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Self-Efficacy is Biggest Factor in Financial Well-Being

Self-Efficacy is Biggest Factor in Financial Well-Being-NEFE-Three Young People Looking at Computer & Papers in Coffee Shop

From the National Endowment for Financial Education® (NEFE®), May 21, 2018

New Findings Issued from Decade-Long Research

Financial self-efficacy* is a better predictor of financial well-being more than race, gender and socioeconomic background, according to a landmark 10-year study.

The Arizona Pathways to Life Success for University Students (APLUS) project has followed the same group of young adults from their first year in college through adulthood to measure how financial capability relates to happiness. The latest wave marks the fifth time APLUS participants have been surveyed since they started college as freshmen in 2008.

Now approaching age 30, APLUS participants show few differences in their achievement of adult milestones such as completing education, finding work and leaving the parental home. However, some groups are thriving more than others. Financial self-efficacy (e.g., confidence in one’s ability to perform financial tasks, such as paying bills) is a stronger indicator of positive well-being over race, gender, socioeconomic level or first-generation college status, according to the study funded by the National Endowment for Financial Education® (NEFE®).

∗ Wikipedia defines Self-efficacy as… an individual’s belief in his or her innate ability to achieve goals.

Parents’ Role in Financial Self-Efficacy

Although many APLUS participants continue to rely on their parents for financial knowledge and support, the study finds that receiving financial assistance from family is linked to lower well-being, even in participants from higher socioeconomic backgrounds.

“Self-efficacy isn’t defined as just having knowledge and skills, but believing in success as long as you try,” says Ted Beck, NEFE president and CEO. “That confidence develops from performing financial tasks on your own—not relying on your parents to do it for you.”
Self-assessed financial efficacy dropped for everyone in this wave of data collection, however men continued to rate themselves higher than women, a trend seen throughout the study.

“Perhaps as they face more complex financial decisions about housing, retirement and health insurance, young adults’ confidence wavers,” Beck says. “It’s important for parents to focus more on sharing information and less on sharing money during these key transitions to adulthood.”

Gender Differences in Self-Efficacy

Men and women tend to consult the same types of resources when seeking financial information, but in the opposite order. While men first go to websites, then ask their employers, and only then consult their parents. Women start with their parents, then their employers, and only then turn to the internet. Men also tend to check more sources.

Overall, men seem to be doing slightly better:
• Men show slightly higher objective financial knowledge in this wave, despite being equal with women earlier in the study.
• Men’s self-assessed knowledge of retirement accounts was 19 percent higher than women’s.
• Although men and women are equally employed, men earn significantly more—45 percent of men in the study earned $60,000 annually compared to only 27 percent of women.
• Women are more likely to have a second job.
• Women are more likely to receive financial help from family.

“Women seem to be more relationship oriented as they seek information, while men are more likely to investigate on their own. This could be a key factor in higher confidence among men,” adds Beck, who is retiring from NEFE after 13 years.

“In addition to offering timely and relevant information around milestones like home buying and workplace benefits, the financial education field must use data to shape experiences for multiple learning styles, and scale these through online learning environments,” says Billy Hensley, Ph.D., newly-named president and CEO of NEFE. Hensley has served as senior director of education with NEFE for the past eight years.

Perception vs. Reality

Self-efficacy requires belief in your own abilities, but unfortunately some groups don’t see themselves accurately:
• First-generation college students performed better than their peers in objective financial knowledge, yet they reported feeling less confident and capable.
• Actual knowledge for all socioeconomic groups remained similar, but lower socioeconomic groups ranked their self-assessed knowledge much lower.
• Hispanics’ self-assessed knowledge dropped significantly in this wave.

“Data is crucial, not just for educators and policymakers, but for individuals. Seeing the raw numbers would show some groups are doing better than they think,” Beck says. “Accurate assessment of one’s progress can be a confidence booster.”

“Learners will shape the educational world of the future through data, and individuals will be able to use their own personal information to improve themselves,” Hensley says. “Self-efficacy begins by seeing clearly where you are and actively participating in your financial life.”
For complete findings of the research, click here.

Study Details

The landmark study, Arizona Pathways to Life Success for University Students (APLUS), launched in the spring of 2008 with 2,098 University of Arizona freshmen. Researchers followed and surveyed the participants five times from 2008-2016. The principal investigators are Joyce Serido, Ph.D., University of Minnesota, and Soyeon Shim, Ph.D., University of Wisconsin-Madison. Detailed reports on findings from each wave are available at

About the National Endowment for Financial Education (NEFE)

NEFE is a nonprofit foundation that inspires empowered financial decision making for individuals and families through every stage of life. For more information, visit

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