An Examination of Money Management Tendencies

EXTENDED ABSTRACT - The lack of money management among college aged consumers represents a major concern (Knight & Knight, 2000) and is associated with accumulation of financial debt among young adults (e.g., Lea, Webley, & Walker, 1995). We extend research on money management in the context of well-developed cognitive-behavioral decision theoretic multivariate models of money management addressing past limitations via; 1) inclusion of theoretically grounded constructs, 2) theoretical links between constructs, and 3) focusing on variables amenable to change in short-term interventions. Our goal in this study is to develop a comprehensive model of money management that identifies individuals who may be at risk of incurring financial debt due to poor budgeting.

Citation:

Blair Kidwell and Robert Turrisi (2003) ,"An Examination of Money Management Tendencies", in NA - Advances in Consumer Research Volume 30, eds. Punam Anand Keller and Dennis W. Rook, Valdosta, GA : Association for Consumer Research, Pages: 112-114.

Advances in Consumer Research Volume 30, 2003     Pages 112-114

AN EXAMINATION OF MONEY MANAGEMENT TENDENCIES

Blair Kidwell, Virginia Polytechnic Institute and State University

Robert Turrisi, Boise State University

EXTENDED ABSTRACT -

The lack of money management among college aged consumers represents a major concern (Knight & Knight, 2000) and is associated with accumulation of financial debt among young adults (e.g., Lea, Webley, & Walker, 1995). We extend research on money management in the context of well-developed cognitive-behavioral decision theoretic multivariate models of money management addressing past limitations via; 1) inclusion of theoretically grounded constructs, 2) theoretical links between constructs, and 3) focusing on variables amenable to change in short-term interventions. Our goal in this study is to develop a comprehensive model of money management that identifies individuals who may be at risk of incurring financial debt due to poor budgeting.

We incorporate the following constructs from the Theory of Planned Behavior (Ajzen, 1988; 1991) and the Theory of Social Behavior (Triandis, 1980; 1994) to predict intention: attitude, subjective norm, affect, past behavior (i.e., past experience) and perceived control (i.e., internal ability), based on previous findings. Two models are proposed. One model implicates intention as being determined by attitude, subjective norm, affect, past behavior, and perceived control. In addition, we anticipate that perceived control will moderate relationships between subjective norm and affect on intent.

A second model identifies cognitive structure (Sb _i e _i) variables that influence attitude. Given the centrality of the attitude construct in the consumer decision-making literature, we focus on the determinants of attitude toward maintaining a financial budget. Five perceptions of budgetingCconsumption saliency, undesired effort, purchasing barriers, perceived knowledge, and structured spendingBare likely to influence attitudes toward maintaining a budget.

Method

Sample. Respondents were 191 college students from a large eastern university, who participated as part of extra credit opportunities for required upper division course. Just over 50% of our sample indicated that they maintain a budget of their finances. We identified the salient beliefs from an independent sample of individuals similar to those in the main study (n=30). Measures are reported in the full text.

Results

We conducted two sets of analyses to examine the determinants of intention toward maintaining a financial budget and examine the moderating influence of perceived control onto variables in the proposed model. A summary of the regression analysis is presented in Table 1a.

All hypothesized components of the model for budgeting tendencies contributed significantly to prediction with the exception of perceived control providing support for Hypothesis 1. For the two-way interactions, we treated perceived control as a moderator and examined the relationship between subjective norm, affect, and past behavior onto intention to maintain a financial budget. The nature of the two-way interactions (i.e., the slope at each level of the moderator variable) for the hypothesized constructs is contained in Table 1b.

For intention to maintain a financial budget, respondents with high levels of perceived control, subjective norm was more predictive of intention, while at lower levels of perceived control, negative affect was more predictive of intention. Implications of the relationships and two-way interactions are considered in the discussion section.

Model of Budgeting Attitude. We examined the determinants of budgeting attitude via linear regression framework. Table 2 contains a summary of analyses for each cognitive structure variable. For attitude toward maintaining a financial budget, all hypothesized components of the model contributed significantly to the model.

Discussion

College aged consumers lack of money management continues to be a major problem (Knight & Knight, 2000). Research has indicated that improved budgeting can reduce the likelihood of financial debt (e.g., Heath & Soll, 1996; Lunt & Livingstone, 1991), however educational campaigns thus far have been ineffective (Lea, Webley, & Walker, 1995). The present study extends previous research by examining money management tendencies via theoretically grounded and linked constructs, and variables amenable to change in short-term interventions.

Budgeting Tendencies. Support for multiple determinants of budgeting intention was found via an extended model of the theory of planned behavior. These findings suggests that when people feel they have higher levels of ability toward maintaining a financial budget, they may be more aware of normative expectancies toward engaging in the focal behavior, thus making behavioral performance more likely. In contrast, when people feel that they have lower perceived control toward maintaining a financial budget, they may rely to a greater extent on their emotional reactions to an attitude object than on their beliefs about an object’s attributes in determining their overall intentions.

Budgeting Attitude. Consumption saliency, undesired effort, purchasing barriers, perceived knowledge, and structured spending were hypothesized, tested and found to predict attitude toward maintaining a financial budget. Given our findings, it is not surprising that previous work focusing on single cognitive variables not directly related to budgeting decisions (e.g., general financial knowledge) have had relatively minimal success (e.g., Davies, & Lea, 1995; Hira & Brinkman, 1992). These findings have implications for the theory of planned behavior, and for the development of interventions to address these issues.

The results this study imply that a model of money management tendencies is incomplete when; 1) an influence of multiple variables are not incorporated from diverse decision-making models, 2) perceived control is not incorporated as a direct and indirect influence, and 3) the moderated relationships among levels of perceived control and subjective norm/negative affect onto intention are not considered.

Additionally, interventions focused on increasing money management tendencies in college students should entail one or both strategies; 1) change cognitive structure by increasing (or decreasing) beliefs and evaluations (e.g., perceived knowledge, structured spending), thereby, influencing attitude toward maintaining a budget, and 2) alter perceptions of control that lead to affective or normative mechanisms subsequently influencing budgeting tendencies.

In conclusion, the present research attempts to provide necessary concepts and suggestions to guide educational efforts in devising effective and appropriate strategies for college aged consumers to avoid the consequences of financial debt, often caused by poor money management.

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