Popular wisdom suggests that if you want to succeed financially, you need two things: financial knowledge and access to appropriate financial products. This combination is commonly referred to as financial capability. But a groundbreaking paper from the EARN Research Institute points out that these two factors only lead to financial success when paired with a third component: financial self-efficacy.
The new research illuminates a crucial gap in how most financial education experts believe people manage their money successfully. In light of EARN’s research findings, the definition of financial capability needs to be expanded to include self-efficacy.