Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?

Paula Sarabando; Roge rio Matias; Pedro Vasconcelos; Tiago Miguel

doi:10.58567/jea02020007

Open Access Journal Article

Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?

by Paula Sarabando ^a,b , Roge rio Matias ^a , Pedro Vasconcelos ^c and Tiago Miguel ^a,*

School of Technology and Management, Polytechnic Institute of Viseu, Viseu, Portugal

Institute for Systems Engineering and Computers (INESC-Coimbra), Coimbra, Portugal

PricewaterhouseCoopers, Portugal

Author to whom correspondence should be addressed.

JEA 2023 2(2):28; https://doi.org/10.58567/jea02020007

Received: 2 March 2023 / Accepted: 19 April 2023 / Published Online: 28 April 2023

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Abstract

Financial literacy seems to be more important and focused than ever. Several recent studies have found that Portugal is at bottom of the table compared to the Eurozone countries regarding financial literacy. As it’s a key factor in the development of a country, it appears to be crucial to understand what people know about financial matters when they complete compulsory schooling. With a sample of 296 Portuguese students who enrolled in the polytechnic higher education system for the first time, we studied if they understand simple concepts related to financial issues (such as loans), as well as whether they are aware of the risk of not recovering the money invested that is embedded in some of the most talked-about and common financial products that are available in the market. This last objective seems to be relevant since a lot of fraudulent schemes involving teenagers, young adults, and financial markets have emerged in recent years. From the results, some disturbing conclusions can be drawn. For instance, more than two-thirds of the sample do not know what Euribor is (similar result regarding Spread). About a third of the simple do not understand inflation’s consequences. 16,9% do not know what term deposits are, and derivative products and saving certificates are seen as very alike regarding the risk they represent. Students who chose a business-related course as their first choice when applying showed a higher level of financial literacy, although it is still low compared to what one would expect.

Keywords: Financial literacy; Portugal; Risk perception; Personal finance;

Copyright: © 2023 by Sarabando, Matias, Vasconcelos and Miguel. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

APA Style

Sarabando, P., Matias, R. r., Vasconcelos, P., & Miguel, T. (2023). Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?.  Journal of Economic Analysis, 2(2), 28. doi:10.58567/jea02020007

ACS Style

Sarabando, P.; Matias, R. r.; Vasconcelos, P.; Miguel, T. Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?. Journal of Economic Analysis, 2023, 2, 28. doi:10.58567/jea02020007

AMA Style

Sarabando P, Matias R r, Vasconcelos P et al.. Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?. Journal of Economic Analysis; 2023, 2(2):28. doi:10.58567/jea02020007

Chicago/Turabian Style

Sarabando, Paula; Matias, Roge r.; Vasconcelos, Pedro; Miguel, Tiago 2023. "Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?" Journal of Economic Analysis 2, no.2:28. doi:10.58567/jea02020007

1. Introduction

In the 21st century, there’s a common idea that people are exposed to complex situations that require financial literacy. Nowadays, almost every daily decision includes a financial component. The complexity of financial products, the rise of new financial products, and globalization (which means higher financial products offered in all countries, as well as a faster spread of new economic conditions across the world, regularly changing the circumstances of the individuals) are three key points to justify why financial literacy is more important than ever. In addition, it seems that individuals are replacing companies and employers when it comes to making financial decisions ().

However, it appears to exist a lack of financial literacy. found that only a third of adults worldwide have an acceptable understanding of simple financial concepts. These authors stated that there are deep divergences between developed and developing countries in this matter. This study showed that European Union is clearly divided, with northern countries showing a level of financial literacy high above the average and southern countries showing markedly lower levels – countries like Romania, Italy, and Portugal are in evidence for the worst reasons.

Indeed, in Portugal, the problems regarding financial literacy have become more pronounced over the last few years, as shown by OECD/INFE (2020). In this study, Portugal is pointed out as one of the worst countries when it comes to financial literacy. The scenario is also delicate in terms of financial well-being, as Portugal is in the lowest position, alongside Croatia, Colombia, and Moldova. In addition, other factors can worsen the situation: the rise of interest rates and inflation. Recently, financial literacy seems to be more in focus, and a lot of articles and studies have been published, with a common conclusion to be highlighted: Portugal is one of the most (financially) illiterate countries in the Eurozone (Allianz, 2017; ECB, 2021; OECD/INFE, 2020). This said, financial illiteracy can be considered a public "health" problem, and unfortunately, in the education system, official programs haven’t given enough attention to this matter since Portugal is one of the countries with the lowest financial content in education (; PISA Results, 2018).

Since it is only possible to make good decisions if they are informed and well thought out, it is important to contribute to the improvement of the level of financial literacy, especially among young people, so that in the future better financial decisions could be taken, and improvements in the quality of life could be seen. There are several drivers for the learning of young adults when it comes to financial issues (). An important driver to see financial literacy disseminated is school. The school curriculum is, naturally, strongly conditioned by the perspectives of governments. The Portuguese government seems to want to introduce financial topics in compulsory education (Despacho^[1] n. º 702/2023, 2023).

With all the above in mind, this study will explore the level of financial literacy of new students of polytechnic higher education in Portugal in the academic year 2022/2023. The purpose of this investigation is to contribute to a more rigorous characterization of the level of financial literacy of young adults who have finished compulsory education at the time, seeking to understand if choosing a business-related higher education course is somehow related to financial literacy. Additionally, we propose to study students who enroll in courses in the polytechnic system, because there is a lack of studies that cover this part of the population, and it seems extremely important that this happens since polytechnic students tend to be more deprived, with less favorable family and socioeconomic conditions (EDULOG, 2019). This way, we focus our investigation on a very important population, not only because they are the future of the country, but also because they are the ones (within the higher education student population) for whom the financial knowledge would serve the most when it comes to improving living conditions. We hope this study could be useful for policymakers to implement financial literacy initiatives and reach people with less financial preparation. Furthermore, this study could serve as an important catalyst to the understanding of how young people evaluate financial products’ risk, and whether students enrolled in a business-related course are more likely to have a risk perception more adjusted to what should be expected since very few works have covered this kind of financial literacy’s topic until now.

