The extent to which financial behaviour can explain over-indebtedness amongst New Zealand families
5. Implications for policy
It is clear from the results that financial behaviour has an important role to play in determining whether families experience financial strain. Being a ‘spender not saver’, in particular, consistently emerged as the strongest variable in the regressions carried out.
This finding offers support for existing policy measures to encourage saving. The Retirement Commission already provides and promotes financial education and information programmes to help people make informed financial decisions throughout their lives.
A recent overseas study suggests that debt literacy is low and is linked with financial strain (Lusardi, Keller & Keller, 2009). However, the potential for personality traits to mediate the effects of education initiatives to encourage saving should also be acknowledged and explored further.
In terms of underlying personality traits, the finding in this current paper suggests that having external locus of control (ie believing things are outside of your control) and low self-control (ie tending to be impulsive) may also be linked with financial strain.
There may be scope to test the relationship between financial literacy, personality traits and financial behaviour with the results of the Retirement Commission and ANZ’s 2009 Financial Knowledge Survey.
Irrespective of the relationship, an overseas study has already demonstrated that social marketing approaches that are responsive to employees’ financial knowledge and behaviours are successful (Lusardi & Tufano, 2008). One of the behaviours identified was low self-control. There is also a growing body of literature that suggests regulation or saving programmes (like KiwiSaver) can help raise the opportunity costs associated with impulsive spending for some individuals (for example Besheares, Choi, Laibson & Madrian, 2005). Simply improving awareness amongst families that there are opportunity costs, however, seems an obvious place to start.