On Scarcity, Self-threat, and the Avoidance of Financial Advice

• Published in: Advances in Consumer Research Vol. 50; pp. 140 - 141
• Main Authors: So, Jane, Agrawal, Nidhi
• Format: Conference Proceeding
• Language: English
• Published: Urbana Association for Consumer Research 01.01.2022
• Subjects: Consumer behavior; Decision making; Financial planning; Scarcity; New York; United States > US
• ISSN: 0098-9258

This paper investigates the psychological reasoning the avoidance of financial advice (e.g., financial services, money management books) that money-scarce consumers have. In four experiments, this paper shows that money scarcity, relative to time scarcity, leads to avoidance of financial advice. Consumers are often confronted with situations that make them feel that their money is scarce. However, interventions to assist people in making financial decisions seem to have little appeal, especially to those who experience greater financial constraints (Fernandes, Lynch, and Netemeyer 2014; NFCS 2018). This research suggests why money-scarce consumers are more reluctant to seek help to improve their financial decisions and strategies for overcoming this aversion. Specifically, we propose that money-scarce people avoid financial advice, such as financial services, money management apps, or self-help books, because the domain of financial advice leads to defensiveness. In contrast to other forms of resource scarcity (e.g., time scarcity), money scarcity will lead people to perceive financial advice as a psychological threat to their negative self-perception. Feeling money scarcity is an unpleasant experience that people would like to avoid (Griskevicious et al. 2013; Paley et al. 2019; Sharma and Alter 2012). When experiencing money scarcity, they may feel less 'worthy' since money can be an important tool in proving their competence and maintaining positive self-views (Zhang 2009). However, we expect that people who experience time scarcity may not respond defensively to financial advice because time scarcity may not be such a negative state that people want to avoid compared to money scarcity (Bellezza et al. 2017; Gershuny 2005). Furthermore, we propose two ways of minimizing the defensiveness of money-scarce consumers: reducing the threat from money scarcity and reducing the supposed threat from financial advice. First, we suggest that the threat from money scarcity can be reduced if money-scarce consumers are presented with the opportunity to buffer their threat (Hall et al. 2014). Research shows that self-affirmation can buffer the threat allowing people to respond less defensively to situations that are threatening (Aronson, Cohen, and Nail 1999; Hall et al. 2014; Steele 1988). Another approach to reducing the defensiveness of money-scarce people is to discount the threat stemming from financial advice through message framing. That is, when financial advice aids money-scarce consumers to cope with the threat, by helping the money-scarce consumers devalue the threat from the message (Gibbons, Benbow, and Gerrard 1994; Tesser 1988), people would no longer consider the financial advice as a threat and show lower defensive processing. In study 1, we test defensive processing by measuring people's distrust toward financial advice. Participants in the money-scarcity and time-scarcity conditions first performed an episodic recall task (adapted from Roux et al. 2015). Following that, participants were instructed to view a financial service advertisement and answer the questions. We found a significant effect on the financial advice acceptance such that the money scarcity condition showed lower financial advice acceptance than the time scarcity condition (Mmoney = 4.93, SD = 1.96 vs. Mtime = 5.45, SD = 1.79; F(1, 443) = 8.59, p = .004, η2p =.019). We also found that the money scarcity condition showed greater distrust toward the advertisement than the time scarcity condition (Mmoney = 4.01, SD = 1.86 vs. Mtime = 3.67, SD = 1.73; F(1, 443) = 4.04,p= .045; η2p=.009). We found that distrust significantly mediated the scarcity effect on the financial advice acceptance (B = -.26, SE = .12, 95% CI = [-.510, -.011]). In study 2, we examine the moderating effect of self-affirmation. A 2 (scarcity: money scarcity vs. time scarcity) × 2 (self-affirmation: present vs. absent) between-subjects design was used. Participants were asked to evaluate advertisements for self-help books (money management book, time management book, stress management book). They were asked to choose one book that they would like to read and rate how likely they would purchase the books. The chisquare test result showed that when participants were self-affirmed in the money scarcity condition, they chose money-management books significantly more than those not self-affirmed (χ2 (2, 161) = 11.84, p = .003). A 2 (scarcity: money scarcity vs. time scarcity) × 2 (self-affirmation: present vs. absent) × 3 (book: money-management vs. time-management vs. stress management) mixed repeated- measures ANOVA demonstrated a significant three-way interaction F (1, 316) = 9.16, p = .003, η2p=. 03). Study 3 evaluates whether money (vs. time) scarce consumers' defensiveness toward financial advice can be mitigated through message framing. This study used a 2 (scarcity: money scarcity vs. time scarcity) × 2 (message framing: stressed vs. strapped) between-subjects design. The analysis revealed a significant interaction between the scarcity and message framing (F(1, 833) = 4.11, p = .04, η2p = .005). and a significant interaction between the scarcity and message framing (F(1, 833) = 6.43, p = .011, η2p = .008). Moderated mediation analysis showed a significant result (B = .33, SE = .16, 95% CI = [.004, .654]). In study 4, we used a 2 (scarcity: money scarcity vs. time scarcity) × 2 (message framing: stressed vs. strapped) × personal relevance between-subjects design. Phase 1 consisted of a survey measuring the financial advice relevance. Phase two study was carried out one week later. The procedure of phase 2 was identical to that of study 3. The three-way interaction (Model 3, Hayes 2017) was significant (B = .51, SE = .24, t = 2.11, p = .036). Consistent with our prediction, when the relevance is low (-1 SD), interaction between scarcity and message framing was not significant (F(1, 326) = .22, p = .64). However, when the relevance was high (+1 SD), the interaction between scarcity and message framing was significant (F(l, 326) = 13.24, p < .001). Our findings suggest that feeling money scarcity is a negative state that makes people act defensively toward financial advice, which is perceived as a further threat. We test this notion by comparing money scarcity with time scarcity, which is a relatively less aversive state than money scarcity. Furthermore, this research reveals that money scarcity can be moderated.