Science for Education Today, 2023, vol. 13, no. 5, pp. 105–123
© Kormiltseva E. A., Simonova N. Y., Shmakova A. P., Filimonov V. A., Burmistrova N. A., 2023
UDC: 
336.011+378.14+511.13

The assessment of integrative potential of simple and compound interest models in increasing students’ financial literacy

Kormiltseva E. A. 1 (Moscow, Russian Federation), Simonova N. Y. 1 (Moscow, Russian Federation), Shmakova A. P. 1 (Moscow, Russian Federation), Filimonov V. A. 2 (Novosibirsk, Russian Federation), Burmistrova N. A. 1 (Moscow, Russian Federation)
1 Financial University under the Government of the Russian Federation
2 Sobolev Institute of Mathematics SB RAS
Full text (Open Access) — Downloaded 132
Abstract: 

Introduction. The article studies the contradiction between the unprecedented surge in financial technologies, which determines the relevance of financial decision-making, and the lack of the educational process organization in an economic university that takes into account the cumulative effect of using formalized models of simple and compound interests in terms of integrating academic disciplines. The objectives of the study are (1) to identify opportunities to increase students’ financial literacy using the integrative potential of academic disciplines and (2) to assess the relationship between skills in applying formalized methods of financial decision-making based on the models of simple and compound interests, and the dynamics of financial literacy that contributes to positive financial behaviors.
Materials and Methods. The methodological basis of the study is the Pareto principle, or the 20/80 rule, which says that 20 % of efforts give 80 % of the result and vice versa. Financial literacy of 224 students of Omsk economic universities was evaluated by means of an online survey. The questions reflected the objective level of respondents’ financial literacy, the subjective level and the need for further knowledge and skills in financial literacy.
Results. The study has identified the possibilities of increasing students’ financial literacy by using formalized models of simple and compound interests in terms of integrating academic disciplines.
The results of the analysis confirm that a higher level of financial literacy correlates to skills in applying simple and compound interest models and reveal a positive dynamics of the cumulative effect of integrating academic disciplines.
The use of the Pareto principle in this study confirms that skills in applying formalized models of simple and compound interests, which account for about 20 % of financial literacy (in terms of attitudes, knowledge and skills), determine 80 % of the positive dynamics in the overall financial literacy level.
Based on the findings, recommendations for managing educational process in order to ensure the positive dynamics of digital financial literacy have been provided.
Conclusions. The study suggests that it is a promising idea to use the integrative potential of simple and compound interest models in increasing financial literacy that contributes to positive financial behaviors of economic university graduates.

Keywords: 

Financial literacy; Assessment of financial literacy; Economic education; Integration; Simple interest model; Compound interest model.

For citation:
Kormiltseva E. A., Simonova N. Y., Shmakova A. P., Filimonov V. A., Burmistrova N. A. The assessment of integrative potential of simple and compound interest models in increasing students’ financial literacy. Science for Education Today, 2023, vol. 13, no. 5, pp. 105–123. DOI: http://dx.doi.org/10.15293/2658-6762.2305.05
References: 
  1. Ansari Y., Albarrak M. S., Sherfudeen N., Aman A. Examining the relationship between financial literacy and demographic factors and the overconfidence of Saudi investors. Finance Research Letters, 2023, vol. 52, pp. 103582. DOI: https://doi.org/10.1016/j.frl.2022.103582
  2. Figart D. M. Teaching financial literacy in the wake of the financial crisis.Consequences of Economic Downturn, 2011, pp. 239–257. DOI: https://doi.org/10.1057/9780230118355_12
  3. Gignac G., Gerrans P., Andersen C. B. Financial literacy mediates the effect between verbal intelligence and financial anxiety. Personality and Individual Differences, 2023, vol. 203, pp. 112025. DOI: https://doi.org/10.1016/j.paid.2022.112025
  4. Harahap S., Thoyib A., Sumiati S., Djazuli A. The impact of financial literacy on retirement planning with serial mediation of financial risk tolerance and saving behavior: Evidence of medium entrepreneurs in Indonesia. International Journal of Financial Studies, 2022, vol. 10 (3), pp. 66. DOI: https://doi.org/10.3390/ijfs10030066
  5. Hasan M., Le T., Hoque A. How does financial literacy impact on inclusive finance? Financial Innovation, 2021, vol. 7 (1), pp. 40. DOI: https://doi.org/10.1186/s40854-021-00259-9
  6. He X., Liu C. Monitoring attention of institutional investors and trade credit financing. Finance Research Letters, 2023, vol. 55, pp. 104007. DOI: https://doi.org/10.1016/j.frl.2023.104007
  7. Klapper L., Lusardi A. Financial literacy and financial resilience: Evidence from around the world. Financial Management, 2019, vol. 49 (3), pp. 589–614. DOI: https://doi.org/10.1111/fima.12283
  8. Kumar P., Pillai R., Kumar N., Tabash M. I. The interplay of skills, digital financial literacy, capability, and autonomy in financial decision making and well-being. Borsa Istanbul Review, 2022, vol. 23 (1), pp. 169–183. DOI: https://doi.org/10.1016/j.bir.2022.09.012
  9. Lin C.-A., Bates T. C. Smart people know how the economy works: Cognitive ability, economic knowledge and financial literacy. Intelligence, 2022, vol. 93, pp 101667. DOI: https://doi.org/10.1016/j.intell.2022.101667

