Financial Literacy and Financial Satisfaction: A Moderated Mediation Analysis of Self-Esteem and Financial Behavior

Abstract

Recent studies suggest that domain-specific behavior contributes to domain-specific satisfaction. It is believed that finance-specific literacy brings positive financial behavior and healthy financial behavior further contributes to financial satisfaction. In general, this study has been undertaken to examine the effect of financial literacy on financial behavior and financial satisfaction. Data have been collected from 326 participants by using a self-administered questionnaire. Linear regression has been applied to test the hypotheses, while Preacher and Hayes method has been used to estimate the moderation and mediation effect. There is less knowledge about the mechanism that may clarify the link between financial literacy and level of financial satisfaction. This paper is the first of its kind in Pakistan to investigate the relationship between financial literacy and individual’s financial satisfaction with intervening role of financial behavior and moderating role of self-esteem. Study findings reveal that financial literacy is significantly related to both financial behavior and financial satisfaction. Further it is also observed that financial behavior plays intervening role in the relationship between financial literacy and financial satisfaction. Findings also reveal that self-esteem does not affect the link between financial behavior of individuals and financial literacy. This study provides several significant implications for individuals, organizations, academicians and policy makers, in the sense that increasing financial literacy is essential to form positive and healthy financial behavior which ultimately increases individual’s financial satisfaction with financial situation.