Consumer Financial Capability and Financial Wellbeing; Multi-Year Analyses

The positive association between financial capability and financial wellbeing is well-established in the literature. However, research is limited in examining the association from a long-term perspective with multi-year national data. This study attempted to fill this gap and examined the association between financial capability and financial wellbeing using pooled cross-sectional data from all five waves of National Financial Capability Studies (NFCS) conducted between 2009 and 2021, covering periods both before and after the onset of the COVID-19 pandemic. Financial capability was assessed using both a financial capability index and a set of financial capability components. Descriptive statistics revealed that financial wellbeing, as measured by financial satisfaction, showed an upward trend from 2009 to 2021. The financial capability index also exhibited an upward trend, with a dip in 2015. Four financial capability components showed different trends over the 12-year period. The results of multiple regression analyses conducted on the pooled sample and yearly samples indicated that, overall, the financial capability index was positively associated with financial wellbeing. Specifically, financial capability components, including subjective financial knowledge, desirable financial behavior, and perceived financial capability, were positively related to financial wellbeing. However, objective financial knowledge was negatively associated with financial wellbeing, consistent with findings from previous studies. The results suggested that the potential positive effects of the financial capability index on financial wellbeing increased over the survey years, primarily driven by the effects of subjective financial knowledge.