Consumer Financial Capability Research Articles

A COGNITIVE ANALYSIS OF CONSUMER LITERACY TRAINING AND FINANCIAL CAPABILITY IMPROVEMENT AMONG SOUTH AFRICANS: A CROSS-SECTIONAL STUDY

By using quantitative and descriptive research approach via a cognitive analysis, this article investigated the influence of consumer literacy training as a tool to improve financial capability among South Africans. Data was gathered from 10300 consumer literacy trainees from Gauteng and Mpumalanga provinces of South Africa and purposively and conveniently sampled. The use of pre- and post-test questionnaire surveys, employing a Likert scale, was identified as crucial for gathering data on cognitive improvement. The collected data underwent analysis through descriptive statistics and regression analysis. To ensure the reliability of the results, robustness analysis was conducted using SPSS version 28 and STATA. Empirical findings from this research study have statistically demonstrated that consumers enhanced their knowledge and skills related to financial capability after receiving consumer financial capability training. This study contributes significantly to the existing literature by addressing a critical gap and substantially enhancing the knowledge of financial capability among the study’s participants. These results carry potential implications for various stakeholders, including donors, consumers, policymakers, financial literacy educators, and finance practitioners, all of whom can play a pivotal role in promoting consumer financial education, particularly in the South African context. The study suggests that the theoretical models developed thus far have primarily focused on the driving forces behind consumer financial capability success. However, these findings also hold substantial promise for academia, policymakers, banks, and other key players in the field of consumer financial capability training, including short courses within South Africa. Furthermore, this study provides a solid foundation for future research aimed at enhancing consumer protection and shedding light on the various factors that may hinder low-income individuals from achieving their financial goals through financial institutions.

Consumer Financial Capability and Financial Wellbeing; Multi-Year Analyses

Consumer Financial Capability and Financial Wellbeing; Multi-Year Analyses

Informal financial education and consumer financial capability: The mediating role of financial knowledge.

With the development of the economy, family wealth continues to accumulate, and more and more consumers participate in financial management affairs. As an important way to improve financial knowledge, informal financial education is vital to consumer financial capability. Utilizing data from the 2012, 2015, and 2018 US National Financial Capability Study and the approaches of ordinary least squares and ordered probit regression are employed to produce more accurate estimates. Meanwhile, the study also explores the mediating effects of financial knowledge between informal financial education and consumer financial capability. The results show that informal financial education has a positive effect on the improvement of consumer financial capability. Besides, financial knowledge partially mediates the nexus between informal financial education and consumer financial capability. Therefore, policymakers are encouraged to formulate measures to promote financial education programs not only in schools and universities but also in workplaces or communities. Companies also should offer more opportunities for their employees to receive financial education and further enhance their financial capability. Consumers should be aware of the importance of financial education and actively learn financial knowledge to improve financial capability and further enhance financial satisfaction.

Financial capability: a systematic conceptual review, extension and synthesis

PurposeThis study aims to examine the literature on consumer financial capability. By analyzing the research trends, theories, definitions and themes, the literature on financial capability is synthesized, and agenda for future research is suggested. A framework is presented that portrays the antecedents as well as the outcomes of financial capability and their interlinkages.Design/methodology/approachFollowing a systematic approach, the review is based on 215 articles published during January 2007 and–March 2022, retrieved from Scopus. It presents the definitions and theories of financial capability, publication trends, influential articles, prominent authors, prolific journals and countries publishing on financial capability. Using bibliographic coupling, the intellectual structure of the topic is explored, along with offering a framework through content analysis.FindingsThe bibliographic coupling analysis identifies four major clusters of research themes and capability theory appeared to be the most prominent theory. The synthesis draws upon five conceptual definitions of financial capability. Based on the discussion, in this review, financial capability is defined as an individual ability to apply appropriate financial knowledge, perform desirable financial behaviors and take available financial opportunities for achieving financial well-being. A conceptual framework delineates the synthesized literature and propositions based on this framework and relevant research are proposed. Finally, directions for future research are discussed.Originality/valueThis paper is an attempt to offer a comprehensive synthesis of the scholarship on financial capability and its conceptualization. It further proposes an extensive future research agenda. The study has implications for financial services providers relating to retail bank marketing.

Consumer Financial Capability and Quality of Life: a Global Perspective

Consumer Financial Capability and Quality of Life: a Global Perspective

How is Consumer Financial Capability Measured?

