IDEAS home Printed from https://ideas.repec.org/a/eee/intell/v103y2024ics0160289624000023.html
   My bibliography  Save this article

Attitude toward numbers: A better predictor of financial literacy and intelligence than need for cognition

Author

Listed:
  • Gignac, Gilles E.
  • Stevens, Elizabeth M.

Abstract

In a recent meta-analysis, financial literacy – understanding basic financial terms and concepts – was significantly correlated with general intelligence (r ≈ 0.62). However, this correlation may be underestimated, as few studies employed robust measures of both intelligence (more than one subtest) and financial literacy (>12 items). Additionally, cognitive reflection has not been investigated for its unique capacity at predicting financial literacy, an important consideration, as cognitive reflection has been suggested to be a measure of financial cognition. Beyond cognitive factors, non-cognitive predictors like need for cognition and attitude toward numbers (comfort with numerical concepts) may also influence financial literacy. In our study of 688 young adults (17–40 years), we administered four intelligence subtests (including a measure of cognitive reflection), a financial literacy test, and questionnaires assessing need for cognition and attitude toward numbers - the first to investigate all of these dimensions simultaneously. Results revealed a stronger latent correlation (0.76) between general intelligence and financial literacy than previously reported. Cognitive reflection was found to yield some incremental predictive variance in predicting financial literacy beyond general intelligence. Finally, attitude toward numbers and need for cognition both correlated positively with both general intelligence and financial literacy, however, only attitude toward numbers uniquely predicted financial literacy in a structural equation model. These findings suggest that financial literacy shares closer to 50–60% of its variance with general intelligence. They also highlight the potential value of fostering a positive numerical attitude alongside financial knowledge in educational interventions.

