Assessing numerical reasoning provides insight into financial literacy

Financial literacy is linked to financial well-being and decision making. While financial literacy and numeracy skills are strongly related, the relevance of different aspects of numeracy (mental arithmetic, math achievement, and numerical reasoning) for financial literacy has not yet been examined. Data were collected from 88 cognitively healthy adults, mean age = 50 years (SD = 15); mean education = 15 years (SD = 2); 61% females; with 56% Caucasian, 36% Black, and 90% non-Hispanic. Financial literacy was measured with the widely used Big Three scale, and numeracy was measured with the Wechsler Adult Intelligence Scale-III, Arithmetic subtest; the Wide Range Achievement Test-IV, Math Computation subtest; and the Weller's Abbreviated Numeracy Scale (WANS). Regressions analyses were conducted with financial literacy as the outcome variable and each numeracy measure along with demographics (age, sex, and education) as the predictors. In all the models, only the numeracy measures were significant as individual predictors, with numerical reasoning holding the strongest association with financial literacy, followed by mental arithmetic and math achievement. The current study supports the existing literature that numeracy is important for financial literacy, and provides empirical evidence for the specific contributions of individual numeracy measures that clinicians may use to garner impressions about financial skills.