The relationship between financial literacy level and psychological prejudices: A case study of Mersin city

Individuals are make financial plans starting from today in order to ensure their and their families' futures and to lead their lives in prosperity. Financial plans of individuals consist of activities such as savings, retirement, budget, investment, etc. In order to make all these financial plans, financial knowledge is needed. Financial literacy is especially important for the chaos and difficulties brought about by the developing and changing economic system. Financial literacy of individuals can facilitate effective and rational financial decisions. But individuals always cannot make rational decisions. The reason for this is the psychological biases that behavioral finance indicates. The purpose of this study is to determine the relationship between individuals' financial literacy levels and psychological prejudices. In the literature, there are many studies in recent years when financial literacy and behavioral finance are considered separately. However, there are very few are available studies examine the relationship between financial literacy and behavioral finance. Therefore, this study draws attention to a gap in the literature. In this study, a questionnaire was used to determine the financial literacy level of the individuals and to determine which psychological prejudices they fell or not. Data were analyzed with SPSS 22.0 package program. Chi-square test statistics were used to determine the relationship between financial literacy level and psychological prejudices. As a result of the analysis, a significant relationship determined was found between financial literacy level and anchoring, conservatism, familiarity, overconfidence, and loss avoidance bias.