Thus, aiming at its purpose, the article is segmented as follows: 1. Introduction; 2. Literature review, in which the concept of financial literacy is briefly explored 3. Results, where the sample is characterized, the sampling process, and the results obtained presented, subdivided by theme (namely, mathematical and financial sensitivity, economic concepts, and financial investments – risk perception); 4. Conclusions and future research, which contain the study’s main conclusions, highlight problems identified that may be the subject of investigation in the future.

2. Literature review

As mentioned by , although the core ideas are common, several institutions and authors provide different definitions of what financial literacy is and what it consists of. These authors define it as “the ability to understand the implications of interest, inflation, risks, and diversification”. In turn, , as cited in , defines financial literacy “as the ability of citizens to make financial decisions to satisfy their interests, both in the short and long term”. In a more simplistic perspective, describe financial literacy as “the ability to manage personal finances, in a short-, medium- and long-term perspective”. Also, in a study carried out by the OECD/INFE (2011), the term financial literacy is described as “a combination of awareness, knowledge, skill, attitude, and behavior necessary to make sound financial decisions and, ultimately, to achieve individual financial well-being. For National Foundation for Educational Research, as cited in in the “foreword” section, financial literacy is “the ability of individuals to make informed judgements and to take effective decisions regarding the use and management of money”. In short, it is about essential knowledge and information when it comes to making financial decisions – namely managing the family budget, managing bank accounts, and choosing financial products (loans and savings applications), among others – so that the alternative chosen meets the needs and observes the characteristics and context of the individual taking the decision (Banco de ; ).

As reported in Allianz (2017), financial literacy should be a transversal issue to any fringe of society, as so are financial decisions. The relevance of financial literacy extends to different aspects of human life, with the need to make good decisions so that the consequences are not catastrophic. Though it should be noted that decisions in the field of personal finances do not only affect the individual but the whole society, with a deterioration of collective well-being when bad financial decisions are made by individuals (Allianz, 2017; ). Financial literacy is extremely important for a country to progress economically and, therefore, improve many aspects of people’s lives. It is believed that education and knowledge transmission, when it comes to financial issues, are crucial for the future of young adults (but not only), as well as, thus, of the nation (; ). Recently, various governmental entities tried to reinforce the actions to increase the financial literacy level among the populace, particularly when it comes to young people. In fact, OECD (2005) recommended the inclusion of financial matters as early as possible in children’s life, ideally in the school curriculum. That seems to be happening in Portugal since financial topics were recently added to the school curriculum, even if in a very slight way (Despacho n. º 702/2023, 2023).

Some authors have documented that students who enrolled in a business-related course aren´t more prone to show a higher financial literacy level (Kubicková et al., 2019). On the other hand, have shown that students who attend (or attended) a business-related course tend to perform better when it comes to financial issues. Regarding other authors who investigated the relationship between attending a business-related course and financial literacy, it seems that a consensus conclusion doesn´t exist yet. Our study aims to contribute to this matter, studying a population (Portuguese youth) that hasn’t been studied yet on this topic, as it will be presented in this article.

On the other hand, it seems that financial markets play an important role in today’s youth, as the frauds related to financial markets, essentially foreign exchange markets (Forex) and cryptocurrency, have increased in the past few years, as reported, for example by Ministério Público . As several victims have stated, scams occur in a wide range of ways. Criminals lure victims by telling them that they have a booming business or that they could provide the victims with a large profit in a short time. Sometimes, the first “investment” gets a good profit, and that’s the way fraudsters elude the victims to invest a larger amount of money – and this larger “investment” is the one that victims never recover again since the scammers disappear without any reliable justification.

However, there are other tools scammers use to steal money from the victims (e.g., an announcement of an innovative software that can manage financial investment without the need for the victims to have financial knowledge, which leads them to “invest” money by trusting on this software). Related to the topic, there’s a concept that can’t be forgotten: the Ponzi scheme. This is the form the frauds use to take. It means that new participants feed the old ones, sustain the structure and, in time, are encouraged to recruit new members who will then be responsible for bringing in money. defines it as “investment scams wherein investors’ returns are generated by capital coming in from new investors rather than the success of the underlying business ventures”. Therefore, the more we can know about the characteristics of the victims (as well as the fraudsters and their modus operandi), the better we can fight these scams. Apparently, young adults and teenagers are the main victims (Lioyds ). This said, it seems important to understand how young adults are when it comes to evaluating financial products’ risk.

Very few studies have tried to understand the relationship between attending a business-related course and financial products’ risk perception, especially in the Portuguese context. As enrollment in a business-related course could be seen as having some interest in this field (at least, more than a student who enrolls in an engineering or medicine course, for example), it seems interesting to take into account conclusions. These authors have shown that higher interest in financial issues is associated with higher risk tolerance. Our study aims to contribute to validating this idea or to present an opposite conclusion. With this, it may be possible to better understand which type of young people have a more worrying perception of risk (namely if they are on a business-related course or not) and thus plan how to reach them and prepare them for common scams nowadays related to financial markets.

3. Results

3.1. Sampling procedure description

This study was based on data collected from September 2022 to November 2022 and focused on students who have entered, for the first time, the Portuguese polytechnic higher education system in the academic year 2022/2023, mainly in a business-related course, though not exclusively. The purpose of including responses from students who joined courses from other areas is to determine whether there are significant differences between those who are interested in pursuing careers in business sciences and those who want to pursue academic degrees in other fields. In this sense, we note that some studies have documented that students from non-economic or management departments have lower levels of financial literacy (Ergün, 2018). Hence, the sample was expanded to include responses from students who enrolled in courses at other Polytechnic Institute of Viseu’s (hereinafter referred to as “IPV”) schools in the same academic year.

The survey was conducted whichn digita” for’at, and it was disseminated among students by higher educational institutions that collaborated on this academic research. 464 valid responses from students were obtained, but only 296 stated it was the first time they enrolled in a higher educational system, so only these were considered for the subsequent analysis, as we aim to understand what people know when they complete compulsory schooling, without any experience in the higher education system. All the questions related to the students’ financial knowledge can be seen in (which is in the appendix, as well as all the tables mentioned later in this paper), and each question has an associated code (Q1 to Q11).

