An Empirical Study of Financial Literacy versus Risk Tolerance Among Higher Education Students

Abstract

The survey conducted in 2012–2013 by the State Audit Office of Hungary and its non-governmental partners examined the financial literacy, financial knowledge and risk appetite among higher education students (n=1,743), as well as the factors influencing the same. Our results show that starting a business only appears among the students’ plans and goals to a lesser extent, and some three-quarters of the students are risk averse. It is surprising, at the same time, that their risk appetite does not depend on either the level of their knowledge of finance and economics or on their perception of their own financial knowledge and competence. Excessive risk aversion may prevent the leveraging of financial opportunities and may act as an obstacle to the development of the national economy if it becomes a mass phenomenon. This creates a need for young people with realistic self-perceptions, appropriate attitudes towards risks, and the capability of enterprise.