Cognitive and Non-Cognitive Skills: Determinants of Couples’ Money Management Systems

Abstract

Intra-household money management is of increasing interest, given impacts on welfare. Cognitive skills, measured by Wechsler’s Adult Intelligence scale, and non-cognitive skills, measured by Dickman’s Dysfunctional Impulsivity scale, are analyzed as determinants of pooling, money manager choice, and the combined management system. Evidence regarding whether women prefer joint or full control is discussed. For a unit higher female impulsivity score, it is 1.5 times as likely that females control pooled funds and 1.7 times as likely that males manage separate funds, as compared to joint control of pooled funds. Previous research identifies joint pool as the ideal system for women, female pool as the worst option for women’s financial deprivation, and male separate as the worst for women’s access to funds. At covariates’ means, an individual’s higher cognitive skills decrease probability that his/her partner manages pooled funds and increase probability that his/her preferred manager (joint for women, male for men) controls separate funds. Relative to joint pool, male pool is less likely at higher female cognitive skills, and male separate is more likely at higher male cognitive skills. An interaction effect between female impulsivity and intelligence is evident; impulsivity impacts money management more at low rather than high cognitive scores. Results for non-cognitive skills are more meaningful in magnitude than those for cognitive skills. Future research should consider non-cognitive skills’ impact on money management, interactions between non-cognitive and cognitive skills, and that higher bargaining power may not mean more financial decision-making responsibility, especially for women.