To conduct this study, we consider a 95% confidence level. Therefore, considering the 296 valid answers we obtained, the margin of error is approximately 5.61%. The method to collect the data is a non-probability sampling method: convenience sampling. We are aware of the possible biases associated with this method, but considering our objective and the features of our study, this method seems to be the most appropriate one since it’s easier to collect a larger number of responses from students enrolled in different polytechnics. As said before, we chose undergraduate students who have just enrolled in the higher education system as our population because we aim to measure what youth know about financial issues in the early years after finishing compulsory school, as this way, it’s possible to get an idea of how well the compulsory school has been when it comes to promoting and improving financial literacy among young people. Furthermore, we chose polytechnic system students because it’s said they are the ones who come from less favorable circumstances (when it comes to financial and familiar aspects), as mentioned in EDULOG (2019).

Considering that our sample is deliberately constituted of undergraduate students, we believe that there are a couple of ideas that should be kept in mind. On the one hand, it isn’t expected a considerable level of practical experience regarding the questions presented in this investigation, as most of them probably have never taken a relevant loan (they are not at the age of buying a house, and it is not that usual to take a loan in Portugal to study) and have never had enough money to start investing it in financial markets seriously and regularly. On the other hand, as students enrolled in higher education courses, they are expected to have the ability to easily understand and to show a certain level of reasoning when it comes to the questions presented in this study since none of them is considered as being cognitively challenging regarding its format or the reasoning implicit for its understanding.

3.2. Characteristics of the participants

Of those who participated in the survey, 58.1% (172 students) were male, 41.6% (123 students) were female, and 0.3% (1 student) were nonbinary. The youngest student to respond to the survey was 17 years old, and the oldest was 58 years old, thus resulting in an average age of the respondents of 21 years old, with a standard deviation of 6.8 years, suggesting a sample primarily composed of young students. Additionally, 21.3% (63 students) enrolled in CteSP courses, and the remaining enrolled in degree courses (233 students – 78.7%). The percentage of students who chose a business-related course was 41.6% (123 students).

Even though the study’s target audience was all students who enrolled in Portuguese polytechnic higher education programs in the business-related area and all students who enrolled in a course at IPV, the majority of responses came from students who enrolled in the IPV’s Technology and Management School (202 students – 68.2%). Nevertheless, we also received a significant number of responses from students who enrolled at the Polytechnic Institute of Portalegre (14 students – 4.7%), the IPV’s Agrarian School (15 students – 5.1%), and the Institute of Accounting and Administration of Aveiro University (27 students – 9.1%). We received responses from students from all 18 districts of continental Portugal, as well as one from a student from Madeira. However, Viseu (150 students – 50.7%), Aveiro (37 students – 12.5%), and Porto (23 students – 7.8%) stood out. Apart from the mentioned districts, we received few responses from each of the others (less than 12 students, which was the number of answers we obtained from Braga).

When it comes to secondary education courses attended, the scientific-humanistic course – science and technology is the most common in our sample (95 students – 32.1%), followed by professional courses in other areas than economic and business sciences (81 students – 27.4%) and scientific-humanistic course – socioeconomic sciences (46 students – 15.5%). Only 12 students (4.1%) attended a professional course in economic and business sciences. Considering this, one can say that only 19.6% attended a course related to economics and business in secondary – 15.5% from socioeconomic sciences course and 4.1% from professional course within the area. This is something that should be kept in mind while reading the results presented in the next sections.

Detailed results regarding the sociodemographic characteristics of the sample can be found in .

3.3. Students’ financial knowledge

3.3.1. Financial and mathematics sensitivity

Regarding financial and mathematics sensitivity, there was a more specific section of the survey that contemplated three straightforward questions (Q1, Q2, and Q3) on daily situations involving percentages (calculation and perception of their impact) and the idea of inflation. The answers to these questions can be found in . In relation to Q1, it was found that 57.1% (169 students) correctly answered, 5.1% (15 students) said they were unsure about the answer, and the remaining students erred (37.8% – 112 students). The Q2 results were similar. These numbers clearly show some difficulty in calculating a percentage that was thought to be straightforward. Regarding Q3, 67.9% (201 students) indicated that they understand the concept of inflation, whereas 23.3% (69 students) admitted they were unsure of the answer, and the remaining students (8.8% - 26 students) erred in their responses. It is important to note that this was a seemingly simple question that required no calculations. While the country is reaching historically high levels of inflation, students demonstrated a lack of understanding of both its meaning and, consequently, its implications.

The relationship between the answers to questions Q1 and Q2 and the decision to pursue a business-related course as one’s first option is not significant (Chi-Square test for independence, p-value = 0.37 and 0.44, respectively). On the other hand, the relationship between the responses to question Q3 and the fact that the student chose a business-related course as the first choice is significant (p-value = 0.006) despite not being particularly strong (contingency coefficient = 0.184). The rate of correct answers is noticeably higher among students who chose a business-related course as their first choice. See .

When discussing financial literacy, a key concept to keep in mind is the notion of the time value of money. The truth is that whether we have access to a given amount immediately or over the course of some period, it does not have the same value for us (CFI, 2022; ; ). It is crucial to recognize if and to what extent students realize that the value of money changes over time. Two questions were placed to determine whether students understood this (Q4 e Q5). The answers to these questions can be found in . When asked whether they would prefer to receive the same amount of money today or one year from now (Q4), 77.4% of the students (229) indicated that they would choose the answer that seems the most logical and accurate – today. However, when the question is reversed, i.e., choosing between paying today or waiting a year from now to pay, merely 33.8% (100 students) say they would prefer to pay only next year, which seems to be the more intuitive and accurate option during regular economic periods. In the previous question, perhaps the students have used other justifications for their choice besides financial ones. From a strictly financial standpoint, it makes sense to prefer having a certain amount on hand as soon as possible (receiving it as soon as possible) and maintaining it for as long as possible (paying it as late as possible); this is known as “preference for liquidity”. There is no statistically significant correlation between the answers to questions Q4 and Q5 and the fact that students have chosen a business-related course as their first choice (p-value = 0.721 and 0.509, respectively).