Suggested Citation

  • Gignac, Gilles E. & Stevens, Elizabeth M., 2024. "Attitude toward numbers: A better predictor of financial literacy and intelligence than need for cognition," Intelligence, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:intell:v:103:y:2024:i:c:s0160289624000023
    DOI: 10.1016/j.intell.2024.101808
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0160289624000023
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intell.2024.101808?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gianpaolo Parise & Kim Peijnenburg, 2019. "Noncognitive Abilities and Financial Distress: Evidence from a Representative Household Panel," The Review of Financial Studies, Society for Financial Studies, vol. 32(10), pages 3884-3919.
    2. Daniel Fernandes & John G. Lynch & Richard G. Netemeyer, 2014. "Financial Literacy, Financial Education, and Downstream Financial Behaviors," Management Science, INFORMS, vol. 60(8), pages 1861-1883, August.
    3. Gerrans, Paul, 2021. "Undergraduate student financial education interventions: Medium term evidence of retention, decay, and confidence in financial literacy," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    4. Erceg, Nikola & Galić, Zvonimir & Bubić, Andreja, 2022. "Normative responding on cognitive bias tasks: Some evidence for a weak rationality factor that is mostly explained by numeracy and actively open-minded thinking," Intelligence, Elsevier, vol. 90(C).
    5. Julia Grass & Florian Krieger & Philipp Paulus & Samuel Greiff & Anja Strobel & Alexander Strobel, 2019. "Thinking in action: Need for Cognition predicts Self-Control together with Action Orientation," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-20, August.
    6. Gilles E. Gignac & Elizabeth Ooi, 2022. "Measurement error in research on financial literacy: How much error is there and how does it influence effect size estimates?," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 938-956, June.
    7. Lin, Chien-An & Bates, Timothy C., 2022. "Smart people know how the economy works: Cognitive ability, economic knowledge and financial literacy," Intelligence, Elsevier, vol. 93(C).
    8. Brice Corgnet & Mark Desantis & David Porter, 2018. "What Makes a Good Trader? On the Role of Intuition and Reflection on Trader Performance," Journal of Finance, American Finance Association, vol. 73(3), pages 1113-1137, June.
    9. Justine S. Hastings & Brigitte C. Madrian & William L. Skimmyhorn, 2013. "Financial Literacy, Financial Education, and Economic Outcomes," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 347-373, May.
    10. Albert Hizgilov & Jacques Silber, 2020. "On Multidimensional Approaches to Financial Literacy Measurement," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 787-830, April.
    11. Rob Ranyard & Simon McNair & Gianni Nicolini & Darren Duxbury, 2020. "An item response theory approach to constructing and evaluating brief and in‐depth financial literacy scales," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(3), pages 1121-1156, September.
    12. Callis, Zoe & Gerrans, Paul & Walker, Dana L. & Gignac, Gilles E., 2023. "The association between intelligence and financial literacy: A conceptual and meta-analytic review," Intelligence, Elsevier, vol. 100(C).
    13. Angela Fagerlin & Brian J. Zikmund-Fisher & Peter A. Ubel & Aleksandra Jankovic & Holly A. Derry & Dylan M. Smith, 2007. "Measuring Numeracy without a Math Test: Development of the Subjective Numeracy Scale," Medical Decision Making, , vol. 27(5), pages 672-680, September.
    14. Gignac, Gilles E. & Bates, Timothy C., 2017. "Brain volume and intelligence: The moderating role of intelligence measurement quality," Intelligence, Elsevier, vol. 64(C), pages 18-29.
    15. repec:cup:judgdm:v:11:y:2016:i:1:p:99-113 is not listed on IDEAS
    16. Melissa A. Z. Knoll & Carrie R. Houts, 2012. "The Financial Knowledge Scale: An Application of Item Response Theory to the Assessment of Financial Literacy," Journal of Consumer Affairs, Wiley Blackwell, vol. 46(3), pages 381-410, September.
    17. Annamaria Lusardi, 2012. "Numeracy, financial literacy, and financial decision-making," NBER Working Papers 17821, National Bureau of Economic Research, Inc.
    18. Annamaria Lusardi, 2019. "Financial literacy and the need for financial education: evidence and implications," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-8, December.
    19. Grinblatt, Mark & Keloharju, Matti & Linnainmaa, Juhani T., 2012. "IQ, trading behavior, and performance," Journal of Financial Economics, Elsevier, vol. 104(2), pages 339-362.
    20. Otero, Inmaculada & Salgado, Jesús F. & Moscoso, Silvia, 2022. "Cognitive reflection, cognitive intelligence, and cognitive abilities: A meta-analysis," Intelligence, Elsevier, vol. 90(C).
    21. Brice Corgnet & Mark Desantis & David Porter, 2018. "What Makes a Good Trader? On the Role of Reflection and Intuition on Trader Performance," Post-Print hal-02312062, HAL.
    22. Rosseel, Yves, 2012. "lavaan: An R Package for Structural Equation Modeling," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 48(i02).
    23. Shane Frederick, 2005. "Cognitive Reflection and Decision Making," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 25-42, Fall.
    24. Neshat Yazdani & Karen L. Siedlecki, 2021. "Mediators of the Relationship Between Cognition and Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 22(7), pages 3091-3109, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Callis, Zoe & Gerrans, Paul & Walker, Dana L. & Gignac, Gilles E., 2023. "The association between intelligence and financial literacy: A conceptual and meta-analytic review," Intelligence, Elsevier, vol. 100(C).
    2. Nicolas Eber & Patrick Roger & Tristan Roger, 2024. "Finance and intelligence: An overview of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 503-554, April.
    3. Gilles E. Gignac & Elizabeth Ooi, 2022. "Measurement error in research on financial literacy: How much error is there and how does it influence effect size estimates?," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 938-956, June.
    4. Lorenzo Esposito & Lorenzo Marrese, 2021. "The impact of cognitive skills on investment decisions. An empirical assessment and policy suggestions," DISCE - Quaderni del Dipartimento di Politica Economica dipe0019, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    5. Marco Angrisani & Marco Cipriani & Antonio Guarino, 2022. "Strategic Sophistication and Trading Profits: An Experiment with Professional Traders," Staff Reports 1044, Federal Reserve Bank of New York.
    6. Firth, Chris, 2020. "Protecting investors from themselves: Evidence from a regulatory intervention," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    7. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
    8. Brice Corgnet & Cary Deck & Mark DeSantis & David Porter, 2022. "Forecasting Skills in Experimental Markets: Illusion or Reality?," Management Science, INFORMS, vol. 68(7), pages 5216-5232, July.
    9. Adam Farago & Martin Holmén & Felix Holzmeister & Michael Kirchler & Michael Razen, 2019. "Cognitive Skills and Economic Preferences in the Fund Industry," Working Papers 2019-16, Faculty of Economics and Statistics, Universität Innsbruck.
    10. Roger, Tristan & Roger, Patrick & Willinger, Marc, 2022. "Number sense, trading decisions and mispricing: An experiment," Journal of Economic Dynamics and Control, Elsevier, vol. 135(C).
    11. repec:dpr:wpaper:1156 is not listed on IDEAS
    12. Maran, Thomas & Ravet-Brown, Theo & Angerer, Martin & Furtner, Marco & Huber, Stefan E., 2020. "Intelligence predicts choice in decision-making strategies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    13. Te Bao & Brice Corgnet & Nobuyuki Hanaki & Katsuhiko Okada & Yohanes E. Riyanto & Jiahua Zhu, 2022. "Financial Forecasting in the Lab and the Field: Qualified Professionals vs. Smart Students," ISER Discussion Paper 1156r, Institute of Social and Economic Research, Osaka University, revised Sep 2024.
    14. Firth, Chris & Stewart, Neil & Antoniou, Constantinos & Leake, David, 2023. "The effects of personality and IQ on portfolio outcomes," Finance Research Letters, Elsevier, vol. 51(C).
    15. Brice Corgnet & Mark DeSantis & Christoph Siemroth, 2023. "Algorithmic Trading, Price Efficiency and Welfare: An Experimental Approach," Working Papers 2313, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    16. Andrzej Cwynar & Beata Świecka & Kamil Filipek & Robert Porzak, 2022. "Consumers' knowledge of cashless payments: Development, validation, and usability of a measurement scale," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 640-665, June.
    17. Hermansson, Cecilia & Jonsson, Sara & Liu, Lu, 2022. "The medium is the message: Learning channels, financial literacy, and stock market participation," International Review of Financial Analysis, Elsevier, vol. 79(C).
    18. Weiss-Cohen, Leonardo & Newall, Philip Warren Stirling & Ranyard, Rob & Ayton, Peter & Clacher, Iain, 2023. "Revalidating Fernandes et al.’s 2014 financial literacy scale in response to ongoing legislative and behavioral changes," OSF Preprints 493x7, Center for Open Science.
    19. Corgnet, Brice & DeSantis, Mark & Porter, David, 2020. "The distribution of information and the price efficiency of markets," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    20. Duffy, John & Rabanal, Jean Paul & Rud, Olga A., 2023. "Market reactions to stock splits: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 325-345.
    21. Gerrans, Paul, 2021. "Undergraduate student financial education interventions: Medium term evidence of retention, decay, and confidence in financial literacy," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intell:v:103:y:2024:i:c:s0160289624000023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/intelligence .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.