2.1. Conceptual framework

Figure 1 provides a framework for examining the FWB literature by summarizing the various ways that FWB has been measured in the literature. We should note that Figure 1 displays a framework for organizing the literature, rather than serving as a conceptual model of the FWB construct. Well-regarded general conceptual models representing how researchers conceive of FWB and its antecedents can be found in Kempson and Poppe (Reference Kempson and Poppe2018) and Joo (Reference Joo2008), as well as many of the empirical papers that we review.Footnote ³ The literature on FWB typically focuses on how individuals achieve FWB or on factors associated with differences in FWB across individuals. For the purposes of this review, we define FWB as the combined outcome of financial behaviors and decisions related to budgeting, borrowing, spending, saving, and investing, taking into account individual expectations, perceptions, and satisfaction. The papers we summarize in this review examine various measures of FWB, which we organize based on the type of FWB measure that is studied. In our assessment, these fall into four logical categories: (1) composite measures of FWB; (2) financial outcomes; (3) measures of individual perceptions related to FWB; and (4) financial behaviors. Regardless of the category, the authors often refer to them as measures of FWB.

Figure 1.

How has FWB been conceptualized and measured in the literature? A framework for examining the literature.

Figure 1. Long description

A diagram of the conceptualization and measurement of financial well-being. The diagram is divided into several sections, each detailing different aspects of financial well-being. The top section defines financial well-being as the combined outcome of financial behaviors and decisions related to budgeting, borrowing, spending, saving, and investing, taking into account individual expectations, perceptions, and satisfaction. The left side of the diagram is labeled Measures of FWB and includes three categories: Outcomes, Single-item Perceptions, and Behaviors. Outcomes are objectively measurable financial outcomes such as income, wealth, debt, home ownership, and retirement savings. Single-item Perceptions include self-reported attitudes and feelings about financial standing and prospects, such as financial satisfaction, financial stress, and retirement preparedness. Behaviors refer to actions taken by an individual such as planning, saving practices, budgeting, credit management, and investment allocation. The right side of the diagram is labeled Inputs to FWB and includes three categories: Financial, competence, & confidence variables, Psychological, preference & non-cognitive abilities, and Demographic controls. Financial, competence, & confidence variables include financial literacy, financial self-efficacy, financial capability, executive functioning, numeracy, cognitive ability, overconfidence, and experiences/shocks. Psychological, preference & non-cognitive abilities include time preferences, risk preferences, personality traits, propensity to plan, and self-control. Demographic controls include gender, age, income, marital status, and race. The central section of the diagram is labeled Composite Measures, which are measures of FWB that estimate a single metric composed of multiple components related to objective and/or subjective financial behaviors, perceptions, or outcomes.

Composite measures attempt to describe FWB in a single metric. We present and discuss this category first because it encompasses many of the concepts included in the other measures. However, many papers analyze FWB using single-item indicators. Some measures of FWB, such as financial satisfaction or retirement preparedness, focus on subjective assessments, whereas others focus on objectively quantifiable outcomes such as net worth or retirement savings. Lastly, there are many papers that analyze financial behaviors, such as budgeting and investing, that are viewed as indicators of FWB.

In the figure, financial outcomes, perceptions, and behaviors are depicted below the composite measures since they typically measure only one aspect of FWB at a time. This arrangement is not intended to imply causality. However, there are inherent relationships between these concepts, and they are often represented as drivers of FWB in the theoretical models referenced above. For example, saving behaviors generally result in higher wealth outcomes, which may influence a person’s perception of retirement preparedness. These components may all be indicative of overall FWB. In early studies, researchers may have focused on these component measures due to data limitations. Today, however, there are many large survey datasets that include variables that fit in all four of the categories in Figure 1. In the US, for example, nationally representative datasets such as the Health and Retirement Study (HRS),Footnote ⁴ the Survey of Consumer Finances,Footnote ⁵ FINRA’s National Financial Capability Survey (NFCS),Footnote ⁶ and the Understanding America Study (UAS)Footnote ⁷ include observations for variables such as FWB, financial literacy, income, wealth, savings, debt levels, financial behaviors, risk, personality traits, health, and demographic data.Footnote ⁸ The choice of FWB measure may be informed by the focus of the study and the source of the data.

