The Link Between Financial Knowledge, Financial Attitudes and Financial Behavior: Empirical Evidence from China

China’s booming economy has brought not only great wealth but also escalating living expenses; which resulted in shrinking individuals’ disposable income and challenging their economic safety. Within this context, making good use of money has become increasingly important, particularly to economically disadvantaged groups. Rural migrant workers in urban settings are one of the most vulnerable groups in China due not only to their meager earnings but to their lack of institutional protection. Good practice of money management can help Chinese rural migrants to eschew financial fraud, accumulate wealth, and achieve financial stability.

Previous studies show that people with low socioeconomic status are less likely to possess financial knowledge and also less likely to develop self-beneficial financial behavior. Using stratified random sampling method, this study is a first quantitative investigation of financial knowledge, attitude, and behaviors of Chinese rural migrant workers who work on the campus of Beijing Normal University (N=329). Financial knowledge encompassed saving, borrowing, and investment knowledge. Financial attitudes about importance of planning and money management were collected. Financial behavior were measured by making spending budget, keeping a record of money, making ends meet, preparing for retirement, and saving for life contingency. Multiple linear regression is employed to examine the association among financial knowledge, financial attitudes, and financial behavior of rural migrant workers.

Results show that, controlling for socio-demographic characteristics, financial knowledge is associated with financial behavior (β=.08, p<.05). Financial attitude towards necessity of money management is associated with financial behavior (β=.95, p<.01). The interaction between financial knowledge and financial attitude was not statistically significant. In addition, age is associated with financial behavior (β=.04, p<.001). Other socio-demographic characteristics including gender, education, income, job experience, parental financial behavior of Chinese rural migrant workers are not associated with financial behavior.

The findings suggest that Chinese rural migrant workers who possess more financial knowledge and who have positive attitude towards necessity of money management are more likely to develop self-beneficial financial behavior, respectively. Older Chinese rural migrant workers are more likely to develop self-beneficial financial behavior. These findings imply that financial education programs that focus on improving financial knowledge and fostering positive financial attitudes, specifically targeting younger rural migrant workers, are likely to be effective in promoting self-beneficial financial behavior.