Journal of Business Research 79 (2017) 228–237

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Journal of Business Research

Financial well-being: A conceptualization and research agenda

Elisabeth C. Brüggen a, Jens Hogreve b, Maria Holmlund c,⁎, Sertan Kabadayi d, Martin Löfgren e
a
Department of Marketing and Supply Chain Management, School of Business and Economics, Maastricht University, Maastricht, The Netherlands
b
Ingolstadt School of Management, Catholic University of Eichstaett-Ingolstadt, Ingolstadt, Germany
c
CERS-Centre for Relationship Marketing and Service Management, Department of Marketing, Hanken School of Economics, Helsinki, Finland
d
Gabelli School of Business, Fordham University-Lincoln Center, New York, USA
e
Karlstad University, Karlstad, Sweden

a r t i c l e i n f o a b s t r a c t

Article history: With savings rates at record lows and inadequate long-term financial planning for retirement, financial well-
Received 22 October 2016 being has become an important topic for individuals and households as well as for societies and countries. Re-
Received in revised form 16 March 2017 search on the topic, however, remains scarce and scattered across disciplines. The present paper aims to consol-
Accepted 17 March 2017
idate and extend knowledge on financial well-being and makes a three-fold contribution to the discussion. First,
Available online 23 March 2017
we propose a new definition based on a perceptual perspective of financial well-being and link it to an
Keywords:
individual's current and anticipated desired living standard and financial freedom. We then develop a framework
Financial well-being that distinguishes key elements of financial well-being; namely, interventions and financial behaviors, conse-
Transformative service research quences, contextual factors, and personal factors. We then present a research agenda to guide future research
Service research on financial well-being. This work is designed to inspire researchers to continue expanding the knowledge so
Consumer financial decision making that financial institutions can take measures to increase financial well-being.
Financial services © 2017 Elsevier Inc. All rights reserved.

1. Introduction the markets recover, these young adults in particular struggle

(Kasperkevic, 2016). An additional issue that is being increasingly ob-
As the world economy slowly recovers from the recent financial tur- served is rising student debt. A recent analysis by Citizens Financial
bulence, healthy spending and saving habits of citizens have become a Group in the US showed that college graduates aged 35 or under are
topic of increasing importance for companies, policy makers, and regu- spending 18% of their salaries on student loan payments, which signifi-
lators. The OECD reports that household savings rates have decreased cantly limits their consumption (Citizens Financial Group, 2016) and
for most industrialized countries in recent years (OECD, 2016). In the saving for retirement. In addition, average saving contributions are
eurozone, for example, savings rate are estimated to drop from over about 4% of current salaries in the US, whereas experts suggest that
8.5% in 1999 to 6.56% by 2017. In the US, the OECD forecasts that house- members of Generation Y, especially, need to save up to 15–20% of
hold savings rates will drop to 4.48% by 2017 (OECD, 2016). There are their annual incomes beginning at age 25 in order to maintain a similar
several explanations for this phenomenon. A stable labor market and standard of living in retirement (Struck, 2012). The situation is even
an increase in consumption demand has led to greater private spending more dire with regard to long-term financial behavior, since a recent in-
and caused the savings rate to decline at the same time. Moreover, with dustry report states that retirement is not the main savings priority for
record-low base interest rates, depositing money in traditional savings 85% of working-age people. Paradoxically, while retirement planning is
accounts has become considerably less attractive as an investment not the main priority for a majority of working-age people, more than
(Blackstone & Troianovski, 2013). two-thirds (69%) are worried about running out of money in retirement
Young adults between the ages of 20 and 30 are particularly vulner- and 66% are concerned about having enough money for everyday ex-
able to these financial threats. Many members of Generation Y (that is, penses in later life (HSBC Global Report, 2016). All of these numbers
those people born between the early 1980s and mid-1990s) entered show that the issue of financial well-being is of utmost importance to
the workforce during the economic downturn (Kasperkevic, 2016). As nearly every industrialized country on the globe.1

⁎ Corresponding author. 1
While financial well-being is, of course, not limited to industrialized countries, the
E-mail addresses: [email protected] (E.C. Brüggen), meaning of the term is quite different for developing countries, where a large part of the
[email protected] (J. Hogreve), maria.holmlund-rytkonen@hanken.fi (M. Holmlund), population struggles to make ends meet. Recent service research has started to generate
[email protected] (S. Kabadayi), [email protected] (M. Löfgren). insights for base-of-pyramid settings (e.g., Gebauer & Reynoso 2013).

http://dx.doi.org/10.1016/j.jbusres.2017.03.013
0148-2963/© 2017 Elsevier Inc. All rights reserved.
 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237 229