Other researchers gather data through the experimental method. Generating observations in controlled laboratory settings (or through similar online processes) provides a complementary methodology for studying financial decision-making. It adds value by providing control over treatments and specific financial decisions. It also provides a means to directly compare self-reported perceptions of their own characteristics (such as numeracy, executive function, financial ability, knowledge, and time preferences) against observable outcomes (such as performance on a financial task or financial literacy quiz). Compared with surveys where decisions are hypothetical in nature, experimental studies allow researchers to provide incentives for effort and/or outcomes in decision-making.Footnote ⁹

The right-hand side of Fig. 1 identifies various inputs that have been identified as being influential to the various measures of FWB. These are often included in empirical models as explanatory variables and controls. For example, individual characteristics such as personality, risk and time preferences, financial literacy, and demographic characteristics are often used as controls in empirical studies. Depending on data sources, these characteristics may be measured in different ways. Because the focus of this review is on research that defines and explains FWB, we specifically selected papers that help explain the relationships between FWB and various individual attributes. We broadly categorize these inputs as pertaining to (a) knowledge, skill, or financial confidence or (b) psychological, individual preferences, or other non-cognitive abilities. We address some natural overlap between the categories of FWB in our organizational framework and the following discussion.

2.2. Composite measures

To date, researchers do not all agree on a single composite metric for FWB. This is in part due to the complex nature of the concept and the practical limitations of the number of questions that can be deployed in large surveys. We recognize that many composite FWB scales are comprised primarily or entirely of survey items pertaining to perceptions, and some incorporate financial behavior practices (such as saving). We classify an FWB measure as composite if it combines multiple items into a single measure.

The CFPB conducted consumer research to arrive at an evidence-based definition encompassing criteria for a composite measure of FWB that is now widely applied and referenced across research and policy discussions. It defines FWB as a state in which individuals: (1) perceive they have control over short-term finances; (2) would be capable of absorbing a financial shock; (3) are progressing toward financial goals; and (4) have the financial flexibility to allocate time and money to enjoyable life activities. Formalizing the concept of FWB in this way enabled the CFPB to develop a scale for researchers to measure this complex concept consistently across surveys and over time. This definition and its representative metric, while not fully comprehensive or the sole means of interpreting and measuring FWB, have gained acceptance and now appear to provide a common reference point for researchers in this area of study.

Researchers are currently developing different approaches to measuring FWB that account for the time dimensions, perceptions, and quantifiable outcomes that are components of FWB.Footnote ¹⁰ Other composite measures of FWB emphasize subjective perceptions more heavily than the CFPB measure. Brüggen et al.’s (Reference Brüggen, Hogreve, Holmlund, Kabadayi and Löfgren2017) construct of FWB depends heavily on reference points, social comparisons, and an ability to conceive of the future, and is very susceptible to changing with an individual’s perceptions. However, their paper does not recommend specific survey items for constructing a composite measure designed to represent their definition of FWB. Netemeyer et al. (Reference Netemeyer, Warmath, Fernandes and Lynch2018) proposed the Perceived FWB Scale, which incorporates perceptions of current money management stress and expected future financial security. Similarly, Strömbäck et al. (Reference Strömbäck, Skagerlund, Västfjäll and Tinghög2020, Reference Strömbäck, Lind, Skagerlund, Västfjäll and Tinghög2023) use a composite measure that combines financial anxiety and perceived financial security. A scale proposed by Mahendru et al. (Reference Mahendru, Sharma, Ameen, Do, Periera and Singh2025) incorporates aspects of financial security, financial preparedness and satisfaction, financial resilience, and financial wisdom.

The role of perceptions in FWB can limit comparability across measurements, studies, and time. For example, Fan and Henager (Reference Fan and Henager2021) distinguished financial behaviors along temporal lines and examined their impact on FWB as measured by the CFPB-FWBS. They found that the relationships between well-being, knowledge, and behavior are sensitive to the time dimension under consideration, calling into question the comparability of the scale across analyses. While some researchers argue for a standard FWB scale in the field (Singh and Malik Reference Singh and Malik2022), others propose applying scales tailored to specific groups for analysis or to account for life-cycle timing (e.g., Vieira et al. 2022; Sorgente et al. Reference Sorgente, Atay, Aubrey, Bhatia, Crespo, Fonseca and Lanz2024; Goncalves et al. Reference Goncalves, Ponchio and Basilo2021; Salignac et al. Reference Salignac, Hamilton, Noone, Marjolin and Muir2020; Wilmarth Reference Wilmarth2021).

