Financial knowledge and financial behavior: evidence from five Latin American countries before and during the COVID-19 pandemic

Purpose
This study examines the relationship between subjective and objective financial knowledge and three financial behaviors (comparing products, seeking financial advice and overspending) for individuals from Argentina, Colombia, Ecuador, Mexico and Peru before and during the COVID-19 pandemic.

Design/methodology/approach
This study uses primary data from 2,394 voluntary participants who completed an online survey administered through an online course between January 2019 and April 2021. The relationships between two measures of financial knowledge and three financial behaviors are estimated using logistic regression and average marginal effects. Interaction terms are included to assess how these relationships varied before and during the COVID-19 pandemic, as well as across countries. Standard errors are clustered at the country level.

Findings
The findings reveal a positive relationship between financial knowledge and comparing financial products before acquiring them, and a negative relationship with overspending. Regarding seeking financial advice, the association was negative for the objective measure and positive for the subjective measure. The results also indicate that COVID-19 led to more precautionary behaviors among those with higher financial knowledge. However, there is considerable variation by country, both before and during the pandemic, suggesting that structural factors influence these relationships.

Originality/value
This study provides new evidence on the relationship between financial knowledge and purchasing, advice-seeking and budgeting behaviors in five Latin American countries before and during COVID-19. Existing financial literacy research provides limited coverage of this region and gives little attention to how these associations may have been affected during this period. The study also discusses how structural country characteristics might explain cross-country differences. Therefore, the findings offer valuable insights into the potential outcomes of financial education policies implemented in these countries and their relevance during crises such as pandemics.