The research literature on the growing field of consumer financial capability displays a wide diversity of understanding about the meaning and measurement of the concept. While sufficient research literature has been produced for a review of measurement domains and indicators, this work remains undone. The aim of the study is to assess the quantitative peer-reviewed research literature to advance the field toward building an evidence base for financial capability interventions and policies to improve family financial well-being and reduce economic inequality. This scoping review study analyzed the financial capability scholarly literature between 2015 and 2018. Overall, 34 studies used quantitative data and met all inclusion criteria for this study. Findings suggest that financial capability measurement constructs were operationalized in 12 different ways (n = 22). Most commonly, financial capability was operationalized as the combination of objective financial knowledge and financial access. Few studies included measurement of financial socialization or financial well-being. Most studies measured financial access using only formal financial access measures, such as bank account ownership and/or whether the consumer has investments. A smaller number of studies measured both formal and informal access (including use of non-bank financial institutions/products). Half of the articles that included financial access used bank account either solely or in combination with other measures as the indicator(s). Many studies lacked any measure of financial access. Recommendations are made about standardizing measurement for the constructs within financial capability and measurement of financial capability.

The Impact of Financial Capability in Managing Income and Expenditure on Consumer Financial Satisfaction: Evidence from the USA

Using the survey data of the National Financial Capability Study in 2018, this study aims to provide empirical insight into the impact of financial capability in managing income and expenditure (MIE) on consumer financial satisfaction. To produce more accurate results, the approach of the ordered logit regression is utilized. The results suggest a positive association between financial capability in MIE and consumer financial satisfaction, implying that consumers who can manage their spending within income tend to enjoy a higher level of satisfaction under current financial conditions. In addition, when an ordered probit regression is utilized, and the outliers of income and the heterogeneity of consumers’ annual income are taken into account, the results remain unchanged. Moreover, this study also verifies the role of perceived mathematical capability as a moderator. Hence, the findings enable policymakers and consumer educators to formulate effective measures to enhance consumer financial capability in MIE.

Financial Capability: A Conceptual Review, Extension, and Synthesis

Financial capability is an important factor that contributes to consumer financial wellbeing. In the research literature, financial capability has multiple meanings that could refer to financial literacy, financial behavior, financial access, and/or financial outcome, depending on different research purposes and conceptualizations. The purpose of this review is to examine the literature on consumer financial capability with a focus on conceptual definitions. After reviewing 250 research papers on financial capability published in 2007-June 2021 and retrieved from Scopus, five conceptual definitions of financial capability are identified and discussed. Based on the discussion, in this review, financial capability is defined as an individual ability to apply appropriate financial knowledge, perform desirable financial behaviors, and take available financial opportunities for achieving financial wellbeing. A conceptual framework on the antecedents, construct, and outcomes of financial capability is then presented and propositions based on this framework and relevant literatures are proposed. Finally, implications for future research are discussed.

Racial/ethnic differences in consumer financial capability: The role of financial education

AbstractThis study examined the racial/ethnic differences in financial capability controlling for various factors focusing on the role of financial education. Furthermore, we investigated the contributing factors to clarify where such gap stems. Regression results using data from the 2018 U.S. National Financial Capability Study indicated that Whites had a higher level of financial capability across all indicators than other racial/ethnic minority groups. Respondents who participated in the financial education had a higher level of financial capability than those without financial education. Multiple sources, hours and quality of financial education were positively associated with the level of financial capability. Decomposition analyses showed that age, income, negative income shock and banking status contributed to explain the gaps of financial capability between Black and White respondents as well as between Hispanic and White respondents. Financial education was a contributing factor only to explain the Black–White difference and it may narrow the gap. However, we found substantial unexplained gaps between Black and Hispanic respondents attributed by unobservable characteristics. Results of this study provide important insights into the racial/ethnic disparities in financial capability that have implications for consumer policymakers, educators and researchers.

Development of a consumer financial goals ontology for use with FinTech applications for improving financial capability