3.3.2. Financial and mathematics sensitivity

The concept of interest is one that affects how we live our daily lives. To determine whether students can understand the concept of interest and distinguish between a simple interest and a compound interest, we posed two questions (Q6 e Q7). The answers to these questions can be seen in . The responses were quite unexpected and not for the best reasons. Only 48.6% (144 students) understand the concept of simple interest (Q6), and 15.5% (46 students) do not follow up with a response. The answers are still worse when they relate to compound interest (Q7), and it is important to note that there was no apparent complicated calculation involved – only 33.8% of the students (100 students) responded correctly, while 22.6% (67 students) claimed to be unsure and the remaining students indicated an incorrect answer. Given that these concepts are linked to numerous significant aspects of people’s lives (e.g., housing and personal loans), it is worrisome to realize that more than half of the students, future adults, do not understand them. The relationship between the answers to questions Q6 and Q7 and whether the student chose a business-related course as their first option is not statistically significant (p-value = 0.782 and 0.363, respectively).

With the increase of Euribor and its impact on many loans’ installments, Portuguese families seem to be in financial trouble in fulfilling their obligations under contract agreements. Questions Q8, Q9, and Q10 are intended to determine whether young adults have knowledge of concepts related to loans: whether they are aware that in loans’ payments, in addition to capital amortization, interest is also paid, and whether they are aware of the terms “Spread” and “Euribor” (crucial concepts to the formation of the active interest rate linked to an ordinary loan). The results are shown in . Regarding Q8, the majority of students (64.2% – 190 students) believe that if they ask for a €1000 loan to be paid back in ten installments, each installment will be greater than €100. However, there is a significant percentage of students who do not know (17.9% – 53 students), and the most concerning statistic is that 23 students (7.8%) believe that each payment will be less than €100. Concerning the meaning of the Euribor (Q9), 103 students (34.8%) reveal that they have no idea, whereas 96 students (32.4%) incorrectly believe that it is a rate set by the European Central Bank and less than a third got it right. In terms of Spread (Q10), 44.6% (132 students) of those polled do not understand what it means, while only 30.1% (89 students) do. With a 5% level of significance, the relationship between the answers to Q8, Q9, and Q10 and the decision to pursue a business-related course can be considered significant (p-value = 0.039, 0.026, 0.002, respectively), despite being weak (contingency coefficient = 0.166, 0.190, 0.220, respectively). The percentages of correct answers in the three questions are higher for students who chose a business-related course as the first option. See .

It tested the association between all the questions and the course attended in secondary school. It was found that students who attended the socioeconomic course are more prone to prefer the money today rather than only one year from now, and technology and natural sciences students are less prone to have this pattern of preference (p-value = 0.005; contingency coefficient = 0.244). The other questions’ answers aren’t related to the course attended at a secondary level considering a 5% level of significance.

3.4. Financial applications: risk perception

In personal finance, savings are crucial. There are numerous ways to apply savings, so it is necessary to analyze them and choose the ones that fit the characteristics of the investor. The purpose of the final question (Q11) is to determine whether the respondents are aware of the various ways to apply savings and what its characteristics are, namely the level of risk of not recovering the money invested.

The answers to Q11 can be found in . About 25% of respondents believe that pension saving plans carry a high (or very high) level of risk, while about 32% of respondents share this opinion regarding cryptocurrencies, which look too similar, attending to all the discrepancies between these products when it comes to the risk they represent. Nearly 17% do not know what term deposits are, and more than 21% believe it is a high (or very high) risk product. It seems quite surprising since it could be considered the most well-known product – and one that represents a very low level of risk. Of those who are familiar with NFT, the percentage who say it is a high-risk product is similar to the percentage who consider it a low-risk product (around 35% for both perceptions). Likewise, within the group who say they are somehow familiar with Forex, the proportion of those who assess this type of product as low risk (33%) is similar to the proportion of those who consider this investment to be high-risk (38%).

For a significance level of 5%, the association between having chosen a business-related course and the answers given concerning stocks (p-value = 0.041, contingency coefficient = 0.194), bonds (p-value = 0.001, contingency coefficient = 0.252), savings certificates (p-value = 0. 014, contingency coefficient = 0.215), investments funds (p-value = 0.014, contingency coefficient = 0.215), term deposits (p-value = 0.011, contingency coefficient =0.218), Forex (p-value = 0.009, contingency coefficient =0.222) and NFT (p-value = 0.033, contingency coefficient =0.198) can be considered significant. See .

The percentage of those who say they do not know what stocks are whichs considerably higher among those who didn’t choose a business-related course as the first option (17.3%, compared to 4.9%) – this difference produces a significant effect on the high-risk level perception, essentially. A very similar pattern could be seen when it comes to bonds, besides the very higher percentage of those who assume they don’t know the definition of bonds (39.3% for those who didn’t choose a business-related course as the first option and 21.1% for those who did).

Related to savings certificates, it is interesting to note that, despite significant differences in terms of unfamiliarity with the product between those who chose a business-related course as the first option and those who didn’t, 30% of those who didn’t choose a business-related course as a first option consider this product to be low risky, and 30% of those who chose a business-related course as the first option have the same perception. This is somewhat surprising since it is a low-risk product and, therefore, it is expected that the group more familiar with the product could have a higher percentage of perception of low risk. A similar pattern could be seen in investment funds since it is significantly more familiar to those who chose a business-related course as the first option, but a higher percentage of those who didn’t choose a business-related course as the first option consider it a low-risk product.

Within the group of those who didn’t choose a business-related course as the first option, 20.8% assumed that they don’t know what term deposits are (almost doubled the percentage compared to the group of those who chose a business-related course as the first option). However, the group of those who didn’t choose a business-related course as the first option presents a higher percentage of high-risk perception (around 35%), and it is important to

note that the percentage of high-risk perception within the group of those who chose a business-related course as the first option is also quite high – more than 30%. These findings can be described as catastrophic and worrisome.

