The differential impact of cognitive style on the relationship between financial education and financial literacy

Past studies have examined the role of financial education on financial literacy, often with mixed results. While some studies have shown a positive effect, others have indicated null or even negative effects. Given that much public faith is given to financial education as a means for improving consumers' financial wellbeing, a deeper understanding of the relationship between financial education and financial literacy is needed. A factor that may moderate this important relationship is cognitive style, which reflects the information processing strategies of consumers. At the two extremes of the cognitive style spectrum are analytical and intuitive consumers, and in the intermediate ranges are adaptive consumers who combine analysis and intuition to different degrees. Using a national panel of American consumers, the moderating role that cognitive style plays in this relationship is empirically examined. The findings indicate that while consumers with analytical and intuitive cognitive styles develop higher financial literacy levels as a result of financial education, the financial literacy levels for consumers with adaptive cognitive styles diminishes with financial education. The potential role of self-assessed investment knowledge in this relationship is examined and implications on curriculum design for financial education programs as well as related research needs are discussed.