It is not surprising that researchers, especially the transformative studies have adopted different indicators for those objective and subjec-
service research initiatives (Anderson et al., 2013), have acknowledged tive dimensions, seemingly without a clear focus. For example, many
the importance of gathering knowledge on how to motivate customers studies that examine students' financial well-being have included the
to engage in healthier spending and saving behavior (e.g., Mende & van students' level of debt as a measure of their objective well-being and
Doorn, 2015; Winterich & Nenkov, 2015). Generating more knowledge their satisfaction with their financial status as a subjective measure
in this area is important: a large number of people facing financial prob- (Shim et al., 2009). Likewise, Porter and Garman (1992) included quan-
lems at the same time creates a societal problem and leads to negative titative indicators of the financial situation such as income level as the
welfare effects, both now and in the future. From an individual's point objective measure of financial well-being and perceived satisfaction
of view, financial well-being is important and research has shown that with standard of living as the more subjective measure.
it has a strong and positive relation to overall well-being. Van Praag In the second group, income and other financial indicators have
and Frijters (2003) confirmed that a healthy spending and savings bal- mostly been included as objective measures of financial well-being
ance is crucial for sustaining long-term financial and personal well- without considering subjective variables (e.g., Joo & Grable, 2004;
being. Hojman, Miranda, and Ruiz-Tagle (2016) found that depressive Kahneman & Deaton, 2010). While some studies included mostly finan-
symptoms are higher for those who have been persistently over-indebt- cial information, financial ratios, and benchmarks as objective measures
ed. In addition, research has shown that personal stress caused by un- of financial well-being (e.g., Greninger, Hampton, Kitt, & Achacoso,
healthy spending and saving behavior will not only affect the 1996), others stated that a household's ability to increase and manage
individual, but also their families and societies (resulting, for example, liquidity can be used to determine its financial well-being (Aggarwal,
in reduced physical health or weaker job performance) (Dunn & 2014).
Mirzaie, 2012; Kim & Garman, 2003). Having limited financial reserves While many studies have used these two approaches to defining and
can cause great difficulty when unexpected financial emergencies measuring financial well-being, other studies have emphasized a more
arise, and may prompt individuals to suffer from financial hardship subjective and less objective approach when defining financial well-
(UBS, 2014). being. Although objective measures of the financial situation (income,
In light of the pressing nature of this topic, this article makes the fol- debt-to-income ratio, etc.) provide objective evidence of where an indi-
lowing contributions. First, the fact that research on financial well-being vidual stands financially, subjective measures of financial well-being
is still at an early stage and is currently scattered over various disciplines can help researchers examine peoples' perceptions about and reactions
has led to a lack of clarity in understanding what the term financial well- to their financial condition (Norvilitis, Szablicki, & Wilson, 2003; O'Neill
being actually means. Therefore, we aim to synthesize the various mean- et al., 2005). The above-mentioned objective indicators measure facets
ings and definitions of financial well-being to provide a new definition of the financial condition itself rather than one's subjective assessment
for future research in this domain. More specifically, we define financial of the situation (Prawitz et al., 2006). Furthermore, people in similar fi-
well-being as “the perception of being able to sustain current and antic- nancial situations, as defined by objective measures such as assets or in-
ipated desired living standard and financial freedom”. Gaining a common come, could perceive their financial well-being differently depending,
understanding of this important term is crucial in order to advance a co- for example, on what they compare it to and what they prefer it to be.
hesive body of knowledge on this topic of growing interest and impor- Thus, people in the same financial situation may assess their personal fi-
tance and to make research outcomes more comparable and nancial well-being more or less positively (Garman, Sorhaindo, Bailey,
interchangeable across disciplines. Second, the article develops an over- Kim, & Xiao, 2004). Most of these studies have underlined the impor-
arching framework that can serve as a guideline for future research into tance of personal characteristics (e.g., Joo & Grable, 2004) and financial
the measurement, drivers, and outcomes of financial well-being. We also behavioral factors (Shim et al., 2009) that affect individuals' subjective
discuss boundary conditions that could influence either the antecedents' assessment of their financial well-being. In other words, those individ-
effects on financial well-being or its specific outcomes. Third, based on uals may have a different assessment of their financial well-being
the framework, we develop a list of research themes and research ques- based on, for example, their life stages (Malone, Stewart, Wilson, &
tions that will help generate knowledge on financial well-being. Korsching, 2010), or based on their attitude toward risk (Kim &
Garman, 2003). The perceived ability to meet expenses, satisfaction
2. Previous definitions and conceptualizations with savings and investment, and tendency to worry about debt have
also been included in studies with a subjective definition of financial
Financial well-being has been studied in various academic fields, in- well-being (Kim & Garman, 2003). In summary, this part of the litera-
cluding economics, financial counseling and planning, developmental ture suggests that a subjective approach is more comprehensive and
psychology, consumer decision making, and services marketing. How- can also capture non-financial issues, and is therefore more suited
ever, there is no universally agreed-upon definition or measurement than an objective approach to defining and measuring a complex and
and no clarity with regard to its conceptualization and its components. personal phenomenon such as financial well-being.
In many cases, while published studies have included financial well- Besides different approaches to its definition and measurement, an-
being as one of their major variables of interest, such studies have devel- other cause of confusion is that some definitions use wellness and well-
oped and used various measures of financial well-being without actually being interchangeably, even though the literature makes a clear distinc-
defining it (e.g., Guo, Arnould, Gruen, & Tang, 2013; O'Neill, Sorhaindo, tion between them. While wellness typically implies the quality or state
Xiao, & Garman, 2005; Shim, Xiao, Barber, & Lyons, 2009). The majority of being healthy in body and mind, especially as the result of deliberate
of these papers, including the oft-cited InCharge Financial Distress/Fi- effort (Judge, Ilies, & Dimotakis, 2010), well-being refers to a good or
nancial Well Being (IFDFW) scale (Prawitz et al., 2006), do not provide satisfactory condition of existence (Guo et al., 2013). Studies of the dif-
a clear definition of this construct that they set out to measure. ferent types of wellness seem to have primarily focused on personal
However, the existing definitions and measures can be clustered wellbeing and to have been anchored in psychology, whereas our con-
into three groups in terms of their approach: those that use both objec- ceptualization relies on the well-being literature where financial well-
tive and subjective characteristics, and those that use either objective or being as such is of interest.
subjective characteristics to define financial well-being. In the first
group, financial well-being is defined as an objective and subjective
concept that contributes to a person's assessment of his/her current fi- 3. Financial wellbeing: a new conceptualization
nancial situation (Vosloo, Fouche, & Barnard, 2014). It is treated as a
composite concept that consists of both objective and subjective dimen- We define financial well-being as the perception of being able to sus-
sions (Cox, Hooker, Markwick, & Reilly, 2009), although different tain current and anticipated desired living standards and financial freedom.
230 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237