Regarding Forex, a very similar proportion of both groups revealed not to know what this financial product is. However, it should be noted that it’s within the group of those who chose a business-related course as the first option that seems to exist a more accurate perception of the product’s risk, since only 17.1% classified Forex as a low-risk product, compared to the 32.4% of the other group. It is something to be focused since the ones who supposedly have less interest and knowledge in the matter (as they didn’t choose a business-related as the first option to enroll in higher education system) seem to perceive Forex as less risky and, therefore, they could be more prone to be scammed in fraudulent schemes.

Surprisingly, NFTs are more familiar to those who didn’t choose a business-related course as their first option (69.9%, compared to 56.9%). Furthermore, it seems that this group is quite more prone not to consider NFT a high-risk product, since almost 28% assessed it as a low-risk product (less than 25% evaluated it as high-risk), while only 13% of those who chose a business-related course as first option shown the same perception of risk (and more than 25% evaluated it as high-risk product). And this is, one more time, quite disturbing to note.

The relationship between choosing a business-related course and the responses provided about investment funds (p-value = 0.067), pension saving plans (p-value = 0.626), derivative products (p-value = 0.156), and cryptocurrencies (p-value = 0.647) cannot be deemed significant.

3.5. Critical analysis of the results

The findings of this study are not very optimistic and highlight some knowledge gaps among young adults regarding daily financial situations. Students who enrolled in a business-related course performed better in some topics. That differs from the conclusions presented in Kubicková et al. (2019), in which was possible to understand that students from a business field don’t perform significantly different from other students who attend other academic fields, even considering that these authors’ sample is composed of 16–18-year-old students. On the other hand, our results are aligned with other authors that found a significant relationship between financial literacy and the study’s field, pointing out that the youth who attend (or attended) a business-related course tend to perform better regarding financial literacy matters, as . However, even for these students (who enrolled in a business-related course), the percentage of wrong or “don’t know” answers are quite disturbing since it’s still very high.

Nevertheless, it seems important to note that the enrolment in a business-related course doesn’t mean students had studied financial matters before at compulsory school since a student who attended Science and Technology course in secondary can easily enroll in a management, finance, or economics degree. This said, it should be noted that no significant differences were found between students with different secondary backgrounds in almost every topic considered in this study. This seems to be of interest to the Portuguese government, as it shows that all kinds of secondary courses are quite similar to each other when it comes to financial literacy. Apparently, it means that no different approaches – depending on the secondary course’s field of knowledge – are needed to improve teens’ financial literacy during compulsory school. Therefore, the difference between the students who enrolled in a business-related course could be justified as a matter of personal interest, considering that it doesn’t depend on the course attended in secondary.

Also, as mentioned before, with a high level of inflation and other economic factors, it seems to be very important that everyone knows how to manage their money, in particular when it comes to their savings. The results are quite unsettling. Surprisingly, term deposits are more unknown than cryptocurrencies. Furthermore, the percentage of those who assess cryptocurrency as a low-risk product is very similar to the percentage of those who assess this financial product as a high-risk product (about one-third of the total sample for both). In fact, several studies have provided evidence that supports the idea of a high-risk level regarding cryptocurrency. documented that cryptocurrency investors are exposed to a very high-risk level of (daily) losses. , in a different way, reinforced the high-risk level idea when it comes to cryptocurrency, highlighting that it could be even more risky for inexperienced traders, and the social pressure – implicit in social media, news and related to the Fear Of Missing Out (FOMO), as mentioned by the authors – can be a key point increasing risky behaviors tendency that could lead to dangerous financial situations. pointed out that diversification plays no significant role in reducing the risk regarding cryptocurrency (within this market), and highlighted the inherent risk in it, as other authors did. All this said, it could be interesting to see raised the cryptocurrency awareness among the Portuguese populace (particularly teenagers and young adults) since numerous fraud schemes related to cryptocurrency (even not only) have been noted in the past few years, as reported (Ministério Público ).

However, the apparent misunderstanding in regard to financial products’ level of risk is far wider than simply cryptocurrency matter, as, for instance, the percentage of those who evaluate derivatives as high-level risk is similar to the percentage of those who evaluate saving certificates as high-level risk – the same happens when it comes to Forex and stock funds, since the percentages of those who evaluate these products as high-level risk are very similar. In truth, these peculiar risk perceptions could be related to the poor results obtained regarding economic and financial concepts (e.g., the definition of Euribor and Spread, as mentioned earlier in this paper). stated a set of interesting conclusions about financial literacy and the attitude adopted when investing in savings. According to these authors, the ones with a lower financial literacy level are more risk-loving than the ones with a higher financial literacy level, as well as more prone to exhibit a higher overconfidence level, which may lead these individuals to be more susceptible to participate and to be scammed by fraudulent schemes. Hence, this may explain why our sample (with a low financial literacy level shown) is prone to evaluate highly volatile and high-risk financial products as not so risky.

On the other hand, it appears that those who have chosen a business-related course as their first choice at the time they applied for higher education tend to exhibit slightly fewer worrying perceptions of risk when it comes to financial products. It could be explained by the fact that a student who chooses a business-related course is supposed to be more interested in those matters, therefore a little bit more informed and aware of the financial products’ features. , conversely, found that a high interest in financial issues is associated with a higher risk tolerance, which partly invalidates our suggestion that the less disturbing results within the group of those who chose a business-related course as the first option could be explained by the interest they have on financial topics. Nevertheless, we propose that the lack of awareness among our sample could play an important role in that, biasing and diverting the results from those obtained by the cited authors. However, even within the group that showed a slightly less misaligned perception of risk, the results indicate a perception of risk by the sample that is quite unbalanced and not in line with what one might expect. It could be said that this is due to the age of the individuals in the sample. In fact, some authors found evidence that leads to the idea of a higher risk tolerance and risk-seeking behavior among young people when compared to older adults (), with a decrease in the propensity to take risks as age increases (). Nevertheless, several other authors as found that older people show a higher risk tolerance in financial matters. Taking all this into account, it seems that what is important to highlight is, in fact, the extremism regarding risk tolerance and the considerably misaligned risk perception presented by the sample, regardless of being composed of very young individuals.