Many financial firms have a vested interest in demonstrating that their products and services improve the FWB of their clientele. Some have developed composite scales to enable tracking of FWB. The scales include indicators for both objective outcomes and behaviors and individual perceptions. These types of studies tend to be descriptive in nature and do not provide insight into causative factors.Footnote ¹¹

2.3. Quantifiable financial outcomes

Many FWB studies focus on objectively quantifiable outcomes that are believed to be indicative of FWB, such as net worth, retirement wealth, and debt. These outcomes can differ based on an individual’s financial environment, the quality of their decisions, chance, and other exogenous factors. For instance, retirement wealth is likely to be higher for individuals with access to employer-provided plans but may also be influenced by personal characteristics such as risk attitudes, financial knowledge, and financial efficacy. See, for example, Merkoulova and Veld (Reference Merkoulova and Veld2022) and Van Rooij et al. (Reference Van Rooij, Lusardi and Alessie2012).

2.4. Subjective perceptions

Various measures of individual perceptions are now included in many of the large survey datasets. A person’s perception of their FWB cannot definitively summarize their financial position, but is likely to be correlated with it. Financial satisfaction, financial distress, and retirement preparedness are examples of commonly used perception variables. These variables are usually self-assessments based on a scale (e.g., 1 to 5) or relative agreement or disagreement with a statement. A person’s perception of their well-being is hypothesized to be closely linked to personal characteristics and experiences such as personality traits, financial literacy, and confidence. Given that most composite measures also encompass perceptions, we categorize papers in this category if they focus on one perception at a time.

2.5. Financial behaviors

Financial behaviors include decisions and actions related to budgeting, borrowing, spending, insuring, saving, and investing. These variables are typically binary responses to questions asking whether the participant engages in a particular activity. In some cases, such as retirement plan participation, the behaviors may be directly observed. Data on financial behaviors are not always available in larger national surveys, but is beginning to be collected more widely. In some cases, this information is collected for smaller subgroups of the survey population. We acknowledge different ways of interpreting financial behaviors as related to FWB. Sometimes, financial behaviors are described by authors as financial outcomes (e.g., stock market participation) or as explanatory, rather than dependent, variables. We summarize the literature that includes financial behaviors as dependent variables and discuss their inclusion in other studies as explanatory variables when appropriate.

2.6. Individual characteristics

An individual’s financial environment and personal characteristics, such as cognitive ability, numeracy, financial literacy and knowledge, confidence, risk attitudes, and time preferences, are often hypothesized to be influential for FWB. However, the differences in measurement and the interactions between various inputs make it difficult to isolate the effects of individual variables. Cognitive ability, numeracy, financial literacy, and knowledge are usually measured based on responses to quiz questions. Lusardi and Mitchell (Reference Lusardi and Mitchell2014) explain the rationale for the “Big Three” financial literacy standardized questions that measure understanding of compound interest, inflation, and diversification. These have been deployed in surveys around the world to measure financial literacy. Both financial knowledge and financial literacy have been shown to be important factors for various measures of FWB. Presumably, those exhibiting these characteristics are able to make more informed financial decisions, exhibit positive financial behaviors, and thereby improve their FWB outcomes. One concern mentioned in the literature is that financial literacy may change over time, dampening the relationship between financial literacy measured at one time and financial outcomes that occur in the future. However, Angrisani et al. (Reference Angrisani, Burke, Lusardi and Mottola2020) find that financial literacy is relatively stable among respondents during the period under consideration.

Numeracy, or the ability to handle basic mathematical calculations, is also commonly included as a control. Peters et al. (Reference Peters, Tomkins, Knoll, Ardoin, Shoots-Reinhard and Meara2019) find that when numeracy is included as a control, financial knowledge is no longer a significant factor. Another variable that consistently is found to be a significant factor for FWB is financial self-efficacy, or the degree of confidence in one’s ability to make financial decisions and to achieve financial goals. Netemeyer et al. (Reference Netemeyer, Warmath, Fernandes and Lynch2018) find that perceived financial self-efficacy is positively and significantly associated with expected future financial security. Similarly, Van Rooij et al. (Reference Van Rooij, Lusardi and Alessie2012) finds that financial self-confidence is a significant determinant of retirement planning. Closely related to efficacy is the concept of executive function, which is a collection of top-down cognitive control processes that regulate behaviors, thoughts and feelings. In a laboratory experiment, Strömbäck et al. (Reference Strömbäck, Skagerlund, Västfjäll and Tinghög2020) found that subjective measures of self-control were better predictors of FWB than an objective measure of executive function.