We now turn to the individual components of our definition to ex- retirement planning (e.g., Meyer, 1996). Therefore, we believe that in
plain how they fit together. First, our definition of financial well-being order for someone to have the perception of financial well-being, he
is subjective in nature because it is based on how an individual perceives or she must be able to meet his or her desired standard of living. The
it rather than how it is objectively denoted. This implies that only the in- subsequent assessment of financial well-being can fail to meet or ex-
dividual can assess his/her own well-being. Someone cannot make an ceed the expenses necessary for a standard of living, which reflects
evaluation of another person's financial well-being. This means that the reference point. Furthermore, evaluating financial well-being
the perception is personal and that individuals may experience high against the individual's personal life goals as a significant comparison
or low financial well-being regardless of their objective financial posi- standard makes the definition not only individual, but also relative. Peo-
tion. For example, individuals on the same income level can have differ- ple compare what they have with what others have and care about how
ing assessments of their financial well-being depending on their they stand relative to their former classmates, neighbors, friends, or col-
personal preferences and values. How an individual perceives his/her fi- leagues. This reconfirms the need to conceptualize financial well-being
nancial well-being is affected by an extensive list of factors. For example, with a subjective lens. Changes can occur in terms of what kind of living
various studies have included personal demographic characteristics standard is desired, but also in terms of whether the available means
such as gender, age, education, marital status, and family structure will suffice to achieve it, all of which contributes to the dynamics of fi-
(Joo & Grable, 2004; Malone et al., 2010) that affect a person's assess- nancial well-being.
ment of his/her financial well-being. Similarly, someone's financial Finally, financial freedom is an important concept of our definition. It
knowledge and efficacy (Shim et al., 2009; Vosloo et al., 2014), financial implies that someone does not feel forced or stressed about making
attitudes toward matters such as money or debt (Norvilitis et al., 2003), choices with regard to his/her necessities or covering his/her baseline
financial dispositions like materialism and willingness to take risks expenses (Cazzin, 2011; Choudhury, 2009). Having financial freedom
(Gutter & Copur, 2011), and financial behavior regarding areas like enables individuals to make life decisions without worrying about fi-
budgeting, saving, and compulsive buying (Joo & Grable, 2004; Shim nancial constraints, and achieving it would improve that person's per-
et al., 2009) can all affect the perception of financial well-being. The ception of having financial well-being. The relevance of financial
contextual factors, as well as changes in the macroeconomic environ- freedom for financial well-being is confirmed by interviews conducted
ment like increasing or decreasing economic indicators such as unem- by the Consumer Financial Protection Bureau.2 One aspect that came
ployment rate, interest and inflation rates, or the occurrence of out strongly in their research is that people perceive themselves to be
negative financial events (stressors, for example) like losing a job financially ‘well’ when they can splurge once in a while, can afford
(O'Neill et al., 2005) can all contribute to the perception of financial ‘wants’, such as being able to go out to dinner, and are able to make
well-being. Finally, the subjective nature of this definition implies that choices such as being generous toward their friends, family, and
an individual's subjective financial well-being assessment is not only community.
driven by his or her income and other personal factors, but it also chang- Furthermore, it is important to highlight the differences between
es relative to his or her social reference groups (e.g., Ferrer-i-Carbonell, our definition of financial well-being and other constructs that have
2005). What an individual has or does not have plays an important role been used interchangeably in the literature. One such construct is finan-
in shaping that subjective assessment; however, what he or she has in cial distress. Some studies (e.g., O'Neill et al., 2005) have defined finan-
relation to others has an equally important influence on that assessment cial well-being as absence of financial distress or have treated them as
(Dolan, Peasgood, & White, 2008). While traditional measures such as opposite ends of the same continuum (Prawitz et al., 2006). In our
income or net worth are important, they do not fully capture these as- view, however, financial well-being and financial distress are two relat-
pects of the concept of financial well-being. ed but different concepts. Financial distress has a narrower scope, as it
Second, the definition has a time dimension, in two ways. Unlike refers mostly to the (non)-ability to meet expenses at a certain point
many other previous definitions that focus only on the present, our def- in time (Kim & Garman, 2003). Our definition of financial well-being
inition includes both the current and coming situation. A future-based as- is broader than financial stress and includes an assessment of not only
sessment of financial well-being may be part of an individuals' current but also anticipated standard of living and financial freedom.
assessment and behavior in the present (Norvilitis et al., 2003). The These are the main differences between our proposed definition of fi-
other time aspect is that the financial well-being perception is dynamic nancial well-being and how financial distress is captured.
in that individuals' evaluations of their subjective financial well-being Similarly, our conceptualization of financial well-being is different
can change over time. The subjective assessment of financial well- from financial efficacy, as used in the literature. Financial efficacy can
being for an individual is determined by different personal and contex- be defined as a person's perceived capability to control his/her personal
tual factors that are not static or constant. Given the changes that some- finances (Vosloo et al., 2014). It reflects a person's skills and ability to in-
one may go through in their life, it would be unrealistic to assume that fluence and control his or her financial matters. Therefore, while efficacy
an individual's assessment of their well-being will stay the same over is about having the necessary knowledge to control one's finances, fi-
a longer period of time. For example, a divorce has financial conse- nancial well-being refers to the subjective evaluation of one's financial
quences for the short and long term: a separate household needs to be well-being in a comprehensive manner. Financial efficacy, or the lack
financed, assets are split, and accumulated retirement benefits are di- thereof, can undoubtedly affect an individual's perception of having
vided. Since personal and contextual factors change over time, one's the control and means to sustain his/her desired lifestyle. Therefore,
subjective evaluation of financial well-being stays dynamic. Any con- someone who has such financial efficacy may have a more positive per-
ceptualization that does not include subjective and dynamic factors ception of his/her financial well-being. Furthermore, having a positive
would be incomplete. financial well-being perception may reassure someone of his/her finan-
‘Living standard’ refers to the combination of wealth, services, com- cial efficacy. While we agree that these two concepts can be related,
fort, and material goods available to someone that is considered essen- they denote different things.
tial to his/her living (Fah, 2010). In our definition, we include desired Finally, our conceptualization of financial well-being is not the same
living standard to refer to how someone would prefer his or her quality as financial satisfaction, which can be defined as satisfaction with one's
of life to be; in recent years, this has been the focus of many individual present financial situation (Joo & Grable, 2004). While we agree with
and household financial decisions and planning. Maintaining a specific the general consensus that financial satisfaction can be used as one
standard of living is also closely related to financial behaviors and measure of financial well-being, our definition of financial well-being
goals. For example, people often spent significant amounts of money
on housing, cars, or education, so that these fit the desired life-style;
typically at the expense of long-term financial behaviors such as 2
http://files.consumerfinance.gov/f/201501_cfpb_report_financial-well-being.pdf.
 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237 231

