Financial Education and Financial Health: The Mediating Role of Financial Knowledge
DOI:
https://doi.org/10.61190/ch0jb839Keywords:
financial education, financial knowledge, financial literacy, financial healthAbstract
This study analyzed how financial education impacts financial health, a composite score based on spending, saving, borrowing, and planning behaviors, and how financial knowledge mediates this relationship. Data from the National Financial Capability Study waves of FINRA Foundation in 2015, 2018, and 2021 revealed generally positive financial health among respondents with significant differences in demographic groups. In addition, financial health among groups with or without financial education in the past is significantly different, with higher scores for individuals having financial education. Propensity scores matching analysis further confirmed a positive association between financial education and financial health scores (on average, 0.017 points higher for groups with financial education). Objective and subjective financial knowledge both partially mediated this relationship, respectively, in both traditional and causal mediation analyses. The full regression models, including financial education, financial knowledge, and demographic controls, explained 34 to 37% of the variation in financial health. While individual effects are small, there is practical value in understanding the directional influence of indicators, which also provide guidance on areas to focus on for financial planners, counselors, and educators.
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