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					The New Parent’s Guide to Money:
 Evaluating the Effectiveness of
  Financial Literacy Education.
             Undergraduate Thesis
         Prepared By: Genevieve Taylor
         Advisor: Dr. Kenneth MacAulay
                March 31, 2011
Table of Contents:
Chapter I: Introduction ___________________________________________________________________________ 2
Chapter II: Literature Review ___________________________________________________________________ 6
  Section 2.1: Financial Literacy ___________________________________________________________________ 6
    Section 2.1.1: What is Financial Literacy? ___________________________________________________ 6
    Section 2.1.2 The Importance of Financial Literacy ________________________________________ 7
    Section 2.1.3: The Fluidity of Financial Literacy ____________________________________________ 8
    Section 2.1.4: Financial Literacy Education _______________________________________________ 10
  Section 2.2 Empirical Research on the Effectiveness of Financial Literacy Programs ______ 13
    Section 2.2.1: Youth Financial Literacy Programs ________________________________________ 14
    Section 2.2.2: Financial Education Programs for Adults _________________________________ 15
    Section 2.2.3 Implications of Literature for New Parents ________________________________ 19
  Section 2.3: Financial Literacy and the Theory of Planned Behaviour_______________________ 20
    Section 2.3.1: The Theory of Planned Behaviour _________________________________________ 21
    Section 2.3.2: Past Applications in Financial Literacy ____________________________________ 24
Chapter III: Research Questions ______________________________________________________________ 29
Chapter IV: Methodology _______________________________________________________________________ 32
  Section 4.1: The New Parent’s Guide to Money Project _______________________________________ 32
  Section 4.2: Survey Questionnaire _____________________________________________________________ 33
  Section 4.3 Coding the Data ____________________________________________________________________ 34
    Section 4.3.1 Numeric and Alphabetic Coding ____________________________________________ 35
    Section 4.3.2 Theory of Planned Behaviour Coding ______________________________________ 35
  Section 4.4: Statistical Analysis ________________________________________________________________ 36
Chapter V: Analysis______________________________________________________________________________ 38
  Section 5.1 Descriptive Statistics ______________________________________________________________ 38
  Section 5.2: Additional Univariate Analysis ___________________________________________________ 41
  Section 5.3: Partial Least Squares Analysis ___________________________________________________ 42
Chapter VI: Results and Discussion ___________________________________________________________ 47
  Section 6.1: The success of A New Parent’s Guide to Money __________________________________ 47
  Section 6.2: Factors that Influence a New Mother’s Intention to Engage in Good Financial
  Behaviours ______________________________________________________________________________________ 48
  Section 6.3: Potential Limitations of the Study _______________________________________________ 53
Chapter VII: Conclusion ________________________________________________________________________ 55
Appendix A: Coded Survey Questionnaire ___________________________________________________ 58
  Appendix B.1: Basic Model _____________________________________________________________________ 62
  Appendix B.2: Income Model ___________________________________________________________________ 68
  Appendix B.3: Education Model ________________________________________________________________ 74
References: _______________________________________________________________________________________ 80




                                                                                                     1
Chapter I: Introduction
       In a world of inflation, consumerism, and rising living costs, good financial

decisions are becoming increasingly important. Studies show that North Americans, on

average, do not have the skills, knowledge and confidence to make good financial

decisions. Simple concepts like compound interest, budgeting and general saving are not

widely known or practiced within the population (Lusardi, 2006). This widespread

financial illiteracy can lead to life-altering events such as mortgage foreclosure,

bankruptcy, or even the inability to retire. The lack of financial literacy in the population

needs to be addressed in order to ensure the financial wellbeing and standard of living of

North Americans.

       As financial needs change throughout an individual’s life, the best times to

increase financial literacy are at key points when new information is needed. This is

known as the financial lifecycle approach to financial literacy. The Canadian Taskforce

on Financial Literacy identified having a first child as a significant event in a person’s

financial lifecycle (Stewart, 2010A, 15). Starting a family requires that financial

decisions be made to include at least one more person. A new addition to a family means

new expenses and new financial requirements. Financial literacy and good financial

decisions become even more important at this life stage.

       This study reviewed the literature to assess the current state of financial literacy in

Canada and the United States. Key reasons were sought to understand why North

Americans are financially illiterate. The literature review found that women and people

without postsecondary education are less likely to understand and implement good

financial decision-making. These findings are particularly relevant to A New Parent’s


                                                                                             2
Guide to Money as it is targeted at women who reside in an area of Canada with lower

postsecondary attendance rates.

       Past efforts to battle financial illiteracy have focused on educating youth, retirees

and young adults. Although these efforts initially met with mixed results, the most recent

studies on young adults have found significant connections between financial education

programs, financial literacy, and making good financial decisions. These findings suggest

that providing an educational opportunity such as A New Parent’s Guide to Money to

financially educate and prepare new mothers to make good financial decisions for

themselves and their families should be successful.

       The purpose of this study was twofold. First it sought to determine whether the

New Parent’s Guide to Money was successful at improving the financial literacy of new

mothers. It also sought to determine what factors can affect or moderate a new mother’s

intention to engage in good financial behaviours. To better understand the complicated

relationship between financial education, financial literacy and making good financial

decisions, the Theory of Planned Behaviour was applied. The Theory of Planned

Behaviour explains the factors that make up intention (financial literacy) and how it is

linked to actual behaviour, in this case; financial behaviour. There have been very few

studies that have used the Theory of Planned Behaviour to understand financial literacy,

and none on as large of a scale this study. Using the research on financial literacy,

financial education, and the Theory of Planned Behaviour, a model was developed to

explain the financial behaviour process. The model incorporated the three key factors of

the Theory of Planned Behaviour – attitudes, subjective norms, and perceived

behavioural control – in addition to several demographic variables. From this model,




                                                                                               3
hypotheses were formed and tested using data collected from 102 returned survey

questionnaires.

       Information for this study was collected from new parents who used the Open

Arms Clinic in the Saint Martha’s Regional Hospital in Antigonish Nova Scotia.

Individuals received a New Parent’s Guide to Money package at the clinic and were

provided with incentive to complete the survey questionnaire. The results of the survey

questionnaires were used in this study to test the model of financial behaviour based on

the Theory of Planned Behaviour.

       Participants who responded had positive attitudes and subjective norms toward

behaviour and found performing financial behaviours not difficult. The results showed a

significant improvement in both intention to perform good financial behaviours and

confidence in performing these behaviours – both indicators of increased financial

literacy. A model of financial literacy was produced based on the Theory of Planned

Behaviour. It determined that income, attitudes, subjective norms and education affected

a mother’s intention to perform good financial behaviour.

       The New Parent’s Guide to Money program was shown to be an effective

financial literacy education program, which adds to the success of financial literacy

education in general. The program had the strongest impact on women with low incomes

or no postsecondary education, suggesting that programs specifically targeted at different

socioeconomic or demographic groups can be highly effective. This study also

demonstrated the applicability of the Theory of Planned Behaviour to financial topics,

and the benefits of using the lifecycle approach to financial literacy.

       The subsequent chapter reviews the relevant literature on financial education,

financial literacy, and the Theory of Planned Behaviour. Chapter III applies this


                                                                                           4
information to develop the key research questions and model to be tested. The

methodology of the study is then discussed in Chapter IV. The remainder of this study

consists of an analysis of the data (Chapter V), a discussion of the results (Chapter VI),

and a conclusion (Chapter VII).




                                                                                             5
Chapter II: Literature Review
       This chapter provides a review of studies of financial literacy conducted in

North America in the past five years. The first section covers financial literacy in its

broadest sense; focusing on various definitions, and the importance and fluidity of

financial literacy. The difference between financial literacy and financial education

is also discussed. The second section reviews empirical research studies of financial

literacy programs. It discusses their effectiveness on youth, adults and other groups

and notes the implications that arise. The third and final section reviews the Theory

of Planned Behaviour, and discusses its application to financial literacy. In addition

it reviews several previous research studies that have applied the Theory of Planned

Behaviour to financial literacy.



Section 2.1: Financial Literacy
Section 2.1.1: What is Financial Literacy?
       The concept of financial literacy is quite complex. The academic literature

does not provide a clear definition of what constitutes financial literacy (Huston

2010). The scope of financial literacy ranges from “ones understanding and

knowledge of financial concepts” (Fox et al, 2005, 195) and the necessity to

“empower [someone] to make informed consumer decisions and to effectively

manage [his/her] personal financial resources,” (McCormick, 2009, 72) to

“measuring how well an individual can understand and use personal finance-related

information” (Huston, 2010, 306). For the purpose of this study, financial literacy is

defined as the ability to comprehend finance-related information (financial


                                                                                           6
knowledge) and have the confidence and understanding to apply this knowledge to

financial decision-making.

