Do Financially Literate Individuals Have More Confidence in the Financial System?

We examine the link between financial literacy and confidence in the financial system. We find that financially literate individuals are more likely to have confidence in the financial system, confident in managing money, comfortable taking credit and satisfied with their financial circumstances. We also show that individuals become more sceptical of the financial system when they are highly educated but have relatively lower levels of financial literacy. Our results are robust to potential endogeneity problem due to the self-scored financial literacy bias and supported by innovative methods of Regression Trees and Random Forest