The effects of financial, human, and social capital on the perception of financial well-being

Abstract

A considerable amount of research has focused on several effects of social capital such as economic benefits, forming human capital, and crime rate. However, less attention has been paid to the mediating effect of social capital on perception of financial well-being. Community social capital's effect on individual perception of financial well-being has also received little attention. This paper seeks the answer to these questions: (1) What are social capital's mediating effects on the perception of financial well-being and household financial capital? (2) What are community social capital, financial capital, and human capital's effects on individual perception of financial well-being? Data for this study came from the Northwest Area Foundation Horizons Cluster Social Capital Survey conducted from 2004 to 2005. The survey covered 36 communities participating in the Northwest Area Foundation Horizons Program. The results of the study approved the mediating effects of social capital on the perception of financial well-being and on the forming of household financial capital. Among three community capitals, only community social capital shows a significant effect on perception of financial well-being. Community social capital also shows a greater effect on perception of financial well-being than that of individual social capital. It illustrates social capital's characteristic as a public good rather than a private property. Distribution of three capitals indicated that social capital is more equally distributed than those of household financial capital and human capital.