       According to Willis (2009) education that leads to financial literacy is “only

effective if it enables consumers, given their financial resource constraints, to make

decisions and to take the actions necessary for financial well-being today” (Willis,

2009, 421). Effective financial education must teach more than just financial

knowledge – it must teach confidence in and proper use of the knowledge. This

confidence can be reflected in the belief that “[financially literate consumers] can

successfully manage their finances; their financial decisions reflect their personal

values and choices; and financial resources are valuable mostly because they can

create and sustain community and interpersonal relationships” (Stone et al, 2007,

10).


Section 2.1.2 The Importance of Financial Literacy
       Financial literacy is important because it leads to better financial decision.

There is plenty of evidence to suggest that Americans and Canadians need to

improve their financial decisions. For example, in April 2005 the savings rate for

Americans dropped below zero (Stone et al, 2007). Further, in Canada, consumer

bankruptcy rates increased by 54.9% since 2000. In 2009, 116,381 people declared

bankruptcy (Stats Canada – CANSIM, 2010). The environment facing consumers

today is characterized by a lack of retirement savings, increased mortgage

foreclosures, and increased personal bankruptcies. As Fox et al (2005) explain,

“burdensome consumer debt, low savings rates, and record bankruptcies are

commonly considered the result of low financial literacy levels” (p. 195). Mandell



                                                                                         7
and Klein (2009) point out that lack of financial literacy is not limited to North

America alone – the developed world in general is suffering from high levels of

financial illiteracy.

        Financial literacy, unlike financial education alone, is “directly correlated

with self-beneficial financial behaviour [sic]” (Mandell and Klein, 2009, 15). The

confidence and knowledge of being financially literate leads to better financial

decisions. It has also been discovered that financial literacy is positively correlated

to happiness (Stone et al, 2007). Given that financial literacy improves the financial

choices of consumers and is associated with greater happiness, and given that

general happiness is a desired state of mind, it can be concluded that financial

literacy is very important today and in the future.


Section 2.1.3: The Fluidity of Financial Literacy
        Financial Literacy is very important but difficult to attain as it is a moving

target – it is fluid. Throughout an individual’s life there are various types of financial

decisions that must be made. The knowledge and skill required to budget for tuition

and textbooks as a young adult differs from the understanding required of current

interest rates when choosing to apply for a fixed-rate or variable rate mortgage on a

first home purchase. It differs even further from the calculations and evaluations of

various mutual fund prospectuses needed when saving for retirement. As the nature

of financial decisions change through an individual’s lifetime, the knowledge, skill

and competence that make them financially literate will change. The changing

nature of the components of literacy over an individual’s lifetime creates challenges

for researchers and educators alike. In addition to internal factors in individual’s



                                                                                          8
lifetime such as age, education and intelligence, changing external factors like the

economic environment and job market also affect the necessary components of

financial literacy.

       The changing nature of financial literacy was noted in a recent study by a

national taskforce in Canada. In 2009 the Canadian Government created the

Taskforce on Financial Literacy. The purpose of the taskforce was to determine how

to improve financial literacy among the Canadian population. They were determined

to identify the means and channels of use that would most improve the

disbursement of financial literacy education (Stewart, 2010A). In “Leveraging

Excellence” the taskforce describes the various financial stages individuals

experience in a lifetime. These experiences are captured in the personal financial life

events cycle presented in Figure 2.1. It illustrates the very distinct times in an

individual’s life that each require a different kind of financial knowledge for a

different type of financial decision. Stewart stressed the uniqueness of each event by

indicating that a “one size fits all [original in quotations] approach is not realistic”

when trying to teach financial education to different groups of people (Stewart,

2010A, 16).




                                                                                           9
                                           Figure 2.1
                  The Personal Financial Life Events Cycle (Stewart, 2010A, 15)




The taskforce recently released the “What We Heard” publication, which discussed

the input and feedback they received from the Canadian public on the current state

of financial literacy (Stewart, 2010B).


Section 2.1.4: Financial Literacy Education
       It is important to understand the difference between financial education and

financial literacy. The goal of financial education is to teach financial knowledge,

which is, “an integral dimension of, but not equivalent to, financial literacy” (Huston,

2010, 307). Financial literacy education comes in many shapes and forms.

Pamphlets, lectures, campaigns, courses, and lessons are just some of the ways

institutions and individuals try to teach proper financial practices. More broadly,

financial education “can include any program that addresses the knowledge,

attitudes, and/or behaviour [sic] of an individual toward financial topics and

concepts” (Fox et al, 2005, 195). Financial education focuses on the key skills and

topics of financial decisions such as the concept of compound interest. Financial

literacy leverages skills, knowledge and confidence to make self-beneficial financial



                                                                                       10
decisions – such as understanding that time is the key factor to return on compound

interest rates, and that saving earlier means saving more. It is important to

distinguish between financial education and literacy because financial literacy

requires more than just knowledge – there are endogenous and exogenous factors

that are also necessary in addition to knowledge.

       Although financial literacy is a more complex topic, it still requires

participation in financial education. Currently the majority of formal financial

education programs focus on the education of youth. Recently, researchers have also

examined the impact of financial education on retirement savings in the middle-

aged adult population. As the financial situations encountered by these two

demographics differ, education programs must be tailored to the appropriate

audience.

       The Organization for Economic Co-Operation and Development defines

financial education as

       “the process by which financial consumers/investors improve their
       understanding of financial products and concepts and, through information,
       instruction and/or objective advice, develop the skills and confidence to
       become more aware of financial risks and opportunities, to make informed
       choices, to know where to go for help, and to take other effective actions to
       improve their financial well-being” (Lusardi, 2006, 1).


This definition contains two separate assumptions: financial education creates

financial knowledge; and financial education leads to financial literacy. Although

often considered commonsense, these assumptions have been questioned by many

academics (see Willis, 2009 for a review of the literature on this topic). When

considering the impacts of financial education it is important to understand that a



                                                                                      11
direct cause-and-effect relationship is not present between financial education,

financial knowledge, financial literacy, and making good financial decisions (see

Figure 2.2 for a diagram of the common assumption underlying this argument). Just

because a participant has financial knowledge, for example, does not guarantee they

are financially literate (but knowledge is needed for literacy). In other words each

item in the chain is necessary to achieve the next element, but is not sufficient to

achieve it without other factors (see Huston, 2010, and Willis 2009 for similar

diagrams).

                                        Figure 2.2
                       The Assumed Chain of Financial Decision Making


 Education    Knowledge  Literacy  Good Financial Decisions

As Willis (2009) points out, the issue with the assumption that each element is

directly related to another is that advocates and policy makers for financial literacy

are basing their propositions on this theory. Although financial education is very

important, additional elements such as skills and confidence are necessary. In

addition, education programs must identify and address other barriers to financial

literacy.

       Although it is commonly accepted that financial education is “good” many

studies have proved that financial education that teaches financial knowledge alone

cannot be assured to improve financial decision-making (Mandell and Klein, 2009;

Willis, 2009; McCormick, 2009; Lusardi, 2006, Huston, 2010 and many more). In

today’s world financial education must focus on pensions, savings, financial

instruments, bond prices and their relationship to interest rates, mutual funds,


                                                                                       12
stocks, compounding, risk diversification, credit cards and borrowing on credit

(Lusardi, 2006). Mandell and Klein (2009) grouped these topics into four simple

groups: saving; investing; credit management; and cash flow management. These

are the financial questions that adults (and some youth) face daily. Without the

proper knowledge, there is the possibility of great financial risk – a fact echoed by

the recent spike in mortgage foreclosures and bankruptcy filings in North America

(Stats Canada – CANSIM, 2010). Financial education can teach the knowledge to help

halt the downward spiraling trends of credit ratings and retirement savings

currently faced by society, however, financial literacy is needed for this knowledge

to be reflected in decision-making.



Section 2.2 Empirical Research on the Effectiveness of Financial
Literacy Programs
       Over the past decade there have been a number of financial literacy

education programs started in North America. Many researchers have conducted

studies to determine the usefulness of these financial literacy education programs.

More specifically, researchers have tried to determine whether the programs are

effective in increasing the financial literacy of participants and improving financial

decision-making. The majority of this empirical research has been on participants

from the United States. This raises a few comparative issues as the social welfare,

education, healthcare, and financial regulation systems in the US differ from those in

Canada. It is important to keep these issues in mind when considering the levels of

retirement savings, education savings, use of credit, and overall savings rates for



                                                                                        13
Canadians. Further, it should be noted that the Canadian population is situated in

smaller urban centres, which could impact the availability of goods and services

when it comes to both spending and saving.

       A review of the literature found that very few studies have researched the

financial literacy of new parents. Because of this fact, this review will focus on

financial literacy programs for other stages of the life cycle including youth, retirees,

and college students.


Section 2.2.1: Youth Financial Literacy Programs
       The U.S. has many programs to educate youth about financial decisions. An

individual’s youth years (approximately ages 12-18) are the last time that he/she is

legally required to take schooling. As such, many policy makers and educators feel

this is the most important age to financially educate students, as after that there

may not be any formal means or medium to do so. Programs like Jump$tart have

been funded by major banks such as Chase Manhattan and the Fannie Mae

Foundation to target students in K-12 to include education about personal finance in

their curriculum (Fox et al, 2005). Although widely promoted in the States, these

programs have had varying (if any) success in improving the financial literacy or

financial education of youth.

