Financial Well-Being: A Conceptual Model and Preliminary Analysis

Based on an extensive literature review and re-analysis of existing qualitative data, this report offers a working definition and an a priori conceptual model of financial well-being and its possible determinants. Using survey data from Norway (2016), ten regression models have been conducted to identify the key drivers of financial well-being and enhance the understanding of the underlying mechanisms responsible for the unequal spread of well-being across the population. The preliminary analyses in this report were consistent with both the definition and the model, albeit with some nuances and unexplained effects.

The empirical analysis identified three sub-domains of financial well-being. It was found that all three measures share three behaviours as their main drivers: ‘active saving’, ‘spending restraints’ and ‘not borrowing for daily expenses’. Also, ‘locus of control’ stood out as an important explanatory variable, with significant impacts on all three levels of well-being. Beyond that, some distinguishing characteristics were identified for each of the measures.

Levels of Financial Capability in the UK: results of a baseline survey