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Sources of Financial Education and Use of Alternative Financial Services Stefan Ignatovski Walden University Walden University ScholarWorks Walden Dissertations and Doctoral Studies Walden Dissertations and Doctoral Studies Collection 2019 Sources of Financial Education and Use of Alternative Financial Services Stefan Ignatovski Walden University Follow this and additional works at: https://scholarworks.waldenu.edu/dissertations Part of the Finance Commons This Dissertation is brought to you for free and open access by the Walden Dissertations and Doctoral Studies Collection at ScholarWorks. It has been accepted for inclusion in Walden Dissertations and Doctoral Studies by an authorized administrator of ScholarWorks. For more information, please contact [email protected]. Walden University College of Management and Technology This is to certify that the doctoral dissertation by Stefan Ignatovski has been found to be complete and satisfactory in all respects, and that any and all revisions required by the review committee have been made. Review Committee Dr. Maja Zelihic, Committee Chairperson, Management Faculty Dr. Steven Tippins, Committee Member, Management Faculty Dr. Sunil Hazari, University Reviewer, Management Faculty Chief Academic Officer Eric Riedel, Ph.D. Walden University 2019 Abstract Sources of Financial Education and Use of Alternative Financial Services by Stefan Ignatovski MS, Roosevelt University, 2012 BS, Indiana State University, 2010 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management Walden University May 2019 Abstract As the lending practices of the alternative financial services (AFS) industry harm many consumers and consumers’ access and use of traditional credit are restricted, the use of AFS is a growing concern. The financial education of consumers determines their financial behavior, which may be inadequate to make effective financial decisions regarding high-cost borrowings. The purpose of this quantitative study was to examine if and to what extent the sources of financial education is related to the use and frequency of use of AFSs among U.S. consumers. The theory of planned behavior and the transtheoretical model of change shaped the theoretical framework for this study. An explanatory correlational design was used to analyze archival data collected by the FINRA Investor Education Foundation for their 2015 National Financial Capability Study. Binary logistic and negative binomial regression analyses indicated that exposure to formal financial education did not contribute to reduced use and lower frequency of use of AFSs but, instead, contributed to the exact opposite. Only parental financial education was found to contribute to reduced use and lower frequency of use of AFSs. One-way ANOVA analyses indicated that all forms of financial education contributed to increased perceived financial knowledge. This study may lead to positive social change by informing policymakers about the necessary steps to remedy the problem of continuous AFS usage and serving as a foundation for future studies that should consider other factors beyond formal financial education that could influence the use and frequency of use of AFSs. Sources of Financial Education and Use of Alternative Financial Services by Stefan Ignatovski MS, Roosevelt University, 2012 BS, Indiana State University, 2010 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management Walden University May 2019 Dedication I dedicate this dissertation to my family. Grandfather Tomislav Dimovski, you taught me the principles of integrity and honesty. You were my example of what it means to strive, work hard, and thrive in life. You were my inspiration for dedication and patience. Your stories will always narrate in my head. You will always be my guide going forward. My mother, Suzana Ignatovska, taught me how to be fair and just. You are the one who made me believe that I could achieve anything I wanted. You always made sure I was on the right path. Without your strength, patience, care, persistence, and love, none of this would have been possible. You are the one that sacrificed everything to see me succeed, and that is priceless. My father, Mile Ignatovski, taught me about optimism and independence. You were my example of how to fight for what is right. You taught me that principles and justice are everything. You are my inspiration for self- confidence. Because of you, I always believed in myself. Last, but not least, I dedicate this dissertation to my brother, Martin Ignatovski. Younger brothers follow their older brothers everywhere, and I did the same. Trust me, it is much easier to follow while you walked the path for us both. You were the one who enlightened that path, making mine a much easier journey. I was never afraid of what was ahead of me, because you had already cleared the way for me, like a guiding star. You are all my heroes. Acknowledgments This educational journey would not have been possible without the help of many people. While many deserve to be acknowledged in this section, I will provide special acknowledgment to several people. My committee members were instrumental to my doctoral achievement. I want to provide a special gratitude to the members of my dissertation committee Dr. Maja Zelihic and Dr. Steven Tippins. I only went through this process successfully because of your guidance, mentorship, knowledge, and feedback. I want to specifically thank You for your support throughout this process. Your patience and wisdom played a pivotal role to my achievement. Thank you! I also want to thank Dr. Sunil Hazari who provided much-needed feedback that contributed to the quality of my dissertation. Further, I want to thank Dr. Sandy Kolberg for all her support and patience with all my requests throughout this journey. Finally, I want to thank Dr. Gary Mottola for granting me the permission to use the National Financial Capability Study data for the purposes of my study. Table of Contents List of Tables .......................................................................................................................v List of Figures .................................................................................................................... vi Chapter 1: Introduction to the Study ....................................................................................1 Background of the Study ...............................................................................................2 Problem Statement .........................................................................................................4 Purpose of the Study ......................................................................................................5 Research Questions and Hypotheses .............................................................................6 Theoretical Foundation ..................................................................................................6 Nature of the Study ........................................................................................................8 Definitions......................................................................................................................9 Assumptions .................................................................................................................11 Scope and Delimitations ..............................................................................................11 Limitations ...................................................................................................................12 Significance of the Study .............................................................................................13 Significance to Theory .......................................................................................... 14 Significance to Practice......................................................................................... 14 Significance to Social Change .............................................................................. 15 Summary and Transition ..............................................................................................15 Chapter 2: Literature Review .............................................................................................17 Literature Search Strategy............................................................................................18 Theoretical Foundation ................................................................................................19 i Literature Review.........................................................................................................22 Alternative Financial Services .............................................................................. 22 Users of Alternative Financial Services ................................................................ 25 Effects of Using AFS ............................................................................................ 26 Regulation of AFS ................................................................................................ 27 Traditional Financial Services .............................................................................. 29 Traditional versus Alternative Financial Services ................................................ 30 Challenges for Traditional Financial Services Industry ........................................ 31 Self-Assessed (Subjective) Financial Knowledge ...............................................
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