Behavioural science and financial capability : designing and testing complex interventions

Financial capability is a multifaceted concept that describes the skills and knowledge of managing one’s financial resources. This area has seen recent interest in identifying the underlying factors due to the increasing responsibility placed upon consumers. Policy makers typically use financial education to improve financial behaviours (based on economic assumptions), which has demonstrated mixed effects. To develop more reliable methods, the current thesis uses a comprehensive model of behaviour to understand the barriers and facilitators of financial capability, in addition to developing and testing interventions to improve financial capability. The first chapter provides a conceptual review of financial capability through a behavioural science lens, to understand why greater financial literacy may not translate to optimal financial behaviours. The second chapter details the behavioural framework used in the thesis in greater depth, the third chapter details some of the issues why individuals fail to maintain their goals under the concept of cognitive control. In the fourth chapter I present secondary analyses of previously conducted formative research identifying several key behavioural mechanisms affecting people’s financial capability. Firstly, individuals often fail to keep within their means due to automatic mechanisms to improve their social rank amongst peers. Secondly, individuals often struggle to save for the future due to deficits in more reflective mechanisms, e.g., goal-directedness. I provide a behavioural diagnosis from these findings in chapter five, from which I design and pilot three intervention. The pilot study’s findings are then used to inform the design of a randomized control trial. The sixth chapter details a multi-site randomised-controlled trial. This trial uses Goal-Setting and Habit-Based interventions to improve participants’ financial capability, measured via their consumption, account balances, and savings. The Goal-Setting group demonstrated significant improvements across all three measures. In contrast, the Habit-Based group improved only in their account balances compared to the Control group. The seventh chapter examines the moderating effects of individual differences which have been previously demonstrated to account for variations in consumption and savings. These results demonstrate that higher levels of goal-directedness can improve reductions in monetary consumption.