Exploring Hierarchical Relationships from Cognitive Beliefs to Financial Behaviour: A Behavioural Economics Perspective of Financial Literacy

Behavioural economics offers valuable insights into the financial literacy of individuals and its impact on their financial decisions. Through analysing the financial attitudes, cognitive beliefs and confidence of individuals about financial choices, we can shed light on why people exhibit a certain behaviour regarding financial decisions. This study investigates the hierarchical relationships among financial beliefs, attitudes, confidence, and behaviours in Kerala households using the Theory of Planned Behaviour (TPB). The study was done among adults who were predominantly salaried employees living in Kerala. Financial literacy, as indicated by the confidence in managing personal finances, is likely to play a crucial role in shaping individuals' investment and savings behaviours. The study validates the model where cognitive beliefs are shaping the attitudes of the respondents, and this is further impacting their financial confidence. This financial confidence in turn, drives the financial behaviour. The findings of the study conclude with the implications of the correlations in market segmentation in the financial context of the Kerala market.