Representational visuals of abstract financial concepts: A means to foster financial literacy

Abstract

Financial literacy is crucial for making sound financial decisions and living a better life. However, the field of finance is full of abstract concepts, such as inflation, liquidity, asset allocation and credit. Abstract concepts may be harder to comprehend than concrete concepts due to their lack of tangible referents in the physical world. In contrast, concrete concepts (e.g., car or house) have a palpable form and can be directly experienced through the senses. Against this background, the question arises of how instructional material can be designed in a way that helps people acquire knowledge about abstract financial concepts. Multimedia learning theories suggest complementing verbal information with visuals that represent the respective topic or concept. Since abstract financial concepts lack palpable, concrete forms, these representational visuals are not simply available but have to be developed. Based on grounded cognition theory, this article discusses three approaches, ‘situations’, ‘emotions’ and ‘metaphors’, which might be used to generate representational visuals of abstract financial concepts. This study aims to provide ideas and enhance our understanding of how grounded cognition theory can be utilized as a guideline to create representational visuals of abstract financial concepts and thus multimedia learning material, which in turn may support increasing people's financial literacy.