Abstract
The sustainable financial behavior and financial well-being have been a key concern among the developing societies; thereby encompassing the various psychological factors which play a role in influencing individual’s positive financial behavior and financial well-being, this study is conducted. Research focusing on the psychological aspect of human financial behavior and well-being is scarce, focusing more on the cognitive side such as financial literacy and numeracy. The aim of this research study is to find the role played by the non-cognitive factors such as self-esteem, self-control, optimism and deliberative thinking, in forming the financial behavior and financial well-being of the young adults. A sample of 429 university students from public and private sector was collected via an online and field survey using purposive sampling technique. The survey contained measures for demographics, self-esteem, optimism, deliberative thinking, self-control, general financial behavior and financial well-being. SPSS and PLS-SEM tools were used for the exploration of the relationships among dependent and independent variables. The results of PLS path analysis demonstrate that among the non-cognitive factors, self-control and deliberative thinking show a significant association with both financial behavior, and financial security. Self-esteem plays no significant role in forming the financial behavior of the young adults when all the variables are taken together but it exhibits a significant association with financial well-being (financial security and financial anxiety). Optimism on the other hand exhibits no significant association with both financial behavior and financial well-being (financial security and financial anxiety). The results of this study complement the previous studies and also put forth new outcomes. This research is unique as it is the first of its kind conducted in a consumption-oriented economy like Pakistan. In addition to the previous studies which have often established the link of self-esteem with general well-being, this study goes further by analyzing the association between self-esteem and financial well-being and by the identification of the role played by non-cognitive factors like self-esteem, optimism, deliberative thinking and self-control together on the financial behavior and financial well-being of the individuals using PLS-SEM approach.
Highlights
The consumption expenditure pattern of the Pakistani households has increased by 14%, whereby the average per capita expenditure has increased from Rs.5166 ($32.24) to Rs.5959 ($37.19) (2018–19), since the last survey conducted during the annual period 2015–16 [1]
The present study focuses on the role of self-esteem, self-control, deliberativeness and optimism in forming individuals’ financial behavior and financial well-being
This research seeks to determine how the financial behavior and financial well-being of the young adults are formed, in the light of the identification of the role played by non-cognitive factors
Summary
The consumption expenditure pattern of the Pakistani households has increased by 14%, whereby the average per capita expenditure has increased from Rs.5166 ($32.24) to Rs.5959 ($37.19) (2018–19), since the last survey conducted during the annual period 2015–16 [1]. The investigation of the various psychological traits relationship with financial behavior and financial well-being of the individuals is vital to highlight their importance; as subsequently necessary steps for focusing on the development of the non-cognitive skills of the young adults could be taken along with their basic financial literacy. This would support the individuals in making better financial decisions in life that will lead to a better well-being. This research study aims at exploring: “Do non-cognitive factors such as self-esteem, self-control, optimism and deliberative thinking play a role in shaping the financial behavior and financial well-being of the individuals?”.
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