It is extremely important to understand why the results are so unsettling. At this point, it is quite difficult for us to indicate proven reasons to justify the results above. However, there are a couple of points we want to highlight as possible justifications. First, as already said in this work, the compulsory school doesn’t conveniently cover these financial topics. An effort is being made recently, especially with younger kids, but, in our opinion, still inefficient. So, a large majority of the students who answered this survey did not benefit from these efforts, for sure. Thus, it seems that the principal reason for them to acquire knowledge in this field is self-interest since they are not incentivized at school. In addition, the feedback we have already received from teachers, who are forced to talk about financial matters after the latest Portuguese government policies regarding financial literacy in compulsory school, is that they aren´t ready to successfully teach these matters, since they are from other fields (e.g., mathematic, natural sciences, geography, foreign languages, etc.). Another possible reason is that the students from our sample are quite young (an average of 21 years old). It means that few respondents have already gone through a major financial decision (such as a loan), and therefore not so likely to have already searched about the topics we study in this article. The last reason we present is related to cultural and historical features. In the last century, the Portuguese population was little stimulated to take the initiative and take control of their own lives (at least, compared to other developed countries). This lack of self-empowerment didn’t happen just during the dictatorship, it has also been seen in the last 50 years of democracy, although in a different way. Furthermore, it is a country with a low level of individualism, as documented by several authors (e.g., ). This said, Portuguese eoplee may trust too much whichn the government (and other relevant entities) to solve the problems, whichh leads to a low level of initiative when it comes to learning about financial and economic subjects.

4. Main conclusions and future research

Financial literacy is seen as crucial to increasing the well-being of the population. However, several studies have shown that a long path is yet to be done regarding the lower-than-expected level presented by different samples among developed countries (as well as developing ones). Particularly, Portugal has been tagged as being one of the poorest countries when it comes to financial knowledge in Europe. This said, the current study was made to give evidence of how financial literacy is among young people, namely among the ones who enrolled in the Portuguese polytechnic higher education system in 2022/2023. In particular, the defined goal intended to understand if the level of financial literacy or the risk perceived related to the various financial products are affected by some determinants (such as the course in which students enrolled or the course they attended in secondary school).

Unfortunately, the findings of this work confirm the studies that place Portugal in a precarious situation regarding financial knowledge. All the questions were meant to be answered quickly, and no difficult calculations had to be done. However, despite this, the correct response rates remained significantly below what would be expected. Yet, it is important to keep in mind that students who choose a business-related course have a higher sensitivity to some of the issues covered in this investigation.

Several economic concepts and ideas are unknown to a very considerable part of the sample in this study. We could highlight that around two-thirds do not know what Euribor is, and the percentage is very similar for those who do not know what the Spread is. Almost a third of respondents do not know what inflation is. A socioeconomics course attended in secondary school seems to play no significant role in these results, which may indicate that not very dissimilar actions could be applied to the various secondary school courses, without distinction.

When it comes to the perception of risk regarding financial products, disturbing results were found. Term deposits are more unknown than cryptocurrency, and for this last one, one-third evaluate it as high-risk level and one-third evaluate it as low-risk level, a risk assessment that is too balanced for this type of financial product. Moreover, looking at the results, it is possible to draw several surprising conclusions – for instance, it seems that derivatives and saving certificates represent a similar risk, which is something far from the truth. Having put a business-related course as a first choice when applying for higher education seems to indicate a slightly less worrying set of responses regarding risk perception. This could be due to the fact that these young people have more interest in these subjects. However, even within this group, the results indicate that actions are truly necessary.

We would like to mention some limitations of this study. First, we did not get enough responses from different schools to make the sample sufficiently spread out regarding the region of the respondents and the school they enrolled in. This means that our sample has too many responses from one single school compared to the total, which restricts the possibility of drawing more comprehensive conclusions. Second, as it was conducted online, we hadn’t had the chance to clarify any pertinent doubt from the respondents, which could mean that some answers aren’t correct due to a misunderstanding of something not related to financial literacy. Also, very few studies have been done before with a wide range of questions, as we tried to do in this research, so we may not have chosen the right ones to measure some topics, since we didn't find it that much in the previous literature - most studies used far fewer questions.

In addition to the conclusions drawn in this article, it is our intention to explore further relationships between some variables and financial literacy levels. More specifically, it determines whether there are differences in knowledge between genders, whether the student's place of residence affects the answers provided, and whether parental academic education is linked to student knowledge. Moreover, the relationship between the results obtained among students who enroll in higher education for the first time and those who have completed more than one enrolment is also a topic of analysis for future studies. However, regardless of any conclusions that may be drawn in the future, it is already possible to spot some gaps in young adults' financial knowledge.

It seems that a lot can be added to this topic in the near future, given financial literacy’s role in some problems that are getting more and more attention (such as retirement pensions) and the lack of knowledge it appears to exist. Moreover, it is a topic still far from being truly and seriously covered in compulsory education, which promises to be a topic in evidence in the coming years. A couple of justifications could be addressed to this cause. In our view, the key to developing the financial literacy approach in compulsory education could be the preparation given to teachers who are delegated the task of talking about these issues. Lack of preparation, awareness, and motivation of teachers could be a dangerous thorn in the financial literacy side – but it should be noted that many of these teachers, who have not been trained to talk about financial issues, should not be blamed.

There’s an initiative of the National Council of Financial Supervisors – which includes the Bank of Portugal, the Portuguese Securities Market Commission, and the Insurance and Pension Funds Supervisory Authority – that deserves to be highlighted. It started more than a decade ago, and the main objective is clear: improve the level of financial literacy and promote appropriate financial behavior. In order to achieve this objective, this works as an instrument aimed at stimulating and disseminating financial literacy projects in which public and private entities participate. Within the scope of this project, an online portal was launched in which people can find very relevant content regarding financial topics (including credit, taxes, and investment matters), and, therefore, it is seen as a very useful tool to truly improve financial knowledge among the Portuguese population. In addition, it aims to be easy to understand from a language point of view. However, its progress has been very slow, as most students in secondary or higher education are unaware of the initiative and its purpose – actions have been scarce or insufficiently impactful.

