Data Science Lab Project
Linking Italians’ financial literacy and their need for financial services.
This Project was written in collaboration with Paolo Caggiano for the Data Science Lab course in the Master Degree in Data Science.
Financial literacy is an important topic that offers a picture of people’s knowledge about basic financial concepts.
In this project we want to investigate on financial literacy and other struggles with other financial instruments across the general public.
To do so, we are going to use the data coming from the OECD International Network on Financial Education enriched with the ones obtained by a research conducted by Banca d’Italia.
This questionnaire has a very similar structure to the surveys that banks submit to their clients when opening an account, this makes it very suitable for this kind of research.
We want to provide useful insights for banks and other financial businesses that want to investigate the socio-demographic aspects associated with the different financial attitude and knowledge of Italian people.
In particular, our focus is set on financial literacy and the impact that it has on the way the client manages his money.
First of all, we developed a model to understand which factors are more associated with financial literacy.
The results highlighted a positive association with both age and instruction, and better results for the male sex.
This insights could help financial businesses in campaigns focused on an improvement of general financial knowledge to target people most in need.
A better financial knowledge, as highlighted in the next models, will result in a major interest for the businesses’ services.
In the second section we took an in depth look to Retirement Plans.
We thought that, for a bank selling this type of services, it could be interesting to understand which socio-demographic variables better explain the confidence of people of having done a good job for planning their retirement and which explain the usage of safer tools for building their fund.
We found that southern Italy and islands’ people tend to be both less confident of their plan and use precarious tools.
Also, age and being employed are fundamental variables to explain both confidence and tools used.
Lastly, sex seems to be relevant only for the choice of the tools used, not for the individual’s confidence.
Of course, our research variable knowledge score proved to have a deep impact on the matter.
For a business that wants to market this retirement services, it is useful to know that these are the categories of people that most struggle with the problem, and are therefore in need of help.
In the third section, we focused on services related to personal finance.
This type of services consist in helping the individual to manage his savings and expenses.
We found that a bad management of one’s savings is related to: living in southern areas or islands, being unemployed or having a low financial knowledge.
Furthermore, we found that people that are younger, unemployed and with a low financial knowledge are the most in need of this services, since they would struggle to face an improvise expense.
Instead, the need for services like the put in place of an emergency fund would be more necessary for people of southern areas and islands, young people and those with a low financial knowledge, since they do not have any tool to protect them from a sudden interruption of their income.
All this quesites were solved utilizing complex statistical models with R.
Further information about the decisions we made, the dataset, and all of the different models can be read on the official report.