       A study commonly cited among researchers promoting youth financial

education was conducted by Danes, Huddleston-Casa and Boyce (1998). In their

study, they found that the High School Financial Planning Program increased

“knowledge, self-efficacy, and savings rates” among youth (Fox et al, 2005).

Although Danes et al (1998) found links between financial education courses and



                                                                                      14
better financial practices, very few studies since then have found such conclusive

evidence. Other studies such as Peng , Bartholomae, Fox and Cravener (2007), have

found no relationship between students taking financial education in high school

and investment knowledge (McCormick, 2009). Further, Mandell (2005) found that

financial education in youth did not guarantee a better score on the Jump$start

exams (Willis, 2009). The only direct relationship that was repeatedly found while

conducting these tests on youth was that higher financial education scores were

linked to post-graduate education (see Lusardi and Mitchell, 2007; and Lusardi,

2006 for a link between low levels of education and illiteracy.) Mandell and Klein

explain that financial education does not necessarily work with youth because “they

do not perceive that it is relevant to their lives,” (Mandell and Klein, 2007, 108). In

the same study, it was found that motivation and future goals were also key in

financial literacy scores – not the course material itself.

       The implications of the ineffectiveness of youth financial education are quite

important. If students cannot learn the basics of financial decision making while

they are legally mandated to attend school, then education has to evolve to reach

different groups of adults through varying mediums after they enter society.


Section 2.2.2: Financial Education Programs for Adults
       The other common source of financial literacy education programs offered to

individuals and families saving for other stages in the personal financial life stages

cycle like buying a home or retirement. These programs – unlike those run for youth

– are voluntary and often run through workplaces or financial institutions. Within

the various programs, an emphasis is placed on saving for retirement, managing



                                                                                     15
debt, and choosing the vehicles for saving. In their study of the importance of

various personal finance topics to adults, Volpe, Chen and Liu (2006) found that

there is a large gap between what financial topics individuals feel are important and

where the perceived level of understanding is on each of these topics. The study

found retirement and personal finance basics were the two topics that were

emphasized as important but least understood (Volpe et al, 2006). The areas of tax,

insurance, and benefit plans were perceived as slightly more understood (Volpe et

al, 2006). Lusardi (2006) reviewed many studies on adult financial literacy and

found that many adults do not understand the basics of stocks, mutual funds, bond

and other investments – all of which are important when planning for retirement.

This gap between importance and working knowledge of specific financial topics in

the adult population is worrisome from both an economic and social welfare

perspective.

       Even though there is an evident lack of financial literacy in adults, some

education programs being offered by workforces seem to be making a difference in

financial behaviour (see Fox et al, 2005 for a summary). Other programs offered

through banks and other financial institutes focusing on home ownership and credit

also seemed to have a positive impact on financial behaviour (Fox et al, 2005). These

programs all seem to improve the financial literacy of adults but unfortunately, they

are only available on small scale. Other studies like that of Madrian and Shea (2001)

concluded that these sorts of financial education programs may have increased the

desire to invest and save, but no behaviour was changed (Lusardi, 2006). The gap

between intention to perform a beneficial financial behaviour, and actually



                                                                                    16
performing that behaviour is an issue faced by researchers in these studies. The

results of these programs have also been criticized because of the manner in which

subjects become involved in the programs. Participants must volunteer to partake in

the programs and this demonstrates a desire to improve literacy as well as the

recognition that they are currently lacking the necessary skills. Willis (2009)

discusses the bias present in these kind of survey responses, which can be extended

to say that people who volunteer for these programs might not be the ones who

need them the most. Although improved saving rates, on-time mortgage payments

and a stronger desire to save for retirement can be the outcomes of financial

education programs for adults participants, they might not be enough to curb the

downward spiral of savings rates and credit ratings in society.

       To look into the issue of adult financial illiteracy further, Estelami (2009)

tried to identify some of the drivers behind poor financial decisions. Eselami (2009)

found that issues such as improper understanding of the time value of money, the

inability for the human brain to store many items in short-term memory, attribute

anchoring and adjustment, and poor mental accounting are related to making

financial decisions that are not optimal. Because of these findings, the author

suggests that government regulation and financial literacy programs will be

necessary for adults to better their financial decisions.

       One of the most recent studies of adult financial literacy tested a group of

Chilean workers. This study confirmed the lack of financial literacy in adults, and

also showed that financial literacy is linked to good financial decisions such as

wealth accumulation (Behrman et al, 2010). Behrman et al (2010) conducted a



                                                                                       17
specialized survey that controlled for “risk aversion, innate ability, intelligence, and

motivation that may shape the relationship between financial literacy and financial

behaviours [sic]” (p. 3). The study found that both education and financial literacy

are positively and independently correlated to good financial decisions (wealth

accumulation in this sense) (Behram et al, 2010). In addition, the researchers

posited that financial literacy is a factor of education, but may have a stronger

relationship to wealth accumulation. This connection demonstrates that education

alone is not enough to make good financial decisions, but is an underlying factor of

the literacy needed to make them. Another interesting find in this study showed that

negative self esteem is a greater predictor of both education and financial literacy

than positive self esteem (Behrman et al, 2010). These findings justify the inclusion

of confidence in our financial literacy definition. The major outcomes of this study

are an understanding that adults lack financial literacy; that financial literacy is

linked to good financial decisions and is a factor of education as well as confidence,

and because of these correlations, there is a justification for the continuation of and

advancement of financial education programs.

       A review of the literature suggests that financial literacy among adults is

poor. Adults lack the basic financial knowledge needed to successfully and

comfortably progress through the personal financial life events cycle. Basic

knowledge on investment and savings tools that are crucial to proper retirement

savings are not commonly known among adults. If the conclusions of recent studies

are combined, it is apparent that financial illiteracy is non-discriminate across all




                                                                                        18
age groups. This is not an imbalance of knowledge and skill, it is a society-wide

deficiency in the capability to make beneficial financial decisions.


Section 2.2.3 Implications of Literature for New Parents
       The studies reviewed earlier also identified demographic and sociographic

characteristics associated with levels of financial literacy. These characteristics will

be reviewed because they may also influence levels of financial literacy among new

parents.

       Lusardi and Mitchell (2006) found that women and those with lower levels of

education more often lacked financial knowledge. She also found that Blacks and

Hispanics were more likely to lack financial knowledge (Lusardi, 2006). In a

separate study women were found to score lower on financial literacy tests than

men by an average of 10% (Lusardi and Mitchell, 2006). This test also found that

“financial literacy is highly correlated to schooling,” (Lusardi and Mitchell, 2006).

One of the most interesting findings of this study was the high proportion of “don’t

know” answers among those less educated. These results could support the

conclusion of lower financial literacy rates among those without higher education

because they lack the confidence in their financial decisions.

       In a separate study, Lusardi, Mitchell and Curto (2010) studying young adults

aged 23-28 discovered disappointing results about the state of financial literacy in

this age group. Of the people tested only 27% could answer questions on simple

interest rate calculations, risk diversification and inflation, and 84% felt they

needed more education on financial literacy topics (Lusardi et al, 2010). The results

showed that “people with low financial literacy are more likely to have problems



                                                                                        19
with debt, less likely to participate in the stock market, less likely to choose mutual

funds with lower fees, less likely to accumulate wealth and manage wealth

effectively, and less likely to plan for retirement” (Lusardi et al, 2010, 360). In

addition to these findings, the researchers also found a connection between

financial literacy and the education level of an individual’s mother, and once again

demonstrated that women are less financially literate than men (Lusardi et al,

2010). Lusardi et al (2010) reiterate that a “one-size-fits-all” program will not be

successful in improving the financial literacy of individuals, and these programs

should instead focus on reaching the groups most in need of literacy, women, those

without higher education, and minorities (p. 377).

       The results of financial education studies show that there is a discrepancy

between individuals’ levels of financial literacy and the levels they need in order to

make good financial decisions. The next section will discuss the process by which

individuals create intention to perform good behaviours.



Section 2.3: Financial Literacy and the Theory of Planned
Behaviour
       The high levels of financial illiteracy suggest that there is a need to better

understand what determines the varying levels of financial literacy among

individuals. As it has been applied to explain other types of behaviour, the Theory of

Planned Behaviour holds promise in explaining why financial literacy varies. Icek

Ajzen created the Theory of Planned Behaviour in 1991 as an extension of the

theory of reasoned action. The theory attempts to explain the factors affect the

intention to perform, and the actual performance of certain behaviours. This theory


                                                                                        20
may be effective in understanding the actions necessary for good financial decisions.

It is important to understand the link between knowing an action (budgeting for

example) is good; deciding if one is capable of it; intending to do it; and finally

performing the action.


