The role of financial capability in alleviating financial anxiety

Abstract

Orientation: The notion that financial knowledge and capability alone drive optimal financial decision-making is being challenged, highlighting the complexity of financial behaviour and necessitating a more nuanced approach to analysing financial decision-making processes.
Research purpose: The purpose of this study was to investigate the financial factors influencing financial capability and anxiety, and to explore strategies for reducing financial anxiety and elucidate the complex relationships between these constructs.
Motivation for the study: This research explores the relationship between financial capability and anxiety in South Africa, contributing to the literature, with the purpose of enhancing financial well-being.
Research approach/design and method: A quantitative approach was used, collecting cross-sectional primary data from 530 bank clients in South Africa using an online questionnaire, and analysing the data using structural equation modelling (SEM).
Main findings: The study found that financial control, family financial socialisation, financial foresight and financial distress tolerance were positively associated with financial capability. In contrast, cautious spending and digital savvy did not reveal significant relationships. Financial anxiety was inversely associated with financial capability.
Practical/managerial implications: The findings suggest that targeted financial education and counselling initiatives could be effective in mitigating financial anxiety and promoting financial well-being.
Contribution/value-add: This study contributes to existing literature by exploring the relationships between financial capability, financial anxiety and various financial factors, providing valuable insights for policymakers, financial educators and practitioners.