The role and relevance of domain knowledge, perceptions of planning importance, and risk tolerance in predicting savings intentions

Abstract

The need for individuals to increase retirement savings has been widely promoted, yet our understanding of the motivations of individuals to save at a higher rate remains sparse. This paper reports the findings of a survey of 2300 retirement savings fund members and their motivations to contribute more to savings and to actively manage their investment strategy. Utilising the theory of planned behaviour, the study reveals respondent's self-reported attitudes, subjective norms and perceptions of behavioural control account for a high proportion of the variance in behavioural intention.Contrary to expectations, the study finds that respondent's risk tolerance adds little to the prediction of behavioural intention. By contrast, perceptions of planning importance and self-assessed planning preparedness (domain knowledge) are found to exert powerful indirect influences on behavioural intentions via the perceived behavioural control construct. This novel finding confirms the relevance of planning constructs and financial literacy to an understanding of retirement savings behaviour, and establishes a need to improve levels of financial literacy in society.

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

“…Interestingly, we do not observe that subjective saving norms predict saving intention, contradicting other studies (Croy, Gerrans, and Speelman 2010;Davis and Hustvedt 2012;Shim, Serido, and Tang 2012;Xiao et al 2011). There are two potential explanations for this.…”

“…TPB-based research into financial behaviour, like budget keeping (Davis and Hustvedt 2012;Kidwell and Turrisi 2004), saving (Croy, Gerrans, and Speelman 2010) and positive financial behaviours (Shim, Serido, and Tang 2012), indeed show that attitude influences intention. But the magnitude of this influence also varies considerably, even with the same financial behaviour (e.g.…”

“…Finally, the behavioural intention is seen as a key predictor of actual behaviour (Ajzen 1991(Ajzen , 2002Armitage and Conner 2001). The TPB has been validated in a wide range of domains (Ajzen 1991;Armitage and Conner 2001;Conner and Armitage 1998), including financial behaviours like budget keeping (Kidwell and Turrisi 2004), retirement saving (Croy, Gerrans, and Speelman 2010), saving habits (Loibl, Kraybill, and DeMay 2011), negative financial behaviours like not paying bills (Xiao et al 2011) and even future financial behaviours such as saving (Shim, Serido, and Tang 2012). However, it has not yet been applied to financial buffer saving.…”

“…Subjective knowledge, however, has a greater impact on behaviour (Lusardi, Keller, and Keller 2009;Wang 2009;Xiao et al 2011). Since several TPB-based studies found that subjective financial knowledge predicts financial attitude (Croy, Gerrans, and Speelman 2010;Kidwell and Turrisi 2004;Xiao et al 2011), our model assumes that individuals with more subjective financial knowledge have a greater tolerance of financial risks.…”

“…Empirically, social norms influence financial behaviours like retirement saving (Croy, Gerrans, and Speelman 2010) and money management (Cude et al 2006). Furthermore, positive parental norms predict students' intention to perform financial behaviours like saving (Shim, Serido, and Tang 2012;Xiao et al 2011) and positive subjective norms also predict a stronger retirement saving intention (Davis and Hustvedt 2012).…”