Low-wealth adults' financial literacy, money management behaviors, and associated factors, including critical thinking

In 1998 “The Assets for Independence Act” (Title IV of PL105-285) established Individual Development Accounts (IDA) to encourage welfare recipients to save money and requires IDA participants to take financial literacy classes. The purpose of this descriptive, correlational, and pre-experimental research was to study low-wealth adults enrolled in financial literacy classes and their critical thinking, financial literacy attitude, behavior, and knowledge, and money management behaviors.; Low-wealth adults participating in 24 IDA financial literacy programs in Hawaii, Indiana, Missouri, and Ohio from November 1999–May 2001 comprised the sample (n = 253). Data were collected with (1) Adults' Characteristics Questionnaire; (2) Financial Literacy Attitude, Behavior, and Knowledge; (3) Cornell Critical Thinking Test - Level X, and (4) Money Management Behaviors Scales (MMBS) and analyzed using t-test, Pearson Correlations, step-wise multiple regression, and ANOVA.; IDA participants' characteristics contribute to their financial literacy attitude (R2 = .102), to behavior ( R2 = .307), and to knowledge (R 2 = .183). At the end of the four-week financial literacy classes, participants' attitudes mean score decreased slightly (.03); behaviors mean score increased (4.68); and knowledge mean score increased (2.62). All six money management behaviors mean scores increased: goal setting (.43), track spending (.37), spending plan (.43), reducing debt (.14), setting-aside money for unplanned expenses (.52), and saving money (.43). The participants' critical thinking scores (M = 40.36) were comparable to similar adults. The three age groups' critical thinking scores were not statistically different: 16–35 years (M = 39.92, n = 131); 36–60 years (M = 41.32, n = 94); and, over 60 years (M = 39.67, n = 3). Of all the variables (financial literacy attitude, behavior, knowledge, six money management behaviors, IDA account holders and age), spending plan money management behavior had a low association (.121) with critical thinking skill scores.; The six money management behaviors were significantly inter-related. Goal setting behavior contributed (R2 = .392) to spending plan, (R2 = .066) to track spending, and (R2 = .025) to reducing debt. Tracking spending contributed (R2 = .059) to the saving money behavior. Track spending did not predict reducing debt or setting-aside money for unplanned expenses. The spending plan behavior contributed to reducing debt (R2 = .165), setting-aside money for unplanned expenses (R2 = .020), and saving money (R2 = .012). Financial literacy behavior and knowledge, contributed 8% (R2 = .078) of the variance in saving money behavior.