A Study on Influence of Financial Cognition on Personal Financial Planning of Indian Households

Abstract

The term financial planning has been an area of research interest since few years. Studies have underlined the influence of various cognitive factors in individuals’ financial decisions. The present study is also trying to underline the influence of various cognitive factors in personal financial planning of Indian households. The term financial cognition considered three components namely financial attitude, risk attitude and financial knowledge and raise the concern about the influence of various cognitive factors on individual personal financial planning. Especially in India, being a conservative attitude towards financial decisions, individual households do have higher influence of various cognitive and behavioral aspects in their suboptimal decision towards personal financial planning. The present study is putting forward those aspects of personal financial planning decisions of Indian households. The main objective of the model is to create the bare minimum structure to demonstrate the influence of financial cognition on personal financial planning among Indian households. The study mainly tried to explore the fundamental principle of subjective thinking towards financial decision. The model would represent the influence of financial cognition towards people financial decisions and can be helpful in exploring the financial information process. The study used PLS-SEM to explore PFP process in all the area of financial interest i.e. cash flow management, investment, insurance, retirement, tax and estate planning. The salaried individuals from different sectors are considered as sample for the study. The analysis has been done with 452 responses from Indian households.