The state of the art for eliciting psychological variables, such as risk preferences, time preferences, and personality traits, has evolved over time. Obtaining reliable measures requires survey participants to complete a battery of questions for each characteristic. For example, the widely accepted method for measuring personality traits requires responses to 60 questions. The preferred method for eliciting risk preferences requires responses to a series of risky choices. Many survey datasets instead use a simple self-assessment of risk tolerance or risk aversion based on a scale of one to ten. Using this variable, Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) find that risk tolerance is positively related to various measures of FWB. Similarly, discount rate elicitation uses choice architecture in which participants make decisions about present versus future rewards. Most large surveys collect these variables at less regular intervals since it is generally assumed that they are relatively time-invariant.

Many surveys, including those identified above, do not directly include discount rate elicitation. Consequently, much of the research that explicitly examines FWB does not include this variable. However, research shows that time preferences, even when measured in adolescence or early adulthood, are predictors of future life outcomes and significantly affect financial efficacy and well-being (Castillo et al. Reference Castillo, Jordan and Petrie2018; Golsteyn et al. Reference Golsteyn, Gröqvist and Lindahl2014). Cognition and risk preferences are similarly influential on life outcomes (Almlund et al. Reference Almlund, Duckworth, Heckman and Kautz2011; Becker et al. Reference Becker, Deckers, Dohmen, Falk and Kosse2012). Experimental studies can evaluate the impact of targeted policies or interventions while measuring and controlling for important individual characteristics that are often unobservable in surveys. For example, Meier and Sprenger (Reference Meier and Sprenger2013) investigated the decision to acquire financial information, finding that having a higher discount rate is highly correlated with information acquisition.

2.7. Causality

Although results showing significant associations between FWB and various inputs are often couched in terms of predictors or drivers, it is difficult to empirically prove a causal relationship. For example, does financial literacy result in higher FWB, or could it be that FWB enables a person to become more financially literate? A few studies address this issue head-on. Longitudinal studies attempt to infer causality by measuring individual characteristics at younger ages and looking at financial outcomes at older ages. For example, using longitudinal datasets, Angrisani et al. (Reference Angrisani, Burke, Lusardi and Mottola2023) and De Beckker et al. (Reference De Beckker, Frijns, Hubers and Derkx2025) found financial literacy to be a significant predictor of financial outcomes. Similarly, longitudinal analysis by Estrada-Mejia et al. (Reference Estrada-Mejia, de Vries and Zeelenberg2016) found that numeracy was predictive of household wealth. Biljanovska and Palligkinis (Reference Biljanovska and Palligkinis2018) test their explanatory variable of self-control for stability over time in their data to assess the plausibility of reverse causality with their independent variable of household wealth. Other studies apply instrumental variable (IV) analysis in cross-sectional data (Behrman et al. Reference Behrman, Mitchell, Soo and Bravo2012; Van Rooij et al. Reference Van Rooij, Lusardi and Alessie2012). This research provides growing evidence that the associations between individual characteristics and FWB found in cross-sectional analysis are at least consistent with causality running from those characteristics to FWB. Nevertheless, we make no assumptions about causality in the following discussion of key themes in the literature.

3.1. Studies explaining composite FWB

We define composite measures of FWB to be those that estimate a single metric composed of multiple objective and/or subjective indicators of financial behaviors, perceptions, or outcomes. As illustrated in Table 1 summary of these studies, the most common composite measure is the CFPB-FWBS. However, the studies focus on different predictors and controls. The composite FWB studies summarized below illustrate several of the themes across the FWB literature, including the roles of psychological traits, time preferences, financial literacy, and time frame under consideration.

Table 1.

Analyses of composite measures of financial well-being

Table 1 Long description

A table with 15 rows and 4 columns. The columns are labeled Study, Dependent variable(s), Financial, competence, and confidence variables, and Psychology and preference variables. The table lists various studies and their respective dependent variables, financial competence and confidence variables, and psychology and preference variables. Each row provides detailed information about the studies, including the specific variables and measures used. The studies focus on different predictors and controls related to financial well-being.

Source: Authors’ summary analysis. Papers that also analyze dependent variables in the categories in Tables 2–4 are indicated with a superscript: outcomes = “o”; perceptions = “p,” and behaviors = “b.”

