AN ASSESSMENT OF FINANCIAL KNOWLEDGE IN HIGHER EDUCATION Domicián MÁTÉ Controlling Department, Faculty of Economics and Business, University of Debrecen. Zsuzsanna KISS Human Resource Management Department, Faculty of Economics and Business, University of Debrecen. Abstract This paper analyses the educational self-assessment of native (Hungarian) and non- native (international) undergraduate business economics students, focusing primarily on the concept of financial literacy as students predict and evaluate their own performance in written examinations relative to their externally assessed achievement. In our estimations we also examine and compare the gender and linguistic gaps in both the self-estimation assessment results. Although there is no clear gender gap when dealing with overestimation, we found substantial differences when comparing language background of the students. Consequently, our results might allow policy makers to establish that it is important to improve financial literacy, as well as providing evidence about which groups of people are in need of support to reduce disparities, not only in higher education but in other social contexts as well. Key words: self-assessment; overestimation; higher education; financial literacy JEL Classification: B23, I22, I25, Introduction From time to time the great economic crises shed light on the negative consequences of making decisions without adequate financial knowledge. Financial literacy is especially critical nowadays for promoting desired financial behaviours, such as making carefully deliberated decisions which result in prudent saving and budgeting, or regarding the use of bank loans (IBRD, 2009). The OECD (2005) defines financial literacy as the ability to use knowledge and skills to manage financial resources effectively for a lifetime. Thus, financial education is the process by which people improve their understanding of financial products and services etc., in order to become more aware of risk and return, so they are empowered to make informed choices, to avoid undesirable consequences, or to recognize where to apply for help, and take other measures to improve their present and long-term financial well-being (PACFL, 2008). Greater financial literacy, together with financial education, can reduce the likelihood of customers at any income level purchasing products or services that they do not need or that are not in their personal interest. Consequently, financially competent consumers are more likely to save their money, compare financial products and services, and discuss daily financial routines with their families.