1. Context
2. The study
3. Key findings
4. Points to consider

Context

The study builds on earlier work in the UK (Kempson et al, 2013) and by the World Bank to investigate the links between financial capability and financial well-being, the latter being viewed as the outcome of the behaviours involved in capability. It aimed to help strengthen the understanding of the concept of financial capability and so its use in policy, notably in countries like Norway where there is a strong focus on dealing with the financial crisis and poverty rather than promoting and supporting well-being.

The study

The study set out to establish and test a conceptual model of “financial well-being” and its drivers. It reviews international literature to explore the concepts of “financial literacy” (which relates to knowledge) and “financial capability” (a set of attitudes and behaviours), and re-analyses data from 58 focus groups to develop a conceptual definition of “financial well-being”. It then tested the idea through a questionnaire delivered to a sample of 2,058 people, weighted to be representative of the Norwegian population. The resulting data was analysed to derive the potential principal components of well-being, which included various attitudes and behaviours. These were then tested with OLS regression to identify the key drivers of financial well-being. The study is a preliminary analysis and was intended to be followed up in 2017.

Key findings

• “the extent to which someone is able to meet all their current commitments and needs comfortably, and has the financial resilience to maintain this in the future”.
• a range of behaviours and external social and economic factors as key drivers of well-being, which are in turn determined by psychological factors and attitudes to spending, saving and borrowing. Knowledge and experience had little or no effect.
• meeting current financial commitments, feeling financially comfortable, and having financial resilience for the future. Planning how to use income, informed product choice and keeping track of money were much less predictive.
• :
• Spending restraint
  • Active saving
  • Not borrowing for daily expenses
• • “Not borrowing for daily expenses” had a median of 100 index points and a long tail of atypical observations, suggesting that borrowing for this purpose is uncommon in Norway.
  • “Spending restraint” and “active saving” had medians of about 75 and a small tail at the lower end.
• • Attitudes to spending, impulsivity control and particularly locus of control had the strongest associations.
• • Women were better at saving, planning how to use income and keeping track of money, but not as good as spending.
  • Part-time workers were better at tracking money; the self-employed were less capable savers and planners.
  • The retired were better at spending and tracking money but less active savers. Other people who were not working shared these characteristics and stronger than full-time employees at budgeting and keeping track of money.
  • People responsible for household budgeting score higher on keeping track of money.

Points to consider

• • The report includes a detailed account of methodology; the review notes some shortcomings of the questionnaire and alterations used for a later survey.
  • The report notes maintenance of some variables in line with the Norwegian policy context.
• • The report is relevant to ideas about and differentiation of the concept of “well-being” and of interest to anyone involved in determining how to measure it.
• • The report builds on wider international research and focuses on Norway. While the literature review is thus more focused on international definitions, the survey and analysis reflect the Norwegian context, which may vary even from other wealthy countries.
  • Given the importance of concepts and definitions, there may be slight differences arising from linguistic factors.

Full report

Financial well-being: a conceptual model and preliminary analysis - full report