Netemeyer et al. and several additional studies explore the role of self-control and other psychological or personality factors explaining FWB as reflected by composites of current money management stress and expected future financial security. Like Netemeyer et al. (Reference Netemeyer, Warmath, Fernandes and Lynch2018), Van Raaij et al. (Reference van Raaij, Riitsalu and Poder2023) find self-control as indicated by an impulsivity scale to be associated with current money management stress, but not expected future financial security. Interestingly, results by Strömbäck et al. (Reference Strömbäck, Lind, Skagerlund, Västfjäll and Tinghög2023) show subjective perceptions of good self-control were associated with both composite measures (in the expected directions). In a follow-up study (Strömbäck et al. Reference Strömbäck, Skagerlund, Västfjäll and Tinghög2020), which controlled for an objective measure of self-control, subjective perception of self-control was a significant explanatory variable, whereas the objective measure was not. Personality traits associated with self-control also show significant associations with composite FWB measures. For example, Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) find that conscientiousness and neuroticism are, respectively, positively and negatively related to FWB.

Other studies investigate how individual time preferences and attitudes about planning for the future relate to composite FWB. Middlewood et al. (Reference Middlewood, Chin, Johnson and Knoll2018) use the CFPB-FWBS to investigate the impact of intertemporal preferences on FWB for respondents with savings accounts.Footnote ¹² Respondents with high discount rates had significantly lower levels of FWB, associated with difficulty in paying monthly expenses, reduced ability to sustain a shock, and having less money in liquid savings. Lee et al. (Reference Lee, Lee and Kim2020) found that the propensity to plan is positively associated with the CFPB-FWBS score. Similarly, Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) found a strong inverse relationship between the individual discount rate and the CFPB-FWBS score, as well as many other indicators of FWB. Applying the Netemeyer et al. FWB construct (current money management stress and expected future financial security), Van Raaij et al. (Reference van Raaij, Riitsalu and Poder2023) found future time perspective to be a key determinant of expected future financial security, but not current money management stress. In their study, current money management stress was largely explained by self-control.

All the papers discussed thus far include measures of financial literacy or knowledge as explanatory variables, and in the majority, financial literacy is significantly associated with composite FWB. Additional studies show that composite FWB is positively associated with financial literacy across demographic groups (Clark et al. Reference Clark, Lusardi and Mitchell2025) and generations (Fan and Henager Reference Fan and Henager2025). However, much of the research shows that the relationships between explanatory variables, including financial literacy as well as confidence, time preferences, and others, impact their associations with composite FWB. For instance, we categorize positive financial behavior as an indicator of FWB in this review because financial behavior is treated as a main dependent variable in many articles that we discuss. However, many studies also reasonably view financial behaviors as factors leading to FWB, finding that financial literacy operates through financial behaviors as well as directly on FWB (such as Dare et al. Reference Dare, van Dijk, van Dijk, van Dillen, Gallucci and Simonse2023; Fan and Henager Reference Fan and Henager2021; Sajid et al. Reference Sajid, Mushtaq, Murtaza, Yahiaoui and Pereira2024). These results suggest that models that do not account for mediating effects and interactions among explanatory variables may overlook important relationships. For example, Roll et al. (Reference Roll, Kondratjeva, Bufe, Grinstein-Weiss and Skees2022) showed a negative relationship between composite FWB and financial shocks, which may be mitigated by financial literacy and/or financial self-confidence.

Other studies focus on how the mix of perceptions and objective measures of financial or related ability impacts composite FWB. Using data from the UAS, Peters et al. (Reference Peters, Tomkins, Knoll, Ardoin, Shoots-Reinhard and Meara2019) explore the relationship between objective numeracy competence, perceived numeracy competence (“numeric confidence”), and respondents’ CFPB-FWBS score (as well as financial behaviors). With the inclusion of objective numeracy and numeric confidence variables in the sample, financial knowledge was not significantly related to FWB. In their study, objective numeracy was negatively related to FWB, but numeric confidence mitigated this relationship through a positive interaction effect. Peters et al. suggest that when numeric confidence is high compared to actual competence, reported levels of financial satisfaction may not align with actual financial circumstances. Without modeling interaction effects, Phelps and Metzler drew a similar conclusion in their results, showing that financial skill, but not self-assessed financial knowledge, is associated with composite FWB. Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) show a positive relationship between financial literacy and the CFPB-FWB score when financial self-efficacy is high, but no significant relationship at below-average levels of financial self-efficacy.

