Development and Validation of a Financial Behavior Scale for Low-Income Earning Groups

Abstract

ABSTRACT Most research studying financial behavior, including those studying the behavior of economically deprived sections, have ignored manual laborers. They are a segment that plays a significant role in economic development, but the lack of access to economic resources forces them to perform undesirable financial behaviors. Even though policymakers claim that removing stress in managing money is one way of achieving financial well-being, somehow, their financial empowerment has been overlooked in mainstream literature. This study aims to develop and validate a measure of financial behavior for the toiling class and to assess how different demographic segments vary in different dimensions of behavioral practices. An 18-item scale has been developed, taking input from several existing measures of financial behavior and considering the unique characteristics of the population. The behavioral attributes of 401 laborers were measured in Kerala, India. Factor analysis resulted in four components with coherent reliability. The alpha reliability of the whole scale was 0.864. A detailed analysis using demographic variables revealed that gender, age, and education are significant for most of the behavioral dimensions and overall financial behavior. The type of laborer was found to be significant for three behavioral dimensions. Other than providing a measure of financial behavior for students and researchers of economically deprived sections, a scale can help counselors, educators, and policymakers bring focused and constructive interventions into the lives of the poor.