financial decision-making, financial quantitative literacy


Some consumers finance discretionary spending at extremely high interest rates. Many carry substantial balances on their credit cards at effective annual rates as high as 36 percent, and some pay annual rates on “pay day” loans as high as 400 percent. High interest debt can rapidly cascade into an overwhelming financial burden, threatening the consumer’s credit and long-term financial health.

This survey study investigates how quantitative literacy may promote forward-looking financial decisions, decisions that recognize the long-term consequences of current choices and may favor the future over the present. In addition, we examine the consumer’s confidence in their quantitative skills. Confidence in working with numbers could help consumers think through the implications of their financing choices. Although quantitative literacy and consumer education matter, we propose that consumer values also may be important in explaining financial behavior. In particular, materialism may drive many American consumers to take on high levels of debt. Understanding consumer financing choices may require a better understanding of the consumption behavior that motivates those choices.

Results from a diverse sample (n = 267) of consumers confirm that both quantitative literacy and subjective numeracy, the individual’s confidence in applying quantitative skills, are positively related to forward-looking financial behavior. The impact of materialism on financial behavior is largely mediated by impulsive consumption, the tendency to make frequent purchases without forethought or consideration of the financial consequences. Finally, subjective numeracy may encourage a less-impulsive, more-considered approach to consumption decisions.



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