Financial well-being (FWB) research is growing rapidly, despite the lack of consensus on its definition, conceptualisation, and operationalisation. Little is known about the relationship between subjective FWB and objective financial data. We contribute to it by developing a three-dimensional, human-centric conceptualisation of FWB, comprising of security, freedom, and pleasure, developing and testing its scale, and conducting the first longitudinal analysis of the relationship between subjective FWB and objective financial situation and behaviours.
Our validated measure was used for data collection in a bank in Czechia in two waves, in February and September 2024. Confirmatory factor analysis and structural equation modelling confirmed the reliability and construct validity of the scale. Pseudonymised transactional data from 14 months was linked to the survey responses (n=6182 in wave 1 and n=1704 in wave 2), and analysed using models and methods such as LightGBM, random forest, and regression models.
We find that security is fundamental - one cannot have high freedom or higher pleasure without having average or higher security. The relationship between freedom and pleasure is more nuanced. The most significant gap lies in the freedom to change course in life without worrying about money. The second key fact is that men report higher FWB than women with equivalent assets or liabilities. Third, we observe that assets play a more evident role in FWB than liabilities. Importantly, the predictors of the FWB elements partly differ, highlighting its multi-dimensional and multifaceted nature. We are the first to observe gender differences in assessing the elements of subjective FWB while controlling for objective transactional bank data.