Subjective Financial Literacy And Financial Behavior

The increased interest in financial literacy which is a key determinant of financial behavior has been prompted by the increasing accessible and complexity of financial products and the increasing responsibility on the part of individuals for their own financial decisions.However,people's level of financial literacy does not seem to be as satisfactory as expected,and there are differences between the objective financial literacy based on tests and people's self-perception of financial literacy.Moreover,although test-based objective financial literacy has been shown to be associated with healthy financial decision-making,it is still an open question whether the current highly expected financial education programs aimed at improving objective financial literacy and financial behavior are effective in improving financial behavior.Are there any different factors related to objective financial literacy that influence financial behavior decision making? This paper attempts to further explore from the perspective of subjective financial literacy.This paper uses data from the China Family Panel Studies(CFPS)project in 2014 Shared by the Institute of Social Science Survey,Peking University.This paper discusses the influence of Chinese residents' subjective financial literacy on their investment behavior,borrowing behavior,saving behavior and planning behavior.Several conclusions are summarized as follows:(1)The objective financial literacy level of Chinese residents is not high,which is similar to the results of the mainstream literature.Different from the fact that western countries generally have high subjective financial literacy,Chinese residents' self-assessment level of financial literacy is not high.Generally speaking,the objective financial literacy level of Chinese residents is not high,so is the subjective financial literacy level.In addition,the subjective literacy level of Chinese residents seems to be related to gender and health status.In terms of financial literacy,men rated themselves higher than women,and those who thought they were healthier also rated themselves as having higher levels of financial literacy.(2)From the interviewees' evaluation of their financial behavior and willingness to fit the situation.Most Chinese residents are risk-averse and unwilling to accept high-risk investment products.In addition,when purchasing financial products,they tend to collect product information and make analysis and comparison.They are unwilling to use loans and pay attention to their shopping affordability when consuming.They have a strong willingness to save.They will make financial planning in a moderate way and have longer-term plans than short-term ones.(3)This paper finds that subjective financial literacy can affect people's investment behavior.Subjective financial literacy may have a positive impact on investors' risk appetite,and the increase of subjective financial literacy may increase the possibility of people accepting high-risk and high-return financial products.At the same time,subjective financial literacy can also make people more inclined to compare goods with goods when purchasing financial products.The role of subjective financial literacy in these two behaviors is similar to that of objective financial literacy,but the influence of subjective financial literacy is stronger.(4)Subjective financial literacy can affect people's borrowing behavior.Subjective financial literacy increases people's willingness to use loans to maintain balance of payments and may be one of the main reasons for neglecting their affordability when consuming,which indicates that higher subjective financial literacy may promote the use of borrowing tools such as consumer credit.The effect of subjective financial literacy on borrowing behavior is completely opposite to that of objective financial literacy.(5)Subjective financial literacy can affect people's saving behavior.Subjective financial literacy may reduce the ratio of savings to income because it may increase people's propensity to spend.Subjective financial literacy has a positive impact on the perception that spending is more satisfying than saving and that money is spent.Similar to our conclusions on the two problems of borrowing behavior,subjective and objective financial literacy has an opposite effect on saving behavior.(6)Subjective financial literacy can affect people's planned behavior.Subjective financial literacy can enhance people's attention to long-term and short-term financial situation,and make people more inclined to make long-term financial planning and record the daily income and expenditure.