Subjective self-control but not objective measures of executive functions predicts financial behavior and well-being

Abstract

Executive functions consist of three separable but correlated functions; inhibition, working memory, and shifting. Here we used an extensive and validated battery of objective performance measures of executive functions and intelligence to investigate if individual differences in these cognitive abilities can explain sound financial behavior and subjective financial well-being. Additionally, we measured a set of self-reported personality traits, including self-control, optimism, and deliberative thinking. We found that neither executive functions nor intelligence was associated with sound financial behavior and financial well-being in our sample. Although objective self-control, measured as the ability to override impulses (i.e. inhibition), could not be linked to financial behavior and financial wellbeing, subjective (i.e. self-reported) self-control had a strong positive effect. This indicates that the ability to avoid financial temptation is more important than the cognitive ability to override impulses when it comes to sound financial behavior and financial well-being.