Section 2.3.1: The Theory of Planned Behaviour
        The Theory of Planned Behaviour stresses the important role that intention

plays in actually performing a behaviour (Ajzen, 1991). The underlying assumption

in the theory is the greater the intention is, the greater the likelihood an action will

be performed. It also assumes that “motivation and ability interact in their effects on

behavioural [sic] achievements” (Ajzen, 1991, p. 183).

        In the theoretical model, intention is influenced by three distinct factors. The

first affective factor is an individual’s attitude toward the behaviour. An attitude in

the context of the Theory of Planned Behaviour is how an individual views a

particular behaviour/action as good (self-beneficial) or bad (harmful) (Ajzen, 1991,

p.188). From a financial perspective, a classic attitude difference is whether an

individual views borrowing on credit as good: a viable option for short-term loans,

or for funding expenses; or bad: a high-interest trap, or an unnecessary financial

risk.

        The second factor that determines an individual’s intentions is subjective

norms. How an individual views the existence of social pressure to perform or avoid

a behaviour makes up his/her subjective norms. A financial example of these norms

is the common negative social attitude toward bankruptcy. If a consumer feels that

bankruptcy is not socially acceptable, she will alter her actions and intentions to try



                                                                                       21
to avoid filing for bankruptcy – even if it is the best possible financial decision at

that time. Another subjective norm often perceived by consumers is the pressure to

raise a family in an owned (not rented) house or condo. Feeling this social pressure

might persuade the family to purchase an unaffordable dwelling using a mortgage

that they cannot afford.

       The third factor that affects behavioural intention is perceived behaviour

control (Ajzen, 1991). It is also the factor that differentiates the Theory of Planned

Behaviour from the theory of reasoned action. An individual’s “perception of the

ease or difficulty of performing the behaviour of interest” is his/her perceived

behaviour control (Ajzen, 1991, p.183). This effect varies with differing actions and

situations and is associated with an individual’s locus of control, but does not

necessarily have to support it. For example, a man may believe he has total control

over the amount of money he saves (an internal locus of control) but may not

believe that he can save enough to become a millionaire (a low perceived behaviour

control). High levels of effort are often associated with high level of perceived

behaviour control, because if people believe they can perform a behaviour, they are

more likely to exert the effort to achieve that performance (Ajzen, 1991). This factor,

unlike the other two, is associated with increased intention and also increased

frequency of the behaviour (Ajzen, 1991). In the simplest explanation, this can be

explained by equating perceived behaviour control with the confidence to complete

a task. People, in general, are more intent on completing a task that they feel

confident they can perform and will be more willing to attempt it than those with

low confidence about completion. Although confidence is not necessary to perform a



                                                                                         22
behaviour, it is an important factor in intending to perform it, as well as acting on

that intention. Perceived behaviour control plays importantly into the definition of

financial literacy as it represents the confidence aspect that must be present to

make effective financial decisions. Figure 2.3 illustrates the Theory of Planned

Behaviour as proposed by Ajzen.

                                           Figure 2.3
               Simplified Theory of Planned Behaviour, (adapted from Ajzen, 1991)


         Attitudes
          Toward
         Behaviour




         Subjective
                                           Intention                       Behaviour
          Norms




         Perceived
        Behavioural
          Control


       Depending on the specific behaviour, an individual will vary the relative

importance of perceived behavioural control, subjective norms, and attitudes

(Ajzen, 1991). Ajzen also incorporates the role of beliefs in the Theory of Planned

Behaviour. Each normative factor influencing the intention to perform an action is

affected by a positive belief whether behavioural, normative, or based on control

(Ajzen, 1991). By associating objects or actions with specific attributes, we form

each “salient” belief and these underlie the formation of attitudes, subjective norms

and perceived behaviour control (Ajzen, 1991, p. 189). Although these beliefs are

important in the Theory of Planned Behaviour, it is very difficult to pinpoint their



                                                                                        23
causation, and they are not as important in affecting intention as attitudes,

subjective norms, and perceived behavioral control. When applying the Theory of

Planned Behaviour to financial literacy, measurable attributes that can lead to the

various factors affecting intention are more important to the study than beliefs. In

the past applications of the Theory of Planned Behaviour to financial issues,

researchers have removed beliefs from their models to better pinpoint the cause of

poor financial decisions.


Section 2.3.2: Past Applications in Financial Literacy

       The Theory of Planned Behaviour has been applied to many different aspects

of life; however, its use in understanding financial literacy is only beginning to

emerge in the last decade. Schuchardt, Hanna, Hira, Lyons, Palmer, and Xiao (2009)

explain financial literacy as: “the process of acquiring and developing values,

attitudes, standards, norms, knowledge, and behaviours [sic] that contribute to the

financial viability and well-being of the individual” (pg 86). The similarities between

the Theory of Planned Behaviour and financial literacy are very evident in the

definition. Researchers like Rutherford and DeVaney (2009), as well as Xiao and Wu

(2008) have applied the Theory of Planned Behaviour to credit and debt specific

issues, while other researchers like Lee (2003) have studied the theory and its

implications for using online financial tools. Loible and Scharff (2010) are currently

studying the implementation intentions of savings plans. These studies each focus

on different areas that can lead to better financial literacy.

       Rutherford and DeVaney (2009) found that attitude was a key determinant

in whether consumers use credit cards for a short-term loan and then pay off the


                                                                                       24
balance at the end of each month (what they refer to as “convenience users”), or as a

method of financing expenditures over many periods without paying down the

balance – “revolvers”. If consumers have a positive or undecided attitude about

credit, they are more likely to be revolvers in that they carry a balance on their

cards from month to month (Rutherford and DeVaney, 2009). In contrast, those

consumers that view credit as bad and risky were less likely to carry a balance on

their card (Rutherford and DeVaney, 2009). The financial literacy implications of

these findings is that financial education should strive to instill a negative attitude

about credit use so as to encourage good financial behaviour – fully paying off credit

balances monthly. In addition to attitudes the study found a connection between

subjective norms and likelihood of being a convenience user. Those consumers who

seek financial knowledge from outside sources (media, financial advisors, family,

etc.) are far less likely to be convenience users than those who do not depend on

outside sources for information (Rutherford and DeVaney, 2009). This finding

implies that the more importance an individual assigns to their own subjective

norms, the more likely they are to make poor financial decisions when it comes to

credit. Three very interesting findings that also came out of this study were:

focusing on long-term goals is associated with low levels of credit use; older

households are more likely to use credit only for convenience purposes; and having

a college education is significantly linked to good (convenience) credit use

(Rutherford and DeVaney, 2009). These findings help can help educators focus on

teaching proper credit use to those groups that need it the most – young adults

without a college education who focus primarily on short-term financial planning.



                                                                                          25
       Many credit-counselling services have arisen to help teach proper credit

management. There are mixed results as to whether debt management plans

created by counselling services positively impact financial behaviour but their

completion has been associated with better financial health and happiness (see Xiao

and Wu, 2008 for a summary). Xiao and Wu (2008) found that attitude and

perceived behaviour control have an impact on the completion factors of debt

management plans. Consumers with positive attitudes about the plan had more

intention to complete the behaviour and those who had a higher perceived

behaviour control had both higher intentions and higher completion rates of the

plans (Xiao and Wu, 2008). This study implies that focusing on fostering positive

attitudes about debt management and teaching both skill and confidence can

effectively increase good financial behaviour in consumers. It is imperative for

consumers to feel that they can complete debt management programs and reduce

their debt if they want to be successful in achieving these behaviours.

       There are many other aspects to financial literacy than credit and debt

management. Many researchers are focusing on different savings tools and how to

encourage their use. Lee (2003) tested consumers willingness to switch to online

financial services – like account management, seeking investment information,

opening investment accounts, online bill payments and transfers – many of which

can improve a person’s financial literacy. The study found a number of factors were

positively associated with intentions to use online financial services like

“satisfaction with finances, positive attitude toward credit market risk, professional

advice unneeded, [...] and a college degree or more” (Lee, 2003, p.142). Each one of



                                                                                    26
these factors, Lee (2003) linked with various aspects of the Theory of Planned

Behaviour. An interesting factor to note is the presence of a college degree or more

formal education, as this is a recurring theme in many financial literacy studies.

Another study currently underway by Loibl and Scharff (2010) also uses education

as a demographic variable to study the Theory of Planned Behaviour on savings

intention. Through the application of the Theory of Planned Behaviour, the

researchers hope to provide insight into how setting implementation strategies with

specific intentions, concerning “when, how, how much, and from what source of

income” consumers will save money, can improve consumers’ likelihood of

performing the behaviour (Loibl and Scharff, 2010, p. 338). This study might prove

helpful to financial educators as it can identify a clear path on how to best convert

savings intention into savings behaviour.

