The Role of Self‐Regulation, Future Orientation, and Financial Knowledge in Long‐Term Financial Decisions

TLDR

Prior experiments in retirement savings show that self‑regulatory state, future orientation, and financial knowledge influence consumer evaluations and intentions toward 401(k) plans. This research examines why consumers struggle to make long‑term financial decisions that best benefit them. An experiment was conducted to evaluate how self‑regulatory state, future orientation, and financial knowledge affect consumer evaluations and intentions regarding 401(k) plans. Results indicate that higher future orientation boosts 401(k) participation, especially when self‑regulatory state is strong, and that financial knowledge moderates this effect—future‑oriented consumers with basic knowledge are more likely to enroll, whereas knowledge absence nullifies the orientation advantage.

Abstract

This research examines potential explanations of why consumers have difficulty making personal financial decisions that will be most beneficial in the long run. Within the decision context of retirement savings, results from an experiment suggest that self‐regulatory state, future orientation, and financial knowledge can influence consumer evaluations and intentions related to retirement investments (i.e., a 401(k) plan). Findings suggest that consumers who express higher levels of future orientation are more likely to participate in a retirement plan, an effect moderated by self‐regulatory state. Results also suggest that financial knowledge and orientation toward the future can interact to influence the likelihood of 401(k) plan participation. Among consumers with a basic level of financial knowledge, future‐oriented consumers expressed a greater likelihood to participate in a retirement plan than less future–oriented consumers. However, in the absence of knowledge, consumers’ orientation toward the future did not influence the likelihood of 401(k) plan participation.