Propensity to plan, financial capability, and financial satisfaction

Jing Jian Xiao,Barbara O'Neill

doi:10.1111/ijcs.12461

Abstract

AbstractPropensity to plan is an indicator of financial capability that contributes to consumer financial well‐being. Previous research has shown that propensity to plan is positively related to objective financial well‐being but little research was found to examine its association with subjective financial well‐being. Using financial satisfaction to measure subjective financial well‐being, this study addressed this research gap and had three objectives: (1) to explore factors associated with propensity to plan, (2) to examine the association between propensity to plan and financial capability factors, and (3) to examine the association between propensity to plan and financial satisfaction. Using data from the 2015 US National Financial Capability Study, the results showed socioeconomic differences in propensity to plan. The results suggest consumers with more economic resources had higher scores in propensity to plan. In addition, propensity to plan was positively associated with financial capability factors, suggesting financial planning is a desirable financial behavior. Finally, propensity to plan made unique contributions to financial satisfaction after controlling for socioeconomic and other financial capability factors.

Highlights

Financial satisfaction, a measure of subjective financial well-being, is an important component of general well-being (Diener & Biswas-Diener, 2002)
National Financial Capability Study, this study examined factors associated with propensity to plan, the association between propensity to plan and financial capability factors, and the association between propensity to plan and financial satisfaction
Propensity to plan is positively associated with four financial capability variables: objective financial literacy, subjective financial literacy, desirable financial behavior, and perceived financial capability

Summary

Introduction

A measure of subjective financial well-being, is an important component of general well-being (Diener & Biswas-Diener, 2002). Some researchers explored the association between financial behavior and financial satisfaction (Alsemgeest, 2015; Xiao, Chen, & Chen, 2014). To encourage consumers to actively pursue financial security and freedom, more research is needed to explore which specific financial behaviors contribute to consumer financial satisfaction. Planning for long-term financial goals is such a desirable financial behavior, which is considered an indicator of consumer financial capability (Lusardi & Mitchell, 2007). Propensity to plan refers to a consumer’s tendency to plan for long-term goals that may result in rational, goal-setting behavior (Ameriks, Caplin, & Leahy, 2003). Previous research demonstrates that propensity to plan contributes to financial well-being

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Results

Conclusion