Our goal in this paper is to provide an overview of existing work in this important field, and also we provide new evidence from the data collected by the Programme for International Student Assessment (PISA) of the Organisation for Economic Co-operation and Development (OECD). As we show below, financial ignorance can be expensive and even ruinous, for many. Nevertheless, our research shows that many people make poor economic decisions because they are financially illiterate. Almost daily, our students, colleagues, relatives, and even strangers on airplanes ask us difficult questions including: “How many credit cards should I have, and how do I select them? Should I borrow for college, and how much is too much to pay? How much should I save in my 401(k) plan, and where do I invest it? Should I lease or buy a car? Should I rent or buy a place, and how much do I need to put down and what can I afford to pay? When can I afford to retire?” Obviously, not everyone needs an economics degree, but people do require some financial knowledge to make such decisions, or they should consult an advisor to help with these decisions. The modern economy increasingly requires consumers to make many complex and sometimes bewildering financial choices.
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