DEVELOPING AN INSTRUMENT TO MEASURE FINANCIAL LITERACY LEVEL OF YOUNG ADULTS IN SINGAPORE

Recent researches have argued for the need to prepare young adults to be aware of the long-term impact of their financial habits on their future financial stability. As positive correlations have been found between financial knowledge and financial practices, developing a comprehensive measurement of financial literacy especially designed for young adults will raise awareness of current situation and contribute to more effective assessment of financial literacy education efforts. Although multiple assessment tools have been developed over the last decade to measure financial literacy, existing literature has not agreed on the use of common and standardized measures. A review of existing questionnaires revealed that they were not suitable for local context. This paper presents the development and validation process of an instrument to measure the financial literacy of young adults. Based on extensive literature reviews and preliminary exploratory interviews, this instrument incorporates critical constructs of financial literacy in terms of knowledge, application and financial confidence. The initial version of the instrument consisted of eighty items and was administered to 228 respondents between the ages of 17-19. The instrument was further subjected to a rigorous review by both academic and industry experts and the data collected were validated. A final instrument was developed and psychometrically validated for future use in financial literacy researches in Singapore.