How does financial capability work?
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How financial capability affects financial behavior is the main question addressed in this study. The selection of variables draws on previous literature. Gender, age, education level, and income, and financial capability factors, such as risk tolerance, ability to pay off bills, subjective financial knowledge, and objective financial knowledge, are tested to clarify whether they influence spending, saving, retirement, and investment behavior, respectively. Findings of this research support previous findings reported in the literature that changing financial capability can cause change in financial behavior. Beyond academics, the findings of this study can also be used by the financial services industry and financial education institutions, helping to predict clients’ financial behavior and improve the effectiveness of financial education programs.