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Understanding the Role of Financial Literacy in Enhancing Economic Stability and Resilience in Montenegro: A Data-Driven Approach

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  • Ivana Katnic

    (Faculty for International Economics, Finance and Business, University of Donja Gorica, 81000 Podgorica, Montenegro)

  • Milorad Katnic

    (Faculty for International Economics, Finance and Business, University of Donja Gorica, 81000 Podgorica, Montenegro)

  • Marija Orlandic

    (Faculty for International Economics, Finance and Business, University of Donja Gorica, 81000 Podgorica, Montenegro)

  • Marija Radunovic

    (Faculty for International Economics, Finance and Business, University of Donja Gorica, 81000 Podgorica, Montenegro)

  • Ilija Mugosa

    (Faculty for International Economics, Finance and Business, University of Donja Gorica, 81000 Podgorica, Montenegro)

Abstract

Financial literacy has emerged as a crucial factor in promoting economic stability and resilience, particularly in Montenegro. With the increasing complexity of financial products and the growing need for individuals to make sound financial decisions, the importance of financial literacy cannot be overstated. This study employs a quantitative, survey-based approach to explore the association between financial literacy levels and measures of economic stability, including savings rates, active debt management, and access to financial products. Data were collected through a representative, two-stage stratified sample of 1000 Montenegrin adults aged 18–79, ensuring comprehensive geographic coverage across all Montenegrin municipalities and balanced representation by gender and age. This stratification enables a detailed analysis of financial literacy trends across the population. Correlation analysis reveals that higher levels of financial literacy are associated with better financial practices, such as increased savings and responsible credit use, thereby enhancing economic resilience at the household level. Moreover, improved financial literacy contributes to sustainability by fostering long-term financial stability, reducing inequalities, and promoting inclusive economic growth. The findings suggest that financial literacy can mitigate the impact of economic shocks, emphasizing the need for policies that promote financial education as a tool for sustainable development. This study contributes to the literature on financial literacy in emerging economies and offers actionable insights for policymakers in Montenegro and similar contexts, highlighting financial education as a pathway to individual and national economic resilience.

Suggested Citation

  • Ivana Katnic & Milorad Katnic & Marija Orlandic & Marija Radunovic & Ilija Mugosa, 2024. "Understanding the Role of Financial Literacy in Enhancing Economic Stability and Resilience in Montenegro: A Data-Driven Approach," Sustainability, MDPI, vol. 16(24), pages 1-25, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:24:p:11065-:d:1545706
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    References listed on IDEAS

    as
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    2. Nikola Fabris & Radoica Luburić, 2016. "Financial Education of Children and Youth," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 5(2), pages 65-79.
    3. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    4. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    5. Thérèse Lind & Ali Ahmed & Kenny Skagerlund & Camilla Strömbäck & Daniel Västfjäll & Gustav Tinghög, 2020. "Competence, Confidence, and Gender: The Role of Objective and Subjective Financial Knowledge in Household Finance," Journal of Family and Economic Issues, Springer, vol. 41(4), pages 626-638, December.
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