Determinants of Financial Self-Efficacy among Working Adults in Pakistan: Examining the Predictive Role of Financial Behavior, Knowledge, Attitude, and Skills

Abstract

This research explored the role of Financial Behavior, Financial Knowledge, Financial Attitude, and Financial Skills in contributing to the variance in Financial Self-Efficacy. Specifically, it concentrated on adults who are between 25 and 55 years old and work for nonprofit organizations operating in the development sector of Pakistan. For this purpose, the theories of Social Cognitive Theory by Bandura, Economic Importance of Financial Literacy Theory, and Behavioral Finance Theory were applied. A correlational prediction approach was used as part of the research methodology. The sample size was composed of 397 valid participants residing in Karachi, Lahore, Islamabad, and Peshawar cities. The measurement tools that were used for collecting data were the Financial Literacy Questionnaire (FLQ), Revised Financial Management Behavior Scale (FMBS), and Financial Self-Efficacy Scale (FSES). The combined model significantly explained 31.4% of the variance in Financial Self-Efficacy [F(4, 392) = 44.857, p < .001, R² = .314]. Individually, Financial Behavior (β = .418, p < .001) and Financial Skills (β = .148, p = .007) emerged as significant predictors, whereas Financial Knowledge (β = .042, p = .412) and Financial Attitude (β = .058, p = .194) did not reach statistical significance. These findings imply that intervention strategies focusing on practice rather than knowledge alone might prove to be more successful in building financial confidence among working adults in Pakistan. This study is an addition to the indigenous financial literacy literature and provides recommendations to the State Bank of Pakistan, Securities and Exchange Commission of Pakistan, and the development sector.