Assessing The Impact of Financial Risk Tolerance on Household Wealth

Abstract

This study examines the impact of financial risk tolerance on household wealth accumulation in Ghana, exploring the role of demographic factors such as age, education level, and gender in influencing this relationship. Utilizing Partial Least Squares Structural Equation Modelling, the analysis reveals that financial risk tolerance has a significant positive effect on wealth accumulation. Additionally, while age and education level exhibit significant control effects, gender does not significantly alter the relationship between risk tolerance and wealth. The findings contribute to the theoretical understanding of wealth accumulation by demonstrating that financial risk tolerance plays a crucial role in household wealth creation, even in lower-income populations. The study's results are of significant policy relevance, suggesting that financial literacy programs should be tailored to address the demographic differences in risk tolerance and wealth-building behaviours. From a practical standpoint, the study underscores the importance of fostering financial risk management skills and financial literacy, particularly among younger and less educated households, to enhance their wealth-building potential and overall economic stability.