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Household Financial Capability and Economic Hardship: An Empirical Examination of the Financial Capability Framework

Author

Listed:
  • Sicong Sun

    (Washington University in St. Louis)

  • Yu-Chih Chen

    (The University of Hong Kong)

  • David Ansong

    (University of North Carolina at Chapel Hill)

  • Jin Huang

    (Saint Louis University)

  • Margaret S. Sherraden

    (Washington University in St. Louis)

Abstract

This study investigates the components and mechanisms of the financial capability framework using national representative data from the 2015 National Financial Capability Study with the structural equation modeling approach. We find financial socialization and financial education are significantly associated with both financial access and financial literacy, which are associated with positive financial behavior and negatively associated with economic hardship. We further find that financial access plays a more pronounced role in the mediation effects decomposition compared to financial literacy. Our findings demonstrate that financial capability lies in both the opportunity to act and the ability to act—with opportunity relatively more important than ability—and that financial capability is strongly associated with household experiences of economic hardship. Policies and programs should provide accessible and affordable financial products as well as enhance effective financial education and guidance to promote financial inclusion.

Suggested Citation

  • Sicong Sun & Yu-Chih Chen & David Ansong & Jin Huang & Margaret S. Sherraden, 2022. "Household Financial Capability and Economic Hardship: An Empirical Examination of the Financial Capability Framework," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 716-729, December.
    • Handle: RePEc:kap:jfamec:v:43:y:2022:i:4:d:10.1007_s10834-022-09816-5
    DOI: 10.1007/s10834-022-09816-5
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    References listed on IDEAS

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    1. Tomasz Potocki & Sylwester Białowąs, 2023. "What Factors Predict a Positive Change in a Consumer’s Financial Capability over Time? The New Evidence from Poland," Journal of Family and Economic Issues, Springer, vol. 44(3), pages 634-654, September.
    2. Zewei Liu & Ji-Kang Chen, 2024. "Financial Resilience and Adolescent Development: Exploring a Construct of Family Socioeconomic Determinants and Its Associated Psychological and School Outcomes," Child Indicators Research, Springer;The International Society of Child Indicators (ISCI), vol. 17(5), pages 2283-2318, October.
    3. Jeffrey Anvari-Clark & David Ansong, 2022. "Predicting Financial Well-Being Using the Financial Capability Perspective: The Roles of Financial Shocks, Income Volatility, Financial Products, and Savings Behaviors," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 730-743, December.

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