Besides that, some other initiatives have emerged over the past but suffer from a number of problems that limit their growth or impact: lack of long-term planning, lack of vigor as regards the mode of intervention (either because they are not linked to a larger project and with important stakeholders involved or for another reason), and are therefore completely voluntaristic, depending solely on the will of the few people involved. However, these initiatives should be applauded and encouraged, as their impact is real, even if it is not at the maximum exponent of what it could be. Possibly, it might be good to have a plan where these "disconnected" initiatives could be aligned, complement each other, and contribute to something more impactful.

This said, all the efforts made in terms of initiatives that seek to enrich the population with information and knowledge will count. It is important to increase the level of financial literacy, both in terms of credit, savings, and investment. It is necessary to alert to the importance of saving and awareness when consuming. It is important to discuss the idea of investing and its significance in the pursuit of better future living conditions, as well as the risks and considerations that must be made at the time of investing: raising awareness of the significance of going through an auto-discovery process and becoming familiar with financial products to make weighted decisions that are in line with each person's preferences, characteristics, and ambitions. To give continuity to the process of learning about financial investments, it is necessary to educate the public on the variety of financial products available, focusing on its characteristics and citing reliable sources. Finally, it is necessary to warn people that fraudulent situations exist. It could be a good idea to design approaches considering current daily patterns, including a strong social media component on this, as it would then be possible to reach a much larger number of people. The language used could also be a key factor, as some people may find the very technical language too complex.

Funding Statement

This research was funded by the project “IPV Inova e Inclui. IPV I2”, grant POCH-02-53I2-FSE-000014 SKILLS 4 PÓS-COVID — COMPETÊNCIAS PARA O FUTURO NO ENSINO SUPERIOR, by Portugal2020 and European Social Fund (European Union). In addition, this work was supported by INESC Coimbra, within the scope of project UIDB/00308/2020.

Acknowledgment

Acknowledgments to anonymous referees' comments and editor's effort.

Declaration of Competing Interest

All the authors claim that the manuscript is completely original. The authors also declare no conflict of interest.

Notes

Despacho is a Portuguese name for a Government Order. In this case, it is a Despacho from Ministério da Educação (Ministry of Education) ↑

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Table 1. Questions in the survey (Q1-Q11).

Q1	Mr. X owns a coffee shop. Recently, he increased the price of each coffee from 50 to 60 cents. What was the percentage increase in the price of coffee? (5%, 10%, 20%, other, I don’t know)
Q2	Mr. Y’s current monthly salary of €1000 will increase by 20%. After the increase, 20% of his income will be used to pay taxes and contributions. After these taxes and contributions are discounted, how much would Mr. Y receive? (Exactly €1000, more than €1000, less than €1000, I don´t know)
Q3	If a short-term deposit has a 3% annual interest rate and the annual inflation rate is 4%, you will be able to buy, on average: (more than today, less than today, exactly the same as today, I don´t know)
Q4	You were awarded a €1000 prize. Would you rather receive this award now or in a year from now (at that time, also €1000)? (Today, one year from now, I don’t have a preference)
Q5	You must pay a €1000 charge. Would you rather pay it now or in a year from now (at that time, also €1000)? (Today, one year from now, I don’t have a preference)
Q6	Imagine making a €1000 long-term deposit with a 2% annual interest rate. The bank calculates interest once a year and does not pay interest on interest. There are no withdrawals or additional deposits. There are no taxes or commissions. What will be the balance of this bank account three years later? (€1060, less than €1060, more than €1060, I don’t know)
Q7	Imagine making a €1000 long-term deposit with a 2% annual interest rate. The bank calculates interest once a year and pays interest on interest. There are no withdrawals or additional deposits. There are no taxes or commissions. What will be the balance of this bank account three years later? (€1060, less than €1060, more than €1060, I don’t know)
Q8	Assume you have taken a €1000 loan today with a 4% annual interest rate. To refund your debt in ten equal payments, each one must be: (exactly €100, more than €100, less than €100, I don´t know)
Q9	What is the Euribor? (Rate set by the European Central Bank, rate set by the Bank of Portugal, rate based on loans that a panel of banks lends to each other, rate set by the European Parliament, I don´t know)
Q10	What is the Spread? (The interest rate that banks charge on loans; additional, equal for all customers, that banks apply to an interest rate, to determine the final interest rate for the customer; additional, variable from customer to customer, that banks apply to an interest rate, to determine the final interest rate for the customer; I don’t know)
Q11	How would you categorize the following financial products in terms of their likelihood of not returning the money invested in it after five years (0 = I don’t know this financial product; 1 = extremely low probability to 5 = extremely high probability)?1. Stocks; 2. Bonds; 3. Savings certificates; 4. Investment funds; 5. Stock funds; 6. Pension saving plans; 7. Term deposits; 8. Foreign exchange market (Forex); 9. Derivative products; 10. Cryptocurrencies; 11. Non-Fungible Tokens (NFT).

Table 2. Sociodemographic characteristics of the sample.

Gender		Frequency	Percentage
Male		172	58.1
Female		123	41.6
Nonbinary		1	0.3
Type of course enrolled		Frequency	Percentage
CteSP		63	21.3
Degree courses		233	78.7
Choose a business-related course as their first choice?		Frequency	Percentage
Yes		123	41.6
No		173	58.4
Schools		Frequency	Percentage
IP Portalegre – ESTG		14	4.7
IP Porto – ESTG		8	2.7
IP Viana do Castelo – ESCE		3	1.0
IP Viseu – ESAV		15	5.1
IP Viseu – ESEV		2	0.7
IP Bragança – ESTiG		8	2.7
IP Viseu – ESSV		2	0.7
IP Viseu – ESTGL		5	1.7
IP Viseu – ESTGV		202	68.2
UA-ISCA		27	9.1
Ualg – ESGHT		7	2.4
IP Coimbra – ISCAC		1	0.7
Other		2	0.3
District		Frequency	Percentage
Aveiro		37	12.5
Leiria		9	3.0
Lisboa		9	3.0
Portalegre		8	2.7
Porto		23	7.8
Santarém		4	1.4
Setúbal		1	0.3
Viana do Castelo		3	1.0
Vila Real		4	1.4
Viseu		150	50.7
Beja		1	0.3
Madeira (Região Autónoma)		1	0.3
Braga		12	4.1
Bragança		5	1.7
Castelo Branco		1	0.3
Coimbra		8	2.7
Évora		4	1.4
Faro		7	2.4
Guarda		9	3.0
Secondary education course attended		Frequency	Percentage
Scientific-humanistic course – Science and Technology		95	32,1
Scientific-humanistic course – Socioeconomic Sciences		46	15,5
Scientific-humanistic course – Languages and Humanities		28	9,5
Scientific-humanistic course – Visual Arts		9	3,0
Education and Training Course or Apprenticeship Course		5	1,7
Professional Course in Economic and Business Sciences		12	4,1
Professional Courses in other areas		81	27,4
Technological Course		17	5,7
Artistic Course		3	1,0
Age
Mean	21
Standard Deviation	6,8
Minimum	17
First Quartile	18
Median	19
Third Quartile	20
Maximum	58