       As evident from the above review, there are only a few applications of the

Theory of Planned Behaviour in financial literacy studies. However, the theory is

very applicable to financial literacy because it can demonstrate the attitudes,

subjective norms, and perceived behaviour control that are necessary aspects (in

addition to knowledge) to achieve financial literacy, and identifies a gap between

literacy and making good financial decisions. These decisions are also affected by

perceived behaviour control, which can be likened to confidence or comfort in

financial decision-making. As the above-cited studies show, attitudes, subjective

norms, and perceived behaviour control play an important role in good financial

decision-making, and so need to be addressed and strengthened by effective

financial education.



                                                                                        27
       After reviewing the literature it is apparent that society needs to be more

financially literate in order to increase the standard of living in the current

economic environment. Studies have shown that factors like sex and education can

also impact the financial literacy of an individual. These factors need to be

considered in expanded financial education programs so as to effectively teach the

knowledge, skill and confidence that make up financial literacy. The Theory of

Planned Behaviour implies that subjective norms, attitudes, and perceived

behavioural control have an impact on financial literacy which should also be

considered in determining an appropriate financial education program. Finally,

studies have shown that there is a gap between financial literacy and making good

financial decisions, which must be addressed by researchers and policy makers

before significant changes will occur in the financial well-being of society. This

study aims to address all these factors in the research questions, which are

presented in the next section.




                                                                                     28
Chapter III: Research Questions
       From the studies conducted on financial literacy education, a clear gap was

identified between financial knowledge, financial education and making good

financial decisions. This chapter presents the research questions of this study and

how they address this gap. The chapter concludes with the development of a new

model of financial literacy based on the Theory of Planned Behaviour that includes

demographic and sociographic variables found in the previous research. From this

model, seven hypotheses were developed and tested in this research project.

       Using the Theory of Planned Behaviour to identify attitudes towards financial

behaviours, subjective norms, and perceived behaviour control can help researchers

and consumers understand what affects the intention to make good financial

decisions (financial literacy), and from that identify ways to convert intention into

action. In addition to the three factors of planned behaviour, education has been

identified frequently as a factor determining financial literacy. Factors such as

income, age, and specific to parents – the number of children they have – may also

affect financial literacy levels. As attitudes, subjective norms, and perceived

behaviour control can all be affected by demographic characteristics such as

education, it is important to consider these factors as potential influences on

financial literacy. Figure 3.1 identifies the proposed general model for financial

literacy that was tested in this research.




                                                                                      29
                                           Figure 3.1:
            A model of financial literacy based on the Theory of Planned Behaviour


                                      Attitudes
                                       Toward
                                      Behaviour
       Demographic
      Characteristics



                                                                           Intention
                                      Subjective
                                       Norms




                                      Perceived
                                     Behavioural
                                       Control


      From this Figure, seven hypotheses can be identified

             Hypothesis 1. The demographic characteristics of an individual will
                           affect the attitude he/she holds toward a specific
                           financial behaviour.
             Hypothesis 2. The demographic characteristics of an individual will
                           affect the subjective norms he/she considers pertaining
                           to a specific financial behaviour.
             Hypothesis 3. The demographic characteristics of an individual will
                           affect his/her perceived behavioural control about a
                           specific financial behaviour.
             Hypothesis 4. A positive attitude toward a specific financial behaviour
                           will increase the intention to perform this behaviour.
             Hypothesis 5. Positive subjective norms will increase the intention to
                           perform a specific financial behaviour.
             Hypothesis 6. Positive perceived behavioural control will increase the
                           intention to perform a specific financial behaviour.
             Hypothesis 7. Demographic characteristics will increase the intention
                           to perform a specific financial behaviour.

      This study aimed to use the model, hypotheses, and statistical analysis to

answer two research questions:

   1. Was the New Parent’s Guide to Money a successful financial literacy education

      program? and


                                                                                       30
   2. What factors (psychological and demographic) affect a new mother’s

      intention to engage in good financial behaviours.

The methods used to answer these questions are presented in the next section.




                                                                                31
Chapter IV: Methodology
        This chapter will describe the proposed methods used to gather and analyze data

on improving financial literacy for new parents. The methodology of this research project

started with the running of the NPGTM project, followed by the collection of data from a

survey questionnaire, coding the questionnaire in terms of answers and relevance to the

Theory of Planned Behaviour, evaluating the questionnaire’s effectiveness, statistically

analyzing the data collected, and finally using this data to map out a model of the Theory

of Planned Behaviour as it relates to financial literacy. The first part of this section will

briefly discuss the NPGTM project.



Section 4.1: The New Parent’s Guide to Money Project
        The New Parent’s Guide To Money project began in 2009 with the goal of

improving the financial literacy of new parents in the Antigonish community. The

program targeted new parents, as they are a group identified by the Taskforce on

Financial Literacy as experiencing a new major financial stage in their lifecycle. The

project was a partnership between the Gerald Schwartz School of Business and

Information Systems at Saint Francis Xavier University and the Saint Martha’s Regional

Hospital in Antigonish, Nova Scotia Canada in co-operation with the Guysborough

Antigonish Straight Health Authority.

        As part of the project, NPGTM packages were distributed, free of charge, through

the Open Arms Clinic at Saint Martha’s to parents attending prenatal check-ups. The

package provided parents with financial literacy educational materials. New parents were

also asked to participate in a survey, with respondents receiving a $20.00 gift certificate



                                                                                                32
to a local drugstore. The packages included: an invitation to the participate in the study

and consent form; the New Parent’s Guide to Money: 5 Simple Steps to Financial Health

booklet; two postage-paid envelopes entitled Survey and Gift Certificate Redemption

with separate addresses; a copy of the survey questionnaire; a gift certificate redemption

form; and a copy of the Nova Scotia Birth Certificate Application, the Nova Scotia

Pharmacare Program Registration Form, the Nova Scotia Community Services, Early

Childhood Development Services Application for Child Care Subsidy.

       The NPGTM project is a trial project that will be refined based on the findings of

this study. The key part of the project for the purpose of this study was the survey

questionnaire, which will be discussed in the next section.



Section 4.2: Survey Questionnaire
       The questionnaire distributed as part of the NPGTM project consisted of a series

of questions to be answered after reading the New Parent’s Guide to Money: 5 Simple

Steps to Financial Health booklet (herein referred to as the Guide). A participant’s

answers reflected the effectiveness of the Guide, the participant’s level of confidence and

stress associated with making financial decisions, demographic information, as well as

other questions about the usefulness and relevance of the information contained in the

Guide (see Appendix A for a copy of the survey questionnaire). Most questions on the

survey required the participant to rank his/her response to each question on a scale from

one to seven. The participant was also asked a series of demographic questions and

questions concerning his/her confidence, stress and role in making family financial

decisions.




                                                                                             33
       The advantage to using a survey was that it produced quantitative data, which was

most appropriate for this study. With this data, modeling and other forms of statistical

analysis could be performed. To best reach the intended audience, a mail-in,

questionnaire survey was used. The value of a mail-in questionnaire survey is derived

from the uniform design, comparability of responses, and the lack of influence from the

interviewer. Mail-in surveys, however, are limited by participation rates and the clarity of

questions. Participants may not interpret a question in the same way and do not have the

option to ask the interviewer how to correctly interpret it. Quantitative data in general is

more objective, and succinct than qualitative data, which can allow for more complex

analysis. Shortcomings of quantitative data are the inability to personalize answers, the

inability to justify answers, and the tendency to oversimplify complex answers into

numbers.

       Even with these shortcomings in mind, survey data was determined to be the best

source of information for the purposes of this study. To properly record and analyze the

quantitative data, the survey questionnaire was coded. This coding process is discussed in

the next section.



Section 4.3 Coding the Data
       For ease of recording and analyzing the questionnaire, responses to questions

were coded by assigning a unique number and letter value. The next section discusses the

numeric and alphabetic coding. In addition, a table is presented showing the different

ways key concepts from the Theory of Planned Behaviour were operationalized.




                                                                                            34
Section 4.3.1 Numeric and Alphabetic Coding
       All questions on the survey questionnaire were assigned a consecutive number tag

from 1-25. For questions with more than one part, each sub-question was assigned an

alphabetic tag ranging from A-J. Using this alphanumeric tag, each response was then be

recorded in SPSS. The written answers to questions two and seventeen were recorded in a

Microsoft Word document. All other questions were recorded in SPSS by assigning a

number value to each possible response. Responses to questions three through fourteen

were based on an interval scale ranging from one to seven.

       For the demographics section, responses were coded on an ordinal scale.

Responses to questions in a single horizontal line were coded from one through five

reading left to right. Responses found in two columns were coded from one to six down

the left column then down the right column. A copy of the coded survey can be viewed in

Appendix A. Once the coding process was complete, the responses were simply recorded

using SPSS.


