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This study investigates the relationship between financial self-efficacy (FSE) and saving behavior within a sample of 847 U.S. pre-retirees aged 50 to 70 from the Health and Retirement Study. In accordance with the social cognitive theory of self-regulation, results revealed that FSE is positively related to saving behavior after controlling for sociodemographic attributes, financial characteristics, and saving motives. Understanding how FSE contributes to saving behavior is critical as older workers attempt to bridge the retirement saving gap. Financial counselors and planners can help this population save by cultivating and supporting clients' FSE throughout the financial planning and counseling process.
Keywords: financial self-efficacy, older pre-retirees, saving behavior, social cognitive theory of self- regulation
Many Americans are expected to enter retirement with insufficient financial resources to maintain their pre-retirement standard of living (Munnell, Hou, & Webb, 2014). Workers tend to experience peak lifetime earnings in their early to mid 50s (Guvenen, Karahan, Ozkan, & Song, 2015), which suggests older pre-retirees (defined as workers age 50 and over) are in a financial position to close the retirement preparedness gap, yet they have limited time to do so. With retirement on the immediate horizon, the motivation to save may also assist older preretirees in following through with their saving plans. This scenario, however, presents a saving and consumption dilemma, as higher earnings increase the temptation to spend (Shefrin & Thaler, 1988). Consequently, older pre-retirees experience competing demands on their financial resources (i.e., save vs. spend) and require a significant amount of self-regulation to overcome the mental costs associated with forgoing consumption (Shefrin & Thaler, 1988).
The self-regulatory process is multifaceted, with personal beliefs about one's capability to exert control and influence over their situation central to the successful execution of self-regulatory behavior, such as saving behavior (Bandura, 1991). These "self-efficacy beliefs" are unique to each behavioral domain (e.g., life, health, financial) and are fundamental to personal agency-the intentional engagement in behavior. Bandura (1997) specifically defines self-efficacy as "...beliefs in one's capabilities to organize and execute the courses of action required to produce given attainments" (Bandura, 1997, p. 3).
Financial self-efficacy (FSE) and general self-efficacy have been linked to saving behavior; however, studies have focused on niche samples (e.g., younger workers, college students, and women) leaving the relevance of...