research study about financial management

ORIGINAL RESEARCH article

Financial management behavior among young adults: the role of need for cognitive closure in a three-wave moderated mediation model.

• 1 Department of Social and Organizational Psychology, Universidad Nacional de Educación a Distancia, Madrid, Spain
• 2 Department of Business Economics and Accounting, Universidad Nacional de Educación a Distancia, Madrid, Spain
• 3 Department of Psychology, University of Bologna, Bologna, Italy

This three-wave study aims to explore whether the impact of investment literacy on the financial management behavior is mediated by investment advice use and moderated by the need for cognitive closure. A total number of 272 financially independent adults, under 40 years, completed questionnaires at three different times with 3-month intervals. The results reveal that employees with more investment advice use and characterized by high need for cognitive closure show a higher level of financial management behavior, in relation to both the urgency (seizing) of getting knowledge and the permanence (freezing) of such knowledge. The present study contributes to better understand how and when investment literacy drives well-informed and responsible financial behavior. According to these results, interventions to improve financial behavior should focus on the combination of investment advice use and metacognitive strategies used by individuals to make financial decisions.

Introduction

Why are some people more efficient in their financial behaviors than others? Financial management is a complex set of behaviors and decisions that can change as a function of the importance and difficulty of implementing the behavior, as well as of people’s capabilities, skills, and opportunities to perform such behaviors. The undesirable short-, mid-, and long-term consequences of inadequate financial management behavior not only affect individuals, but also their household, and ultimately could produce a wide range of unwanted events on the entire society ( Fenton et al., 2016 ). For instance, inadequate financial behaviors can lead to temporary or chronic debts, inability to pay utility bills or filing for bankruptcy and such behaviors result from economic factors together with psychological ones.

Financial literacy has been defined as “the ability and confidence to use one’s own financial knowledge to make financial decisions” ( Huston, 2010 , p. 307). This concept not only concerns individual investors but also professional ones working in companies that manage money. It is in fact important not only to establish a long-term financial plan but also to know, and to have, financial alternatives in which to invest money or to save it. Financial planning is a very important knowledge and skill considering that individuals live longer and have to save for their old age, when they are no longer working.

Recent studies investigated the impact of financial literacy on various financial behaviors, like loans, mortgages, or retirement planning. The fact that financial literacy is rather low, even across well developed countries, is a critical factor toward well-informed financial decision making and behaviors. Hence, financial behavior management is a topic of interest to economists, social workers and policy makers as well.

However, a large-scale analysis of recent data indicated that financial education interventions explain only 0.1% of the variance in financial behaviors. In contrast, financial literacy has a stronger effect on financial behavior when the former is measured rather than manipulated ( Fernandes et al., 2014 ). However, Fernandes et al. (2014) study shows also that financial literacy has less impact on financial behavior when psychological and social variables, often omitted in previous research, are considered. Therefore, this study aims to fill this gap by taking a psychosocial approach and including cognitive, motivational and social factors in the relationship between financial literacy and financial behavior.

Huston (2010) distinguishes two concepts often considered as synonymous: financial literacy and financial knowledge. A successful measure of financial literacy should allow to identify which outcomes are most impacted by a lack of financial knowledge and skill, and, consequently, allow educators to provide knowledge achieve a desired outcome ( Huston, 2010 ).

In addition, as most of the studies have used samples of students, that is, adolescents or people who are still in their early youth, and not yet financially independent, in this study, we will analyze the financial management behavior of young adults who have their own economic income. Economic independence is in fact a key indicator of transition to adulthood ( Lee and Mortimer, 2009 ).

Based on Huston (2010) theoretical model, this work aims to explore predictors, mediators, and moderators of financial management behavior when people have independent economic resources to save for the future. Specifically, in the present study, we argue that it is necessary to consider the mediating role of investment advice use in the relation between investment literacy and financial management behavior among young adults. As Huston (2010 , p. 307) stated, “financial literacy is a component of human capital that can be used in financial activities” to increase behaviors that enhance financial wellbeing. Hence, financial knowledge would be translated in behaviors by using available resources “directly related to successfully navigating personal finances” ( Huston, 2010 , p. 307), as professional investment advisory services. In addition, we propose that need for cognitive closure (hereafter, NCC), an individual dispositional characteristic, moderates the relations between investment advice use and financial management behavior. The moderated mediation analysis that includes both processes will allow us to better understand the variables that facilitate or hinder young adults’ financial management behavior.

In summary, this study makes three main theoretical and methodological contributions. First, we investigate if the strong direct relationship between financial literacy and financial behaviors is valid when considering two psycho-social variables that consider conditions and types of individuals showing the financial behaviors. Second, we consider younger adulthood, which is a period of individuals’ life-cycle in which many important financial choices start to be made, like buying commodities, a house or setting up a family ( Webley et al., 2002 ). Three, considering what reported by Fernandes et al. (2014) , we investigate if the consistent association between financial literacy and financial behavior observed in many cross-sectional studies is observed also when such independent and dependent variables are measured in different moments.

Financial Management Behavior

Financial management behavior is the acquisition, allocation, and use of financial resources oriented toward some goal. Empirical evidence supports that, if families achieve effective financial management, both their economic well-being and their financial satisfaction improve at the long term ( Consumer Financial Protection Bureau, 2015 ). However, financial management behavior is complex and difficult to implement. The supervision of money and expenditure, which includes frugal and careful spending of money, is a useful protection against risky financial practices.

Moreover, financial management behavior may vary between younger and older people. Although the repeated experience and practice of financial activities influence people’s skills to manage their finances, empirical evidence seems to support that young people practice fewer basic financial tasks, such as budgeting or regularly planning their long-term savings ( Jorgensen and Savla, 2010 ). Because of this evidence, it is of interest to analyze the antecedents of young adults’ financial management behavior.

Investment Literacy

Investment literacy implies, firstly, an accumulation of knowledge about personal concepts and financial products, obtained by means of education or direct experience. Secondly, it includes a series of abilities and self-confidence to effectively apply the knowledge to the management of one’s own finances. Different empirical works have shown the consistent relations between the specific financial knowledge, the probability of saving, the effectiveness of investment strategies, and saving behaviors in general ( Jorgensen and Savla, 2010 ). Hence, considering we measured our variables at three points in time, we propose that:

Hypothesis 1: Investment literacy at time 1 (hereafter T1) will be positively related to financial management behavior at time 3 (hereafter T3).

Investment Advice Use

The use of financial consultants has been proposed as a useful support to financial decisions and as a substitute of financial knowledge and capacity for individuals and family with lower resources. However, Collins (2012) shows that financial literacy, and search and use of professional advice, are not only distinct and complementary processes, but also positively related, because results show that individuals with higher incomes, better educated and with more financial literacy are the most likely to search and use financial advice. Individuals that are less knowledgeable tend to overestimate their abilities and are unable to recognize their limited financial competences ( Kruger and Dunning, 1999 ). However, other studies show that the use of financial consultants seems to have a direct influence in guiding individuals and families toward more profitable investments ( Joo and Grable, 2004 ). In the light of this evidence, we argue that individuals financially competent, aware of the complexities of the economic field, may search for, understand and then implement the advices provided by financial consultants and, consequently, show good financial management behaviors. Accordingly, we propose that:

Hypothesis 2: Investment advice use at time 2 (hereafter T2) will mediate the relationship between investment literacy at T1 and financial management behavior at T3.

Need for Cognitive Closure

Although some empirical studies have addressed the influence of personality on earning and saving, most of them have focused on psychological biases, self-control problems, procrastination ( Rahimi et al., 2016 ), future time perspective and risk tolerance ( Pak and Mahmood, 2015 ). However, other studies have called attention to the influence of relatively stable individual differences in information processing and complex decision making, such as the NCC ( Webster and Kruglanski, 1994 ).

Need for cognitive closure refers to the individual necessity of arriving to a clear and definitive opinion, or answer to a problem, and particularly any opinion or answer rather than experiencing confusion, ambiguity or inconsistency ( Webster and Kruglanski, 1994 ). Empirical research reports significant differences between people with high and low NCC; such differences concern the amount of information they can process, the intensity of that information, the rules employed in decision-making processes, and the self-confidence on the decisions that they reached ( De Dreu et al., 1999 ; Szumowska and Kossowska, 2017 ). Due to this characteristic, people with low NCC are more available to consider complex information that is difficult to process, such as financial information. They are also concerned about the loss of information and more oriented toward the accuracy of the response than to the speed with which it is reached. As a consequence, these people tend to consider more information and decide more slowly, to be more open minded and more creative. In contrast, people with high NCC are more likely to focus on information they can process easily, to reject the more complex or even incomplete one ( Livi et al., 2015 ), and less likely to consider new evidence and update their investments when changes in market uncertainty appear ( Disatnik and Steinhart, 2015 ).

Need for cognitive closure has been described as characterized by two different tendencies: the tendency of the urgency to achieve knowledge ( Seizing ) and the tendency to retain permanently that knowledge ( Freezing ) ( Roets et al., 2006 ). People with high NCC have a pressing desire to achieve closure and to retain it permanently. Thus, these people tend to limit the quantity of information to be processed in order to facilitate decision-making and then to retain and perpetuate the information on which they have based this judgment.

This pattern of information processing has been shown in a broad array of situations related to information processing and decision-making ( Dolinski et al., 2016 ), such as consumer purchasing choices, attitudes about complex technological products, suppliers’ purchasing decisions to manage business supply chains, or helping behavior, among others. Due to the fact that financial management behavior includes processing of complex information and the anticipation of needs with a high degree of uncertainty, we argue that individuals with high NCC will consider a limited amount of information provided by the financial consultant, and particularly information that solve their immediate needs; will revise or modify such information with some reluctance, and all this will result in a less efficient financial management behavior. In contrast, we expect that low NCC remain open to information provided by the consultant and, through the elaboration, integration and revision of such information, they will be more consistent and efficient in the management of their financial behavior. Accordingly, in the present study, we propose that:

Hypothesis 3: The relationship between investment literacy at T1 and financial management behavior at T3, mediated by investment advice use at T2, will be moderated by both NCC dimensions (seizing and freezing) at T1. Specifically, we expect the relationship between investment advice use (T2) and financial management behavior (T3) to be weaker for individuals with high levels of both NCC dimensions (T1) than for individuals with low levels of both NCC dimensions (T1).

Materials and Methods

Ethics statement.

The Institutional Ethics Committee of the first and second authors’ university (National Distance Education University, UNED) approved this research on May 4th, 2016.

Participants and Procedure

This study, with a three-wave design, was carried out with a sample of young, non-student, Spanish adults, who completed the questionnaires at three different moments (T1, T2, and T3), with an interval of 3 months between each one. Following Taris and Kompier (2016) suggestions, and due to the limited longitudinal studies available on these factors, the real time lag between these factors is unknown; considering literature and the processes under examination, we retain the 3 months as an appropriate period to explore such relations. Also, because the time-lag design contributes to control and counteract the common method variance ( Podsakoff et al., 2003 ). The T1 measurement was carried out in January–February. Participation in the study was voluntarily, and potential participants were informed about the anonymity, and all subjects gave their informed consent for inclusion before they participated in the study. The only inclusion criteria in the study were being younger than 40 years of age and having a paid job (being full time or part time active workers). A total 500 people were invited to participate at T1, but we only obtained 390 responses (78% response rate), and 304 responses at T2. At T3, the sample was reduced to 272 respondents, who are included in this study. The mean age of the participants at T1 was 26.3 years ( SD = 4.9), and at T3 mean age was 26.8 years. Men made up 40.4% of the sample. Average job seniority was 9.9 years ( SD = 6.6). In terms of educational level, 57% of the sample had received a university or similar level of education, 29% finished the Secondary School, and 11% had received only basic education. Professionally, 63.2% of participants were employees, 22.8% were middle managers, and full-time workers accounted for 91.9% of the sample, and the rest were employed part-time.

Instruments

Financial management behavior was assessed with the Financial Practices Scale ( Loibl et al., 2006 ), consisting of seven items that measure the probability of the participants’ adopting positive practices of financial management behaviors. The Likert-type response scale ranged from 1 ( unlikely ) to 5 ( very likely ). Examples of some items are: “Pay your bills on time every month”; “Start saving for emergencies”; “Develop a written plan for expenses”; “Have more organized records of payments.” The authors recommend adding the scores to create a global measure of financial management behavior. Reliability was α = 0.78 in the present study.

Investment literacy was appraised with the Financial Knowledge Scale , of Joo and Grable (2004) . This 10-item scale was designed to assess investors’ financial literacy. Higher scores indicate more knowledge. The original dichotomic response scale was transformed into a Likert-type response scale ranging between 1 ( strongly disagree ) and 5 ( strongly agree ). Examples of some items are: “Both employee and employer contribute to Social Security”; “Over a 20-year period, one is more likely to win than to lose money in the stock market”; “Interest paid on a credit card is deducted from taxes” (reversed score). Reliability was α = 0.81 in the present study.

Investment advice use was assessed using the Investment Advice Use Scale of Li et al. (2002) which contains eight items. The original four-point response scale, which ranges between 1 ( strongly disagree ) and 4 ( strongly agree ), was adapted to a five-point Likert-type format, with an intermediate rating for indifference ( neither disagree nor agree ). Examples of items are: “I prefer to consult with a specialist when I take financial decisions”; “I would be willing to pay for the advice of a financial expert”; “I feel qualified to make my own investment decisions without advisors” (reversed score). Reliability was α = 0.77 in the present study.

Need for cognitive closure was assessed with the Need for Cognitive Closure Scale , in its translated version ( Mannetti et al., 2002 ), adapted to Spanish by Ramelli (2011) . This scale has two factors: Seizing (predisposition to seek an immediate response when faced with uncertainty) and Freezing (predisposition to retain closure and avoid considering new information that might question it). The scale has 14 items that are rated with scores ranging between 1 ( strongly disagree ) and 5 ( strongly agree ). Reliability of the Spanish version was adequate, both in the original study (with α = 0.78; Ramelli, 2011 ), and in the present study (with α = 0.78). Examples of seizing (urgency) items are: “In case of uncertainty, I prefer to decide immediately, whatever it may be”; “When I have several potentially valid alternatives, I decide in favor of one quickly and without hesitation”; “After finding the solution to a problem, I think it is a waste of time to take other possible solutions into account.” Item examples of the freezing (permanence) dimension are: “I feel very uncomfortable when things are not in their proper place”; “I feel uncomfortable when I do not get a fast answer to a problem I face.” The NCC scale was subjected to Confirmatory Factor Analysis with Amos 24.0. The generalized least squares procedure was used. This two-factor CFA fitted the data reasonably well (χ 2 = 139.199, p < 0.000; df = 71, CMIN/df = 1.96; GFI = 0.93; AGFI = 0.90, RMSEA = 0.06).

All the factor loadings for the items exceed the 0.40 and both factor correlated as expected (0.72). Some covariances among error have been allowed due to the similarity of the item content, but in any case, between items included under the same factor. Factor loadings, and the Spanish formulation of items, are displayed in Table 1 .

TABLE 1. Need of Cognitive Closure Scale ( Ramelli, 2011 ) and factor loadings.

Analytic Strategy

In order to test the study hypotheses, we performed a linear regression analysis. Before testing the hypothesized moderated mediation model, the indirect and moderating effects were first tested separately with the PROCESS macros for SPSS 24 ( Hayes, 2013 ). With bootstrap procedures of 5,000 samples at a 95% confidence level, the confidence intervals that do not contain 0 indicate that the indirect effect is significant. We did not include any control variables in the following analyses.

Descriptive statistics and Pearson correlations between the study variables are provided in Table 2 . Investment literacy was positively and significantly associated both with investment advice use ( r = 0.19) and with financial management behavior ( r = 0.31), whereas investment advice use and financial management behavior showed the strongest correlation ( r = 0.41). The relation between freezing and financial management behavior reached statistical significance ( r = 0.16). NCC dimensions showed a positive relationship with each other ( r = 0.44).

TABLE 2. Descriptive statistics and correlation matrix.

Table 3 shows the results obtained when testing the first hypothesis. The linear regression analysis shows the total effect ( b = 0.17, p < 0.000) of investment literacy on financial management behavior [ R 2 = 0.22, F (2,269) = 37.54, p < 0.001].

TABLE 3. Regression results of testing the mediation of investment advice use (T2) in the relationships between investment literacy (T1) and financial management behavior (T3) (hypotheses 1 and 2).

Regarding the mediation of investment advice use in the relationship between investment literacy and financial management behavior, a significant and positive association between investment literacy and investment advice use ( b = 0.20, p < 0.000) was observed. Furthermore, a statistically significant direct effect of investment literacy on financial management behavior ( b = 0.16, p < 0.001) was found, as well as a statistical significant effect of investment advice use on financial management behavior ( b = 0.23, p < 0.001). Hence, there is a significant indirect effect of investment literacy on financial management behavior through investment advice use ( b = 0.05). Finally, we tested the significance of this mediation effect through the bootstrapping procedure, which showed that the confidence interval for the indirect effect does not contain zero [0.01, 0.09], supporting the significance of the mediation effect. These results provide reasonable confirmation of hypothesis 2.

Finally, we tested hypothesis 3 following the procedures recommended by Hayes (2013) , as shown in Table 4 .

TABLE 4. Results of testing the moderation of NCC (T1) on the investment advice use (T2) – financial management behavior relationship (T3) (hypothesis 3).

Firstly, Table 4 shows a negative direct effect between NCC – seizing and financial behavior ( b = -0.32, p < 0.05), which suggests that the higher the tendency to seek an immediate solution to solve an uncertainty, the lower the management of financial behavior. Secondly, upon testing hypothesis 3 regarding the moderating effect of seizing on the relationship between investment literacy and financial management behavior, mediated by investment advice use, we found a statistically significant positive interaction effect ( b = 0.12, p < 0.01). Thirdly, regarding the moderating effect of freezing on the relationship between investment literacy and financial management behavior, mediated by investment advice use, we also found a statistically significant positive interaction effect ( b = 0.12, p < 0.01). The index of moderated mediation for the seizing dimension was 0.024 ( SE = 0.013), while the 95% confidence interval with bootstrapping of 5,000 samples did not contain zero (Boot CI [0.003, 0.059]), and for the freezing dimension, the index was 0.023 ( SE = 0.013, Boot CI [0.002, 0.059]).

Hence, the data support hypothesis 3. The indirect conditional effects of investment literacy on financial management behaviors at the two levels of the moderators are displayed in Table 5 , where the effect of investment literacy on financial management behavior was strong at the high level of NCC (seizing and freezing), and it was correspondingly weak when NCC was low. The two effects are statistically significant although in the opposite direction that was expected.

TABLE 5. Results of testing moderated mediation of NCC dimensions in the relationship between investment literacy (T1) and financial management behavior (T3).

Figures 1 , 2 depict the moderation effect of both NCC dimensions. What they show is not consistent with our expectations: individuals reporting higher investment advice use also showed a greater level of financial management behavior if they were characterized by high NCC-seizing at T1 (see Figure 1 ).

FIGURE 1. Moderation of NCC-Seizing (T1) on the investment advice use (T2) – financial management behavior (T3) relationship.

FIGURE 2. Moderation of NCC-Freezing (T1) on the investment advice use (T2) – financial management behavior (T3) relationship.

Also, contrary to our expectations, respondents reporting higher investment advice use at T2 showed a greater level of financial management behavior at T3 if they were characterized by high NCC freezing at T1 (see Figure 2 ).

Taken together, this result implies that investment advice use (T2) mediates more strongly the relationship between investment literacy (T1) and financial management behavior (T3) for young adults characterized by moderate to high levels of NCC (T1) than in adults with lower levels of NCC (T1). These results are depicted in Figure 3 .

FIGURE 3. Results of the moderated mediation analysis. NCC, need for cognitive closure; [95% CI]; ∗ p < 0.05, ∗∗ p < 0.01, ∗∗∗ p < 0.001. Values in italics: correspond to the Freezing dimension.

The present work supports the hypothesis that investment literacy may affect subsequent financial management behavior in young, financially independent, adults. These findings corroborate the key assumption of a long research tradition that links financial literacy with the improvement of financial management behavior. In addition, the present investigation suggests that efficacious financial management should not be conceived as only a mere consequence of knowledge and confidence to use it, but rather as the outcome of the joint influence of cognitive aspects and social influences that affect individuals. In fact, in the present work, the impact of investment literacy on financial management behavior is explained by the use of investment advices provided, in a social communication exchange, by a financially expert advisor. Therefore, the present study has focused on facets predominantly studied in current economic psychology ( Webley et al., 2002 ).

Following the growing number of works suggesting that personality traits affect financial behavior beyond the influence of people’s knowledge and external factors ( Norvilitis et al., 2006 ; Warmoth et al., 2016 ), this work shows that NCC plays a moderating role in the relation between investment literacy and financial management behavior, mediated by investment advice use. Thus, our evidence shows how the personal tendencies of seizing and freezing influence predictors of financial management behavior. On this regard, results show a two side picture. From one side, as we expected, seizing is negatively related to financial behavior; which suggests that individuals with higher tendency to reach quickly a knowledge, a solution to some financial problem, the lower the rate of financial practices. On the other side, contrary to our expectations, individuals that look for financial advice and with high NCC, both for seizing a solution and for freezing it, probably accept quickly the suggestion from the advisor and start to implement it consistently and repeatedly, thus improving their financial performance, in comparison to individuals with lower NCC that may take longer to implement the advice provided by the financial advisor.

This work presents a new viewpoint of how to improve financial behavior among youth and, therefore, can contribute to increasing the efficacy of early interventions to develop responsible financial behavior ( Gariepy et al., 2017 ). Firstly, confirming previous studies (e.g., Calcagno and Monticone, 2011; Collins, 2012 ), it seems that to benefit of financial advice it is, at least, useful (if not, necessary), to have a good level of financial literacy. Thus, educational, social and political systems should consider how to create opportunities for young adolescents to experience and practice financial competences. Secondly, in this same line, intervention strategies should be oriented toward increasing the coherence between knowledge, expert advice, and financial management behaviors to practice the specific behaviors of saving and investment during young adulthood. Translating this into concrete practices, early assessment of people’s tendencies of Seizing and Freezing could help to recognize these early propensities and their potential bias in the processing of financial information. For example, special attention should be paid during adolescence to these psychological traits to help people develop strategies that compensate these tendencies and reduce their potential negative impact on processes of making complex decisions which may require more time for the analysis and processing of more complex information ( Gerlach, 2017 ). Following these recommendations, parents and educators can develop training programs specifically designed to offset those biases.

Thirdly, while the relationship between investment advice use and financial management behavior is not questionable, the present findings indicate that the quality and quantity of the effects are influenced by employees’ NCC tendencies. According to the present findings, financial advisors might rely upon a complementary tool to increase the efficacy of their interventions. In particular, by monitoring the level of NCC of investors, they may provide some customized services. This would support the idea that not all the products or services fit all the customers, but rather that professionals should fine tune their work in relation to investors’ need to remain open or to close and fix the financial suggestions that are provided. If high NCC individuals might be efficient in implementing easily and quickly the advices provided to them, it is also necessary to remind them of the need to continue to search regularly the advices, to update, and modify financial choices that might become outdated and no more matching the financial situation of the market. In comparison, they must present much wider and more complex financial solutions to low NCC investors, to satisfy their need for extended information processing and thus, facilitate their passage to the actual and concrete financial behavior.

This study presents some limitations that should be considered. Firstly, even though we have considered some cognitive, social, and personality variables in accordance with Huston (2010) model, many other variables could have been considered and should be considered in future research. When referring to long-term economic planning, young workers’ expectations about occupational security, career development, promotion, and progress might also influence their financial management behavior ( Ekici and Koydemir, 2016 ).

Secondly, in this study we measured financial management behavior by tapping participants’ perceptions of their behavior; future studies should include real daily behaviors (e.g., checking one’s bank account, making a monthly budget, controlling credit card expenditures), for example, using research procedures like day reconstruction methods or experience sampling.

Thirdly, in this study we used a 3 months’ lag time between each wave and the following. This lag time allowed anyway to detect a significant relationship between financial literacy and use of financial advice, and between this latter and financial behavior. However, time between waves might be extended to investigate how long is the effect of financial literacy on investment advice, and especially how long such advices may affect financial performance. Fourthly, another limitation is that investment literacy was included only at a first point in time, precluding the possibility of establishing the reverse causation between behavior and knowledge. A research design including the same three variables in each wave, will allow to investigate if, for instance, it is an underperforming financial situation to stimulate the search of financial advices.

Fifthly, in this study, we did not deal with attitudes toward financial professionals, such as customers’ trust and anxiety when consulting them ( Grable et al., 2015 ). In future studies, one might directly ask participants what they think and feel about their financial advisors and incorporate this information as a moderating variable.

Finally, financial literacy studies in general showed another limitation that is due to the well-known association between lower literacy with poor health, low income, and other undesirable outcomes but, as with the present findings on financial management behavior, there is not enough evidence to support any causal direction ( Ma, 2016 ). To date, little is known about the causes and correlates of wrong financial decisions during the life course ( Budowski et al., 2016 ). This kind of knowledge needs to be improved, despite the difficulty of obtaining information from the participants regarding their wealth, financial literacy, and consumer behaviors, and this study does not escape to similar challenges and gaps in data ( Manske et al., 2016 ).

However, this investigation can provide some suggestions to guide future research. First, although we did not examine the impact of gender on financial literacy and financial behavior, it seems that gender differences are related to the quality of financial decisions, even though women’s levels of financial literacy and economic income have improved regarding past decades ( Heilman and Kusev, 2017 ). Therefore, investigating the relationship between gender and NCC could help educators in general, and financial advisors, to design intervention strategies to help women to achieve efficacious financial management ( Rudzinska-Wojciechowska, 2017 ).

Second, research seems to indicate that NCC and risk intolerance are associated. Specifically, risk intolerance is a widely studied variable in the financial setting, but the antecedents of intolerance of risk and ambiguity are still unclear. Therefore, a possible link with NCC could be analyzed, as has been shown in an experimental study ( Vermeir and van Kenhove, 2005 ).

Third, research indicates that executive functions such as impulse control, attention regulation or mental flexibility could be linked to NCC ( Dolinski et al., 2016 ) and to performance in complex tasks and financial well-being. However, recent studies related to the executive functions show that they develop throughout adolescence. Accordingly, early intervention with youth could contribute to improving these cognitive functions, with their consequent influence on NCC and subsequent benefit for the management of complex behaviors, like finances ( Barnhoorn et al., 2016 ; Urquijo et al., 2016 ).

Lastly, NCC and its correlates of ambiguity intolerance and risk aversion have always been analyzed from an individual perspective. However, recent works propose the possible influence of social comparison in decision making in general and, specifically, in risk-taking behavior ( Wang et al., 2016 ). In this sense, it would be interesting to analyze in future works the influence of the social gains of decisions and their possible interaction with the decision-makers’ NCC.

Financial literacy and decision making should be further explored to better understand how health and well-being are influenced by them during the life course. This research could help societies and policy makers to reduce the considerable economic and public health challenge that posed fast population aging, associated with low financial knowledge and overconfident decision making ( Khan et al., 2016 ). Ultimately, such data will guide interventions to improve literacy and promote independence, wealth, health, and well-being among people from young adulthood to old age.

Author Contributions

GT, MH-S, and SZ designed the research, analyzed the data, and wrote and revised the manuscript. GT collected the data.

Conflict of Interest Statement

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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Keywords : financial management behavior, investment literacy, investment advice use, need for cognitive closure, retirement, retirement planning

Citation: Topa G, Hernández-Solís M and Zappalà S (2018) Financial Management Behavior Among Young Adults: The Role of Need for Cognitive Closure in a Three-Wave Moderated Mediation Model. Front. Psychol. 9:2419. doi: 10.3389/fpsyg.2018.02419

Received: 26 July 2018; Accepted: 16 November 2018; Published: 30 November 2018.

Reviewed by:

Copyright © 2018 Topa, Hernández-Solís and Zappalà. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Gabriela Topa, [email protected]

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.

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The Best Practices of Financial Management in Education: A Systematic Literature Review

2023, International Journal of Research and Innovation in Social Science

This study explored the literature on the best practices of Financial Management in Education utilizing a systematic review analysis design. This study aimed to answer the following questions: 1. The demographic data in the existing literature on the the best practices of Financial Management in Education in terms of country, research design, and the number of participants. 2. The best practices of Financial Management in Education, and 3. Suggestions for further research can be identified by exploring the current literature on an educational strategic direction based on the elements of financial management. As a result of the systematic analysis showed themes on the best practices of Financial Management in Education as According to the demographics of the literature, Western countries and Southeast Asia conducted very few studies on best practices of financial management in education Therefore, this integrated and systematic study of the educational literature on the best practices and financial management sought to identify the key best practices of financial management in education. Finally, we hope that the framework offered by this study and the overview of the difficulties presented here will help to improve school leaders' practices in strategic financial management and serve as the basis for future research and policy decisions.

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Financial Management Research Paper Topics

Financial management research paper topics have emerged as an essential part of contemporary education in business and economics. As financial management continues to evolve with global economic changes, the need for research and analysis in this area grows. This article provides a comprehensive guide for students who study management and are assigned to write research papers on various aspects of financial management. From understanding the diverse topics to learning how to write an impactful research paper, this page offers valuable insights. Additionally, it introduces iResearchNet’s writing services, specifically tailored to assist students in achieving academic excellence. The content is structured to guide students through topic selection, writing, and leveraging professional services to meet their academic goals. Whether a novice or an advanced student of financial management, this resource offers a multifaceted perspective on the vast and dynamic field of financial management research.

100 Financial Management Research Paper Topics

The field of financial management offers a vast array of research paper topics. This complex discipline touches every aspect of business operations, influencing strategic planning, decision-making, and organizational growth. Below, you will find a comprehensive list of financial management research paper topics, divided into 10 categories. Each category offers 10 unique topics that cater to various interests within financial management. These topics have been carefully selected to reflect the richness and diversity of the subject.

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Get 10% off with 24start discount code, financial planning and control.

• The Role of Budgeting in Financial Planning
• Strategic Financial Management in SMEs
• The Impact of Working Capital Management on Profitability
• Ethical Considerations in Financial Planning
• Risk Management in Financial Planning
• Cost Control Techniques in Manufacturing
• Financial Decision-making Processes in Non-profit Organizations
• The Impact of Inflation on Financial Planning
• International Financial Planning Strategies
• The Relationship between Corporate Governance and Financial Planning

Investment Analysis and Portfolio Management

• The Efficient Market Hypothesis: A Critical Analysis
• The Role of Behavioral Finance in Investment Decisions
• Modern Portfolio Theory and Its Limitations
• Risk and Return Analysis in Emerging Markets
• Socially Responsible Investment Strategies
• The Impact of Political Instability on Investment Decisions
• Real Estate Investment Trusts (REITs): An In-depth Study
• Impact of Technology on Portfolio Management
• Mutual Funds vs. ETFs: A Comparative Study
• The Role of Artificial Intelligence in Investment Management

Corporate Finance

• Capital Structure Decisions in Startups
• The Role of Dividends in Corporate Financial Management
• Mergers and Acquisitions: Strategic Financial Analysis
• Corporate Financing in Developing Economies
• An Analysis of Venture Capital Financing
• The Impact of Corporate Social Responsibility on Financial Performance
• The Role of Financial Management in Business Turnaround Strategies
• Debt Financing vs. Equity Financing: A Comparative Analysis
• Corporate Financial Risk Management Strategies
• Financing Innovation: Challenges and Opportunities

International Financial Management

• Exchange Rate Dynamics and International Financial Decisions
• The Role of International Financial Institutions in Economic Development
• Cross-border Mergers and Acquisitions
• Globalization and Its Impact on Financial Management
• International Tax Planning Strategies
• Challenges in Managing International Financial Risk
• Currency Risk Management in Multinational Corporations
• International Capital Budgeting Decisions
• The Impact of Cultural Differences on International Financial Management
• Foreign Direct Investment Strategies and Financial Management

Financial Markets and Institutions

• The Role of Central Banks in Financial Stability
• The Evolution of Microfinance Institutions
• The Impact of Regulation on Banking Operations
• An Analysis of Stock Market Efficiency
• Financial Derivatives and Risk Management
• The Role of Technology in Financial Services
• A Study of Financial Crises and Regulatory Responses
• Peer-to-Peer Lending Platforms: A New Paradigm
• The Role of Credit Rating Agencies in Financial Markets
• The Future of Cryptocurrency in the Financial Landscape

Personal Finance Management

• Financial Literacy and Personal Investment Decisions
• The Role of Technology in Personal Finance Management
• Retirement Planning Strategies
• Impact of Consumer Behavior on Personal Financial Decisions
• Personal Finance Management in the Gig Economy
• A Study of Personal Bankruptcy Trends
• Credit Card Management Strategies for Individuals
• The Effect of Education on Personal Financial Management
• The Role of Financial Counseling in Personal Finance
• Estate Planning: A Comprehensive Analysis

Risk Management

• Enterprise Risk Management: A Strategic Approach
• The Role of Insurance in Financial Risk Management
• Financial Innovations in Risk Management
• A Study of Credit Risk Management in Banks
• Risk Management Strategies in Supply Chain Finance
• Cyber Risk Management in Financial Institutions
• The Impact of Climate Change on Financial Risks
• A Study of Operational Risk Management in the Healthcare Sector
• Behavioral Aspects of Risk Management
• Crisis Management and Financial Stability

Financial Technology (FinTech)

• The Rise of Blockchain Technology in Finance
• The Impact of FinTech on Traditional Banking
• Regulatory Challenges in the Age of FinTech
• Financial Inclusion through FinTech Innovation
• Artificial Intelligence in Financial Services
• The Future of Cryptocurrencies: Opportunities and Risks
• A Study of Peer-to-Peer Lending Platforms
• FinTech and Consumer Privacy: Ethical Considerations
• Mobile Banking: An Evolutionary Study
• The Role of Big Data Analytics in Financial Decision Making

Ethics and Sustainability in Finance

• Ethical Investing: Trends and Challenges
• Corporate Social Responsibility Reporting in Finance
• Sustainable Finance in Emerging Economies
• Environmental, Social, and Governance (ESG) Criteria in Investment
• The Impact of Business Ethics on Financial Performance
• The Role of Sustainability in Corporate Financial Strategy
• Green Bonds and Financing Sustainable Development
• Social Impact Investing: Opportunities and Challenges
• A Study of Gender Equality in Financial Institutions
• Financial Strategies for Achieving Sustainable Development Goals

Accounting and Finance

• Forensic Accounting: Techniques and Case Studies
• The Role of Management Accounting in Financial Decision-making
• International Financial Reporting Standards (IFRS) Adoption
• The Impact of Taxation on Financial Management
• Accounting Information Systems: An In-depth Analysis
• The Role of Auditing in Corporate Governance
• Accounting Ethics: A Study of Professional Conduct
• Environmental Accounting and Sustainable Development
• The Effect of Automation on Accounting Practices
• A Comparative Study of GAAP and IFRS

The extensive list above offers a broad spectrum of financial management research paper topics. They cater to different academic levels and areas of interest, providing a wealth of opportunities for students to explore the multi-dimensional world of financial management. The selection of these topics can lead to exciting discoveries and insights, pushing the boundaries of existing knowledge in the field. Whether it’s understanding the intricate dynamics of global finance or delving into the ethical considerations in investment decisions, these topics serve as starting points for thought-provoking research that can shape future practices in financial management. By choosing a topic from this comprehensive list, students embark on a journey of intellectual exploration that can contribute to both academic success and the broader understanding of financial management in the modern world.

Financial Management and the Range of Research Paper Topics

Financial management is a multifaceted discipline that stands at the intersection of economics, business administration, and finance. It governs the planning, organizing, directing, and controlling of financial activities within an organization or individual framework. In an ever-changing global economy, the importance of financial management cannot be overstated. It empowers organizations and individuals to make informed decisions, manage risks, and achieve financial stability and growth. This article delves into the vast domain of financial management and explores the wide array of research paper topics it offers.

A. Definition and Core Concepts of Financial Management

Financial management refers to the efficient and effective management of money to achieve specific objectives. It involves processes and tasks such as budgeting, forecasting, investment analysis, risk management, and financial reporting. The primary goals are to maximize shareholder value, ensure liquidity, and maintain solvency.

• Budgeting and Forecasting : These processes involve planning and estimating future financial needs and outcomes. They guide decision-making and help in aligning resources with organizational goals.
• Investment Analysis : This includes evaluating investment opportunities and determining the most profitable and sustainable investments.
• Risk Management : This aspect focuses on identifying, evaluating, and mitigating financial risks, including market risk, credit risk, and operational risk.
• Financial Reporting : This entails the preparation and presentation of financial statements that accurately reflect the financial position of an organization.

B. Importance of Financial Management

• Ensuring Financial Stability : Effective financial management helps in maintaining the financial health of an organization or individual by ensuring a balance between income and expenditure.
• Optimizing Resources : It enables the optimal utilization of resources by aligning them with short-term and long-term goals.
• Strategic Planning : Financial management plays a key role in strategic planning by providing insights into financial capabilities and constraints.
• Enhancing Profitability : By making informed investment and operational decisions, financial management enhances the profitability of an organization.

C. Modern Trends and Challenges in Financial Management

The evolution of technology, globalization, regulatory changes, and societal expectations have shaped modern financial management. Some noteworthy trends and challenges include:

• Financial Technology (FinTech) : The integration of technology into financial services has revolutionized banking, investing, and risk management.
• Globalization : The interconnectedness of global markets presents both opportunities and challenges in managing international financial operations.
• Sustainability and Ethics : The growing focus on environmental, social, and governance (ESG) criteria has led to ethical investing and sustainable finance.
• Regulatory Compliance : Navigating the complex regulatory landscape is a challenge that requires constant adaptation and vigilance.

D. Range of Research Paper Topics in Financial Management

The vastness of financial management offers a rich source of research paper topics. From exploring the intricacies of investment analysis to understanding the ethical dimensions of finance, the possibilities are endless. The following are some broad categories:

• Corporate Finance : Topics related to capital structure, mergers and acquisitions, dividend policies, and more.
• Investment and Portfolio Management : Including research on investment strategies, portfolio optimization, risk and return analysis, etc.
• International Financial Management : This encompasses studies on exchange rate dynamics, global financial strategies, cross-border investments, etc.
• Risk Management : Topics include various risk management techniques, insurance, financial innovations in risk management, etc.
• Personal Finance Management : This field covers financial planning for individuals, retirement strategies, credit management, etc.
• Financial Technology : Blockchain, cryptocurrencies, mobile banking, and more fall under this innovative domain.
• Ethics and Sustainability in Finance : Research in this area may focus on ethical investing, corporate social responsibility, green financing, etc.

Financial management is an expansive and dynamic field that intertwines various elements of finance, economics, and business administration. Its importance in today’s world is immense, given the complexities of the global financial system. The array of research paper topics that this subject offers is indicative of its diversity and depth.

From traditional concepts like budgeting and investment analysis to modern phenomena like FinTech and sustainability, the world of financial management continues to evolve. It invites scholars, practitioners, and students to explore, question, and contribute to its understanding.

The range of research paper topics in financial management offers avenues for academic inquiry and practical application. Whether it’s investigating the effects of globalization on financial strategies or exploring personal finance management in the gig economy, there’s a topic to spark curiosity and inspire research. These research endeavors not only enrich academic literature but also play a crucial role in shaping the future of financial management. In a rapidly changing world, continuous exploration and learning in this field are essential to remain relevant, innovative, and responsible.

How to Choose Financial Management Research Paper Topics

Choosing the right research paper topic in the field of financial management is a critical step in the research process. The chosen topic can shape the direction, depth, and impact of the research. Given the wide array of subfields within financial management, selecting a suitable topic can be both exciting and challenging. Here’s a comprehensive guide to assist you in choosing the ideal financial management research paper topic.

1. Understand Your Interest and Strengths

• Assess Your Interests : Consider what aspects of financial management intrigue you the most. Your enthusiasm for a subject can greatly enhance the research process.
• Identify Your Strengths : Understanding where your skills and knowledge lie can guide you towards a topic that you can explore competently.
• Connect with Real-world Issues : Relating your interests to current industry challenges or trends can make your research more relevant and engaging.

2. Consider the Scope and Depth

• Define the Scope : A clear understanding of the scope helps in keeping the research focused. Too broad a topic can make the research vague, while too narrow may limit your exploration.
• Determine the Depth : Decide how deep you want to delve into the topic. Some subjects may require extensive quantitative analysis, while others may be more theoretical.

3. Examine Academic and Industry Relevance

• Align with Academic Requirements : Ensure that the topic aligns with your course objectives and academic requirements.
• Analyze Industry Needs : Consider how your research could contribute to the industry or address specific financial management challenges.

4. Evaluate Available Resources and Data

• Assess Data Accessibility : Ensure that you can access the necessary data and information to conduct your research.
• Consider Resource Limitations : Be mindful of the time, financial, and technological resources that you’ll need to complete your research.

5. Review Existing Literature

• Analyze Previous Research : Review related literature to identify gaps, controversies, or emerging trends that you can explore.
• Avoid Duplication : Ensure that your chosen topic is unique and not merely a repetition of existing studies.

6. Consult with Experts and Peers

• Seek Guidance from Faculty : Consulting with faculty or mentors can provide valuable insights and direction.
• Collaborate with Peers : Discussions with classmates or colleagues can help in refining ideas and getting diverse perspectives.

7. Consider Ethical Implications

• Evaluate Ethical Considerations : Ensure that your research complies with ethical guidelines, especially if it involves human subjects or sensitive data.
• Reflect on Social Impact : Consider how your research might influence society, policy, or industry standards.

8. Test the Feasibility

• Conduct a Preliminary Study : A small-scale preliminary study or analysis can help in gauging the feasibility of the research.
• Set Realistic Goals : Ensure that your research objectives are achievable within the constraints of time, resources, and expertise.

9. Align with Career Goals

• Consider Future Applications : Think about how this research might align with your career goals or professional development.
• Build on Past Experience : Leveraging your past experiences or projects can lend depth and continuity to your research.

10. Stay Flexible and Adaptable

• Be Open to Change : Research is often an iterative process; being flexible allows for adaptation as new insights or challenges emerge.
• Maintain a Balanced Perspective : While focusing on your chosen topic, keep an open mind to interrelated areas that might enrich your research.

Choosing the right financial management research paper topic is a nuanced process that requires careful consideration of various factors. From understanding personal interests and academic needs to evaluating resources, ethics, and feasibility, each aspect plays a significant role in shaping the research journey.

By following this comprehensive guide, students can navigate the complexities of selecting a suitable research paper topic in financial management. The ultimate goal is to find a topic that resonates with one’s interests, aligns with academic and professional objectives, and contributes meaningfully to the field of financial management. Whether delving into the dynamics of risk management or exploring the impact of FinTech innovations, the chosen topic should be a catalyst for inquiry, creativity, and growth.

How to Write a Financial Management Research Paper

Writing a research paper on financial management is a rigorous process that demands a thorough understanding of financial concepts, analytical skills, and adherence to academic standards. From selecting the right topic to presenting the final piece, each step must be methodically planned and executed. This section provides a comprehensive guide to help students craft an impactful financial management research paper.

1. Understand the Assignment

• Read the Guidelines : Begin by understanding the specific requirements of the assignment, including formatting, length, deadlines, and the expected structure.
• Clarify Doubts : If any aspect of the assignment is unclear, seek clarification from your instructor or mentor to avoid mistakes.

2. Choose a Strong Topic

• Identify Your Interest : Select a topic that interests you, aligns with your strengths, and meets academic and industry relevance. Refer to the previous section for detailed guidelines on choosing a topic.

3. Conduct Extensive Research

• Explore Varied Sources : Use academic journals, textbooks, online databases, and industry reports to gather diverse perspectives and evidence.
• Evaluate the Credibility : Ensure that the sources are credible, relevant, and up-to-date.
• Organize Your Findings : Maintain well-organized notes, including source citations, to facilitate smooth writing later.

4. Develop a Thesis Statement

• Define Your Focus : Craft a clear and concise thesis statement that outlines the central argument or purpose of your research.
• Align with the Evidence : Ensure that your thesis is well-supported by the evidence you have gathered.

5. Create an Outline

• Structure Your Paper : Plan the structure of your paper, including the introduction, body, and conclusion.
• Organize Ideas : Arrange your ideas, arguments, and evidence logically within the outline.

6. Write a Compelling Introduction

• Introduce the Topic : Provide background information and context to the reader.
• Present the Thesis : Clearly state your thesis to guide the reader through your research.
• Engage the Reader : Use compelling language to create interest in your study.

7. Develop the Body of the Paper

• Present Your Arguments : Use clear and concise paragraphs to present each main idea or argument.
• Support with Evidence : Include relevant data, charts, graphs, or quotations to support your claims.
• Use Subheadings : Subheadings can help in organizing the content and making it more reader-friendly.

8. Include Financial Analysis

• Apply Financial Models : Use relevant financial models, theories, or frameworks that pertain to your topic.
• Perform Quantitative Analysis : Utilize statistical tools, if necessary, to analyze financial data.
• Interpret the Results : Ensure that you not only present the numbers but also interpret what they mean in the context of your research.

9. Write a Thoughtful Conclusion

• Summarize Key Points : Recap the main arguments and findings of your paper.
• Restate the Thesis : Reiterate your thesis in light of the evidence presented.
• Provide Insights : Offer insights, implications, or recommendations based on your research.

10. Revise and Edit

• Review for Clarity : Read through the paper to ensure that the ideas flow logically and the arguments are well-articulated.
• Check for Errors : Look for grammatical, spelling, and formatting errors.
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Retirement planning – a systematic review of literature and future research directions

• Published: 28 October 2023

Cite this article

• Kavita Karan Ingale   ORCID: orcid.org/0000-0003-3570-4211 1 &
• Ratna Achuta Paluri 2  

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Rising life expectancy and an aging population across nations are leading to an increased need for long-term financial savings and a focus on the financial well-being of retired individuals amidst changing policy framework. This study is a systematic review based on a scientific way of producing high-quality evidence based on 191 articles from the Scopus and Web of Science databases. It adopts the Theory, Context, Characteristics, and Method (TCCM) framework to analyze literature. This study provides collective insights into financial decision-making for retirement savings and identifies constructs for operationalizing and measuring financial behavior for retirement planning. Further, it indicates the need for an interdisciplinary approach. Though cognitive areas were studied extensively, the non-cognitive areas received little attention. Qualitative research design is gaining prominence in research over other methods, with the sparse application of mixed methods design. The study’s TCCM framework explicates several areas for further research. Furthermore, it guides the practice and policy by integrating empirical evidence and concomitant findings. Coherent synthesis of the extant literature reconciles the highly fragmented field of retirement planning. No research reports prospective areas for further analysis based on the TCCM framework on retirement planning, which highlights the uniqueness of the study.

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Data Availability

The research data will be made available on request.

Acknowledgment.

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Ingale, K.K., Paluri, R.A. Retirement planning – a systematic review of literature and future research directions. Manag Rev Q (2023). https://doi.org/10.1007/s11301-023-00377-x

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Title: The rise of sustainable, responsible and impact investing: ETFs and ESG

Authors : Jesus Carmona; Natalya Delcoure; Francisco Haces Fernandez

Addresses : College of Business Administration, Texas A&M University – Kingsville, 700 University Blvd., Kingsville, TX 78363, USA ' College of Business Administration, Texas A&M University – Kingsville, 700 University Blvd., Kingsville, TX 78363, USA ' College of Business Administration, Texas A&M University – Kingsville, 700 University Blvd., Kingsville, TX 78363, USA

Abstract : Socially responsible investing (SRI) has gained momentum in recent years. This research study investigated the impact of diverse events on SRI exchange-traded funds (ETFs). The applied event study methodology identified significant abnormal returns around the event dates. Some events had an impact across all the financial instruments, while others were specific to particular sectors. The results indicated that financial markets evaluate sustainable investing and renewable energy as resilient options in the face of uncertainty, such as the financial impacts of COVID-19. These results are further validated by sentiment analysis, indicating that social media evaluate SRI as less risky than traditional mutual funds in times of uncertainty.

Keywords : socially responsible investing; SRI; environmental, social and corporate governance criteria; exchange-traded funds; sentiment analysis; event study methodology.

DOI : 10.1504/IJPAM.2024.137752

International Journal of Portfolio Analysis and Management, 2024 Vol.2 No.4, pp.285 - 315

Received: 11 Feb 2021 Accepted: 22 Apr 2021 Published online: 05 Apr 2024 *

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Impact of financial literacy on financial well-being: a mediational role of financial self-efficacy

Umer mushtaq lone.

1 Research Scholar, Department of Management Studies, University of Kashmir, Jammu and Kashmir, Hazaratbal, Srinagar, 190006 India

Suhail Ahmad Bhat

2 Department of Management Studies, University of Kashmir, Jammu and Kashmir, Hazaratbal, Srinagar, 190006 India

The purpose of this paper is to explore the impact of financial literacy on financial well-being among the business school faculties. Both the variables (financial literacy and financial well-being) are operationalized as multi-dimensional constructs to undertake the study. Moreover, the paper also endeavored to examine the mediating role of financial self-efficacy between financial literacy and financial well-being. The paper adopts a survey by questionnaire method to gather data from 203 business school faculty members through the simple random sampling (SRS) technique. Confirmatory factor analysis was used for scale validation, and structural equation modeling was used for hypotheses testing. Mediation was tested using percentile bootstrap with a 95% confidence interval. The study found a significantly positive impact of financial literacy as well as its dimensions on financial self-efficacy and financial well-being. It was also found that financial self-efficacy partially mediates the effect of financial literacy on financial well-being. Measurement of the constructs was done on subjective measures, and the study is limited to business school faculties only. The present research findings could be employed in crafting educational programs for business schools. These programs shall guide such institutions in imparting the knowledge and skills among students regarding their personal finances in terms of savings and retirement planning. The study was focused on the business school faculties of the Jammu and Kashmir region, who are less exposed to the financial literacy programs due to factors like frequent lockdown and internet shutdowns. Moreover, it is generally witnessed that salaried class people in Jammu and Kashmir pay less attention to long-term financial planning for retirement, which makes the present study more relevant. Therefore, this study will prove beneficial to all the employees, especially the business school faculties, to understand the importance of financial literacy and its subsequent effect on financial well-being.

Introduction

Personal financial decisions and money management have been highly valued in the present economic scenario (Sinha et al. 2021 ). The instability of the global economy has given rise to diverse and complex financial products, which has brought in new challenges thereby forcing people to face these complex financial decisions (Philippas and Avdoulas 2020 ). As a result, the importance of personal financial management skills has amplified and, as such, has caught the attention of academia and policymakers more recently. Moreover, employees face numerous financial challenges ranging from overwhelming financial information, products, and services to financial responsibility (van Rooij et al. 2011 ; Agarwalla et al. 2012 ). Further, on account of complex financial products as well as structural reforms in social protection and pension schemes, people are forced to assume greater responsibilities to make difficult financial decisions for securing their own financial well-being (van Rooij et al. 2011 ). Also, with an increasing number of working-class approaching retirement and most importantly, a changing focus on individual responsibility for personal finances, financial literacy has evolved into a necessary skill that everyone must possess in everyday life (van Rooij et al. 2011 ). Consequently, this has led to the diminishing role of governments and other employers in managing finances on behalf of employees (Agarwalla et al. 2012 ). Additionally, the recent global financial crisis has underscored the implication of financial literacy and the need to be financially educated to make reasoned financial decisions. Further, financial literacy gives rise to the financial attitude, which results in financial well-being (Philippas and Avdoulas 2020 ).

In the light of the above perspective, an individual who is financially literate can plan, borrow, invest, spend more wisely and take risk mitigation measures (Attridge 2009 ; Atkinson and Messy 2012 ; Moulton et al. 2013 ; Grohmann et al. 2014 ; Lusardi and Mitchell 2017 ). In other words, a financially literate people are able to make sound financial decisions which are critical for financial well-being. Pahlevan Sharif et al. ( 2020 ) argued that financial literacy is required for successful financial resource management to achieve financial well-being. Chijwani ( 2014 ) supporting the previous studies state that a low degree of financial literacy has the potential to result in poor financial decisions that will adversely affect the financial condition of people. In this context, financial challenges, like personal bankruptcies, health issues, early retirement, job losses, debt repayment stress, and failing to meet savings targets, will be dealt more efficiently and smoothly by those persons who are financially prepared compared to those who are ill-prepared. Thus, financially prepared persons will achieve more financial well-being than financially ill-prepared (Kamakia et al. 2017 ).

Given the significance of financial literacy in the overall improvement of financial well-being, there is scarce research in the extant literature across the discipline (Bruggen et al . 2017 ). In this context, the present study is an attempt to expand the existing literature more broadly by considering the business school faculties. Therefore, two different approaches can be used to understand the changing dynamics of an association between financial literacy and financial well-being. First, a direct relationship between financial literacy and financial well-being can be investigated. Second, the relationship between the two can be understood indirectly through financial self-efficacy. Because of its increased predictive potential, financial self-efficacy influences individual tasks or decisions directly when it is domain-specific and to perceive favorable results indirectly that people frequently expect (Noor et al. 2020 ). Moreover, individually desired behavior can be attained and controlled based on financial self-efficacy in order to achieve a specific result (Bandura 1977 , 2005 ). As a result, it is critical to have knowledge and confidence in order to make decisions (Danes and Haberman 2007 ). Further, individuals with appropriate financial knowledge and information are also self-assured in their ability to complete successful deals (Noor et al. 2020 ). In this context, financial self-efficacy (in terms of behavioral skills) can play a vital role as an intervening factor in the relationship between financial literacy and financial well-being. Business school faculty is considered financially more aware and literate; thus, they feel more confident in their ability to make sound personal finance decisions, which in turn may lead to improved financial well-being. However, there is very little empirical evidence to back this proposition. Therefore, the present study intends to fill this gap by investigating the mediating role of financial self-efficacy in the relationship between financial literacy and financial well-being among business school faculty. The target population of the present study included business school faculties of the Jammu and Kashmir region. It is noteworthy that Jammu and Kashmir is an erstwhile state of India, which was recently downgraded to a Union Territory (UT) status post the dilution of Article 370 of the Indian Constitution in August, 2019. The borders of the UT of Jammu and Kashmir to the east are bounded with the Union Territory of Ladakh and to the South with the states of Himachal Pradesh and Punjab. Moreover, borders of Jammu and Kashmir to the southwest are bounded with Pakistan and to the northwest with the Pakistan-administered part of Kashmir. The UT of Jammu and Kashmir is fundamentally and greatly service-based economy and to some extent agriculture-oriented. Thus, analyzing the relationship between financial literacy and financial well-being is more relevant especially in the business school faculty group. This is fundamentally because this population segment is less exposed to the financial literacy programs due to certain factors such as frequent lockdown and internet shutdowns. Moreover, it is generally witnessed that salaried class people in Jammu and Kashmir pay less attention to long-term financial planning for retirement which makes the present study more relevant (Gopalakrishnan et al. 2017 ). Further, they rely on their savings mostly in their bank accounts and usually do not take loan from the banks. Also, they have less exposure to the investment avenues like retirement funds, pension funds, stock market investment or mutual fund investments compared to the rest of India. Finally, on account of the recent decision by the Government of India to change the status of Jammu and Kashmir from state to union territory, more centrally sponsored schemes are now available in Jammu and Kashmir. Thus, business school faculties based on their background, area of specialization and knowledge, they have been preferred over other population groups of the Jammu and Kashmir region. Therefore, this study shall prove beneficial to all the employees especially the business school faculties to understand the importance of financial literacy and its impact on their financial well-being.

Theoretical background and literature

There is a large body of existing literature that links financial literacy with financial well-being. Hogarth ( 2006 ) and Shim et al. ( 2009 ) have established that financial literacy, financial fragility and financial behavior have an impact on financial well-being. Moreover, financial literacy fosters a positive financial attitude leading to financial well-being. These studies have established that financial literacy has a strong positive influence on financial well-being. Confirming the results of previous studies, Joo and Grable ( 2004 ) observe that increased levels of financial literacy result in financial contentment and eventually financial well-being. Xiao et al. ( 2014 ) opine that people possessing higher financial literacy are more financially satisfied. Similarly, Ali et al. ( 2015 ) postulate that financial literacy is the significant determinant of financial satisfaction which helps people in planning their spending and saving patterns. Likewise, Chu et al. ( 2017 ) state that the households that are more financially literate enjoy higher financial well-being as measured in terms of positive investment returns. Hilgert and  et al . ( 2003 ) suggest that financial management skills have a strong association with financial literacy. As a result, it is not surprising that retirement planning and the growth in retirement money is a primary pathway through which financial literacy influences financial well-being. People in many countries around the world are expected to assess and organize their savings to ensure that they have sufficient funds to cover for their old age and do not outlast their wealth. In order to do that, one must possess the working knowledge of basics of mathematical finance. In this context, the studies by Lusardi and Mitchell ( 2005 , 2007 ) have used basic mathematical finance concepts to evaluate whether an individual’s financial literacy influence his retirement planning and consequently his financial well-being. These authors have clearly established a significant positive impact of financial literacy on financial well-being. The study of Agnew et al. ( 2012 ) corroborating the views established by these results states that people with less financial understanding are more inclined to draw out from their pension funds. These findings have been confirmed by several other studies including Alessie et al. ( 2011 ), Fornero and Monticone ( 2011 ), Klapper and Panos ( 2011 ), and Sekita ( 2011 ).

Similarly, there are other strands of extant literature which have linked financial literacy to other dimensions of financial well-being. Studies like Stango and Zinman ( 2009 ), Behrman et al. ( 2012 ), van Rooij et al. ( 2012 ), Chu et al. ( 2017 ) have demonstrated that higher wealth accumulation is a result of higher financial literacy, which in turn results in the financial well-being of an individual. Studies like Lusardi and Tufano ( 2009 ), Santos and Abreu ( 2013 ), Tsai et al. ( 2016 ) have established that lower levels of financial literacy often result in excessive debt loads, credit problems, bankruptcy and over-indebtedness which eventually affects financial well-being negatively. Moreover, Scheresberg ( 2013 ) and Lusardi et al. ( 2011 ) have found that increased levels of financial knowledge lead to more precautionary savings and a greater ability to deal with financial emergencies. As a result, people feel more secure and thus achieve financial well-being. Additionally, several other studies have linked financial literacy to the financial costs of households. In this context, studies like Moore ( 2003 ), Lusardi and Tufano ( 2009 ), Gerardi et al. ( 2010 ), Mottola ( 2013 ), and Lusardi and Scheresberg ( 2013 ) have demonstrated that higher borrowing and mortgage costs, higher credit card costs, and increased mortgage defaults result from lower levels of financial literacy. All these financial costs and mortgage defaults are detrimental to financial well-being.

In addition to the above discussions, Bruggen et al . ( 2017 ) have observed that increased financial literacy leads to financial self-efficacy, and that is an essential factor for financial well-being. These authors identify financial self-efficacy as being able to control one’s finance which reflects an individual’s skill and ability to influence his/her financial matters. So, financial self-efficacy can be understood as the confidence of an individual stemming from his/her financial knowledge which eventually results in financial well-being. However, there is scanty literature available pertaining to this relationship, and it is even non-existent when viewed from the perspective of business school faculties. So, the present study will empirically analyze how the relationship between financial literacy and financial well-being is being mediated by financial self-efficacy.

On the basis of the above-discussed literature, the present study identifies financial preparedness for emergency, current money management stress and perceived financial security as constructs of financial well-being (endogenous variable), financial self-efficacy as intervening or mediating variable and financial awareness, financial experience and financial skill as constructs of financial literacy (exogenous variable).

Financial well-being

Financial well-being is conceptualized as the belief in one’s ability to maintain current and predicted ideal living standards as well as financial freedom (Bruggen et al . 2017 ). Moreover, CFPB 1 defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.” Therefore, a person who is financially insecure leads a precarious life, which has an impact on his economic mobility and as a result, a trivial financial issue might quickly escalate into a long-term financial limitation (Gennetian and Shafir 2015 ). The comprehensive study by Bruggen et al . ( 2017 ) presents the multifaceted, complex and dynamic construct framework of financial well-being, which calls for further investigation into different perspectives. However, on the basis of the extant literature and need of the present study, the following three constructs have been identified and analyzed vis-à-vis financial literacy and financial self-efficacy. In the following sub-sections, the identified constructs of financial well-being are operationalized in the light of existing literature.

Financial preparedness for emergency

Financial preparedness for an emergency is conceptualized as an individual’s state of being financially prepared to deal with a financial shock that may hinder him or her from carrying out routine activities (Abrantes-Braga and Veludo-de-Oliveira 2019 ). Therefore, people who have financial stability and the security of meeting their financial obligations are more likely to experience more financial well-being in such a situation (Hagerty and Veenhoven 2003 ). The concept of financial well-being suggests that individuals must have the ability to withstand a financial interruption in order to attain financial well-being (Consumer Financial Protection Bureau, 2015) 2 . The concept of ‘financial preparedness for emergency’ captures this perspective of financial well-being and is likely to act as a driver for financial well-being. The previously stated concept of financial preparedness for an emergency is similar to what Bruggen et al . ( 2017 ) call “stimulating financially sound behavior.”

Current money management stress

Current money management stress is conceptualized as feelings of stress or worry about one's financial situation and inability to effectively manage money in order to meet financial obligations and live the desired life (Netemeyer et al. 2018 ). Despite the fact that the majority of research studies reveal a negligible relationship between income and financial well-being (Ng and Diener 2014 ), however, there is a growing body of research linking current money management stress and financial well-being (Brown et al. 2005 ; Johnson and Krueger 2006 ; Ruberton et al. 2016 ). In this context, Netemeyer et al. ( 2018 ) establish a negative relationship between the two. Therefore, people with enough cash in hand for meeting current requirements are most likely to have satisfied life (Ruberton et al. 2016 ). Similarly, Brown et al. ( 2005 ) observe that current money management stress in terms of excessive indebtedness results in psychological distress, a finding similar to the observation made by Rubertson et al . ( 2016 ).

Perceived financial security

Perceived financial security is understood as the individuals’ subjective appraisal of their economic resources and situations (Haines et al. 2009 ). It involves beliefs about having a financially secure future and achieving financial objectives (Netemeyer et al. 2018 ). Individual perceptions of economic problems and strains have been identified as one of the most severe chronic stresses that people face on a daily basis (Lynch et al. 2010 ; Kahn and Pearlin 2006 ). Therefore, perceived financial security captures the individuals’ level of satisfaction regarding their financial security. In this context, Netemeyer et al. ( 2018 ), while analyzing the causes and effects of perceived financial well-being, find perceived financial security one of the critical causes. The study establishes a positive relationship between the two. People who save/invest responsibly for future needs are significantly more satisfied than people with the same amount of income who save/invest less (Chancellor and Lyubomirsky 2011 ).

Financial literacy

Financial literacy is defined in this study as the understanding of basic economic and financial concepts required for the proper management of financial resources in order to achieve financial well-being (Hung et al. 2009 ). Financial well-being, on the other hand, as defined previously, is the belief in one’s ability to maintain current and predicted ideal living standards as well as financial freedom (Bruggen et al . 2017 ). In this context, financial literacy is believed to have a significant effect on people's financial well-being since financially literate people are more inclined to handle their personal resources, develop effective ways to save, invest and accumulate wealth over time (Nejad and Javid 2018 ). Therefore, people with proper financial knowledge have the potential to make reasonable financial decisions which will lead to the achievement of financial well-being. It can be inferred that as people gain more and more financial literacy, they tend to save and invest more and may even become more skillful about making daily financial choices (Lusardi and Mitchell 2007 ; Lusardi and Tufano 2008 ). Consequently, they achieve financial self-efficacy which eventually results in higher financial well-being (Netemeyer et al. 2018 ). On the basis of the review of extant literature and also the need for the present study, the following three constructs of financial literacy have been found to be more relevant. The following subsections present their conceptualization, their links with financial well-being and financial self-efficacy.

Financial awareness

Financial awareness is conceptualized as the general understanding of budgeting, knowledge about financial products and services offered by financial institutions, and basic concepts of finance to manage one’s personal finance and achieve his/her financial goals (Beal and Delpachitra 2003 ; Nga et al. 2010 ; Remund 2010 ; Chowdhry and Dholakia 2020). Financial awareness, as part of financial literacy, is an essential component of financial stability since it influences financial knowledge, which in turn drives decision-making (Mason and Wilson 2000 ; Khan 2015 ; Priyadharshini 2015 ). The antecedents of financial awareness in terms of both general awareness and product awareness have been ascribed to demographic factors (Nga et al. 2010 ). So, financially aware people will make reasoned financial decisions which will boost their confidence or financial self-efficacy and eventually feel more satisfied, i.e., higher level of financial well-being (van Rooij et al. 2012 ; Khan 2015 ; Priyadharshini 2015 ). Moreover, Guiso and Jappelli ( 2005 ) state that individuals that lack financial awareness limits financial knowledge related to financial products and services which ultimately influences decision-making and investment in financial markets. So, people with no or limited financial awareness will result in low financial self-efficacy and thus a low level of financial well-being. Based on the above-discussed literature, the following hypothesis is formulated:

Financial awareness has a significantly positive impact on financial self-efficacy.

Financial experience

Financial experience is understood as the experience of owning a financial product or sharing the experience of the same with others and is believed to improve financial literacy (Dewi et al. 2020 ). Moreover, financial experience is conceptualized as the engagement or participation in financial education programs that influence and improve financial literacy and eventually the financial behavior (Frijns et al. 2014 ). So, financial experience invariably induces an individual’s motivation to become financially literate (Frijns et al. 2014 ). Moreover, Mandell ( 2008 ) states that financial literacy programs in high schools which incorporate stock market games have resulted in a considerable increase in financial literacy scores of 6–8 percent. This is because stock market games are considered as experimental learning giving controlled exposure to markets without the fear of financial loss in real terms (Frijns et al. 2014 ). Further, financial experience and behavior have an impact on an individual's degree of financial knowledge, which leads to financial competency (Moore 2003 ). So, people with a great degree of financial competency by default develop financial self-efficacy which improves their financial well-being. On the basis of above discussion, the following hypothesis is proposed:

Financial experience has a significantly positive impact on financial self-efficacy.

Financial skill

Financial skill is conceptualized as the numerical and cognitive abilities of individuals, which may encourage them to analyze information, gain new skills, and even search the market for what is available (Lusardi 2012 ; Mitchell and Lusardi 2015 ). Moreover, Priyadharshini ( 2015 ) states that financial skills refer to the individuals’ ability to make information-based decisions to minimize the chances of entrapping themselves in financial complications. Further, people possessing financial skills help them to avail services like internet and mobile banking which eventually aid in the management of personal finances (Nejad and Javid 2018 ). Also, individuals relying on financial skills are less likely to contact customer services to resolve their issues (Nejad and Javid 2018 ). This indicates that financially literate people in terms of possessing necessary financial skills, make informed and effective financial decisions (Starcek and Trunk 2013 ; Lusardi and Mitchell 2017 ). Additionally, one of the underlying causes of the global financial crisis was the lack of basic financial skills in terms of the inability of understanding credit, complex financial products or investment instruments or the utilization of the existing banking system (Lusardi and Mitchell 2011 ). Further, budgeting, saving, borrowing, and investing are the four pre-requisites of financial literacy, which emphasize the importance of the capacity to apply knowledge and skills to manage money (Remund 2010 ). In this context, possessing necessary financial skills makes an individual gain financial self-efficacy which helps him/her eventually improve his/her financial well-being. On the basis of the literature discussed above, the following hypotheses are proposed:

Financial skill has a significantly positive impact on financial self-efficacy.

Financial literacy has a significantly positive impact on financial self-efficacy.

Financial self-efficacy

Financial self-efficacy is conceptualized as the confidence of an individual in his/her ability to acquire information for making effective financial decisions (Netemeyer et al. 2018 ). Therefore, the greater one's belief in one's financial capacity, the more favorable future results accumulate (Hadar et al. 2013 ; Bruggen et al . 2017 ). Moreover, financial self-efficacy helps in avoiding adverse financial behavior, and consequently, the financial anxiety accompanying that behavior (Hadar et al. 2013 ). Also, financial self-efficacy is believed to reinforce responses to challenging present events by making individuals to remain motivated to face obstacles (Kammeyer-Mueller et al. 2009 ). Therefore, financial self-efficacy should have positive association with the financial well-being. Further, it is believed that financial self-efficacy evokes a behavior to be disciplined to achieve long-term financial goals (Chen et al. 2001 ; Chowdhry and Dholakia 2016 ). Additionally, people with a high degree of financial self-efficacy have a belief that the financial decisions taken based on financial knowledge will eventually help them to secure their financial future (Netemeyer et al. 2018 ). This will resultantly enhance their perceived financial security level and will nurture their financial well-being. Based on the discussion of existing literature, the following hypotheses have been proposed:

Financial Self-efficacy has a significantly positive impact on financial well-being.

Self-efficacy mediates the impact of financial literacy on financial well-being.

Proposed model

The conceptual model has been developed on the basis of above-discussed literature pertaining to financial well-being and its various determinants. The present study has put forward a model that contains seven constructs in which financial well-being is depicted as endogenous variable (measured with three constructs, namely financial preparedness for emergency, current money management stress and perceived financial security). Financial literacy is exogenous variable (measured with three constructs, namely financial awareness, financial experience and financial skill) and financial self-efficacy represents a mediating variable measured with a single construct (Fig.  1 ). Both financial literacy and financial well-being are second order latent constructs developed from their dimensions. Overall impact of the second-order financial literacy construct as well as the individual impact of its latent constructs was observed in the financial self-efficacy. However, financial well-being was observed as second-order latent construct only.

Conceptual model

Materials and methods

The items measuring the various constructs have been adopted from previous research studies in the areas of financial literacy, financial self-efficacy, and financial well-being. Financial literacy is expressed in terms of three sub-dimensions viz., financial awareness, financial experience and financial skill and the items measuring these dimensions were borrowed from prior research studies of van Rooij et al. ( 2011 ) and Dewi et al. ( 2020 ). Financial self-efficacy is a unidimensional construct, and the items measuring it have been derived from the research studies of Mindra et al. ( 2017 ) and Losada-Otalora and Alkire ( 2019 ). Lastly, financial well-being is also expressed in terms of three dimensions viz., financial preparedness for an emergency, current money management stress, and perceived financial security. The items measuring these dimensions have been adopted from the research studies of Gutter and Copur ( 2011 ), Howell et al. ( 2013 ), Chatterjee et al. ( 2019 ), Abrantes-Braga and Veludo-de-Oliveira ( 2019 ). The scale items measuring different constructs undertaken in the study are shown in the Appendix I. Some of the scale items have been modified slightly in order to suit the requirements of the present study. The responses from the respondents were collected on a five-point Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly agree).

Target population, sampling process, and data collection

The target population for the study comprises business school faculties of the Jammu and Kashmir region which approximately constitute 300 faculty members (both contractual and permanent). The business school faculties have mostly been selected from higher educational institutions (running post-graduate courses) and universities in the region. The underlying reason for the selection of business school faculties as the target population stems from the fact that they are believed to possess a basic knowledge about personal finance compared to other faculties in specific and to the overall population in general. The data collection from respondents was conducted via an online survey. There are two primary reasons for adopting an online survey. Firstly, on account of the COVID-19 pandemic, all educational institutions were closed and thus offline mode could not be availed. Secondly, the online mode is considered as the efficient and most acceptable approach to data collection (Hsiao et al. 2010 ; Lin and Wang 2015 ). The study used various different digital platforms such as messenger (like WhatsApp etc.) and e-mailing services to approach the respondents by constructing an online questionnaire. The questionnaire-link was sent to the respective respondent using above-mentioned digital platforms. The contact details of the respondents were obtained from the official websites of the different institutions, friends, acquaintances and peers (in case digital address was not available).

Further, to draw a required sample from the population, an itemized sampling procedure was used. In this procedure, 5–10 respondents are enough for each item in the questionnaire to avoid sampling error (Hinkin 1995 ; Hair et al. 1998 ). Subsequently, the current questionnaire has 30 items; therefore, a sample of 150–300 is adequate for the study. Since the current study has used simple random sampling, therefore, an effort was made to reach the maximum population and a total of 203 responses were recorded which forms around 67% of the ideal sample size under itemized sampling criteria.

Sample characteristics

Table ​ Table1 1 presents the sample characteristics in terms of the socio-demographic features of respondents. It is presented in the table that female respondents account for the highest percentage (72.4%) and male respondents account for the lowest percentage (27.6%). Age is categorized into three groups viz., 25–35, 36–45, 46–55 and above 56 (Table ​ (Table1). 1 ). So, in terms of age group, the highest percentage of responses is observed for the respondents falling in the group range of 25–35 (63.1%) and the lowest percentage of responses is observed in the case of respondents falling in the category above 56 (3.9%). Further, specialization acts as the course-teaching specialization of the respondents categorized into five areas viz., finance, human resource, information technology, marketing and tourism. The respondents possessing marketing specialization account for the highest responses (42.4%) and the lowest responses are observed in the case of respondents having human resource specialization (8.8%). Moreover, income has been taken as economic variable categorized into five groups viz., 25,000 – 50,000; 50,000 – 1,00,000; 1,00,000 – 1,50,000; 1,50,000 – 2,00,000 and above 2,00,000 (Table ​ (Table1). 1 ). The respondents in the monthly income group of 25,000 – 50,000 account for the highest percentage of responses (51.7%) and the lowest percentage is observed for the respondents falling in the monthly income range of 1,50,000 – 2,00,000.

Sample profile (N = 203)

Pilot study

Face validity and content validity of the questionnaire were evaluated during the pilot study, which initially consisted of 30 items measuring seven constructs. Face validity and content validity were evaluated by seeking feedback from research experts, personal finance experts, and psychometric experts regarding order, content, wording, sentence structure and layout of the questionnaire (Malhotra, 2010). The questionnaire was revised in light of various suggestions received from the experts. The expert evaluation of the questionnaire resulted in the omission of three items namely FA6, FE11 and CMMS28. Inputs regarding the content of the questionnaire were also collected from respondents, resulting in minor changes in few questions. After the qualitative evaluation, empirical testing of the questionnaire was carried out by drawing a sample of 63 respondents from the population. Respondents were approached through online mode only by sending email/instant messages that contain a link to a questionnaire. In order to validate the instrument, confirmatory factor analysis (CFA) was conducted on the data set. CFA results are discussed in the next section.

Data analysis

Confirmatory factor analysis (cfa).

A measurement model was developed in AMOS 22 and CFA was applied to the pilot study data of 63 respondents to evaluate its reliability and validity. CFA results were gauged on the basis of model fit indices, standardized CFA loadings, composite reliability, average variance extracted and discriminant validity (Hair et al. 1998 ). MLE (maximum likelihood estimation) has been employed to conduct CFA for the 7 constructs designated in the study. The initial model fit indices were observed to be χ 2 /df = 1.88; CFI = 0.842; RMR = 0.096; RMSEA = 0.094 (Hair et al. 2003 ). These model fit indices were slightly out of the acceptable range because of the poor loading of some items (below the threshold of 0.70). The items FA1, FE7, FPE23, CMMS31, and PFS35 were dropped on the ground of factor loading below the standard threshold of 0.70 (Byrne 2006 ). These items were successively removed from the CFA model, and model fitness was rechecked at each dropout. It took five iterations to clean the CFA model from items with poor loadings. The model fit indices after dropping all the poorly loaded items were found to be χ 2 /df = 1.72 (χ 2  = 527.54 & df = 303); CFI = 0.922; RMR = 0.090; RMSEA = 0.074 (appended as footnote to Table ​ Table2 2 ).

Results of confirmatory factor analysis and reliability/validity estimates

AVE- Average Variance Extracted, MSV- Maximum Shared Squared Variance, CR- Composite Reliability; The figures diagonally represent the square root of AVE;

Model fit indices include: Chi-square/df = 1.72; CFI = 0.922; RMR = 0.090; RMSEA = 0.074; Source: AMOS Output

The reliability and validity of the constructs were determined through composite reliability (CR), convergent validity and discriminant validity. CR was employed to determine the internal consistency, and its value was found to be above the acceptable threshold of 0.70 for all the 7 constructs as shown in Table ​ Table2 2 (Nunnally and Bernstein 1994 ). Convergent validity was established through AVE, which was found to be above the acceptable limit of 0.50 for all constructs (Table ​ (Table2). 2 ). Discriminant validity was determined by using Fornell–Larcker’s criterion (Fornell and Larcker 1981 ; Bagozzi and Yi 1988 ), which depicts that correlation among the different pairs of constructs should be lower than square root of AVE (Hair et al. 2010 ). The results of discriminant validity are presented in Table ​ Table2. 2 . It is depicted from the Table that the inter-construct correlation coefficient of all the constructs is below the square root of AVE (diagonally in bold figures), thus providing evidence for DV (Hair et al. 2010 ).

Results and discussion

The proposed research framework has been gauged by developing a structural model in AMOS graphics and was subsequently performed on the final data set of 203 through the MLE approach. To accomplish the objective of the study and test the various hypotheses, two structural models were developed. In the first structural model, financial literacy was treated as a higher-order latent construct (consisting of 3 dimensions, namely financial experience, financial awareness, and financial skill) and its impact was determined on financial self-efficacy and financial well-being (Fig.  2 ). The model fit indices of the first structural model were found to be in the acceptable ranges indicating that data fits the model (χ 2 /df = 1.56 (χ 2  = 495.5 & df = 316); CFI = 0.910; RMR = 0.069; RMSEA = 0.053). In the second structural model, impact of the dimensions of financial literacy (financial awareness, financial experience and financial skill) was directly determined on financial self-efficacy and financial well-being (Fig.  3 ). The model fit indices of the second structural model were found to be in the acceptable ranges indicating that data fits the model (χ 2 /df = 1.57 (χ 2  = 494 & df = 314); CFI = 0.910; RMR = 0.068; RMSEA = 0.053).

(SEM – I). Model fit indices include: Chi-square/df = 1.56; CFI = 0.910; RMR = 0.069; RMSEA = 0.053; Source: AMOS Output

(SEM – II). Model fit indices include: Chi-square/df = 1.57; CFI = 0.910; RMR = 0.068; RMSEA = 0.053; Source: AMOS Output

The SEM results (of both the structural models) presented in Table ​ Table3 3 show standardized path estimates, critical ratios and R 2 estimates. It is depicted from the table that financial literacy has a significant impact on financial self-efficacy. Thus, hypothesis H1 is supported with standardized regression estimates (SRE) of 0.71 (critical ratio of 4.47 significant at 0.05). Further, the results illustrate that the R 2 of 0.50 (shown in brackets in Fig.  2 ) indicates that financial literacy explains 50 percent of the variance in financial self-efficacy. Table ​ Table3 3 results reveal that financial awareness, financial experience and financial skill significantly impact financial self-efficacy. Therefore, hypotheses H1a, H1b and H1c are supported with SRE of 0.25 (critical ratio of 2.69), 0.24 (critical ratio of 2.42); and 0.28 (critical ratio of 3.09), respectively. From the SEM results, it is observed that financial awareness has the highest effect among the three constructs of financial literacy. The underlying reason for such highest effect stems from the fact that unless an individual becomes aware of personal financial matters, it is difficult to have proper knowledge about such things and, as such, will not be able to develop relevant skills. Moreover, financial skill is seen to have a higher effect than financial experience vis-à-vis financial self-efficacy, which points to the fact that more skillful people feel more confident compared to those who only have financial experience. This means that financial experience acts only as an impetus for financially literate people (Frijins et al . 2014 ). However, developing skills out of such experience is more important because it is a financial skill that ultimately facilitates one’s sail into increased confidence (Nejad and Javed 2018 ). Therefore, individuals with greater financial skills are more likely to make effective financial decisions (Starcek and Trunk 2013 ; Lusardi and Mitchell 2017 ). This indicates that business school faculties that possess higher financial knowledge in terms of financial awareness, financial experience and financial skill are more likely to feel confident about that and, as such, achieve higher financial self-efficacy.

Results of SEM

* Indicates significant at 0.05; FL- Financial Literacy; FSE- Financial Self-efficacy; FA- Financial Awareness; FE- Financial Experience; FS- Financial Skill; FWB- Financial Well-being Source: AMOS Output

The results further reveal that R-square value of 0.32 (shown in brackets in Fig.  3 ) indicates that financial awareness, financial experience and financial skill explain 32 percent of the variance in financial self-efficacy. Further Table ​ Table3 3 illustrates that financial self-efficacy has a significant impact on financial well-being. Thus, hypothesis H2 is supported with an SRE of 0.82 (critical ratio of 5.83). This is explained by the fact that people with higher financial self-efficacy elicit a response to self-discipline, which helps to overcome challenges and eventually accomplishes long-term financial goals (Kammeyer-Mueller et al. 2009 ; Chen et al. 2001 ; Chowdhry and Dholakia 2016 ). Moreover, financial self-efficacy induces a strong belief in an individual regarding financial decisions, when based on sound financial knowledge, will help to secure future financially (Netemeyer et al. 2018 ). Consequently, an improvement is evidenced in one’s perceived financial security which gets manifested into improved financial well-being. In this context, business school faculties who have attained greater financial self-efficacy feel more motivated and are able to make sound personal finance decisions like retirement planning, cash management, debt management. Such people are more satisfied and result in their increased financial well-being. It is noteworthy that financial well-being becomes more important when an individual belonging to the Jammu and Kashmir region is facing numerous challenges which threaten his well-being. The challenges in the form of political and security situation in the said region have been volatile on account of hostilities between three nuclear-armed countries including India, Pakistan and China. The results further reveal that R-square value 0.68 (shown in brackets in Fig.  3 ) indicates that financial self-efficacy explains 68 percent of the variance in financial well-being.

Mediation analysis

Mediation hypothesis H3 was tested by employing one of the empirical approaches given by Nitzl et al. ( 2016 ). According to this approach, mediation analysis is performed using percentile bootstrap confidence interval method (with 3000 bootstraps resample) to obtain standardized direct, indirect and total effects at 95 percent CI in AMOS (Preacher and Hayes 2008 ; Hayes and Scharkow 2013 ). The results obtained are shown in Table ​ Table4 4 which reveal that the direct relationship between financial literacy & financial well-being and financial self-efficacy & financial well-being is significant. However, in the presence of financial self-efficacy (mediator), the direct effects are still significant and the ratio of indirect to total effects is less than 50 percent. These results provide strong support to our predicted relationship between financial literacy and financial well-being both directly and indirectly through the mediation effect of financial self-efficacy. From the results, it is deciphered that financial literacy is an underlying cause of financial well-being as the highest direct effect estimate was reported. These findings are consistent with the findings of Lusardi and Mitchell ( 2007 ) and Lusardi and Mitchell ( 2008 ). Thus, an individual’s financial knowledge does not alone guarantee him improved financial well-being; instead, an induced behavior manifested in greater self-belief about managing personal finances is also evidenced (Netemeyer et al. 2018 ). It is important to note that the overall sample population of business school faculties (which include finance, marketing, human resource, information technology and tourism) validate the results. One possible and important reason for such validation seems to be that nowadays faculties undergo FDPs (faculty development programs) wherein not only subject-related issues are discussed rather issues pertaining to personal finance are also highlighted. Thus, on the basis of direct, indirect and total effects, given in Table ​ Table4, 4 , hypothesis H3 is partially supported.

Mediation analysis results

* Indicates significant at 0.05; FL- Financial Literacy; FWB- Financial Well-being; FSE- Financial Self-efficacy Source: AMOS Output

Contribution and implications

The present study contributes to existing research on determinants of financial well-being in multiple ways. While the prior research works focused on the students, women, and other salaried class people, this study is exclusively related to business school faculties, virtually non-existent in the literature. Moreover, the present study analyzes the impact of financial literacy on the financial well-being of business school faculties through a mediator, i.e., financial self-efficacy. Financial self-efficacy is seen to develop self-assuredness in an individual which can enhance personal finance management skills. In addition to financial literacy, financial self-efficacy plays an important role in magnifying the financial well-being of an individual. This finding has not received much attention in the existing literature. Finally, the present study employs subjective measures for all the constructs instead of objective measures. The underlying reason for such a choice was necessitated by the fact that subjective measures address the inherent limitations of objective measures. They provide insight into how the individuals perceive financial literacy, financial self-efficacy and perceived impact on financial well-being from an individual’s perspective.

The findings of the study have implications for policymakers, educational institution administrators, financial analysts, financial planners, and most importantly the business school faculties themselves. The findings could be employed to develop financial education programs that will help business school faculties to impart the knowledge and skills to manage their personal finances in terms of savings and retirement planning and thus improve their overall financial well-being. Moreover, people with low levels of financial literacy are most vulnerable to online frauds, internet phishing scams and financial cybercrimes. All such activities are aimed at credit card thefts, capturing user credentials and gaining illegal access to bank accounts of individuals. So, business school faculties can disseminate the financial knowledge to other people, who can become financially literate, which can help them to protect themselves from such frauds. Additionally, students who are the beneficiaries of the educational loans have little experience in servicing such loans properly. The dissemination of financial knowledge from business school faculties to students has the potential to become a life-long pursuit for financial education. Thus, students, by virtue of being financially literate, can develop personal financial management skills which can increase their financial well-being.

The mediating role of financial self-efficacy has been partially established in the study which also holds important implications for managers and policymakers. Individuals that possess a greater sense of self-assuredness in their personal finance management skills are more likely to deal with any financial hardships as a ‘challenge to be mastered, rather than threats to be avoided.’ In this context, individuals that have a greater sense of self-belief in their capabilities have more appetite for taking risks and have stronger likelihood of making stock market investments or taking loans. However, those individuals that are low on financial self-efficacy exhibit financially risk-averse behavior and are more likely to go for a savings account. Apart from financial literacy that has an important implication for managers and policymakers for financial programs, financial self-efficacy in itself has an important role in personal finance behavior. The managers and policymakers can use the results related to mediating role of financial self-efficacy to devise their strategies and policies for better outcomes.

Limitations and directions for future research

There are certain limitations of the present study which deserve attention and could potentially become areas for future research. First, the survey sample is restricted to business school faculties of the Jammu and Kashmir region only; thus, future researchers need to be cautious while generalizing the results of this study. Moreover, the business schools operate in an environment where there is constant threat to their personal well-being, which emanates from the political and security instability of the region. In order to increase the generalizability of the current theme, more coverage to the sample should be given beyond business school faculties by considering other adult population. As depicted from the R-square results, financial self-efficacy and financial well-being is only 32 and 68 percent explained by financial literacy, respectively. Therefore, there is scope for more factors that could explain financial self-efficacy and financial well-being of an individual. Finally, the present has used financial self-efficacy as a unidimensional construct. Thus, future research could identify more dimensions for financial self-efficacy so that policies to improve financial well-being could be more effectively designed and implemented.

In an economic environment characterized by rapid changes with increased financial uncertainty, the ability to make effective and sound personal financial decisions has gained importance. An individual who is financially more literate has the ability to spend wisely and plan to secure future financial needs to attain improved financial well-being. In this context, the present study attempted to evaluate the impact of financial literacy on financial well-being. Although several studies have been conducted across different sections of the society including adults, students and other salaried class people. However, studies on business school faculties are non-existent in the extant literature and, as such, make the contribution of the present study more vital and relevant. The study has used structure equation modelling (SEM) to test the proposed hypotheses. The SEM results reveal that business school faculties that are financially literate in terms of financial awareness, financial experience and financial skill are more likely to have financial self-efficacy which helps in improving their financial well-being. Further, the results of mediation analysis depict that financial self-efficacy partially mediates the impact of financial literacy on financial well-being. It is deciphered from the findings of the present study that people not only from finance backgrounds have shown positive results regarding financial well-being but people from other disciplines also have given a positive response. Also, the present is more relevant in the context of the Jammu and Kashmir region as people belonging to this region always have a looming threat to their well-being. Such threat particularly emanates from political and security instability on account of hostilities between the nuclear-armed countries surrounding the region.

Biographies

is a full-time Ph. D scholar at the Department of Management Studies, University of Kashmir, Srinagar, (India). His research interests include corporate finance, investment management, asset pricing, market efficiency, financial economics, risk management, accounting and personal finance. He can be reached at: [email protected].

Dr Suhail Ahmad Bhat

is a faculty at the Department of Management Studies, University of Kashmir, Srinagar. His research interests include e-consumer behaviour, green marketing, social marketing, sustainable development, personal finance, CRM and different facets of CRM in the service industry. He has published papers in national and international journals such as International Journal of Bank Marketing, Vikalpa, Decision, Global Knowledge, Memory and Communication, Vision, International Journal of Tourism Cities, FIIB Business Review, Pacific Business Review International, Abhigyan, and Productivity. Dr Suhail is the corresponding author and can be reached at: [email protected]

• FA1- I am aware of the interest rates being charged by banks and other financial institutions.
• FA2- I am familiar with the fundamentals of personal finance management.
• FA3- I often make a list before shopping.
• FA4- I always compare financial products before making a decision.
• FA5- I often gather information related to financial issues.
• FA6- I am always willing to discuss financial issues.
• FE7- I always hold emergency savings.
• FE8- I always maintain financial records.
• FE9- I have an experience in managing personal assets.
• FE10- I have an investing experience in stock market.
• FE11- I plan how I will spend and invest my money.

Financial Skills

• FS12- I evaluate personal financial statement on regular basis.
• FS13- I manage risks through purchasing insurance.
• FS14- I regularly evaluate my debt position.
• FS15- I always try to diversify my investments.
• SE16- I am confident in my ability to manage my funds.
• SE17- I can plan for the future from the money saved in my bank.
• SE18- I possess the potential to take/raise loan from the bank.
• SE19- I use financial skills efficiently to manage my financial goals.
• FPE20- If I lose my job today, I will be able to cover my expenses until I find a new one.
• FPE21- I regularly manage to save some money from my income.
• FPE22- I have been able to save enough money to secure my future life.
• FPE23- I believe I would never have desirable things in my life due to my bad financial condition.
• FPE24- I consider credit limits as extra cash (as cash buffer) whenever I plan my budget.
• CMMS25- My finances have complete power over my life.
• CMMS26- Whenever I think I am in charge of my finances, something happens to throw me off track.
• CMMS27- I am not able to enjoy life on account of being too much preoccupied with my money.
• CMMS28- I am frequently concerned about my personal finances in general.
• CMMS29- I am worried about meeting my normal monthly living expenses.
• CMMS30- I have moderate level of financial stress today.
• CMMS31- I am satisfied with my current financial situation.
• PFS32- I frequently borrow money to pay off my debts.
• PFS33- I plan to secure my future financially.
• PFS34- The financial goals that have set will be accomplished.
• PFS35- I am not worried about my current financial situation.

Declarations

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

1 https://files.consumerfinance.gov/f/documents/201705_cfpb_financial-well-being-scale-technical-report.pdf.

2 https://files.consumerfinance.gov/f/201511_cfpb_report_fiscal-year-2015.pdf.

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Contributor Information

Umer Mushtaq Lone, Email: ni.ude.kou@enolqathsumremu .

Suhail Ahmad Bhat, Email: ni.ca.ytisrevinurimhsak@liahusdamha .

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Technology Strategy

Get the flexibility and value you need from technology

Why technology strategy matters.

the revenue growth when leaders double down on investments in technology and innovation

of CIO/CTOs are primarily focusing investment on revenue growth as opposed to cutting costs

of CIOs are focusing on an overall business transformation, versus a single function, in 2024

of enterprise transformation projects fail to meet expectations

Start with technology, then reinvent

Use everything technology offers to build a better business.

What you need to do

Get out of tech debt and into tech value.

Curb your tech debt and focus your tech spending on the activities that will power your business growth. Give your management team a shared understanding of how tech can deliver more value.

Design an enterprise architecture that allows your business to soar

Make the most of digital core technologies and techniques to improve business continuity and reduce your risk. Reinvent every aspect of your IT using generative AI.

Build an operating model that’s as innovative as your team

Respond to changing market demands by being nimbler. Design and implement an intelligent operating model built for business agility, resiliency and growth.

Have a clear vision for your tech transformation

Prioritize what you want to achieve, set the success criteria, and establish a transformation office to deliver it.

What you’ll achieve

A tech strategy everyone supports

Create a coalition for change with a plan that also fires up your business, tech and finance teams.

Total transparency on where your tech spend is going

With a clear view, you can decide where to reduce, redistribute and expand your tech investments.

A vision for your future architecture

Get the outcomes your business needs while continuously transforming your organization at scale.

An operating model that is your competitive edge

Get an intelligent operating model that moves at the same pace as your customers.

A transformation that meets expectations

Track and communicate the value of your enterprise transformation and get insights to help you make better decisions.

What’s trending in technology strategy

This is a singular moment for CIOs: here is how they can take advantage to unlock true business value across their enterprise.

How do you simplify a complex enterprise transformation; Accenture’s Jason Sain recommends starting with a clear vision and value creation story.

By focusing on new opportunities provided by cloud, data and AI, CSPs can accelerate their legacy technology transformation to resolve tech debt and position themselves for new product and service growth. 

CIOs can bring the greatest value to transformation. Accenture’s Greg Douglass explains how CIOs address new challenges in today’s business.

If Agile is challenging, meet multi-speed; a model combining the best of both worlds to gain agility.

Accenture’s Kit Friend explains what’s at risk when CIOs mistake a hybrid solution for Agile, and why multi-speed isn’t always the answer.

Five imperatives the C-suite must address to reinvent in the age of generative AI.

Greg Douglass from Accenture advises how to boost a tech-savvy board as embracing digital transformation requires tech expertise across enterprises.

Accelerate your journey

myDiagnostic

Assess your business, talent, and IT maturity to understand your strengths and gaps. Unlock opportunities over a data-driven path to hastened growth and value.

Accenture Momentum

Orchestrate large-scale business transformations from start to finish, focusing on vision, value, speed, talent and technology.

Partners in change

Our leaders

Koenraad Schelfaut

Lead – Technology Strategy & Advisory

Keith Boone

Lead – Technology Strategy & Advisory, North America

Frédéric Brunier

Lead – Technology Strategy & Advisory, EMEA

Tejas R. Patel

Lead – Technology Strategy & Advisory, Growth Markets

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Congratulations to the McGill Desautels professors who received 2023 SSHRC Insight Grants.

The Social Sciences and Humanities Research Council of Canada (SSHRC) is the federal research funding agency that promotes and supports research and training in the humanities and social sciences.

Warut Khern-am-nuai (Principal Investigator) for “Uncovering the Changes in Content-Generating Behaviour on Online Platforms in Response to Online Hate Speech Regulation: A Case Study of Japan”.

DaHee Han (Principal Investigator) for “Will Sharing This Taint Me or Help Others: The Effect of Message Framing on Willingness to Share Information About Stigmatized Health Topics on Social Media in the Opioid Crisis Context”.

Emmanuelle Vaast (Principal Investigator) and Juan Camilo Serpa (Co-Applicant) for “Unpacking open data initiatives for environmental nonprofit organizations”.

Yongoh Roh (Principal Investigator) for “Show me the money: Pay Transparency and the Quality of Workplace Practices”.

Gregory Weitzner (Principal Investigator) for “How Does Bank Information Enter Financial Markets?”.

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En partie financé par le Conseil de recherches en sciences humaines.

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