is more encompassing, including someone's present assessment of his/ planning; and (2) communication approaches, which focus on changing
her satisfaction as well as his/her ability to finance the desired life in participant knowledge (through training) or perceptions (Wiener &
the present and the future. Doescher, 2008). Examples of structural changes include tax benefits,
raising saving limits, and automatic saving increases such as “Save
4. Financial well-being: a new framework More Tomorrow” (SMarT) (Thaler & Benartzi, 2007). Another widely
advocated structural approach for long-term financial planning (that
Now that we have defined financial well-being, we will develop a is, retirement planning) is automatic enrollment, which involves auto-
broad framework of financial well-being (see Fig. 1). Elements in the matically enrolling employees in the employer's pension scheme and
framework include interventions, financial behavior, and contextual requiring them to actively opt out if they do not want to join. In terms
and personal factors. The consequences of financial well-being are also of the second approach, there has been a lot of research into the effects
included. Inspired by the literature on transformative service research of financial education (e.g., Lusardi & Mitchell, 2011). Individuals who
(TSR), which analyzes the effects of service concepts on both the indi- have a good understanding of financial principles are found to plan
vidual as well as on the collective level, we discuss financial well- more for retirement (Lusardi & Mitchell, 2011), while other studies
being on both levels. We also include other stakeholders and look at or- have shown that literacy has a positive effect on behavior promoting fi-
ganizational and societal consequences. In the following sections, we nancial well-being (e.g., Mende & van Doorn, 2015). Framing of mes-
will describe each element of the framework in more detail, summarize sages (adapting the wording but not the content of communication)
the state of research in this area, and point out directions for further can be a powerful nudge to shape individuals' intentions and behaviors
research. into a desired direction (e.g., Saez, 2009; Ulkumen & Cheema, 2011).
Framing effects are interesting, since minor changes in the wording of
4.1. Interventions a message can significantly alter an individual's perception and re-
sponse, compared to expensive awareness-generating campaigns and
Interventions are an effective means of motivating consumers' sus- programs (Saez, 2009). Many government institutions around the
tainable behaviors. Research has shown that interventions can encour- world have also set up behavioral insight units that develop interven-
age consumers to engage in desirable behaviors in a variety of tions aimed at ‘nudging’ people into desired behaviors; for example,
contexts, including alcohol consumption (Campo & Cameron, 2006; the Nudge Unit (Halpern, 2015). While many of those studies provide
Perkins, 2002), recycling (Schultz, 1999), sustainability behaviors such interesting and important results, they have not yet found completely
as “grass cycling” (White & Simpson, 2013), financial decisions satisfactory answers about how to improve financial behaviors.
(Beshears, Choi, Laibson, Madrian, & Milkman, 2015), and energy
usage (Allcott, 2011). Thus, at the heart of our framework we place 4.2. Financial behavior
the role of interventions such as financial counseling or advice
(Gerrans, Speelman, & Campitelli, 2014), education (such as financial We have put behavior at the heart of the model because it has a di-
literacy interventions) (Joo, 2008; Lusardi, 2012), framing (Grinstein & rect impact on financial well-being. Possible behaviors include breaking
Kronrod, 2016; White & Simpson, 2013), nudging (Thaler & Sunstein, financially destructive behaviors, stimulating sound financial behaviors,
2008), or structural interventions (tax benefits, Save More Tomorrow, or stabilizing behaviors during critical life situations. More specifically,
etc.) (e.g., Benartzi & Thaler, 2007). financially destructive behaviors include overspending, generating
It is important to consider interventions because they make it possi- debt, paying bills late, or consuming an emergency fund. Interventions,
ble for policy makers and financial institutions to affect financial well- for example through educating consumers or generating awareness,
being. Interventions can be roughly classified into two areas: (1) struc- may aim to reduce those destructive behaviors, thereby increasing fi-
tural approaches, which attempt to change the conditions for financial nancial well-being. Alternatively, interventions may aim to increase

Fig. 1. Pictorial representation of five elements and their interrelationships of a new financial well-being framework.
232 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237

