*3.2. Construction of Financial Literacy Scores*

In this paper, we follow the methodology in OECD/INFE (2015a) to calculate scores for the various indicators of financial literacy and financial inclusion. The score for financial knowledge is calculated from responses to seven questions reflecting the subject's understanding of basic knowledge (or awareness) of finance such as calculation of interest rates and compound interest rates, risk and return evaluation, the effect of inflation, and the benefits of financial diversification. This indicator ranges between 0 and 7 based on the number of correct answers. The financial behavior score is calculated from nine questions relating to household budgeting, saving, considered purchases, bill payments, care about financial affairs, long-term financial goals, and borrowing, and ranges between 0 and 9. The score for financial attitude measures the respondent's responses to five questions about about money, saving, and spending, and ranges from 1 to 5. A higher score represents more conservative and considered behavior. The overall score for financial literacy is the sum of three scores, and hence takes values between 1 and 21. The score for financial inclusion is calculated from seven indicators, including holdings of paymen<sup>t</sup> products, savings, insurance, credit products, product choice, and family financial support in case of emergency, and ranges from 0 to 7.

For ease of interpretation, we converted all indicator scores into z-score values:

$$score\_z = \frac{(score - \overline{score})}{score\_{sd}}$$

where *scorez* is the converted z-score, *score* is the mean score, and *scoresd* is the standard deviation of the score.
