Pedro Nunes, PhD in Economic Analysis and Business Strategy, Instituto Superior de Administração e Línguas, Leiria, Portugal

ORCID ID: 0000-0001-7364-1202
e-mail: pedronunes82@gmail.com

Karina Sytnychenko, master of Finance of the Faculty of Economics Taras Shevchenko National University Kyiv, Ukraine

ORCID ID: 0000-0002-3988-972X
e-mail: sitnichenkoo@gmail.com

The Impact of Financial Literacy on Perceiving The Need to Create an Emergency Fund

Abstract. Introduction. This study examines the intersection of financial literacy and emergency fund preparedness, with a focus on adhering to personal finance guidelines during turbulent economic times.

Purpose. The primary objective is to identify factors that influence households’ perceptions of emergency funds. The study examines the impact of financial literacy on individuals’ perceived need for emergency funds, addressing gaps in the literature and contributing to interventions to improve financial well-being.

Results. The findings highlighted the core dimensions of financial literacy and addressed the lack of a universally accepted definition. Five key dimensions were identified: knowledge of financial concepts, financial communication skills, ability to manage personal funds, ability to make wise financial decisions, and confidence to effectively plan for future financial needs by establishing an emergency fund. A notable discrepancy between individuals’ financial knowledge and confidence is demonstrated, underscoring the need for interventions that address both. The study highlights the importance of bridging the knowledge gap and addressing subjective perceptions for overall financial well-being. Demographic nuances indicate different levels of preparedness for an emergency fund among different groups, calling for tailored financial education initiatives. Recommendations include longitudinal studies, comparative analyses across socio-economic contexts, and evaluations of the effectiveness of financial literacy interventions.

Conclusions. Fostering robust financial literacy emerges not only as a means to navigate financial complexities with different strategies, including the establishment of emergency funds, but also as a transformative force for achieving individual financial prosperity, shaping interventions for financial well-being.

Keywords: financial literacy; financial planning; emergency funding; financial decision-making; emergency fund allocation.

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