Financial Well-Being and the Role of Empowerment Originated Self-Efficacy: A Confirmatory Factor Analysis

Overview: This interactive E-poster session will provide an overview of individuals’ goal-oriented self-efficacy measures in finance, and discuss the assessment of financial self-efficacy using goal-oriented behaviors and individuals’ self-efficacy. The impact on ones' financial accessibility and management will also be discussed.Proposal text: Self-efficacy becomes an important factor in understanding individuals’ level of financial capabilities and a key marker of fostering financial independence among young people (Curran et al., 2018). However, only a few curricula address the impact of personality characteristics (Xiao et al., 2014), and importantly self-efficacy has been measured inconsistently across the literature. For example, self-efficacy was once measured by asking about one’s future [e.g., ‘Will you have a job that pays well?] (Lee & Mortimer, 2009). Another study assessed based on behavior [e.g., ‘I usually use credit when an unexpected expense occurs’] (Farrell et al., 2016). This increases the inconsistency of findings of self-efficacy and its impact on individuals’ financial well-being. The current study will assess and re-validate self-efficacy, followed by Bandura and Ajzen’s planned behavior (Ajzen, 1991; Bandura, 1982). Further, to identify the extent to which individual-level and socialization may increase self-efficacy and how self-efficacy positively influences individuals’ level of financial well-being and skills and access to financial products and management.

The 2017 National Financial Capability Study was used for this study (CFPB, 2017). Five variables were used to assess socialization and family communication processes (e.g., discuss financial matters with family and ask before making decisions). Self-efficacy were measured based on goal-oriented behavior (e.g., active discussion with family about finance, educated by family) and self-efficacy (e.g., stick to my budget, set financial goal). Individual characteristics (e.g., gender, educational attainments) and overall financial well-being, skills, and subjective knowledge were measured.

A series of confirmatory factor analysis model revealed the two different domains of socialization and self-efficacy met all factor loadings. Path analysis then performed, active family discussion on finance matter increases individuals’ self-efficacy (StdYX = 1.30; 95% CI [1.14, 1.45], p < .05). Self-efficacy then significantly increases financial well-being (StdYX = .54; 95% CI [.52, .56], p < .05), likely to report having sufficient financial skills (StdYX = .54; 95% CI [.52, .56], p < .05), and believe to have great knowledge of finance matters, (StdYX = .62; 95% CI [.60, .64], p < .05). Both years of education and income level increase parents-peers communication, thereby likely to increase self-efficacy.

The results suggests the importance of socialization and the family communication process to increase individuals’ level of self-efficacy. Self-efficacy becomes an important factor for financial well-being and subjective knowledge on finance matters. Presenters will discuss economic efficacy and accessing mainstream financial products and behavior and discuss the common covariates that possibly impact financial well-being, such as gender, ethnicity, and educational attainments. Further, generational differences in self-efficacy influences will be discussed throughout the presentation.