How is Consumer Financial Capability Measured?

2022  Journal Article

How is Consumer Financial Capability Measured?

Pub TLDR

The study reviews the diverse understanding and measurement of consumer financial capability, analyzing 34 quantitative studies published between 2015 and 2018. It finds that financial capability is operationalized in various ways, primarily focusing on objective financial knowledge and access, while highlighting gaps in measuring financial socialization and well-being. The research calls for standardization in measuring constructs related to financial capability to enhance interventions and policies aimed at improving family financial well-being and reducing economic inequality.

DOI: 10.1007/s10834-022-09825-4    PubMed ID: 36373053
 

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Abstract

The research literature on the growing field of consumer financial capability displays a wide diversity of understanding about the meaning and measurement of the concept. While sufficient research literature has been produced for a review of measurement domains and indicators, this work remains undone. The aim of the study is to assess the quantitative peer-reviewed research literature to advance the field toward building an evidence base for financial capability interventions and policies to improve family financial well-being and reduce economic inequality. This scoping review study analyzed the financial capability scholarly literature between 2015 and 2018. Overall, 34 studies used quantitative data and met all inclusion criteria for this study. Findings suggest that financial capability measurement constructs were operationalized in 12 different ways (n = 22). Most commonly, financial capability was operationalized as the combination of objective financial knowledge and financial access. Few studies included measurement of financial socialization or financial well-being. Most studies measured financial access using only formal financial access measures, such as bank account ownership and/or whether the consumer has investments. A smaller number of studies measured both formal and informal access (including use of non-bank financial institutions/products). Half of the articles that included financial access used bank account either solely or in combination with other measures as the indicator(s). Many studies lacked any measure of financial access. Recommendations are made about standardizing measurement for the constructs within financial capability and measurement of financial capability.

Birkenmaier, J., Rothwell, D.W., Agar, M. (2022) How is Consumer Financial Capability Measured?Journal of Family and Economic Issues43(4)