Financial literacy and financial well-being of Australian consumers: a moderated mediation model of impulsivity and financial capability

Abstract

PurposeThis study aims to test a moderated mediation model for a twofold purpose. First, to examine the mediating role of financial capability (FC) in the association between financial literacy (FL) and financial well-being (FW). Second, to analyze if non-impulsive future-oriented behavior (NIB) moderates the associations of FL with FC and FL with FW.Design/methodology/approachThe authors use the PROCESS macros in IBM SPSS Statistics to test the moderated mediation model and analyze the 2016 wave of the Household, Income and Labor Dynamics in Australia Survey.FindingsThe empirical analysis shows that FC partially mediates the association between FL and FW. Furthermore, the moderated mediation analysis shows that NIB strengthens the associations of FL with FC and FL with FW. Specifically, the positive associations of FL with FC and FL with FW significantly increase for those consumers who score high on NIB.Practical implicationsThe findings have implications for the financial services industry. Professional financial planners can positively improve the ability of consumers to deal with their financial matters by highlighting the importance of FL and NIB.Social implicationsThe study findings suggest educating consumers to discourage impulsive behavior and encourage them to create financial plans as it will enhance their ability to conduct financial tasks efficiently, improving their FW.Originality/valueTo the authors’ knowledge, this is the first study to assess a moderated mediation model, which examines the role of FC as a mediator variable and NIB as a moderator variable in the association between FL and FW.

Households' intentions under financial vulnerability conditions: is it likely for the COVID-19 pandemic to leave a permanent scar?

“…Financial capability is defined as the ability (i.e. knowledge and education, skills, confidence and motivation) and opportunity to act (through access to quality financial products and services), which influences households' financial management and decision-making (Sherraden, 2013; Xiao and Porto, 2017; Tahir et al , 2021). Risk tolerance is the ability to handle risk, a characteristic that varies considerably among individuals and plays an important role in shaping their financial decisions (Grable and Lytton, 1999).…”

The role of impulsivity and financial satisfaction in a moderated mediation model of consumer financial resilience and life satisfaction

“…The term financial resilience in the fields of personal finance and consumer finance came to prominence in the second decade of the twenty-first century (Jayasinghe et al , 2020; Klapper and Lusardi, 2020; Lowe, 2017; Lusardi et al , 2021; Salignac et al , 2019; Kunicki and Harlow, 2020). As the research on financial literacy, financial capability and financial well-being increased at the start of the twenty-first century (Tahir et al , 2021), financial resilience took its place as an emerging concept. financial resilience secures a significant position in consumer finance because it shows consumers’ ability to cope with financial adversities and enables them to bounce back (Salignac et al , 2019).…”

“…Other studies focus on cognitive-based factors that influence financial satisfaction, with findings showing that future-orientated consumers are more financially satisfied (Xiao and O'Neill, 2018; Lee et al , 2020). Additionally, impulsive behavior has a negative impact on financial decisions, which deteriorates consumers’ financial well-being (Ottaviani and Vandone, 2011, 2018; Tahir et al , 2021). Financial resilience and impulsivity are related to each other under the life cycle hypothesis (LCH).…”

“…Financial resilience and impulsivity are related to each other under the life cycle hypothesis (LCH). The LCH contends that consumers’ inconsistent preferences may affect their savings and consumption pattern (Modigliani and Brumberg, 1954), triggering impulsive behavior and weakening their ability to manage their finances (Frigerio et al , 2020; Tahir et al , 2021). In contrast, if consumers are financially resilient and exert non-impulsive behavior, it may help them to achieve higher financial satisfaction levels.…”

“…In contrast, if consumers are financially resilient and exert non-impulsive behavior, it may help them to achieve higher financial satisfaction levels. Recent studies suggest that non-impulsive behavior strengthens (moderates) the positive connection between financial well-being and financial literacy (Tahir et al , 2021). However, no prior research has determined a link between financial resilience, non-impulsive behavior and financial satisfaction.…”