The role of financial literacy in payment defaults
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Mustonen, J., Buturak, G., Ruuskanen, O. P., Kalmi, P., & Vaahtoniemi, S. (2025). The role of financial literacy in payment defaults. Applied Economics, 1–18. https://doi.org/10.1080/00036846.2025.2567013
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© 2025 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way. The terms on which this article has been published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
Household indebtedness has increased in recent decades, and young adults have become financially independent during an era of low inflation and very low interest rates. However, recent changes in macroeconomic conditions have made it essential for individuals to understand the effects of inflation and interest rates on their net residual income. Otherwise, low financial literacy may cause individuals to make inferior financial decisions, which can be highly costly. In this paper, we study how financial literacy is related to payment defaults using Finnish survey data from early 2023. Our results suggest that financial literacy is negatively related to the likelihood of severe debt problems. We also show that being financially fragile is positively associated with the risk of default and that financial literacy substantially reduces the default risk for financially fragile individuals.
Emojulkaisu
ISBN
ISSN
1466-4283
0003-6846
0003-6846
Aihealue
Kausijulkaisu
Applied economics
OKM-julkaisutyyppi
A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä