Competence, Confidence, and Gender: The Role of Objective and Subjective Financial Knowledge in Household Finance

Thérèse Lind (), Ali Ahmed (), Kenny Skagerlund (), Camilla Strömbäck (), Daniel Västfjäll () and Gustav Tinghög ()
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Thérèse Lind: Linköping University
Ali Ahmed: Linköping University
Kenny Skagerlund: Division of Psychology, Department of Behavioral Sciences and Learning
Camilla Strömbäck: Linköping University
Daniel Västfjäll: Division of Psychology, Department of Behavioral Sciences and Learning
Gustav Tinghög: Linköping University

Journal of Family and Economic Issues, 2020, vol. 41, issue 4, No 3, 626-638

Abstract: Abstract We studied the association of individual differences in objective financial knowledge (i.e. competence), subjective financial knowledge (i.e. confidence), numeric ability, and cognitive reflection on a broad set of financial behaviors and feelings towards financial matters. We used a large diverse sample (N = 2063) of the adult Swedish population. We found that both objective and subjective financial knowledge predicted frequent engagement in sound financial practices, while numeric ability and cognitive reflection could not be linked to the considered financial behaviors when controlling for other relevant cognitive abilities. In addition, both objective and subjective financial knowledge served as a buffer against financial anxiety, while we did not detect similar buffering effects of numeric ability and cognitive reflection. Subjective financial knowledge was found to be a stronger predictor of sound financial behavior and subjective wellbeing than objective financial knowledge. Women reported a lower level of subjective financial wellbeing even though they reported a more prudent financial behavior than men, when controlling for sociodemographics and cognitive abilities. Our findings help to understand heterogeneity in people’s propensity to engage in sound financial behaviors and have implications for important policy issues related to financial education.

Keywords: Financial literacy; Objective financial knowledge; Subjective financial knowledge; Household finance; Numeracy; Cognitive reflection (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (35)

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DOI: 10.1007/s10834-020-09678-9

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