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Self-esteem, financial knowledge and financial behavior

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  • Tang, Ning
  • Baker, Andrew

Abstract

Financial knowledge is an important but insufficient driver of responsible financial behavior. Having a positive evaluation of oneself may also be essential for individuals to initiate and persist with the daunting process of financial management. In this study, we distinguish subjective financial knowledge from objective financial knowledge, and we propose that self-esteem relates to financial behavior both directly as well as indirectly through subjective financial knowledge. Results based on a nationally representative dataset of U.S. adults suggest that self-esteem significantly relates to individual financial behavior after controlling for financial knowledge and other socioeconomic factors. The association between self-esteem and financial behavior could be both direct and indirect through subjective financial knowledge. These findings highlight the importance of psychological traits such as self-esteem in explaining financial behavior difference. Its implications are discussed.

Suggested Citation

  • Tang, Ning & Baker, Andrew, 2016. "Self-esteem, financial knowledge and financial behavior," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 164-176.
    • Handle: RePEc:eee:joepsy:v:54:y:2016:i:c:p:164-176
    DOI: 10.1016/j.joep.2016.04.005
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    2. Brenner, Lukas & Meyll, Tobias & Stolper, Oscar & Walter, Andreas, 2020. "Consumer fraud victimization and financial well-being," Journal of Economic Psychology, Elsevier, vol. 76(C).
    3. Pallavi Dogra & Arun Kaushal & Rishi Raj Sharma, 2023. "Antecedents of the Youngster’s Awareness About Financial Literacy: A Structure Equation Modelling Approach," Vision, , vol. 27(1), pages 48-62, February.
    4. Avdeenko, Alexandra & Bohne, Albrecht & Frölich, Markus, 2019. "Linking savings behavior, confidence and individual feedback: A field experiment in Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 122-151.
    5. Bannier, Christina E. & Schwarz, Milena, 2018. "Gender- and education-related effects of financial literacy and confidence on financial wealth," Journal of Economic Psychology, Elsevier, vol. 67(C), pages 66-86.
    6. Casey J. Totenhagen & Melissa J. Wilmarth & Joyce Serido & Melissa A. Curran & Soyeon Shim, 2019. "Pathways from Financial Knowledge to Relationship Satisfaction: The Roles of Financial Behaviors, Perceived Shared Financial Values with the Romantic Partner, and Debt," Journal of Family and Economic Issues, Springer, vol. 40(3), pages 423-437, September.
    7. Sumaira Khawar & Aamir Sarwar, 2021. "Financial literacy and financial behavior with the mediating effect of family financial socialization in the financial institutions of Lahore, Pakistan," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    8. Nurul Shahnaz Mahdzan & Rozaimah Zainudin & Mohd Edil Abd. Sukor & Fauzi Zainir & Wan Marhaini Wan Ahmad, 2019. "Determinants of Subjective Financial Well-Being Across Three Different Household Income Groups in Malaysia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 146(3), pages 699-726, December.
    9. Umair Baig & Batool Muhammad Hussain & Vida Davidaviciene & Ieva Meidute-Kavaliauskiene, 2021. "Exploring Investment Behavior of Women Entrepreneur: Some Future Directions," IJFS, MDPI, vol. 9(2), pages 1-15, April.
    10. Krische, Susan & Mislin, Alexandra, 2020. "The impact of financial literacy on negotiation behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    11. Maria A. Maricheva & Vadim A. Petrovsky, 2024. "The Value Of Choice And Non-Choice As A Psychological Characteristic Of Money," HSE Working papers WP BRP 139/PSY/2024, National Research University Higher School of Economics.
    12. Lu Fan & Robin Henager, 2022. "A Structural Determinants Framework for Financial Well-Being," Journal of Family and Economic Issues, Springer, vol. 43(2), pages 415-428, June.
    13. Gan, Hongwu & Lu, Shengfeng & Lu, Weijie & Niu, Geng & Zhou, Yang, 2023. "Beauty and stock market participation," Journal of Banking & Finance, Elsevier, vol. 155(C).
    14. Tang, Ning, 2021. "Cognitive abilities, self-efficacy, and financial behavior," Journal of Economic Psychology, Elsevier, vol. 87(C).
    15. Noh, Mijeong, 2022. "Effect of parental financial teaching on college students’ financial attitude and behavior: The mediating role of self-esteem," Journal of Business Research, Elsevier, vol. 143(C), pages 298-304.
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    More about this item

    Keywords

    Self-esteem; Financial knowledge; Financial behavior;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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