Several studies investigate separate temporal dimensions of composite FWB as a function of financial behaviors, in addition to the other explanatory variables. As discussed above, Netemeyer et al. (Reference Netemeyer, Warmath, Fernandes and Lynch2018) developed a construct of FWB distinguishing between current money management stress and expected future financial security. They demonstrate that both measures are important to an individual’s overall level of well-being and are associated with different explanatory variables. Perceived financial self-efficacy and financial literacy are positively and significantly associated with expected future financial security, but are not significant in explaining current money management stress. Positive long-term financial behaviors (treated as an explanatory variable in this study) do not significantly affect current money management stress. Furthermore, short-term negative financial behaviors are significant factors in predicting current money management stress, but despite potential long-term consequences of these behaviors, they do not significantly impact expected future financial security.

Collins and Urban (Reference Collins and Urban2020) found that positive financial behavior was associated with the CFPB-FWBS. However, regressing the CFPB-FWBS on financial perception and knowledge measures, financial stress, positive financial behaviors, and financial satisfaction, Fan and Henager (Reference Fan and Henager2021) showed that the association between the CFPB-FWBS and financial behavior depends on whether the behavior is short-term or long-term. While short-term positive financial behavior and perceived financial efficacy improved FWB scores, long-term positive financial behavior was surprisingly associated with lower levels of FWB. They suggest this occurs because positive long-term financial behaviors involve short-term costs. In this case, we might also expect different associations of explanatory variables and FWB for pre-retirees bearing the costs of long-term positive financial behaviors and retirees, enjoying the results of such behaviors, which is consistent with the Olajide et al. (Reference Olajide, Asebedo and Little2023) study of perceived financial satisfaction, discussed below.

3.2. Studies explaining financial outcomes

As discussed previously, many studies examine one or more objective financial outcomes indicative of FWB. While the studies reviewed in the previous subsection focus on composite measures of FWB, the research summarized here considers measurable financial outcomes such as wealth, savings, and investment levels. In some studies, researchers utilize data from nationally representative surveys with extensive information on participants, while others focus on smaller samples, e.g., drawn from employer or retirement plan records, shorter surveys, or outcomes from controlled experiments. Studies reviewed in this section support the previously identified themes in the FWB literature. Many conclude that wealth and savings are significantly influenced by individual characteristics such as psychological and personality traits, risk and time preferences, and financial knowledge. Several studies also emphasize the importance of aligning self-perceptions to actual financial skill. For reference, Table 2 summarizes the articles discussed in this subsection.

Table 2.

Analyses of quantifiable outcomes and circumstances indicative of financial well-being

Table 2 Long description

A table with 16 rows and 4 columns. The columns are labeled Study, Dependent variable(s), Financial, competence, and confidence variables, and Psychology and preference variables. The table lists various studies and their focus on different dependent variables related to financial well-being, along with associated financial competence, confidence variables, and psychological preferences. Each row provides specific details for each study, including the dependent variables they analyze and the related factors considered.

Source: Authors’ summary analysis. Papers that also analyze dependent variables in the categories in Tables 3 and 4 are indicated with a superscript: perceptions = “p”, and behaviors = “b.”

Multiple studies demonstrate that psychological and personality traits are associated with financial outcomes that are indicative of FWB. Psychological variables include self-control, trust, optimism, and emotion. Biljanovska and Palligkinis (Reference Biljanovska and Palligkinis2018) developed a measure for self-control failure from available HRS data and show that it is strongly associated with several measures of household wealth, across a range of the wealth distribution. However, they did not control for many of the other standard explanatory variables, such as financial literacy. Merkoulova and Veld (Reference Merkoulova and Veld2022) investigated stock market investment by designing a survey for the UAS, which elicited respondents’ understanding of expected returns and distributions of returns on stock investments, as well as how trusting respondents were in general. They found that the probability of making stock market investments and the dollar amount of those investments were positively related to optimism and trust in addition to objective expected return and risk knowledge. Other studies have found that positive emotions are significant drivers of favorable financial outcomes (Asebedo et al. Reference Asebedo, Quadria and Chen2022).

Several other studies investigated how the established Big Five personality traits influence quantifiable financial outcomes. Their influence depends on the outcome under consideration. Unsurprisingly, high levels of conscientiousness are associated with positive financial outcomes such as lower unsecured debt (Brown and Taylor Reference Brown and Taylor2014). Brown and Taylor found that extroversion was associated with a lower amount of household assets and higher unsecured debt and openness was associated with higher household assets, but also higher unsecured debt.