Section 4.3.2 Theory of Planned Behaviour Coding
       Each response was reviewed in terms of its ability to capture the different factors

of the Theory of Planned Behaviour. Those questions that were deemed irrelevant to the

theory will be coded N/A. Responses that demonstrated qualities of attitudes toward a

financial behaviour were coded AT. Responses representing subjective norms toward

financial behaviours were coded SN. Response that demonstrated a perceived

behavioural control were coded PC, and finally, any responses that demonstrated a

participant’s intention to perform a specific financial behaviour were given the code IN.

       These Theory of Planned Behaviour codes helped in the analysis of the survey

and to map out a model using the alphanumeric data. A fully coded survey questionnaire



                                                                                        35
can be found in Appendix A. In addition, Table 4.1 was prepared to summarize how

different elements of the survey questionnaire capture the various factors of the Theory of

Planned Behaviour.

       Once all of the responses were coded and entered into SPSS, statistical analysis

was performed. These procedures are discussed in the following section.



Section 4.4: Statistical Analysis
       Due to the high response-rate, many different types of statistical analysis were

performed. The analysis was split into three different areas: descriptive, univariate, and

finally, model building.

       Firstly, descriptive statistics was used to gain a better understanding of the data

being analyzed. During this analysis, the mean, median, mode, and standard deviation of

the data were calculated. All of this analysis was conducted using SPSS.

       Next, univariate analysis was performed to identify key differences in the data.

The primary demographic variables tested were: age; level of education (whether a

participant has a high school diploma or less, or some/full post secondary); number of

children (first child or not first child); and level of income. The response variables testing

was on those questions identified as demonstrating the factors of the Theory of Planned

Behaviour. Two types of tests were performed: T-tests and ANOVA tests. T-tests were

used to test for differences between dichotomous variables (ex. male or female) while

ANOVA tests tested for differences in variables that have multiple (more than two)

groups (ex. under $40,000 income, income of $40,001-$80,000, or income greater than

$80,000 annually).




                                                                                             36
       Finally, using this data and partial-least-squares analysis, a model was built to

express the relationships between factors identified in the survey and overall financial

literacy. This analysis identified any dependencies between factors and which factors are

more important in determining a person’s intention to engage in good financial

behaviours. From this model assumptions and conclusions were made which are included

in subsequent sections. Table 4.1 illustrates the questions used as manifest variables in

the financial model.

                                          Table 4.1
                       Proposed Questions Assigned to Manifest Variables
                                                    Question Number(s)
                Attitude Toward Behaviour           7, 23
                Subjective Norm                     12, 13
                Perceived Behavioural Control       6, 22
                Behavioural Intention               8, 9
                Behaviour Performance               14


The following chapter contains the analysis performed on the survey questionnaire data.




                                                                                            37
Chapter V: Analysis
       This chapter will review the analysis performed on the collected survey

questionnaire data. Basic descriptive statistics, univariate analysis and partial least

squares modeling were used to answer the two research questions of the study. The

results of these analyses are presented in separate sections.



Section 5.1 Descriptive Statistics
       A total of 216 people received A New Parent’s Guide to Money representing

99% of the people asked to participate. Of these people, 102 returned a completed

survey questionnaire (herein referred to as the participants). Two men and 100

women returned their surveys. The mean age of participants was between 25-35.

This group accounted for 64% of participants while 20% were between the ages of

18-24, and 17% were aged 35-45. The majority (80%) of participants were prenatal.

For 41% of participant’s, this was their first child.

       Occupations varied with 15.7% employed as teachers, 16.7% working in the

medical field, 16.7% unemployed or staying at home with children, 16.7% working

in retail or the food industry, 12.7% working in support positions or customer

service, and the remainder 21.6% working other occupations. 74% of participants

were highly educated with either a post secondary degree or diploma, 10% had

some postsecondary, 13% achieved a high school diploma, and only 4% had no high

school diploma. The mean annual income was between $60,000 and $80,000. 13%

of participants earned less than $20,000 annually, while 20% earned more than

$100,000 per year.


                                                                                      38
       93.1% of participants reported they “learned a lot” from the guide with mean

scores ranging from 5.51-6.20 out of 7 on question 5. Another 92.2% would

recommend the Guide to a friend. These indicators provide insight into the

usefulness of the Guide.

       Participants, for the most part, found performing financial tasks not very

difficult (mean of 2.83) but expressed that basic behaviours were less difficult than

advanced behaviours (mean of 2.56 vs. 3.09)1. Using paired sample T-Tests, this

difference between basic and advanced behaviours was found to be significant at

the 1% level of confidence (t=5.515,p=0.000). Participants were also comfortable

taking care of their families’ money with 47.1% very comfortable, 40.2% somewhat

comfortable, 8.8% somewhat uncomfortable, and only 3.9% not comfortable at all.

These two variables represent a high perceived behavioural control as participants

view financial tasks as not difficult, and are comfortable engaging in them.

       The attitudes expressed toward financial behaviours were positive as

represented by the mean score of 6.31 or strongly agree. Participants felt that

advanced behaviours would be good for their families more so than basic

behaviours (mean score of 6.45 vs. 6.17). These results were also significant at the

1% level (t=0.001, p=-3.284). Participants found taking care of their families’ money

1 Applying for Government benefits, calculating income minus expenses, making a
monthly spending/saving plan, registering for an RESP, and registering for the
Canada Learning Bond were all identified as basic behaviours corresponding to
questions 8 A, B, C, F, and G, respectively. Limiting oneself to one credit card and
paying off the rest, seeking help if in trouble with debt, buying life insurance or
ensuring the current amount is adequate, choosing who will care for children, and
creating a basic will were all identified as advanced behaviours corresponding to
questions 8 D, E, G, H, and I, respectively. For questions 6 and 7, A-D were associated
with basic behaviours, while E-H were associated with advanced behaviours that
take more time, knowledge, and commitment.

                                                                                    39
somewhat stressful (70.6%), with 18.6% finding it not at all stressful, and 10.8%

finding making financial decisions very stressful. These results represent a positive

attitude towards good financial behaviours but also the view that they are

somewhat stressful.

        Subjective norms were tested through questions 12 and 13. Participants

valued the opinions of their spouses/partners most (6.71), then the opinions of

financial advisors (5.38), and valued the opinions of co-workers and hospital

workers the least (2.32 and 2.61respectively). 81.4% of participants responded that

good money management was important to their friends and relatives (mean score

of 5.38). These results show that there is a positive subjective norm about good

financial behaviours.

        Participant’s expressed increased intention to perform good financial

behaviours. The mean score for intention was 5.14 with participants having a

greater intention to perform advanced behaviours than basic ones (5.22 vs. 5.05).

This difference, however, was not found to be significant at the 5% level (t=-1.790,

p=0.076) Confidence was also increased by reading the Guide as shown by the

response mean of 5.42. Tests were performed to see if the increase in intention and

confidence was significant. One-way T-tests were conducted using 4 as a mean

comparison score. These results are summarized in Table 5.1.

                                               Table 5.1
                                 Improvement in confidence and intention
                                                                       Questions   Improvement
Confidence in making financial decisions                               9           Y***
Intention to perform good financial behaviours                         8a-j        Y***
Intention to perform good basic financial behaviours                   8a-c,f,g    Y***
Intention to perform good advanced financial behaviours                8d,e,h-j    Y***
***Significant at the 1% level



                                                                                            40
       Using these and other data, further analysis was performed to determine

other significant results. This analysis is discussed in the next section.



Section 5.2: Additional Univariate Analysis
       One-way ANOVA tests were used to determine if any variances in responses that

resulted from various demographic factors were significant. Neither age nor number of

children were found to have a significant impact on the attitudes, perceived behavioural

control, or intention of participants. The level of education was only found to inversely

and significantly influence the perceived behavioural control toward advanced

behaviours (F=3.117, p=0.030). Tests determined that income has a significant, negative

influence on perceived behavioural control in general (F=2.440, p=0.031), and on basic

financial behaviours (F=3.432, p=0.004). When income was grouped between less than

$40,000, between $40,000-80,000, and greater than $80,000, it is also found to have a

significant negative influence on basic intention (F=3.661, p=0.029).

       Neither number of children nor age of participants significantly influenced

subjective norms. Level of education significantly and inversely impacted a participant’s

likeliness to value the opinions of both co-workers (F=2.814, p=0.043) and financial

advisors (F=3.168, p=0.028). Income was found to significantly inversely influence the

value placed on the opinions of partners/spouses. To gain a better grasp on the variables

contained in questions twelve and thirteen, new variables were computed. By multiplying

each of the first four sections of question twelve, by question thirteen, variables 13A-D

were created. These variables represented a reflection of how often participants relied on

the opinions of family and friends in part due to the importance these groups place on




                                                                                            41
good financial behaviour. These four variables were used in the further statistical

analysis, which will be discussed next.



Section 5.3: Partial Least Squares Analysis
       Partial least squares analysis was performed to identify a model of financial

behaviour using the Theory of Planned Behaviour. Originally the basic Theory of Planed

Behaviour model was set up with attitudes, subjective norms, and perceived behavioural

control influencing intention. All four variables were assigned questions and marked as

reflective. Table 5.2 demonstrates the various questions that were assigned to each

manifest variable and the questions that remained in the model after the loading

procedure discussed below.

