Critics:

Financial literacy in personal financial planning can be defined as objectively measured Financial Literacy and Subjectively measured financial literacy. Objectively measured literacy is mainly about the numerical understanding of facts like compound growth rate, portfolio investment, diversification benefits, and the impact of inflations on financial decisions.

Objective financial literacy has been measured with five 5-item tests, which we call the big five, that include questions related to interest rates, saving accounts, and inflation. Out of 5 questions, people who tend to answer three questions correctly counted as low financial literacy.

Subjective financial literacy is more of the self-perception of individuals about their financial literacy. Luradi and Mitchell (2014) identified that people rate their subjective financial literacy higher than objective financial literacy because of their behavioral biases when judging their financial knowledge subjectively. People often misestimate their financial knowledge.

Some financial literacy researchers have raised questions about the political character of financial literacy education, arguing that it justifies the shifting of greater financial risk (e.g. tuition fees, pensions, health care costs, etc.) to individuals from corporations and governments. Many of these researchers argue for a financial literacy education that is more critically oriented and broader in focus:

An education that helps individuals better understand systemic injustice and social exclusion, rather than one that understands financial failure as an individual problem and the character of financial risk as apolitical. Many researchers work within social justice, critical pedagogy, feminist and critical race theory paradigms.

The Journal of Financial Literacy and Wellbeing, published by Cambridge University Press, is a open-access academic journal established in April 2023. It publishes rigorous research on financial literacy and financial well-being. It aims to inform public policies as public, private and civil society strategies and activities, with the ultimate objective of improving the financial literacy, resilience, and well-being of individuals and micro and small entrepreneurs. 

This journal covers the topics including financial knowledge, financial attitudes and skills. This journal also includes research on related fields like financial well being. Accounting literacy refers to the ability to read and analyse financial statements of the company or individuals and understand the impact of financial decisions, This can be helpful for the investors, managers and individuals.

Accounting literacy can be combined with financial planning, tax planning and understanding the financial health of the company. Academic researchers have explored the relationship between financial literacy and accounting literacy. Roman L. Weil defines financial literacy as “the ability to understand the important accounting judgments management makes, why management makes them, and how management can use those judgments to manipulate financial statements”.

The 1999 Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees recommended that publicly traded companies have at least three members with “a certain basic ‘financial literacy’. Such ‘literacy’ signifies the ability to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.”

Digital financial literacy is all about the combination of Fintech and financial literacy. Digital Financial Literacy (DFL) combines objective financial literacy with the skills and ability of individuals to use digital devices to make financial decisions. There is a need for digital financial literacy across all consumers because of increasing fraud victimization due to digitalization, which prone individuals to misinformed financial decisions.

An international OECD study was published in late 2005 analysing financial literacy surveys in OECD countries. A selection of findings included:

• In Australia, 67 percent of respondents indicated that they understood the concept of compound interest, yet when asked to solve a problem using the concept, only 28% had a good understanding.
• A British survey found that consumers do not actively seek out financial information. The information they receive is acquired by chance, for example, by picking up a pamphlet at a bank or having a chance talk with a bank employee.
• A Canadian survey found that respondents considered choosing the right investments more stressful than going to the dentist.
• A survey of Korean high-school students showed that they had failing scores—that is, they answered fewer than 60 percent of the questions correctly—on tests designed to measure their ability to choose and manage a credit card, their knowledge about saving and investing for retirement, and their awareness of risk and the importance of insuring against it.
• A survey in the US found that four out of ten American workers need to be saving for retirement.