EXPRESS: Financial Advice to Financial Well-being: The Mediating Role of Financial Self-Efficacy

A central goal in consumer financial decision-making is to understand the factors that promote financial well-being. Previous studies show that interventions aimed at improving consumer objective knowledge of personal finance to affect financial well-being have only minor effect-sizes, and that the effects are weaker for individuals in a state of financial vulnerability. In this research, we examine the effects of financial advice on consumer financial self-efficacy, and downstream influence on perceived financial well-being. We present five studies that examine when, how, and why financial advice improves financial well-being via a financial advice →financial self-efficacy→financial well-being chain of effects. Our two correlational studies show that receiving finance advice is positively related to financial self-efficacy, which is strongly related to financial well-being. Our three experimental studies look at the effects of simple vs. more complex general advice from popular authors, the effect of “just-in-time” actionable financial advice, and the effect of advice tailored to a financially vulnerable population. In totality, our findings show that financial advice can foster financial self-efficacy when simple, actionable and tailored to a specific financial need or population, thereby improving financial well-being. The results have implications for research and policymaking.