                                            Table 5.2
                Questions assigned to manifest variables and present in final model
Variable                              Questions Assigned         Questions Loaded in Final Model
Attitude Toward Behaviour             7a-h, 23                   7 b, c, d, e, f, g, h
Subjective Norm                       12e-h, 13A-D               12 e, f, g, h, 13 B, C, D
Perceived Behavioural Control         6a-h, 22                   N/A
Intention                             8a-j, 9                    8 b, c, d, e, f, g, h, i, j, 9

Variables 13A-D, as explained earlier, were computed to better capture the importance of

questions 12 and 13, and how they reflect subjective norms. Although the literature

explained perceived behavioural control as confidence, question 9 was more suited to

intention in that it addressed increased confidence, which is a factor that makes up

financial literacy and the intention to make good financial decisions.

       Using the bootstrap option in the open Visual PLS software, the number of

samples was set to 200. Any manifest variable with a loading below 0.55 was removed

from the construct based on the research performed by Falk and Miller (1992) who

argued that loadings above 0.55 are most desirable. Each manifest variables with a low



                                                                                         42
loading was removed individually, before running another bootstrap test. Once all of the

loadings remained above 0.55, the statistical relationship between factors was analyzed.

Factors with a significance below 1.900 were also removed from the model to ensure that

only significant relationships remained. Perceived behavioural control was eliminated

from the model at this point, as it had no significant influence on intention. The model

was rebuilt with all questions identified in the previous section making up attitudes,

subjective norms and intention. Bootstrapping was performed and variables with low

loadings were removed (7a, 13A, 8a). The model, presented in Figure 5.1, produced

significant relationships between the factors, as illustrated below. The various loadings

and statistical averages are contained in Appendix B.

                                         Figure 5.1
                               Basic Model of Financial Literacy




                                                     Legend:
                                                     ATB -Attitude Toward Behaviour
                                                     SN – Subjective Norms
                                                     Intent – Intention




       A second version of this model was tested where demographic factors were added

to the original Theory of Planned Behaviour model. Age, number of children, income and

education were included as the demographic behaviours that theoretically influenced

attitudes, subjective norms, perceived behavioural control, and intention. The influential


                                                                                            43
arrows were again placed from each factor of the Theory of Planned Behaviour to

intention. Table 5.3 illustrates the survey questions that made up the variables.

                                              Table 5.3
                       Questions assigned to variables and presented in models
Variable                             Questions Assigned         Questions Loaded in Final Model
Attitude Toward Behaviour            7a-h, 23                   7 b, c, d, e, f, g, h
Subjective Norm                      12e-h, 13A-D               12 e, f, g, h, 13 B, C, D
Perceived Behaviour Control          6a-h, 22                   6 a, b, c, d, e, f, g, h (G22) 3rd model only
Intention                            8a-j, 9                    8 b, c, d, e, f, g, h, i, j, 9
Age*                                 15                         N/A
Number of Children*                  Calc19                     N/A
Income*                              G21                        G21
Education*                           SN20                       (SN20) 3rd model only
* indicates factor was treated as a formative variable, not reflective

Variable “Calc19” was calculated to determine the number of (including unborn) a family

had. This variable was calculated using Excel If-Then statements on the data contained in

question 18 (pre- or post-natal) and 19 (number of children). The resulting variable

showed the number of children a mother had, both born and unborn, to represent family

size. The income variable was regrouped into three different categories – less than

$40,000 per year, between $40,000-$80,000, and greater than $80,000 per year. This

grouping was used to distribute the population into more even groups. Education was

grouped into having some postsecondary or not (SN20).

        In the process of building the model, neither age nor number of children had a

significant influence on any of the factors, so these variables were not included in this

model. The causation arrow between perceived behavioural control and intention was

removed from the model due to its lack of significant. Finally, education was removed

from the model, which yielded the statistically significant model presented in Figure 5.2.

In this model, attitudes and subjective norms continued to have a significant influence on




                                                                                                     44
intentions, but similar to the first model, perceived behavioural control did not appear to

have a significant influence on intentions.

                                               Figure 5.2
        A model of financial literacy using the Theory of Planned Behaviour including income.




Due to the high correlation between income and education (correlation of 0.461 at the 1%

level, p=0.000) and the many references to education in the literature, a separate model

was produced ignoring income as a significant demographic factor. This model,

presented in Figure 5.3, is very similar to that produced with income included.




                                                                                                45
                                               Figure 5.3
         A model of financial literacy using the Theory of Planned Behaviour and education.




Education was determined to significantly influence attitudes, subjective norms,

perceived behavioural control, and intention. Again, in this model attitudes and subjective

norms significantly influenced intention, while perceived behavioural control does not.

       These models demonstrate some of the factors that make up a new mother’s

intention to engage in good financial behaviours. There are important social, theoretical,

and policy implications of the two presented models. The significance of these models

and the statistic analysis presented earlier will be discussed in the following section.




                                                                                              46
Chapter VI: Results and Discussion

       This chapter discusses the results of the previous analysis, the implications

that may arise from the analysis, and potential limitations. It is broken into three

sections: the first section strives to answer the first research question concerning

the success of A New Parent’s Guide to Money as a financial literacy program; the

second section addresses the second research question in determining the factors

that make up a new mother’s intention to engage in good financial behaviours;

finally, the third section will briefly discuss some of the limitations of the study.



Section 6.1: The success of A New Parent’s Guide to Money
       Success of the program was based on the aforementioned definition of

financial literacy: the ability to comprehend finance-related information (financial

knowledge) and have the confidence and understanding to apply this knowledge to

financial decision-making. According to this, a successful financial literacy program

teaches the knowledge, skill and confidence to make good financial decisions.

Knowledge and skill were evaluated in the survey using intention as an indicator. If

participants gained the necessary knowledge and skill from the Guide, they would

understand the importance of good financial behaviours and intend to perform

them more. With an increased confidence in making financial decisions, participants

become more financially literate.

       An improvement in knowledge, skill, and confidence reflects an increase in

financial literacy. The variables tested as indicators of financial literacy were



                                                                                        47
increased after being presented with financial knowledge (8b-j), and the confidence

to perform these behaviours (9). After reading the Guide, participants had

significantly increased intention to engage in good financial behaviour. This is an

indication that the Guide significantly improved the financial knowledge and skill of

participants. Participants’ confidence was significantly improved after reading the

Guide. Increased confidence allows participants to better apply their knowledge and

skill to financial decision-making.

       By increasing participants’ knowledge, skill and confidence, the NPGTM

program effectively increased their confidence. This reflects favorably on the

effectiveness of the New Parent’s Guide to Money as a financial literacy education

tool. These results can be used to answer the first research question of this study:

was the New Parent’s Guide to Money a successful financial literacy education

program? According to the presented definition of financial literacy, the New

Parent’s Guide to Money successfully increased the financial literacy of participants

by increasing knowledge, confidence and intention to engage in good financial

behaviours.



Section 6.2: Factors that Influence a New Mother’s Intention to
Engage in Good Financial Behaviours
       The psychological and demographic factors that make up a new mother’s

intention to engage in good financial behaviours are presented in the models in the

previous chapter. These models addressed the second research question, and are

applicable to financial literacy in general. Attitudes, subjective norms, income,




                                                                                       48
education, and perceived behavioural control were all factors that affected the

intention to perform good financial behaviours (financial literacy) in some regard.

       Attitudes and subjective norms were shown to significantly influence

participants’ intention to perform good financial behaviours. The stronger a

participant’s attitude was toward a specific financial behaviour, the more she

intended to perform it. In addition, if a participant saw society’s view of the

behaviour as positive, she intended to perform it more. These results demonstrate

the importance of attitudes and subjective norms in efforts to improve financial

literacy. The public policy implication is that financial literacy education campaigns

should be accompanied by public awareness campaigns to promote good financial

decisions in a positive light.

       As people generally have a bad perception of stress, it is important to

promote the ideas that making good financial decisions is a positive behaviour, and

that it can be a stress-free one. Because the majority of people responded that

taking care of family finances was “somewhat stressful”, efforts should be made to

reduce the perceived stress levels of making financial decisions. Programs that

provide “no stress options” for protecting your child’s future could help change the

attitude toward making important financial decisions. Public programming should

also promote the ideas of stress-less saving tips and other good financial

behaviours.

       Like many other behaviours, good financial behaviours can be learned from

family. Because of this relationship, it is very important to educate the whole family

to ensure they value good money management. Programming should promote the



                                                                                    49
idea that positive attitudes toward good financial behaviour are a necessity for a

healthy family dynamic. The current norms surrounding healthy and happy families

include such behaviours as a focus on health and recreation, positive

communication, and spending time together. It would change the social norms

concerning financial behaviour if making good financial decisions was promoted as

a necessity for a healthy and happy family.

