The role of emotional intelligence in the relationship between framing effects, financial anxiety and financial literacy

People are confronted with financial decisions on a daily basis, and very often this can significantly affect their current and future financial stability. Globalization and modern technology has made it possible for people to have wider access to unlimited information and choices of financial products. If a person is not equipped with sufficient financial knowledge, diverse and complex financial information can lead to cognitive overload and susceptibility to biases such as framing effects, thereby resulting in unhealthy financial decisions. Although the link between financial literacy (FL) and financial anxiety (FA) is well established, the critical role of trait emotional intelligence (TEI) in this relationship has been poorly represented in contemporary literature. Given the volatile nature in the global economy in the post pandemic era, exploring these concepts becomes more important than ever. The overall objective of this research was to investigate the role of trait emotional intelligence in the relationship between framing effects, financial anxiety and financial literacy. Testing with the use of an online survey was done in South Africa with a total of 200 Finance and Economic students from the Department of Economics and Finance at the University of the Free State. Two conditions of differently framed financial information (simple versus complex) were randomized among participants, including measuring instruments of financial literacy, financial anxiety and trait EI. The main findings suggested that TEI is positively correlated with FL and negatively correlated with FA. Willingness to explain information to others mediated the effect between type of condition and financial choice. This was specifically relevant in the condition with complex financial information. Clarity of information mediated financial literacy. Lastly, gender effects interacted with the effects of the condition, financial anxiety, financial literacy and TEI. FL and FA were associated with choice more among males whereas TEI predicted choice among females. To encourage more healthy financial decision making among people the incorporation of emotional intelligence skills training in financial education programmes are strongly recommended.