Knowledge is power, but knowing better doesn’t automatically translate into doing better. Financial literacy may be the term we commonly use but it’s financial capability that determines whether people reach their goals. The distinction may be subtle but common sense tells us that what people do often differs from what they know. Ongoing research is revealing just how true this is.

The University of Bristol’s professor Elaine Kempson has led studies across the world and found there is a surprising degree of agreement about what average people view as financial wellbeing. And key behaviours that drive such wellbeing are people’s propensity to overspend, to borrow, and to save for the future. But individuals’ attitudes, motivations and personal biases – together with their social and economic environment – are often a more significant influence than financial knowledge and skills.

“Knowledge and skills have a value only if they bring about some kind of behavioural change –yet the impact of knowledge on behaviours was mixed,” Kempson said at an ASIC presentation on financial literacy late last year. For example, a comprehensive survey conducted in Norway, where financial wellbeing levels are generally high, analysed the factors behind people’s propensity to overspend.   “The key factors are knowledge and experience of money management, which is encouraging, but it’s also a whole range of motivations, attitudes and biases,” she said.

Read more: Financial literacy alone won’t buy economic security