Using the U.S. Test of Financial Literacy in Germany—Adaptation and validation

ABSTRACT

In this article, the authors present the adaptation and validation processes conducted to render the American Test of Financial Literacy (TFL) suitable for use in Germany (TFL-G). First, they outline the translation procedure followed and the various cultural adjustments made in line with international standards. Next, they present results from the validation of the TFL-G's content and relations between test scores and external variables, including test takers' prior economic education and interest in economic topics. Preliminary analyses of data gathered from expert interviews and cognitive labs, and the results of the first administration to first-year higher education students (N = 1,108) indicate that the TFL-G is a valid instrument to assess young adults' understanding of personal finance in Germany. Perspectives for future research are discussed.

KEYWORDS:

• Adaptation of test instruments
• financial literacy
• personal finance
• Test of Financial Literacy

JEL CODES:

• D14

Notes

1. In its first version from 2015, the TFL consisted of 50 items (Walstad and Rebeck 2016). After a pretest, the number of items was reduced to 45 in the U.S. version. In Germany, all 50 items were adapted, and the same 45 as in the United States are discussed in this study.

2. In think-aloud interviews, respondents are asked to verbalize their thoughts while working on tasks (in this case, responding to items on the TFL-G). During the item response process, respondents were only prompted to continue talking. Afterward, students were asked more detailed questions in cognitive labs (e.g., from which sources they had acquired their knowledge). These interviews were verbally recorded, transcribed, and qualitatively analyzed. The think-aloud method makes it possible to identify not only the clarity of items but also the cognitive processes taking place, which allows researchers to draw conclusions about the validity of the test instrument (for information on cognitive interviews for economics items, see Brückner and Pellegrino 2016).

3. Germany is well known for its dual vocational training system. One main characteristic of the dual system is the practical education in a company (share of approximately 4/5) combined with a school component (share of approximately 1/5). Usually, the vocational training program lasts two to three and a half years, and trainees are paid a small salary by the company where they do their apprenticeship. Such an experience should have an influence on their knowledge of personal finance because the young adults must handle the money they earn and plan expenses.

4. The survey conducted in summer term 2016 was necessary because one item required modification. The sample in the summer term consisted of 126 students for this article.

5. In the German grading system, 1 is the best and 4 the worst passing grade.

6. Analogous to the test developers' analyses (Walstad and Rebeck 2016), the following analyses relate to the 45 items on the TFL-G.

7. Because the revised item 33 was used in the pretest in summer term 2016 only, the difficulty of this item refers to 126 respondents only.

8. For a description of an IRT model for economic tests, see Walstad and Robson (1997). The calculations of the confirmatory factor model and item response modeling were made using the Mplus (version 7.3) software. See Muthén and Muthén (1998–2015) for more details. The remaining modeling was conducted with the SPSS (version 22) software (IBM 2013).