Purpose Individuals experiencing financial anxiety often struggle with decision-making, feel financially helpless, and are less likely to seek support for informed decision-making, which can result in prolonged financial distress. This study investigates how financial literacy influences financial anxiety, drawing on the transactional theory of stress and coping (TTSC). Design/methodology/approach We utilize the data from the 2018 and 2021 waves of the National Financial Capability Study. The potential influencing factor (financial literacy) is the participants’ answers to five objective financial literacy questions. Ordinary least squares regression models are used to detect potential factors associated with financial anxiety. Findings Results reveal a significant negative correlation between financial literacy and financial anxiety among respondents. Improved financial literacy promotes planning ahead and curbs overspending, which helps lower anxiety. The effect is particularly pronounced among men, highly educated individuals, and those with higher incomes. Practical implications The findings underscore the importance of enhancing financial literacy to alleviate financial anxiety and improve financial well-being, particularly through targeted education programs. The government and NGOs may put more effort into enhancing the residents’ financial literacy through a financial education program. Originality/value This study is the first to explore how financial literacy relates to financial anxiety using TTSC. We also provide evidence on the mediating roles of planning ahead and reduced overspending in the negative relationship between financial literacy and financial anxiety.
Tan et al. (Mon,) studied this question.
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