Theoretically, a high individual discount rate leads to a lower accumulation of assets over a lifetime because higher discount rates discourage saving and other forms of delayed gratification. Huffman et al. (Reference Huffman, Maurer and Mitchell2019) examined the impact of time discounting using a sample of older adults and affirmed that higher discount rates reduced both wealth and health outcomes. However, Ameriks et al. (Reference Ameriks, Caplin and Leahy2003) included survey questions measuring respondents’ general outlook about planning, while also controlling for time discounting. They found that respondents with stronger inclinations to plan in general did in fact save more and accumulate greater wealth. The authors further noted that compared to the “propensity to plan,” their controls of risk and time preferences, as well as precautionary and bequest motives, were insignificant determinants of wealth accumulation among their sample.

Discount rates explicitly elicited in experiments show strong associations with both experiment outcomes and survey responses about respondent finances. Hastings and Mitchell (Reference Hastings and Mitchell2020) used an incentivized discount rate elicitation task, showing the results to be a strong predictor of wealth. Goda et al. (Reference Goda, Levy, Manchester, Sojourner and Tasoff2019) combined experimental data with a survey of their experiment participants and found that, among respondents with access to employer-sponsored retirement savings plans, contributions were significantly higher for enrolled participants with lower discount rates. Bajtelsmit and Coats (Reference Bajtelsmit and Coats2023) carefully controlled for both individual discount rates and risk preferences in their experimental design and discovered, that all else equal, participants in an incentivized (over time and risk preference elicitation, and investment decision payoffs) experiment with lower discount rates were willing to undertake greater financial investment and earned higher expected returns. In these studies, higher financial literacy was also positively associated with the financial outcome dependent variables, as is consistent with empirical research using archival data.

Financial knowledge, confidence, and other abilities, such as numeracy, are consistently associated with quantifiable financial outcomes (Behrman et al. Reference Behrman, Mitchell, Soo and Bravo2012; De Beckker et al. Reference De Beckker, Frijns, Hubers and Derkx2025; Estrada-Mejia et al. Reference Estrada-Mejia, de Vries and Zeelenberg2016). However, there are thought-provoking differences in the literature about the relative importance of these related variables and the effects of alignment between objective skill and individuals’ confidence in their abilities. In a study that measured both respondents’ financial skills and their confidence in the skills, Angrisani and Casanova (Reference Angrisani and Casanova2021) found that individuals with better financial skills had the highest amount of positive financial net wealth, IRA wealth, and the highest probabilities of owning stocks. In their longitudinal study, Estrada-Mejia et al. (Reference Estrada-Mejia, de Vries and Zeelenberg2016) showed separate effects of numeracy and financial knowledge on wealth accumulation. However, Schmeiser and Seligman (Reference Schmeiser and Seligman2013), analyzing data from the Health and Retirement Study, which like most surveys, does not provide incentives for correctly answering financial literacy and numeracy questions, observe inconsistencies across time in individuals’ propensity to correctly answer these questions and find further that correct answers are not associated with the financial outcome of higher wealth over the time period analyzed.

The success of more sophisticated investment strategies, such as stock market investment, is likely to depend on the alignment of skill and confidence. Angrisani and Casanova’s study, discussed earlier, investigated this premise further. Considering confidence in addition to skills, they found that the best outcomes occurred for individuals with better financial skills and higher confidence. The next best outcomes occurred for individuals with high financial skills, but low self-confidence in those skills. Individuals who misperceived their skills as high, when they were objectively low, had the lowest values of net worth and lower probabilities of owning stocks than individuals whose high confidence aligned with better objective skills. These results are consistent with findings in the literature on overconfidence bias. See, for example, Giglio et al. (Reference Giglio, Maggiori, Stroebel and Utkus2021).

3.3. Studies explaining single-item financial perceptions

In this section, we discuss studies that examine individual perceptions of various aspects of FWB. In contrast to the composite measures discussed earlier, these studies analyze single-item perceptual indicators as dependent variables. Examples include self-reported perceptions regarding financial satisfaction and financial distress. This literature analyzes the factors that contribute to financial perceptions, investigates the accuracy of individual perceptions, and assesses how individual characteristics are associated with financial perceptions. The studies are summarized in Table 3.

Table 3.