sound financial behaviors such as saving, creating an emergency fund, 4.5. Personal factors
paying bills on time, or retirement planning. Interventions can also
aim to have a stabilizing effect on critical or vulnerable life situations in- The bottom of the framework shows five different types of personal
volving financial shocks; for example, through long-term illness, unem- factors that impact the financial well-being of individuals and families:
ployment, divorce, retirement, and personal bankruptcy. Negotiating socio-demographic factors, skills, traits, financial practices, and life
solutions for these crises and circumstances and preventing them events. Those personal factors can influence financial well-being, but
from becoming long-term problems would have a significant impact also affect the effectiveness of financial well-being interventions or fi-
not only on the financial well-being of individuals and families, but nancial behaviors. In the lower part of the framework we have listed
also on society as a whole. all personal factors that, based on existing research, we would expect
to directly influence, mediate, or moderate the central part of the
4.3. Consequences of financial well-being model. However, since the exact effect may depend largely on the
exact research question, context, and setting, we have left open the
Because of the wide range and significance of its consequences, it is question of how exactly they influence the central part of the model.
important to pay attention to and manage financial well-being. The
framework includes consequences on different levels and for different 4.5.1. Socio-demographic factors
stakeholders; that is, the individual, collective, organizational and soci- Socio-demographic factors play an important role in the context of fi-
etal levels. nancial well-being. For example, women have been consistently found to
On an individual or collective level, financial well-being can positive- be more risk-averse than men (Finucane, Alhakami, Slovic, & Johnson,
ly affect quality of life, success, happiness, general well-being, mental 2000; Flynn, Slovic, & Mertz, 1994; Slovic, 1987; Weber, Blais, & Betz,
health and relationship quality (Dunn & MirzaieI, 2012; Hubler, Burr, 2002). Lusardi and Mitchell (2006, 2007a, 2007b)reported that, in a ma-
Gardner, Larzelere, & Busby, 2016). However, an imbalance in financial jority of their analyses, women seem to be less financially knowledgeable
well-being can affect those factors negatively. For example, a recent than men. Even if women are objectively equally as knowledgeable as
study by Downing (2016) suggested that experiencing financial distress men, they are more insecure about their capacity to make financial deci-
due to foreclosure or being near foreclosure is associated with poor psy- sions (Bucher-Koenen & Lusardi, 2011). Another difference is that finan-
chological and behavioral indicators, such as anxiety and violent behav- cial knowledge provides financial satisfaction for men, whereas
ior, and declining health. women's financial satisfaction is more affected by financial status
On an organizational level, fostering the financial well-being of both (Gerrans et al., 2014). Age can also have a significant effect on wealth ac-
employees and customers is a form of social responsibility, where actions cumulation (Binswanger & Carman, 2012). Lusardi, Mitchell, and Curto
are undertaken to contribute to a larger social good. Thus, supporting fi- (2010) showed that many young people lack the basic financial knowl-
nancial well-being contributes to the corporate social responsibility edge needed to make good financial decisions. Income is generally
(CSR) goals of organizations, which has been found to improve a found to positively influence financial interest (e.g., Donkers & van
company's image (Arendt & Brettel, 2010) and trust (Pivato, Misani, & Soest, 1999) and lead to higher saving rates (Beverly & Sherraden,
Tencati, 2008; Vlachos, Tsamakos, Vrechopoulos, & Avramidis, 2009). Re- 1999); this is believed to be due to the limited access of low-income
search has shown that image and trust have positive effects on profitabil- households to institutionalized saving mechanisms, targeted financial ed-
ity (Cochran & Wood, 1984; García de Leaniz & Rodríguez Del Bosque ucation, and attractive saving incentives and facilitation, which are as-
Rodríguez, 2015). sumed to promote saving behavior (Beverly & Sherraden, 1999).
Financial well-being also has societal implications (Cochran & Wood, Binswanger and Carman (2012) found that having a college or advanced
1984; World Commission on Environment and Development (WCED), degree beyond college has a significant positive effect on wealth accumu-
1987). When a large group of people is facing financial problems at lation. Although the impact of race and different cultures on financial de-
the same time, it creates a societal problem. People consume less or cisions has been studied less extensively than other demographic factors,
rely more on social support, which negatively impacts welfare. Vice there is some evidence that race can potentially influence financial well-
versa, if large groups of people experience financial well-being, they being. When tested on questions concerning financial literacy, African-
consume more and rely less on social support, creating positive welfare Americans and Hispanics were less likely than Caucasians to answer cor-
effects (Griggs et al., 2013; Sacks, Stevenson, & Wolfers, 2012). rectly (Lusardi & Mitchell, 2007b, 2011).
Financial well-being is also influenced by a broad range of different
factors that form the surrounding context and are therefore important 4.5.2. Skills, attitudes and motivations
to consider. These factors are dynamic and may vary over time. Also, Many researchers have asked whether individuals actually possess
the relative importance and impact may be determined culturally and the necessary skills to engage in financially sound behavior and whether
may differ between countries. financial illiteracy, lack of ability, or lack of motivation is the reason why
many fail to accumulate sufficient wealth. Lusardi and Mitchell have
4.4. Contextual factors conducted several studies on financial literacy (Lusardi, 2012; Lusardi
& Mitchell, 2007a, 2007b, 2008, 2011) and found a positive relationship
The contextual factors constitute the overarching setting and are between financial knowledge and planning for retirement. Lusardi et al.
listed on the upper part of the framework. Contextual factors consist (2010) concluded that increasing financial literacy skills is critical for
of economic factors, such as the level of economic development (devel- overall economic and social welfare. However, these results should be
oped economies, economies in transition, and developing economies), viewed with caution, as recent research casts some doubt on the effects
economic growth rates, financial crises, levels of employment, interest of financial literacy on behavior (Fernandes, Lynch, & Netemeyer, 2014).
rates or inflation rates), market factors (such as availability and accessi-
bility of financial solutions, support and advice, marketing, communica- 4.5.3. Traits
tion, and sales efforts for financial services), legal factors (consumer Although demographic information concerning individuals provides
protection), political factors (political stability, terrorism, tax policies, the general basis for differentiating a population, it does not provide
etc.), socio-cultural factors (such as culture, demographic distribution, enough insight to divide people into meaningful segments that explain
population growth rates, level of education, distribution of wealth and financial behaviors or financial well-being. Studying personality traits in
social classes, living conditions, and lifestyle), technological factors this context may add additional information to help understand differ-
(level of digitalization, or new inventions such as robo-advising or mo- ences in financial well-being among people who are similar in terms
bile solutions that offer holistic financial overviews, etc.). of sociodemographic factors. Research shows that personality factors
 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237 233