In this research, we communicate the design and evaluation of a consumer financial goals ontology to be utilized as a knowledgebase within recommender systems applications designed to provide decision support in the domain of financial planning. The goal of this research is to provide a domain conceptualization and knowledge classification of a comprehensive set of financial capability enhancing objectives contextually appropriate for a wide range of socio-economically situated consumers. Currently, to the best of our knowledge, within the domain of consumer financial planning no formal conceptual model or knowledge classification of financial goals exists which might be utilized as a knowledgebase for applications such as a FinTech recommender system. Achieving financial goals is a key behavior associated with consumer financial capability, a topic of national economic importance. A holistic representation of domain concepts is critical for advancement of solutions to problems pertinent to a domain. One primary reason for the dearth of applications designed to assist consumers with financial goal setting is the absence of a common domain ontology of financial goals. This study addresses a gap in the literature by contributing to the research knowledgebase an ontology for a domain of consumer financial goals. In doing so, it advances scholarly research through novel domain knowledge classification while providing researchers and practitioners with an ontological knowledgebase for indexing and retrieval within applications designed to improve consumer financial capability through identification and recommendation of specific, context-aware financial goals. The ontology could be used, for example, as a knowledgebase for a Personal Financial Recommender System (PFRS), or other financial technology (FinTech) application, designed to assist users with identification, setting, and tracking of financial goals.

FinPathlight: Framework for an multiagent recommender system designed to increase consumer financial capability

In consideration of the general lack of trust in human professional financial advisors due to conflicts of interest, and given inadequacies in terms of the utility of FinTech alternatives for financial goal recommendations, this study establishes a framework for an ontology-based, multiagent recommender system designed to improve financial capability through the recommendation of financial goals, called FinPathlight. The FinPathlight framework provides an architecture for a personal financial recommender system designed to identify and recommend specific, achievable financial goals appropriate to a wide range of financially situated users. This framework contributes principles of implementation for a novel financial technology (FinTech) application aimed at addressing a pervasive lack of trust surrounding traditional financial advisory services, as well as utility inadequacies within the current landscape for FinTech applications, providing a comprehensive set of practical and explicit financial goal recommendations. Considering the importance of users' adoption of an innovation, this study empirically tests its utility in terms of trust and perceived usefulness. The experimental evaluation results show that an application built using this framework would likely be perceived as trustworthy and useful to users for identification and selection of financial capability enhancing objectives.

Financial Literacy in Asia: A Scoping Review

This chapter is to provide an overview of financial literacy in Asia, describe financial literacy education in Asian countries, and propose recommendations for policy makers. The chapter demonstrates that: 1) Financial literacy is an important factor contributing to consumer financial capability and wellbeing in Asia; 2) Financial literacy national strategies and education programs in Asian countries are beneficial for consumer wellbeing and economic developments; and 3) Public policies promoting financial literacy education can be compatible with the socio-economic development goals of Asian countries.

EMPLOYMENT TYPE, RESIDENTIAL STATUS AND CONSUMER FINANCIAL CAPABILITY: EVIDENCE FROM CHINA HOUSEHOLD FINANCE SURVEY

Research on consumer financial capability is important for consumer financial wellbeing and emerging in the literature. However, studies on consumer financial capability in the Chinese context remain limited. To fill up the research gap, we used data from the 2011 China Household Finance Survey to investigate whether employment type and residential status were associated with consumer financial capability in China. Consumer financial capability was measured by the range of financial assets. Results from OLS and Poisson regressions showed that people employed in the government-managed system, with urban residence registration and with non-local rural residence registration had a better financial capability than their respective counterparts. The results have policy implications for improving consumer financial education and supporting vulnerable consumers.

Mental accounting and behavioural hierarchy: Understanding consumer budgeting behaviour

AbstractBudgeting is an important step in consumer finance. Budgeting behaviour is considered a desirable financial behaviour to indicate consumer financial capability. However, systematic research on budgeting behaviour with a large scale national sample is limited. The purpose of this study was to address this research gap and examine characteristics of budgeting behaviour from the perspective of a behavioural hierarchy, which is related to mental accounting. The assumption holds that consumer financial behaviours may be performed in a hierarchical manner along with an increase in economic resources. Using data from the 2015 National Financial Capability Study, evidence suggests that budgeting behaviour is at the lower end of the behavioural hierarchy. This finding has implications for consumer financial professionals.

Ability and Opportunity to Act: What Predicts Financial Health in Developed and Emerging Economies?

Consumer financial health has become a prominent topic in developed economy contexts, but its relevancy and microdeterminants in emerging markets are not yet well understood. This paper operationalizes newly formulated conceptual frameworks of global consumer financial health and financial capability using nationally-representative and comparable survey data from three developed and five emerging economies. It applies regression analyses to these data to test whether a joint interaction effect exists between individuals' levels of financial literacy and financial inclusion on their financial health, and how this effect differs across contextual settings. The paper's main findings confirm a multiplicative interaction effect, but demonstrate that this joint relationship is primarily observed in lower-income populations, whether across or within countries, whereas higher-income populations exhibit positive but largely independent relationships between increased financial inclusion, financial literacy, and financial health. The key implication is that, of all populations, the financial health of marginalized populations is most affected by increased integration into formal financial systems, but that the direction of this relationship is also most dependent on their personal levels of financial literacy. As a practical application, the paper focuses on the sample's self-employed and employed lower-income respondents and estimates both their respective optimal minimum financial literacy thresholds, and the subpopulations at risk of negative outcomes.