       Income significantly influenced attitudes, perceived behavioural control, and

intention towards good financial behaviours. Income inversely affected intention.

This could be the result of people with higher incomes already performing these

behaviours, or that people with low incomes were presented with information in

the Guide on behaviours they previously thought they could not afford. This result is

encouraging in that people who have the greatest need for good financial actions are

now intending to perform better financial behaviours, to stretch their dollars

further. Income also inversely affected perceived behavioural control, meaning

people with lower incomes were likely to be more comfortable in making financial

decisions, and found them less difficult. This could due, in part, to the fact that

people with lower incomes have fewer financial decisions to make and are only

making budgetary/ day-to-day decisions because they cannot afford to invest for the

future. As income increased, attitudes did as well. This positive relationship could be

based on the attitudes associated with more advanced financial topics. People with

lower income might not view these behaviours as good for their families, because

they feel they cannot afford them. Subjective norms were not affected by income.




                                                                                      50
       There are implications of the effect income has on all of these factors.

Programs need to be run that target lower income people, and promote positive

attitudes toward all financial decisions, not just basic ones. A focus also needs to be

placed on the fact that financial decisions (especially advanced ones) are good for

everyone, regardless of income, and they are not necessarily difficult. It is also

important to note the R2 value associated with the income model. 35.9% of the

variance in responses was attributable to income, attitudes, subjective norms, and

perceived behavioural control (indirectly through its relationship with income).

This result suggests that the Theory of Planned Behaviour is a very good model to

explain variations in financial literacy among different individuals.

       Attitudes and subjective norms were influenced by level of education in this

study. If a participant had some/full post secondary education she was more likely

to have a positive attitude toward good financial behaviours and viewed society as

having that same positive attitude. These results suggest that some attitudes and

norms towards financial behaviours are developed at different stages of education.

It is therefore, important to promote positive attitudes and norms toward good

financial behaviours at all levels of education. Many previously mentioned studies

tested the effectiveness of financial education on youth (with limited success),

which suggests that some financial education must occur at a higher level of

education than simply junior or senior high school. This poses a great concern about

how to reach the proportion of the population that does not pursue some sort of

post secondary education.




                                                                                      51
       Education was shown to significantly influence a participant’s intention to

perform a good financial behaviour. An interesting relationship developed from the

model in that participants with no post secondary education were more likely to

have increased intention to engage in good financial behaviour than those

participants who had some/full post secondary education. This result may be

attributable to the limitation in that participants with higher education were already

performing those behaviours as they had learned about them in their later

education. This result could also reflect that the behaviours presented in the New

Parent’s Guide to Money were more suitable for people with lower education levels.

Education is highly correlated with income, which could mean that people with

higher education thus higher income are less likely to feel they need to perform

these financial behaviours.

       The third factor of the Theory of Planned Behaviour– perceived behavioural

control – did not significantly influence the intention to perform good financial

behaviours. These findings were similar to those of Rutherford and DeVaney (2009),

who found that only attitudes and subjective norms had an impact on financial

decisions. Xiao and Wu (2008) also only found two of the three factors of the Theory

of Planned Behaviour significantly influenced financial behaviours. The findings of

the New Parent’s Guide to Money study seem to be in line with most of the literature

on this topic, in that all three factors of the Theory of Planed will necessarily

significantly influence all financial behaviours. Perceived behavioural control,

however, was significantly influenced by education and income, thus affected the

relationships within the model. Like intention, perceived behavioural control was



                                                                                     52
inversely influenced by education. Somewhat surprisingly participants with no post

secondary education found financial behaviours easier to perform and were more

comfortable in making financial decisions.

       Using the three models presented in the previous chapter, we can determine

that attitudes, subjective norms, income and education significantly affect a new

mother’s intention to engage in good financial behaviours. The high significance of

these factors also shows that the Theory of Planned Behaviour is an effective model

to explain financial behaviour.



Section 6.3: Potential Limitations of the Study
       Although the models are statistically sound, there are a few limitations to the

study. Firstly, all data was limited to the ability of the survey questionnaire to

capture the underlying constructs of the Theory of Planned Behaviour. Question 6

(to determine PBC) may have been biased in that it asked “how difficult” a

behaviour is, as opposed to how easy. This may have deterred some participants

from answering truthfully because they did not want to admit that they found

certain tasks difficult. A major limitation to the study was the absence of a before-

and-after comparison – participants were only asked if they were more likely to

perform a behaviour after reading the Guide, instead of having two distinct

questions. This limitation may mean that the majority of participant’s were already

applying for government grants (as seen by the lower mean of 4.90 to express the

difficulty of applying for grants), which may have resulted in no increased intention.

The lack of a before-and-after question made for a complex Question 8, which may




                                                                                     53
have reduced the comprehension and the accuracy of answers of participants on

that question.

       Secondly, as in most financial literacy studies, the results focused on the

intention to engage in good financial behaviour, as opposed to the actual

performance of these behaviours. People are very reluctant to allow researchers

access to bank accounts to see if they are saving more, or have fewer credit cards.

Instead, researchers are limited to intention to perform behaviours and must rely

on the relationship of increased intention leading to increased behavioural

performance.

       Finally, the participants may not accurately represent the true population of

the Antigonish area. Education was also limited by the unbalanced representation of

post secondary educated participants: 74% of the sample. The results could be

skewed because there were not enough responses from lesser-educated individuals.

Income values were also high for the surrounding areas as it is not a very affluent

part of the province. Participants may have self-selected, and as a result, the

majority of respondents may only represent a type of person who is very receptive

to change, and very willing to improve their financial decision making.

       These limitations are important to consider when reviewing the results and

implications of this study. A final summary of implications and a conclusion to the

study will be presented in the next chapter.




                                                                                      54
Chapter VII: Conclusion
       This section will highlight some of the key results of the study and their

implications, the effect the study will have on the literature, and the lasting impacts

of the study.

       Increasing the knowledge, skills and confidence of participants, proved the

New Parent’s Guide to Money an effective financial literacy education program. The

Guide had the most resounding effect on women with lower incomes or no

postsecondary education. As this program was run through an institution accessible

and used by people of all socioeconomic and demographic backgrounds, it could

reach women who may not have had access to this type of education elsewhere.

Future financial literacy education programs should be considered in places

accessible to all (like banks, community centres, churches, and grocery stores) and

not limited to educational institutions or workplaces. These programs should

specifically focus on people who may not have the opportunity to participate in

other programs, like the women who participated in the New Parent’s Guide to

Money project. The positive results of this program also reiterate the success of

targeting individuals at specific periods of their life, to teach them financial decision-

making.

       Attitudes, subjective norms, income and education were all factors found to

affect a new mother’s intention to engage in good financial behaviours. Education

programs and public awareness campaigns should take these factors into account.

Positive attitudes and subjective norms need to be promoted when it comes to



                                                                                       55
making good financial decisions. When the Canadian Government tried to change

the public’s perception of smoking, they first had to convince people that smoking

was bad, then made it harder to smoke, which eventually changed the norm to

isolate and stigmatize smokers. The opposite needs to happen for making good

financial decisions. First making good financial decisions needs to be portrayed in a

positive light, so eventually it will be the norm to make good decisions and be

financially literate. Education and income should be taken into account when

planning where programs will be offered and whom they will be targeted at. As

Stewart stressed, a “one size fits all” approach will not work to financially educate

Canadians (Stewart, 2010A, 16). Financial literacy education needs to be accessible

for all, if we want to see significant changes in the financial literacy of the Canadian

public.

          There are many similarities between this study and those in the litearure.

The Lusardi, Mitchell, and Curto (2010) study justifies the need for financial

education especially in young adults. The tested group was of the same age as many

of the parents the NPGTM study reached. Lusardi, Mitchell, and Curto (2010) stress

the importance of financial education before important financial events and

decisions – having a baby fitting nicely into this category. They also tested education

and the impact peer groups have on individual decision-making. The New Parent’s

Guide to Money study adds to the collection of recent research that has found

significant improvement in financial literacy after participation in a financial literacy

education program. This study also demonstrates a successful, large-scale use of the

Theory of Planned Behaviour as applied to financial topics.



                                                                                        56
       The New Parent’s Guide to Money project is still in its early stages, but has

already had significant and positive results. Improving financial literacy can have

extensive effects on the population. If parents become financial literate they can

pass down the knowledge and skill to their children and relatives. There have also

been connections made between a mother’s education and the financial literacy of

her children, making it even more important to target new mothers (Lusardi et al,

2010). The New Parent’s Guide to Money will hopefully have a lasting impact on

Antigonish and the surrounding area, as an important program in the financial

education of residents.




                                                                                       57
Appendix A: Coded Survey
Questionnaire




                           58
59
60
61
Appendix B: Model Loadings

Appendix B.1: Basic Model




                             62
63
64
65
66
67
Appendix B.2: Income Model




                             68
69
70
71
72
73
Appendix B.3: Education Model




                                74
75
76
77
78
79
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