correlate strongly with well-being variables. Whereas demographic fac- increase consumption while potentially decreasing income as parents
tors were shown to correlate to a maximum of 0.20 with well-being re- exit the labor market. Especially for families with three or more chil-
ports, both self-reported and non-self-reported measures of personality dren, pension savings show a severe decline (Scottish Widows, 2009).
correlate much more strongly with well-being (see Diener and Lucas For other events, whether the effect is positive or negative depends
(1999) for a review). Thus, personality factors may predispose individ- heavily on the specific situation. For example, the death of parents can
uals to experience different levels of well-being. Personality traits that improve financial well-being in case of an inheritance, but decrease fi-
could matter in this context are people's propensity to plan, susceptibil- nancial well-being if, for example, parents have left debt. Likewise, a
ity to interpersonal influence, self-efficacy, a person's propensity to job change could lead to a salary increase or decrease. In any case, em-
trust, and life values related to money, consumption, spending, and sav- ployment-related life events are likely to have a strong impact on
ing (Luhmann, Hofmann, Eid, & Lucas, 2012). people's financial well-being.

4.5.4. Financial practices 5. Financial well-being: a research agenda

Another category of personal factors that impact financial well-
being consist of individual's practices in relation to their finances. We now present a research agenda of important research topics re-
These practices are partly formed through financial socialization. Chil- lated to financial well-being, displayed in Table 2, that are based on the
dren learn financial practices from their parents and others as they elements of the new framework presented in the previous sections.
grow up. For example, socioeconomic advantage and disadvantage has First of all, since financial well-being is an emerging research area,
been found to be transmitted between generations (e.g., Cooper & we propose that there is a need for both comprehensive and fine-
Stewart, 2013; Hubler et al., 2016). Many studies have confirmed that grained conceptual development. Because we have defined financial
parental influence through financial socialization has a direct and signif- well-being in a broad manner, we have also opened up many different
icant influence on the financial attitudes and financial behavior of chil- areas. A whole spectrum of cognitive, behavioral, psychological and
dren and young adults (e.g., Gudmunson & Danes, 2011; Jorgensen & also emotional aspects deserve more consideration – not just each of
Savla, 2010). Actual spending behavior and financing spending with dif- these factors in themselves, but also the interplay between them; for ex-
ferent forms of credit have been found among the traps that lead to fi- ample, how emotional issues affect cognition and vice versa. Although
nancial stress (Hojman et al., 2016). Wealth management, including happiness has been studied to some extent, we concur with other re-
cash-flow management, credit management, saving, and investment searchers (e.g., Gaur, Herjanto, & Makkar, 2014) who have called for re-
practices (Hilgert, Hogarth, & Beverly, 2003), are all part of financial search into emotions more broadly. There seems to be a complete lack
practices and influence financial well-being. of such studies in the research on financial well-being, perhaps due to
the popularity of the objective approach. Here, we also refer to different
4.5.5. Life events positive and negative emotions, as different emotions have different ef-
Individuals frequently face circumstances or changes that potential- fects. For example, Lerner and Keltner (2001) found that fearful people
ly affect their financial behavior and well-being. Previous research has are pessimistic, whereas both angry and happy people are optimistic.
shown that these so-called life events can have short- and long-term ef- Our definition offers additional insights; for example, on what differ-
fects on subjective well-being (SWB) (Luhmann et al., 2012). Table 1 ent kinds and levels of desired life standards there are and on the mean-
lists selected key life events that are likely to be relevant for financial ing of financial freedom of choice. Both of these should offer a fresh
well-being. Those life events can be subdivided into employment-relat- perspective and capture individuals' thinking in line with the new sub-
ed life events that typically affect the income side, and personal life jective definition.
events that typically affect expenditures. A different option could be to choose a longitudinal perspective and
Take marriage as an example: Lupton and Smith (1995) proposed aim to identify different typical and atypical patterns that either weaken
that marriage can affect saving behavior in two ways. First, marriage or strengthen the factors of financial well-being. In addition, key drivers
can serve as a “risk-reducing institution” (Lupton & Smith, 1995), of financial well-being for different segments could be explored, such as
where partners insure each other for unforeseen events, making savings those related to the personal factors mentioned in the framework; that
less important. In addition, marriage can be seen as a “wealth-enhanc- is, socio-demographics, skills, traits, financial practices, and life events.
ing institution” (Lupton & Smith, 1995), reducing monthly expenditures We also recommend analyzing life events that are likely to cause funda-
by sharing costs, thereby providing more opportunity to save. The pur- mental changes in financial well-being; for example, when individuals
chase of a house can also have a significant effect on the ability to accu- experience an exceptional increase (such as a lottery win or inheri-
mulate wealth (Binswanger & Carman, 2012). Whereas life events of tance) or decrease (such as bankruptcy) in wealth. In addition, we
this type have a positive effect on financial behaviors and well-being, strongly endorse looking at other disciplines, including psychology, be-
others generally have a negative effect. For example, having children havioral finance, sociology, and social anthropology, for useful models
generally depresses saving behavior (Ricketts, Rezek, & Campbell, and conceptualizations to apply in marketing studies. Furthermore,
2013) and pension preparedness (Scottish Widows, 2009), as parents we would recommend applying a financial well-being perspective to
current key concepts and issues in marketing research and practice.
Table 1 From a customer perspective, how could financial well-being enrich,
Overview of selected life events affecting financial well-being. for example, customer experience, customer value (or the destruction
Employment-related life event Personal life events of value), service satisfaction, and the adoption and use of smart services
and mobile applications? Here, financial well-being could be measured
Being a student Marriage
Starting work for the first time Birth or adoption of child
at the individual level as well as the collective level; that is, the family or
Retirement Last child leaves home community level. Financial well-being is particularly related to the
Being forced to retire Death of spouse emerging transformative service research discipline that focuses on cre-
Losing one's job Death of parents ating ‘uplifting changes’ that aim to improve the lives of individuals
Changing jobs Having grandchildren
(both consumers and employees), families, communities, society, and
Reduction in hours of employment Buying a house
Starting own company Divorce or separation the ecosystem more broadly (Anderson et al., 2013). Using an interac-
Moving to a different location tional approach, additional insights could be gained by infusing financial
Caring for aged relatives well-being into value co-creation, service innovation, and service eco-
Chronic illness or serious injury systems. From a company perspective, financial well-being could be
Parent put in nursing home
useful for discovering not only new business ideas and customer
234 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237

