The New Parent’s Guide to Money:
Evaluating the Effectiveness of
Financial Literacy Education.
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
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
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
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,
hypotheses were formed and tested using data collected from 102 returned survey
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
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).
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
knowledge) and have the confidence and understanding to apply this knowledge to
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,
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
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 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
lifetime such as age, education and intelligence, changing external factors like the
economic environment and job market also affect the necessary components of
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,
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
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
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
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
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
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,
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
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
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$tart have
been funded by major banks such as Chase Manhattan and the Fannie Mae
Foundation to target students in K-12 to include education about personal finance in
their curriculum (Fox et al, 2005). Although widely promoted in the States, these
programs have had varying (if any) success in improving the financial literacy or
financial education of youth.
A study commonly cited among researchers promoting youth financial
education was conducted by Danes, Huddleston-Casa and Boyce (1998). In their
study, they found that the High School Financial Planning Program increased
“knowledge, self-efficacy, and savings rates” among youth (Fox et al, 2005).
Although Danes et al (1998) found links between financial education courses and
better financial practices, very few studies since then have found such conclusive
evidence. Other studies such as Peng , Bartholomae, Fox and Cravener (2007), have
found no relationship between students taking financial education in high school
and investment knowledge (McCormick, 2009). Further, Mandell (2005) found that
financial education in youth did not guarantee a better score on the Jump$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
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
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
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
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
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
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
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
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
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
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
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
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.
Simplified Theory of Planned Behaviour, (adapted from Ajzen, 1991)
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
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
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.
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
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
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.
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.
A model of financial literacy based on the Theory of Planned Behaviour
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
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
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.
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
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
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
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.
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
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
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
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
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.
Proposed Questions Assigned to Manifest Variables
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.
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.
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.
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
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
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.
Improvement in confidence and intention
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
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
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.
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
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.
Basic Model of Financial Literacy
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
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.
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
intentions, but similar to the first model, perceived behavioural control did not appear to
have a significant influence on intentions.
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.
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.
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
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
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,
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
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
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.
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.
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
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
have reduced the comprehension and the accuracy of answers of participants on
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
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.
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-
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
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
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.
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.
Appendix A: Coded Survey
Appendix B: Model Loadings
Appendix B.1: Basic Model
Appendix B.2: Income Model
Appendix B.3: Education Model
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