT CARD DEBTCREDIT INFORMATIONCREDITORCURRICULUMDEBIT CARDDEBIT CARDSDEBT CONTRACTSDEBT LOADSDEBT MANAGEMENTDEFINED CONTRIBUTION PENSIONSDELINQUENCYDEMOGRAPHIC CHARACTERISTICSDEMOGRAPHIC GROUPSDEPOSITSDEVELOPING FINANCIAL MARKETSDOMESTIC CREDITDUMMY VARIABLEDUMMY VARIABLESDURABLEDURABLE GOODSEARNINGSECONOMIC ACTIVITYECONOMIC DECISIONSECONOMIC DEVELOPMENTECONOMIC GROWTHEDUCATION LEVELEDUCATION LEVELSEDUCATIONAL ATTAINMENTEMERGING MARKETSEMPLOYEEEMPLOYERENTREPRENEURENTREPRENEURSETHNIC MINORITIESFAMILY INCOMEFAMILY MEMBERSFEDERAL RESERVEFEDERAL RESERVE BANKFINANCESFINANCIAL ASSISTANCEFINANCIAL BEHAVIORFINANCIAL CONSEQUENCESFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DECISIONFINANCIAL DISTRESSFINANCIAL EDUCATIONFINANCIAL EDUCATION PROGRAMSFINANCIAL EXPERIENCESFINANCIAL FRAGILITYFINANCIAL ILLITERACYFINANCIAL INFORMATIONFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL ISSUESFINANCIAL KNOWLEDGEFINANCIAL LITERACYFINANCIAL LITERACY TRAININGFINANCIAL MANAGEMENTFINANCIAL MARKETPLACEFINANCIAL MARKETSFINANCIAL MATTERSFINANCIAL OUTCOMESFINANCIAL PENETRATIONFINANCIAL PRODUCTSFINANCIAL RESOURCESFINANCIAL SECTORFINANCIAL SERVICESFINANCIAL SOPHISTICATIONFINANCIAL STABILITYFORMAL BANKFORMAL BANKINGFORMAL BANKING SYSTEMFORMAL CREDITFORMAL FINANCIAL INSTITUTIONFORMAL FINANCIAL MARKETSFRAUDGENDERGENERAL POPULATIONHIGH SCHOOLHIGH SCHOOL FINANCIAL LITERACYHIGHER EDUCATIONHOUSEHOLD APPLIANCESHOUSEHOLD DEBTHOUSEHOLD FINANCEHOUSEHOLD FINANCIAL MANAGEMENTHOUSEHOLDSIDINCOMEINCOME SHOCKSINDEBTEDNESSINFLATIONINFORMAL BORROWINGINFORMAL CREDITINFORMATION SHARINGINFORMED CONSUMERSINFORMED FINANCIAL DECISIONSINSTALLMENTINSTRUMENTINTEREST PAYMENTINTEREST PAYMENTSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL STANDARDSINVESTMENT CLIMATELESS FINANCIALLY LITERATELEVELS OF LITERACYLIABILITYLIABILITY SIDELITERACY COURSESLITERACY DATALITERATE INDIVIDUALSLIVING STANDARDLIVING STANDARDSLOANLOW EDUCATIONAL ATTAINMENTLOW FINANCIAL LITERACYLOW INCOMELOW LEVELS OF EDUCATIONLOWER INCOMELOWER INCOMESMACROECONOMIC STABILITYMONTHLY INCOMEMONTHLY PAYMENTSMORTGAGEMORTGAGESMUTUAL FUNDSNEGATIVE INCOME SHOCKNEW BANK ACCOUNTSNUMERACYOCCUPATIONSOLDER INDIVIDUALSPENSIONPENSIONERPERSONAL BANKINGPERSONAL FINANCEPORTFOLIOPORTFOLIO CHOICEPROBABILITYPUBLIC ECONOMICSPUBLIC POLICYPURCHASING POWERRAPID GROWTHREPAYMENTREPAYMENT PERIODSRESEARCH ASSISTANCERESERVE BANKRETAIL PRICERETIREMENTRETIREMENT PLANRETIREMENT PLANNINGRETIREMENT PLANSRETIREMENT READINESSRETIREMENT SAVINGRETIREMENT SECURITYSALARIESSALARYSALESALESSAVING BEHAVIORSCHOOLINGSECONDARY EDUCATIONSECONDARY SCHOOLSINGLE PERSONSOCIAL PROTECTIONSOCIOECONOMIC STATUSSTATE BANKSSTATE UNIVERSITYSTOCK MARKETSTOCKSTECHNICAL EDUCATIONTRANSPARENCYUNDERSTANDING PENSIONSUNEMPLOYEDUNEMPLOYMENTUNEMPLOYMENT RATEUNIVERSITIESVALUABLEVULNERABLE CONSUMERSWorld Bank10.1596/1813-9450-5980