Demystifying financial literacy: a behavioral perspective analysis

Financial literacy has been recognized as a key competency. However, there are some gaps such as the relationship with other behavioral factors. Thus, this paper aims to develop a model that would be able to identify the integrate effect of financial literacy on the behavioral factors: materialism, compulsive buying and propensity to indebtedness.

The study investigated 2,487 individuals in Brazil. For an analysis, the authors used confirmatory factorial analysis and structural equations modeling and six research hypotheses.

The main findings showed that the impact of financial literacy on compulsive buying behavior was the greatest of the direct relationships proposed, as well as the total effects of financial literacy on behavioral aspects.

The outcomes of this study are important for the development of public policies and to other interested agents, as financial literacy goes beyond the fact that it impacts on the individuals’ financial health only and also helps those who suffer from other psychosocial behaviors.

This study is unique and innovative, to the extent that it measures the actual direct and indirect impact of financial literacy on other behavioral factors, which have been so far analyzed in separate. It concluded that financial literacy has much more significant impacts than other academic studies have shown, because under the academic point of view, the central focus up to now has been identifying only its impact on other behaviors.