Academic journal article College Student Journal

The Influence of Locus of Control on Student Financial Behavior

Academic journal article College Student Journal

The Influence of Locus of Control on Student Financial Behavior

Article excerpt

Data on psychological influences of financial behaviors has not been well addressed in student populations, which is concerning given the high levels of general and financial stress experienced by college students. The findings of this study indicate that college students with an external locus of control exhibit the worst financial behaviors. Male students and students who grew up with wealthier parents exhibit better financial behaviors. Black and Hispanic students exhibit slightly worse financial behaviors than other students. Students who receive work study, do not receive military-based education assistance, never attend religious ceremonies, or feel that religion is not very important were more likely to report an external locus of control. Identification of financially at-risk students is imperative given the high dropout rates among college students. This study provides a profile of at-risk students that can be used in developing targeted financial services on college campuses.

Keywords: Credit, spending, financial behaviors, locus of control, personality


Students must master numerous skills during the transition to college life. Some of these skills include preparing meals, cleaning house, living without immediate family, increased course work, and managing social activities on top of having to manage an independent (or more independent) financial budget. New financial behaviors that must be learned range from tracking receipts and spending, making debt payments on time, planning for a large purchase, repaying student loans, to saving for retirement. With college tuition rates at an all-time high (FinAid, 2011) the financial stress of students also continues to rise and financial well-being is on the decline (Norvilitis, Merwin, Osberg, Roehling, Young, & Kamas, 2006). The current study focuses on the inability to make ends meet as a measure of college students' financial well-being. A unique contribution to the literature is determining how college students' locus of control orientation influences financial behaviors. Another distinctive contribution is developing a profile of students who are most at risk for negative financial behaviors.

Conceptual Framework and Related Literature

According to social learning theory, past and current experience influences what is expected in the future (Rotter, 1954). In the financial arena, we have seen that financial knowledge (an indicator of past and current experience) is a strong predictor of future behavior where people with low financial knowledge exhibit lower levels of net worth and a general lack of preparedness for retirement (Lusardi & Mitchell, 2011). Another measure of past behavior not used extensively in financial studies is personality. This study incorporates the personality construct of locus of control in the prediction of college student financial behaviors.

Locus of Control

Locus of control is the degree to which individuals believe they are in control of their own future. Individuals who are internally driven believe that future events are determined by their own behavior, whereas individuals who are externally driven believe that future events are the result of luck, chance, fate, or due to the control of others. Individuals with a strong intemal locus of control are more likely to (a) be more alert to their environment, (b) take steps to improve their environment, (c) place greater value on skill and be more concerned with their ability, and (d) be more resistant to subtle attempts to influence them (Rotter, 1966).

There are a few notable studies that have explored the connection between locus of control and financial behaviors. Joo, Grable, and Bagwell (2003) found that locus of control, among other factors, has a significant relationship with college students' attitude toward credit with those with higher external locus of control having more positive attitudes toward credit. …

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