Building Financial Knowledge Is Not Enough: Financial Self Efficacy as a Mediator in the Financial Capability of Low Income Families
ABSTRACT Policymakers in many countries have taken an interest in population level financial capability. Limited empirical work has examined how constructs that makeup financial capability relate and how they function for individuals with low incomes. Using a national sample of low income Canadians, we investigate relationships between financial knowledge, financial self efficacy, and savings outcomes. Overall, we find that financial self efficacy fully mediated the relationship between objective financial knowledge and postsecondary education saving. The association between objective financial knowledge and retirement saving and emergency saving passed through financial self efficacy. Efforts to promote financial capability need to focus on more than objective financial knowledge.