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The role of self-accounting and financial capability in consumer credit decisions
Abstract
The role of financial capability in the consumers' financial behaviour has been widely analyzed by the literature. The same happened for the relationship between debt and financial capability. The consensus about the benefits of an increase in the levels of financial literacy collides with a diversity of opinions on what the best solutions to increase financial capability. While methods based on traditional teaching may not be an effective solutions and they could not provide results in the short term, solutions oriented to support consumers in important financial decisions (requests for funding, choice of retirement solutions, etc.) may show greater effectiveness. Studies in literature have shown the tendency of subjects with high levels of financial capability to adopt a long term view and to upgrade their daily financial behaviour with attitudes and practices related to self-finance (budget, financial check-up, saving for goals, etc.) The paper focuses on the relationship between financial capability and self-accounting practices, interpreting the latter as evidence of conduct financially aware. After a review of the literature designed to emphasize the role of self-accounting in the context of personal finance, a financial check-up based tool is proposed, pointing out how the financial accounts' schemes and logics (regular budget, estimates and forecasts checking targets) may find useful application in the context of personal finance.
... A range of studies have explored the relationship between financial planning and consumer debt management, highlighting the role of various factors. Filotto (2010) and Gathergood (2011Gathergood ( , 2012 emphasize the importance of self-accounting and self-control in financial capability, with the latter being a stronger predictor of over-indebtedness. Debt literacy, particularly debt management skills, is also crucial in shaping consumer attitudes towards debt . ...
... This synthesis draws on these articles to elucidate the multifaceted relationship between financial literacy and various aspects of personal financial management. Filotto, Nicolini (2010), and Gathergood (2011) underscore the foundational role of financial literacy in shaping individuals' financial behaviors and outcomes. Filotto and Nicolini's introduction of a financial check-up tool based on self-accounting principles aligns with the broader recognition that financial capability-rooted in literacy-is crucial for informed decision-making and long-term financial planning. ...
This qualitative study investigates the complex interplay between financial literacy, financial behavior, self-control, debt management, and financial well-being. Utilizing in-depth interviews with a purposively selected group of individuals engaged in financial planning to manage personal or household debt, the research aims to explore how financial literacy, self-efficacy, and financial motivation mediate the relationship between financial planning and consumer debt management. The methodology encompasses a thematic analysis of participants' narratives to identify and interpret the underlying themes related to financial management practices. Findings reveal a multifaceted relationship where financial literacy emerges as a foundational element, enhancing participants' ability to manage debt effectively. High financial self-efficacy, influenced by literacy, motivates proactive financial behaviors, leading to improved financial well-being. Conversely, low self-control and procrastination were identified as significant barriers to effective debt management. The study also highlights the pivotal role of quantitative literacy and material values in shaping financial behavior, with strong quantitative skills and lower materialism associated with forward-looking financial decisions. These insights underscore the need for comprehensive financial education that addresses not only the cognitive aspects of financial decision-making but also the psychological factors influencing financial behaviors. Tailoring financial education to individual needs and contexts is critical for enhancing financial literacy, self-efficacy, and motivation, ultimately leading to better debt management and financial health.
... The only chance to convey FE to adults is to make relevant information available when and where financial decisions are made, and in a way which is compatible with the very little time and attention generally reserved for a subject which is certainly a 'must have' but not a 'want to have'. Experience in this field has proved the effectiveness of decision-supporting tools; while helping individuals make good choices they also help increase the financial literacy of the adult population (see Filotto U., 2009, Filotto andNicolini, 2010) 4 . Simulators, which help people make choices in their everyday lives, can be effective teaching tools. ...
This paper describes a financial education (FE) experiment organized in Italy by the National Association of Scholars on Financial Institutions and Markets (ADEIMF). The international experience of FE programs addressed to children, as well as findings on learning/cognitive attitudes of adults, motivate the choice of a demand-driven approach to FE. From an empirical analysis of FE needs, researchers extracted 15 financial terms and created a corresponding number of FE tools that have been included in an open-access WEB encyclopaedia. Precisely, each word has been explicated by ADEIMF scholars thanks to a homogenous 'format', in terms of both video-graphic presentation and length (120 seconds). The format has been designed to comply with the typical time-constraints of adults, as well as to ease/foster their attitude towards knowledge. The WEB academic encyclopaedia has been disseminated by exploiting a network approach with Italian financial authorities and media. The expected result is an increase of outcomes and efficacy of FE programs in Italy, based on free patterns of knowledge among the academic programs and the other FE tools offered at various levels.
... Financial capability is a dynamic phenomenon (Leskinen & Raijas, 2005) thus determining a threshold of sufficient capability is dependent on time and trends in the economy (Remund, 2010). Studies have shown the tendency of subjects with high levels of FC to adopt a long term view and to upgrade their daily financial behaviour with attitudes and practices related to self-finance like budgeting, financial check-up, and savings (Umberto & Gianni, 2010). The level of FC of a group of academic personnel evaluated in the present study was found to be adequate as reflected in the ways they manage their money and debt and on how they plan for the future. ...
While a number of studies were conducted to establish the state of financial capability (FC) in several countries, relatively little research exists in a developing country such as the Philippines. This study is an attempt to assess the level of FC of a select group of academic personnel in a comprehensive university as influenced by factors such as knowledge and understanding, skills and competence, attitudes and confidence, and demographic and socioeconomic characteristics. Data yielded by the questionnaire was treated in-depth through inferential statistics. Results indicate that knowledge, skills and attitudes are positively related to financial behavior. However, no significant relationship exists between demographic and socioeconomic characteristics and financial behavior. Interestingly, results show that the academic personnel exhibited popular financial behavior which redounds to above average FC. Results of this exploratory study could serve as a powerful platform for policy proposal, evaluation and adoption on areas like social inclusion, increased financial literacy and financial program effectiveness.
The chapter describes a project of financial education that was delivered in Piedmont, a region of northern Italy. While being local, the project tackles general issues and adopts a replicable methodology. Already and successfully in its third year, the programme has specific characteristics: the definition of the curriculum and the choice of the educational tools is the result of interaction between researchers, teachers and pupils thus ensuring participation and full commitment. Also the programme leverages on an intense and positive approach to experiential learning, complying with the principles of coherence with the cognitive capabilities of children and the fundamental rules of pedagogical ergonomics.
The study surveys 1087 university students to examine their personal financial literacy and the relationship between financial literacy and respondents’ sociodemographic characteristics and family background. First-year and third-year business and non-business students are analysed. The questionnaire administered is designed to test knowledge and skills across a range of specific areas of financial literacy as well as collect extensive details regarding study characteristics, demographic characteristics, family background, and self-perception of knowledge. The study finds that financial literacy among university students is not high and that lack of financial knowledge is widespread. Results show that participants answer about 63% of questions correctly. We find gender differences, with male students performing in average better than females. Financial literacy seems to improve with age, personal interest in financial matters and family financial sophistication. Work experience, living alone, personal educational attainment, and parents’ education appear to be not strongly related to financial literacy. Paradoxically, students who feel less confident about their financial skills are less interested in financial education programs. Our finding is consistent with other studies that show that most young adults are not well equipped to make correct financial decisions.
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