Table 3. Responses to Q1, Q2, and Q3 (absolute frequency and percentage).

Table 4. Responses to Q3 depend on whether they chose a business-related course as the first option.

Table 5. Responses to Q4 e Q5 (absolute frequency and percentage).

Table 6. Responses to Q6 e Q7 (absolute frequency and percentage).

Table 7. Responses to Q8, Q9 and Q10 (absolute frequency and percentage).

Table 8. Responses to Q8, Q9, and Q10 depended on whether they chose a business-related course as the first option.

Table 9. Responses to Q11 (absolute frequency and percentage).

Table 10. Responses to Q11 depend on whether they chose a business-related course as the first option.

Q3/business-related course	Yes	No
Wrong answer	4.9%	11.6%
Correct answer	78%	60.7%
I don’t know	17.1%	27.7%

Q8/business-related course	Yes	No
Exactly € 100	8.9%	11%
More than € 100	73.2%	57.8%
Less than € 100	6.5%	8.7%
I don’t know	11.4%	22.5%
Q9/ business-related course	Yes	No
Rate set by the European Central Bank	31.7%	32.9%
Rate set by the Bank of Portugal	0.8%	1.7%
Rate based on loans that a panel of banks lend to each other	35.8%	19.7%
Rate set by the European Parliament	4.1%	5.8%
I don’t know	27.6%	39.9%
Q10/ business-related course	Yes	No
Interest rate that banks charge on loans	15.4%	15%
Additionally, equal for all customers, that banks apply to an interest rate, to determine the final interest rate for the customer	9.8%	10.4%
Additionally, variable from customer to customer, that banks apply to an interest rate, to determine the final interest rate for the customer	41.5%	22%
I don’t know	33.3%	52.6%

Q11	0	1	2	3	4	5
Stocks	36 (12.2%)	26 (8.8%)	57 (19.3%)	96 (32.4%)	65 (22%)	16 (5.4%)
Bonds	94 (31.8%)	36 (12.2%)	62 (20.9%)	67 (22.6%)	26 (8.8%)	11 (3.7%)
Saving certificates	108 (36.5%)	50 (16.9%)	39 (13.2%)	56 (18.9%)	20 (6.8%)	23 (7.8%)
Investment funds	57 (19.3%)	25 (8.4%)	41 (13.9%)	105 (35.5%)	45 (15.2%)	23 (7.8%)
Stock funds	68 (23%)	30 (10.1%)	40 (13.1%)	92 (31.1%)	52 (17.6%)	14 (4.7%)
Pension saving plans	38 (12.8%)	67 (22.6%)	61 (20.6%)	57 (19.3%)	45 (15.2%)	28 (9.5%)
Term deposits	50 (16.9%)	64 (21.6%)	55 (18.6%)	63 (21.3%)	37 (12.5%)	27 (9.1%)
Forex	85 (28.7%)	24 (8.1%)	53 (17.9%)	58 (19.6%)	39 (13.2%)	37 (12.5%)
Derivate products	115 (38.9%)	21 (7.1%)	48 (15.2%)	67 (22.6%)	31 (10.5%)	14 (4.7%)
Cryptocurrencies	42 (14.2%)	33 (11.1%)	59 (19.9%)	65 (22%)	51(17.2%)	46 (15.5%)
NFT	105 (35.5%)	25 (8.4%)	39 (12.2%)	53 (17.9%)	32 (10.8%)	42 (14.2%)

Q11//business-related course
Stocks	Yes	No	Bonds	Yes	No	Saving certificates	Yes	No
0	4.9%	17.3%	0	21.1%	39.3%	0	29.3%	41.6%
1	9.8%	8.1%	1	14.6%	10.4%	1	20.3%	14.5%
2	20.3%	18.5%	2	19.5%	22%	2	8.9%	16.2%
3	32.5%	32.4%	3	25.2%	20.8%	3	20.3%	17.9%
4	26%	19.1%	4	15.4%	4%	4	8.9%	5.2%
5	6.5%	4.6%	5	4.1%	3.5%	5	12.2%	4.6%
Stock funds	Yes	No	Term deposits	Yes	No	Forex	Yes	No
0	17.9%	26.6%	0	11.4%	20.8%	0	27.6%	29.5%
1	6.5%	12.7%	1	26.8%	17.9%	1	4.9%	10.4%
2	13%	13.9%	2	17.9%	19.1%	2	12.2%	22%
3	33.3%	29.5%	3	15.4%	25.4%	3	21.1%	18.5%
4	20.3%	15.6%	4	15.4%	10.4%	4	20.3%	8.1%
5	8.9%	1.7%	5	13%	6.4%	5	13.8%	11.6%
NFT			Yes			No
0			43.1%			30.1%
1			4.1%			11.6%
2			8.9%			16.2%
3			17.1%			18.5%
4			13%			9.2%
5			13.8%			14.5%

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Financial literacy of Portuguese undergraduate students in polytechnics: does the area of the course influence financial literacy?

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1. Introduction

2. Literature review

3. Results

4. Main conclusions and future research

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