Development and validation of financial well-being related scales

Abstract

PurposeThe purpose of this paper is to develop valid and reliable scales for assessing a driver and two obstacles potentially related to financial well-being (FWB): financial preparedness for emergency, beliefs of credit limits as additional income and risky indebtedness behaviour.Design/methodology/approachThe scales were developed from scratch across six studies, employing a two-step methodology, which encompassed both qualitative (e.g. focus group, interviews) and quantitative (i.e. online surveys) data collection. Exploratory and confirmatory factor analyses were employed to test and validate the proposed scales.FindingsThis study provides a set of three parsimonious, self-reported behavioural measures that could be employed in conjunction with objective economic indicators to identify individuals who are financially ill prepared and potential candidates for delinquency. The three proposed scales achieved satisfactory levels of reliability and convergent and discriminant validity.Research limitations/implicationsThe resulting scales still need to be tested for predictive validity and in different consumer groups. The scales were validated in a single culture population (Brazil, a country that presents extraordinarily high credit card interest rates), and they should be tested cross-culturally in countries with different economic and credit policies.Originality/valueThe literature on FWB has traditionally employed objective financial indicators as an attempt to measure the concept of FWB and its elements. Self-reported behavioural measures of such constructs are scant to the point of being non-existent for some elements. This study is the first to offer scales for measuring the elements of financial preparedness for emergency, beliefs of credit limits as additional income and risky indebtedness behaviour.