10. Lo Prete A. Digital and financial literacy as determinants of digital payments and personal finance. Economic Letters, 2022, vol. 213, pp. 110378. DOI: https://doi.org/10.1016/j.econlet.2022.110378

11. Lo Prete A. Inequality and the finance you know: Does economic literacy matter? Economia Politica, 2018, vol. 35 (1), pp. 183–205. DOI: https://doi.org/10.1007/s40888-018-0097-3

12. Luderer B., Nollau V., Vetters K. Mathematics of finance. Mathematical Formulas for Economists, 2002, pp. 31–44. DOI: https://doi.org/10.1007/978-3-662-12431-4_5

13. Lusardi A., Hasler A., Yakoboski P. J. Building up financial literacy and financial resilience. Mind and Society, 2020, vol. 20 (2), pp. 181–187. DOI: https://doi.org/10.1007/s11299-020-00246-0

14. Mallik G., Shankar S. Does prior knowledge of economics and higher level mathematics improve student learning in principles of economics? Economic Analysis and Policy, 2015, vol. 49, pp. 66–73. DOI: https://doi.org/10.1016/j.eap.2015.12.001

15. Markle G. Crushing debt or savvy strategy? Financial literacy and student perceptions of their student loan debt. Journal of Student Financial Aid, 2019, vol. 49 (1). DOI: https://doi.org/10.55504/0884-9153.1651 

16. Menges K. K., Leonhard Ch. Factors that affect willingness to borrow student loans among community college students. Journal of Student Financial Aid, 2016, vol. 46 (2). DOI: https://doi.org/10.55504/0884-9153.1563 

17. Nicolini G, Haupt M. The assessment of financial literacy: New evidence from Europe. International Journal of Financial Studies, 2019, vol. 7 (3), pp. 54. DOI: https://doi.org/10.3390/ijfs7030054

18. Noviarini J., Coleman A., Roberts H., Whiting R. H. Financial literacy and retirees' resource allocation decisions in New Zealand. Pacific-Basin Finance Journal, 2023, vol. 79. DOI: https://doi.org/10.1016/j.pacfin.2023.101985

19. Sekita S., Kakkar V., Ogaki M. Wealth, financial literacy and behavioral biases in Japan: the effects of various types of financial literacy. Journal of the Japanese and International Economies, 2022, vol. 64, pp. 101190. DOI: https://doi.org/10.1016/j.jjie.2021.101190

20. Sharma S. Enablers to financial literacy: A DEMATEL approach. Procedia Computer Science, 2022, vol. 214, pp. 520–527. DOI: https://doi.org/10.1016/j.procs.2022.11.207

21. Sun G., Li T., Ai Y., Li Q. Digital finance and corporate financial fraud. International Review of Financial Analysis, 2023, vol. 87, pp. 102566. DOI: https://doi.org/10.1016/j.irfa.2023.102566

22. Vali S. Mathematics of interest rates and finance. Principles of Mathematical Economics, 2014, pp. 379–428. DOI: https://doi.org/10.2991/978-94-6239-036-2_12

23. Ostashevsky S. M., Petrova V. S. Financial literacy and ways to improve it as a current problem of professional education. Innovative development of vocational education, 2021, no. 3, pp. 86–90. (In Russian) URL: https://www.elibrary.ru/item.asp?id=46664551

24. Gulyaeva M. A. Integrated approach to formation of financial literacy of students of vocational educational organizations. Professional education in Russia and abroad, 2021, no. 4, pp. 11–20. (In Russian) DOI: https://doi.org/10.54509/22203036_2021_4_11 URL: https://www.elibrary.ru/item.asp?id=47697000

Date of the publication 31.10.2023