To improve our understanding of how people make financial decisions, it is important to investigate what psychological characteristics influence individuals’ positive financial behavior and financial well-being. In this study, we explore the effect of individual differences in self-control and other non-cognitive factors on financial behavior and financial well-being. A survey containing measures of financial behavior, subjective financial well-being, self-control, optimism, deliberative thinking and demographic variables was sent to a representative sample (n=2063)" role="presentation" style="box-sizing: border-box; display: inline-block; line-height: normal; font-size: 14.399999618530273px; word-wrap: normal; white-space: nowrap; float: none; direction: ltr; max-width: none; max-height: none; min-width: 0px; min-height: 0px; border: 0px; padding: 0px; margin: 0px; color: rgb(80, 80, 80); font-family: Arial, Helvetica, 'Lucida Sans Unicode', 'Microsoft Sans Serif', 'Segoe UI Symbol', STIXGeneral, 'Cambria Math', 'Arial Unicode MS', sans-serif; position: relative;"> of the Swedish population. Our findings extend the application of the behavioral lifecycle hypothesis beyond savings behavior, to include general financial behavior. People with good self-control are more likely to save money from every pay-check, have better general financial behavior, feel less anxious about financial matters, and feel more secure in their current and future financial situation.

Export Date: 7 September 2017; Article

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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.

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Are people more likely to (mis)interpret information so that it aligns with their ideological identity when relying on feelings compared to when engaging in analytical thinking? Or is it the other way around: Does deliberation increase the propensity to (mis)interpret information to confirm existing political views? In a behavioral experiment, participants (n = 1207, Swedish sample) assessed numerical information concerning the effects of gender quotas and immigration either under time pressure or under no time pressure. To measure trait differences in cognitive sophistication, we also collected data on numeric ability. We found clear evidence of motivated reasoning when assessing both the effects of gender quotas on companies’ financial results and the effect of refugee intake on crime rates. Subjects who prioritized equality over liberty on the labor market were 13 percentage points less likely to correctly assess numerical information depicting that companies that used gender quotas when hiring made less profit. Subjects who classified themselves as ‘Swedes’ rather than ‘World citizens’ were 14 percentage points less likely to correctly assess numerical information depicting that crime rates decreased following immigration. Time pressure did not affect the likelihood to engage in motivated reasoning, while subjects with higher numeric ability were less likely to engage in motivated reasoning when analyzing information concerning refugee intake, but more likely to engage in motivated reasoning when analyzing information regarding the effect of gender quotas. Together these results indicate that motivated reasoning is primarily driven by individual differences in analytical thinking at the trait level and not by situational factors such as time pressure, and that whether motivated reasoning is primarily driven by analysis or feelings depends on the topic at hand.