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

Financial literacy has emerged as a crucial factor in promoting economic stability and resilience, particularly in the context of 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. The paper discusses how financial literacy could help Montenegro's households, which are highly vulnerable to economic volatility and have limited access to financial services. Using a quantitative survey-based approach, research studies in this paper explore the association of levels of financial literacy with measures of economic stability that involve savings rates, active debt management, and access to financial products. The correlation analysis would therefore show that high levels of financial literacy relate to better financial practices of saving and utilizing credit in a responsible manner, hence contributing to economic resilience at the household level. Findings suggest that financial literacy can mitigate the impact of economic shocks, underscoring 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 provides actionable insights for policymakers in Montenegro and similar contexts, emphasizing financial education as a pathway to individual and national economic resilience.