Consumer financial education and financial capability

AbstractThe purpose of this study was to explore potential effects of financial education on the financial capability of American consumers. Data from the 2012 National Financial Capability Study were used to test the hypothesis that financial education is positively associated with financial capability. Four financial literacy and behaviour variables were used to form a financial capability index. Multivariate linear regression results showed that, after controlling for demographic and financial variables, respondents who ever received financial education had higher scores in all financial capability indicators (objective financial literacy, subjective financial literacy, desirable financial behaviour, perceived financial capability and the financial capability index). In addition, high school, college and workplace financial education variables showed positive associations with these financial capability indicators. Additional state comparison analyses provided evidence suggesting high school financial education may have direct impacts and spillover effects on consumer financial capability.

Age differences in consumer financial capability

AbstractThe purpose of this study is to examine age differences in financial capability. Financial capability is measured by five variables: objective financial literacy, subjective financial literacy, desirable financial behavior, perceived financial capability, and a financial capability index. Financial capability is expected to increase with age. Specifically, we expect older consumers to demonstrate higher levels of both objective and subjective financial literacy, more desirable financial behaviors, a higher level of perceived financial capability, and a higher score on the financial capability index. Data from the 2012 National Financial Capability Study in the U.S. was used to examine the associations between age groups and financial capability variables. One‐way ANOVAs were used to examine age differences in financial capability variables. Then multiple regressions were used to examine age differences after controlling for socio‐demographic and financial variables. The results indicated that age differences in four financial capability variables showed similar patterns. Young adults aged 18–24 had the lowest scores on objective financial literacy, subjective financial literacy, perceived financial capability, and the financial capability index. The results have implications for consumer educators to provide effective financial education for all age groups.

Consumer Finance and Social Indicators in China

Consumer finance as an emerging field draws attention of researchers from diverse fields such as economics, finance, and consumer science (Campbell 2006; Tufano 2009; Xiao 2008). Important social indicators show societal progress and quality of life and can be measured by both objective and subjective measures (Michalos 2008; Sirgy et al. 2006). In consumer finance, important objective indicators include consumer income, expenditure, debt, asset, and various combinations of these indicators. These indicators are all related to consumption: income can be used for both current and future consumption, expenditure is a measure of current consumption, debt is used to finance current consumption, and asset is accumulated to secure future consumption. Another set of important objective indicators of consumer finance is consumer financial behavior. Parallel to key consumer finance indicators, these behaviors include earning, spending, borrowing and saving. Being able to perform desirable financial behaviors with adequate financial literacy to achieve desirable financial goals is considered consumer financial capability (Taylor 2011; Xiao 2011; Xiao et al. 2013) that is closely related to consumer financial well-being. Financial well-being is achieved when desirable levels of these indicators are obtained. Financial well-being can also be measured by subjective measures such as financial satisfaction and satisfactions of other financial indicators such as income, spending, borrowing and saving. Consumer finance as an important life domain is closely related to quality of life and subjective wellbeing such as happiness and life satisfaction. Consumer finance research as a field in China is emerging too. China has started its economic reform and open-door policies since 1978. The Chinese economy is growing to the second largest in the world. Consumer life becomes much richer than before and consumer finance has been more complicated compared to the situation 35 years ago. To

Consumer Financial Capability and Financial Satisfaction

The purpose of this study was to examine associations between consumer financial capability and financial satisfaction. Consumer financial capability was measured by three sets of variables, perceived financial capability, financial literacy, and financial behavior. Using data from the 2009 US State-by-State Survey of Financial Capability, the results indicated the positive association between perceived financial capability and financial satisfaction. The findings suggested that desirable financial behavior increases while risky financial behavior decreases financial satisfaction. Subjective financial literacy was also found to contribute positively to financial satisfaction. The positive association between objective financial literacy and financial satisfaction was found in bivariate analyses but not in multivariate analyses. The results imply that to enhance consumer financial well-being, consumer financial education programs should emphasize action taking and encourage consumers to avoid risky financial behavior, engage in desirable financial behavior, and improve financial self-efficacy.