Let your past define your future? How recalling successful financial experiences can increase beliefs of self‐efficacy in financial planning

Financial self‐efficacy, or the perceived ability to succeed in managing one's personal financial affairs, is fundamental to effective consumer financial decision making. However, little is known about how to improve consumers' financial self‐efficacy and which consumers are more or less responsive to potential policy interventions. We address these questions through an experimental study among US consumers. We find that asking consumers to recall and analyze successful (unsuccessful) experiences regarding the management of their personal finances is associated with higher (lower) financial self‐efficacy. We provide insight into the underlying process of this effect through moderation and mediation analyses. In particular, we show that the effect of a recall and analyze intervention utilizing a successful previous experience is more pronounced for consumers with a more optimistic personality. Finally, consumers who develop greater financial self‐efficacy as a result of our intervention display more self‐control, leading to a higher financial planning propensity and actual planning.