segments, but also values in the design of digitalization, (sustainable) neglected, but could benefit from research with a focus on financial
business models, and contact personnel's skill sets. These notions can well-being.
be considered to have a financial underpinning that has so far been The second set of new research themes we propose relates to the
measurement of financial well-being. Here, measurement refers to its
meaning in a broad manner, as we need a holistic set of methodologies
Table 2
Research agenda for financial well-being. to generate both in-depth insights and generalizable quantitative re-
sults. Thus, research into financial well-being should embrace qualita-
1. Conceptualization of financial well-being
tive interviews as well as surveys, field experiments, archival data, or
The current early stage of research warrants comprehensive and fine-grained
conceptual development. We suggest:
neuroscience techniques such as EEG, eye-tracking, skin-conductance,
and heart-rate measures in order to generate knowledge. Research
- Exploring (additional) subjective and cognitive components of financial well-being.
should also experiment with novel research approaches from semiotics,
- Identifying (additional) constructs that may have relevance for financial well-
being. cultural consumption, sociology, critical perspective, anthropology,
- Enriching current concepts and issues in marketing research and practice with a Consumer-Culture-Theory, historical and novel data collection methods
view to financial well-being. (such as netnography, diaries, video filming, text and image analysis),
2. Measuring financial well-being and comparative approaches. A particularly valuable option could be
The complex nature of the concept necessitates using multiple methods. We suggest:
to analyze the match between objective/numerical and subjective/cog-
- Exploring the correspondence/mismatch between objective and subjective nitive indicators. For example, there could be situations in which some-
indicators of financial well-being.
one possesses considerable wealth but perceives their financial well-
- Developing reliable and valid measures for financial well-being on individual,
household, and group levels.
being as poor, and vice versa. Different scales are needed, as are metrics
- Exploring the use of big data and data analytics to measure and test financial and standards for different purposes. These guidelines could be used by
well-being. companies to better understand their customer base and clients, as well
- Developing standards and metrics for different levels/types of financial well-being as by authorities and organizations. Our new definition inspires the de-
for use by companies and institutions.
velopment of dimensions and scales to describe desired lifestyles and fi-
- Using and comparing different data collection methods to measure financial well-
being. nancial freedom of choice. We also see huge potential in the use of big
- Including different time scopes and levels of analyses to measure financial data and data analytics, particularly over time. Moreover, we strongly
well-being. encourage longitudinal studies and the selection of different levels of
3. Interventions to improve financial well-being and financial behavior analysis, such as individual, household, group, community, society,
We suggest the following ways of improving financial well-being:
and country.
- Developing and implementing new financial interventions to improve finan- The third area in need of more research is the ways in which finan-
cial well-being.
cial well-being can be influenced and favorable financial behavior can
- Testing the effectiveness of different financial interventions on financial be-
havior and financial well-being. be supported. Even though financial well-being is of direct relevance
- Applying technological innovations to monitor and assist in financial well-- to each of us and closely linked to real life, there have been surprisingly
being interventions. few attempts to develop efficient interventions to support it. It is a re-
4. Consequences of financial well-being search area that is very much in an early stage; therefore, studies to de-
Financial well-being has many consequences that need to be explored. We suggest:
velop new tools and practices are needed. We suggest that
- Analyzing how financial well-being affects individual and collective quality of interventions to improve financial well-being could be supported simi-
life, mental health, and interpersonal relationships. larly to the way in which wealth and well-being are studied and pro-
- Examining how individual and collective financial well-being affects compa-
nies and organizations.
moted in transformative service research (e.g., Anderson et al., 2013;
- Assessing how individual and collective financial well-being affects commu- Anderson & Ostrom, 2015; Mende & van Doorn, 2015). There are situa-
nities and societies. tions in which outside support is clearly needed to, for example, break
- Evaluating how to improve the awareness of financial well-being in compa- financially destructive behaviors or stabilize temporary emergencies,
nies and organizations, especially in those that may have consumers in finan-
but there could also be a need to create awareness and support finan-
cial distress, and how to develop business models to serve them better.
- Researching how to increase the awareness of financial well-being in society. cially sound behaviors in general. Thus, interventions of different
- Investigating the links between financial well-being and sustainability atti- kinds through education or counseling need to be developed. Testing
tudes and behavior. different intervention concepts and their effects and doing so in new
- Exploring the relationships between financial well-being and other marketing teams and constellations is encouraged. Researchers with supplementa-
and services-related constructs.
5. Contextual factors of financial well-being
ry skills from disciplines such as communication theory, sociology, and
Financial well-being is embedded in a societal setting, and certain contextual factors information theory could cooperate, and authorities and companies
need to be understood. We suggest: could also be involved in this process. Thus, creating new sorts of
- Identifying different contextual factors and empirically testing their differen-
teams would be beneficial. Another point to highlight is that, because
tial and collective impact on financial well-being. of its relevance and potential, financial well-being should be a promis-
- Comparing different countries and types of markets in terms of their effect on ing and appealing theme for research project applications for company,
financial well-being. organization, governmental, and EU funding. Moreover, IT innovations
- Evaluating how changes in contextual factors affect financial well-being in the
such as apps and wearables would be modern and suitable tools for pro-
short- and long-term.
6. Personal factors affecting financial well-being moting financial well-being that would appeal especially to the younger
Personal factors are fundamental to financial well-being and need to be acknowledged generations. As banks are currently developing related tools because of
in a broad manner. We suggest: the digitalization trend, they could be particularly interested in financial
- Identifying different personal factors and empirically testing their differential well-being issues as a way to add value to their service portfolio.
and collective impact on financial well-being. The consequences of financial well-being form a fourth broad theme.
- Measuring and comparing the effects of different personal factors on financial So far, these consequences have been studied primarily in terms of the
well-being.
effects on the individual level, but we suggest also taking other kinds
- Analyzing how financial well-being is transmitted/learned in households,
groups, and communities. into account. What makes financial well-being so meaningful to study
- Identifying key drivers of financial well-being evaluation for different segments. is its relevance and its multi-faceted effects. So far, the ways in which fi-
- Identifying the drivers of financial well-being evaluation over different life events. nancial well-being affects individuals' everyday life has so far only been
- Revealing processes that deteriorate or strengthen financial well-being over the recognized to a limited extent (e.g., Sacks et al., 2012). Therefore, ana-
short- and long-run.
lyzing life-satisfaction and happiness, mental health, and relationships
 E.C. Brüggen et al. / Journal of Business Research 79 (2017) 228–237 235

