Written By: Carrie L. Johnson, Ph.D., AFC®
Assisting clients to increase their financial satisfaction is one part of a financial counselor’s goals. The three articles summarized below discuss financial satisfaction using slightly different lenses. Financial counselors and educators can help individuals increase their financial satisfaction by increasing their financial knowledge, confidence, and positive behaviors.
“Financial Knowledge, Confidence, Credit Use, and Financial Satisfaction” by Stephen A. Atlas, Jialing Lu, P. Dorin Micu, and Nilton Porto (Journal of Financial Counseling and Planning, 2019) (https://www.afcpe.org/news-and-publications/journal-of-financial-counseling-and-planning/accepted-papers/)
This paper investigated associations between confidence about financial knowledge and financial behaviors and financial satisfaction. The study used the 2015 National Financial Capability Study conducted by the FINRA Investor Education Foundation. The authors considered the overall relationships between financial satisfaction, financial confidence and knowledge, and a credit card index (index created using six survey questions regarding credit card use). The study also evaluated whether the credit card index mediated the relationship between confidence, knowledge and financial satisfaction.
The authors found that there is a direct relationship between confidence and financial satisfaction. It was also found that credit card use is highly predictive of financial satisfaction. Furthermore, the results indicate that the relationship between confidence and satisfaction is explained by credit use. Knowledge was found to moderate
the relationship between confidence and financial satisfaction due to credit use. Applying a spotlight analysis to further understand confidence => credit use => financial satisfaction path, the authors found that confidence has a stronger relationship with financial satisfaction through credit use when knowledge is higher. It was also found that knowledge has a stronger relationship with financial satisfaction through credit card use when confidence is higher.
In addition, they found that confidence has a positive relationship with healthy credit card use and financial satisfaction even when knowledge is low, and a similar result for the return on knowledge when confidence is low. The authors interpreted the results to support the idea that knowledge predicts how confidence impacts credit card choice and his contributes to financial satisfaction.
“College Students and Financial Distress: Exploring Debt, Financial Satisfaction, and Financial Anxiety” by Kristy L. Archuleta, Anita Dale, and Scott M. Spann (Journal of Financial Counseling and Planning, 2013) (https://www.afcpe.org/news-and-publications/journal-of-financial-counseling-and-planning/volume-24-2/)
This study was comprised of 180 students at a Midwestern university who received peer financial counseling. A new scale was developed called the Financial Anxiety Scale (FAS) which can be used as a tool for financial planners, counselors and educators to identify individuals who are experiencing increased levels of financial distress.
In predicting financial anxiety, financial satisfaction was found to be the most significant predictor regardless of the type of debt a student held. It was also found that there was a significant association between financial satisfaction and financial anxiety. The higher one’s financial satisfaction, the lower one’s financial anxiety.
“Consumer Financial Capability and Financial Satisfaction” by Jing Jian Xiao, Cheng Chen, and Fuzhong Chen (Social Indicators Research, 2014) (https://link.springer.com/article/10.1007/s11205-013-0414-8)
This study examined associations between consumer financial capability and financial satisfaction. It used the 2009 National Financial Capability Study conducted by the FINRA Investor Education Foundation. Financial satisfaction was measured by a 10-point scale, where 1 was “not at all satisfied” and 10 was “extremely satisfied”. Respondents were asked “Overall, thinking of your assets, debts and savings, how satisfied are you with your current personal financial condition.” Based on a weighted (nationally representative) sample, the mean financial satisfaction was 4.51.
The study further examined the correlation between financial satisfaction and financial capability. Answering financial literacy questions correctly was associated with a higher level of financial satisfaction. Suggestive knowledge (personal perception) seemed to have more influence on financial satisfaction than objective knowledge (real knowledge). Desirable financial behaviors increased financial satisfaction, while risky financial behaviors decreased it. The results suggest that risky financial behavior, desirable financial behavior and subjective financial knowledge have stronger effects on financial satisfaction than perceived financial capability. The authors suggest that financial educators may need to focus more on raising perceived level of financial knowledge.