Financial threat correlates with acute economic hardship and behavioral intentions that can improve one's personal finances and health

Abstract

This research examines whether the stressful psychological experience of financial threat (a sense of fear, anxiety, and preoccupation about the adequacy, stability, and security of one's financial resources) relates to acute more than chronic economic hardship, and to making sounder financial decisions that would improve personal financial situations. We collected data from two samples of undergraduate students in 2015 and 2016 using online questionnaires. Our findings contribute to the literature in that they show financial threat (1) positively correlates with acute financial hardships (e.g., reduced income), and this relation is stronger than its relationship with chronic financial conditions (i.e., current income). (2) Financial threat positively correlates with constructive financial behaviors, such as increased willingness to cut expenses. (3) Economic hardship moderates the positive relationship between financial threat and constructive financial behavior. When economic hardship is high, individuals with high and low levels of financial threat are willing to engage in constructive financial behaviors. When hardship is low, however, individuals with high financial threat are the most willing to engage in constructive financial behavior.