with others would be natural research themes with the potential to gen- definition that will form a common basis for future research in this do-
erate novel insights into consumers and their lives. Equally important main. Our definition incorporates the relevant stakeholders as well as
are links to companies and organizations and also communities and so- the time horizon covered by decisions that affect financial well-being.
cieties, implying an eco-system or network perspective on financial We decided to propose a very broad definition that recognizes the com-
well-being. This would benefit companies with financially distressed plex nature of an individual's financial well-being, including fundamen-
customers, but also other stakeholders that aim to promote general tally different but supplementing elements such as cognition, emotions,
well-being in society, which could be done by spreading success stories and action and the relationships between these various elements.
and best practices. Furthermore, we recommend linking financial well- Therefore, in contrast with many previous studies, we have not stressed
being to sustainability concerns and discovering ways to simultaneously just the objective dimension of well-being, but have also discussed its
promote both, for the benefit of the whole society and the individual. subjective component. Furthermore, we have recognized the interde-
This combination could also be an idea that has business potential. pendence between the individual and society. This provides the addi-
Since context is very important to financial well-being, we invite re- tional advantage of a broader view, since the financial well-being of
searchers' attention to this aspect as well. Sub-aspects of economic, individuals is not disconnected from, but instead closely linked to, the
legal, political, socio-cultural, technological, and market factors are all societal context and the changes taking place in it. Second, we have syn-
areas in need of more attention. Both structural and dynamic research thesized and structured the current state of the literature. Based on this
designs focused on these aspects are recommended. Since countries discussion, we developed a comprehensive framework showing the de-
and cultures differ, comparative approaches would also be useful. terminants and outcomes of financial well-being. Moreover, our frame-
Money is a fundamental aspect of human life throughout the world, work shows the context factors and personal characteristics that might
and financial well-being needs to be approached in diverse ways – moderate these relationships. In doing this, we have informed aca-
from politics, culture, and economics to digitalization and financial ser- demics about potential avenues for future research. We developed six
vice development. For instance, selecting specific events or changes on a research themes and a comprehensive set of research topics that could
general societal level and revealing how they affect financial well-being be addressed in future research in order to create knowledge on the an-
could benefit political decision-making, social welfare, and business tecedents, consequences, and influencing factors of financial well-being.
innovation. In line with transformative service research, this paper addresses both
Last but not least, and following from the broad range of personal the individual as well as the collective level and the community. In ad-
factors outlined in the framework, we believe that much can be revealed dition, we have included other stakeholders and looked at organization-
about financial well-being by examining different such factors. Most re- al and societal consequences. Thus, we hope that this article contributes
search to date has focused on socio-demographic and skills as anteced- to theory development by stimulating research in this area, thereby en-
ents to financial well-being, but we believe that personal traits, financial hancing our knowledge and understanding of financial well-being, the
practices, and zooming in on different life events are new and fruitful re- factors that influence it, as well as its consequences. We hope that this
search areas. Taking a subjective perspective on financial well-being analysis consolidates and extends knowledge on financial well-being
while linking it to, for example, motivation to manage one's own finan- and encourages more research in this prominent field. Overall, this
cial status, spending behavior, or selected life events can be expected to work may inspire marketing researchers to continue expanding our
substantially enrich our understanding. For example, financial behavior knowledge of financial well-being.
such as credit card use, gambling, compulsive buying, payday personal From a managerial and public policy perspective, we provide the fol-
(online) loans, and over-indebtedness represent behavioral practices lowing insights. First, addressing the research themes proposed in this
that are risky and costly for consumers and society and therefore war- article will improve the financial well-being of individuals and families,
rant closer attention. Similarly, self-efficacy (that is, the ability to man- which will have a positive impact on quality of life and happiness, gen-
age financial problems and cope with setbacks) would be worth eral well-being and mental health, and the quality of interpersonal rela-
supporting through improved insight from intervention studies. Values tionships. In the same vein, the suggested research will provide
such as materialism and the meaning of buying could be other research knowledge about how financial well-being can be improved in order
topics that are particularly suitable to link to the topic of desired lifestyle to help avoid potentially negative effects on consumption in the long
and financial freedom of choice. Furthermore, wealth management run and increased reliance on social support. Financial service providers
(Cho, Geistfeld, & Loibl, 2014; Hira, Sabri, & Loibl, 2013; Pompian, will learn more about how people behave financially and which inter-
2012), including short-term and long-term deliberate and undeliberate ventions work, in order to facilitate financially sound behaviors. This
wealth handling, including savings, investment, cash as parts of an in- knowledge can be used to improve their services so that financial
vestment portfolio, and insurance preferences and management, could well-being is increased.
be other areas related to financial well-being that could be encouraged
from a marketing research perspective.
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