The Moderating Effect of Subjective Financial Literacy on the Relationship between Coping Strategies and Financial Risk Tolerance

Abstract

In the study, the effects of conscious (coping strategies), emotional (emotional intelligence) and cognitive (financial literacy) factors on the level of financial risk tolerance were investigated. Financial literacy was measured both objectively and subjectively, and the impact of both actual knowledge and perceived knowledge was examined. Four independent variables (coping strategies, emotional intelligence, objective financial literacy and subjective financial literacy) and one dependent variable (financial risk tolerance) were examined. 1692 subjects were reached using online survey method. Confirmatory factor analysis, correlation and regression analyses were performed on the collected data, and also the moderating effect of subjective financial literacy was also examined. As a result of the analyses, it was found that coping strategies decrease financial risk tolerance. The moderating effect of subjective financial literacy also was proven in this relationship. In addition, while there was moderate relationship between subjective financial literacy and objective financial literacy, emotional intelligence and objective financial literacy were also reported to be predictors of subjective financial literacy. While a negative and significant relationship was detected between emotional intelligence and financial risk tolerance, a positive and significant relationship was found between objective and subjective financial literacy and financial risk tolerance.

Comparative effects of self-evaluated and test-based financial literacy on choosing life insurance policies in a multi-racial context

“…The study suggests that personal evaluations of financial knowledge may sometimes provide a more accurate reflection of consumer behavior than objective assessments from standardized tests. The hypothesis is based on the observation that subjective literacy often reflects immediate financial concerns and is directly linked to everyday financial decision-making [43][44][45]. The study considers variables such as race and socioeconomic status to understand how these factors interact with financial literacy to impact consumer choices in the life insurance market.…”