Analyses of perceptions contributing to financial wellbeing

Table 3 Long description

The table has 18 rows and 4 columns. The columns are labeled Study, Dependent variable(s), Financial, competence, and confidence variables, and Psychology and preference variables. Each row lists a different study and its associated variables. Row 1: Ameriks et al. (2003), Wealth, Savings, N/A, Discount factor, Risk preferences, Bequest motive, Precautionary motive, Propensity to plan. Row 2: Angrisani and Casanova (2021), Positive financial net wealth, IRA wealth, Stock ownership, Objective financial literacy, Perceived financial retirement knowledge, N/A. Row 3: Asebedo, et al. (2022), Net wealth, N/A, Personality traits, Positive emotion. Row 4: Bajtelsmit and Coats (2023), Expected investment return, Observed financial literacy, Financial efficacy, Parent shock, Risk preferences, Time preferences. Row 5: Behrman et al. (2012), Net wealth, Financial literacy index, N/A. Row 6: Biljanovska and Palligkinis (2018), Net worth, Net real wealth, Net financial wealth, Cognitive abilities, Self-control failure, Risk preferences. Row 7: Brown and Taylor (2014), Unsecured debt holdings, Financial asset holdings, N/A, Personality traits. Row 8: Bucciol and Zarri (2017), Stock market participation, Allocation to stocks, N/A, Personality traits. Row 9: De Beckker et al. (2025), Wealth, Financial literacy, N/A. Row 10: Estrada-Mejia et al. (2016), Wealth, Numeracy, Objective financial literacy, Risk preferences. Row 11: Goda et al. (2019), Retirement savings, Net worth, Debts, Financial literacy, Cognitive ability, Exponential growth bias, Present bias, Risk preferences. Row 12: Hastings and Mitchell (2020), Savings, Financial literacy, Time preferences. Row 13: Huffman et al. (2019), Wealth, Long term care planning, Cognitive ability, Discount rate, Bequest motive. Row 14: Merkoulova and Veld (2022), Stock market investments, Personal equity risk premium, Financial literacy, Cognitive ability, Lack of financial upbringing, Trust, Optimism about stock returns, Loss aversion. Row 15: Schmeiser and Seligman (2013), Change in nonhousing assets, Financial literacy, Numeracy, Risk aversion.

Source: Authors’ summary analysis. Papers that also analyze dependent variables in the categories in Table 4 are indicated with a superscript: behaviors = “b.”

Results from several studies suggest that self-reported perceptions indicative of FWB depend at least in part on psychological factors and personality traits. For example, Xu et al. (Reference Xu, Beller, Roberts and Brown2015) and Parise and Peijnenburg (Reference Parise and Peijnenburg2019) examined the role of personality traits in predicting financial distress (regarded as indicative of low levels of FWB) and found that the trait of conscientiousness is negatively related to multiple indicators of financial distress. Xu et al. find further that financial distress is positively associated with the trait of neuroticism. Parise and Peijenberg also find that emotional stability and conscientiousness are positively associated with “financial insight,” which they measure by the respondent’s perception of how much they understand their current financial situation, and self-reported positive financial behaviors. Other meaningful psychological variables associated with financial perceptions include an individual’s affective state and measures of control (Carton et al. Reference Carton, Xiong and McCarthy2022; Olajide et al. Reference Olajide, Asebedo and Little2023; Riitsalu et al. Reference Riitsalu, Gąsiorowska, van Raaij and Ruggeri2025). Olajide et al. (Reference Olajide, Asebedo, Lacombe and Little2023) examined the role of personality traits in the disparity between an individual’s objective and perceived financial situation, finding that conscientiousness and extraversion were associated with perceptions exceeding objective financial standing, and the reverse association for the traits of neuroticism, openness, and agreeableness.

Several of the papers that study associations between single-item financial perceptions and variables directly measuring time preferences also considered dependent composite FWB and/or objective measures of FWB and were therefore discussed earlier in this section. For example, Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) found negative associations between the discount rate and single-item perception measure of FWB. Additional studies include explanatory variables that are likely to reflect individual time preferences. In Angrisani et al.’s (Reference Angrisani, Burke, Lusardi and Mottola2023) longitudinal study, an individual’s planning attitude was not significantly related to their perception of financial satisfaction. However, Xiao and O’Neill (Reference Xiao and O’Neill2018) showed that propensity to plan is associated with perceived financial capability. Carton et al. (Reference Carton, Xiong and McCarthy2022) took a different approach when studying low-income households in Ireland, surveying individual mindset and money-management habits. Respondents who reported having self-discipline, “doing without,” and the practice of saving for emergencies generally were more likely to have perceptions indicative of FWB (capable of meeting commitments, feeling financially comfortable, and expressing financial resilience for the future).

Many studies have considered the impacts of financial knowledge and/or financial literacy on perceptions indicative of FWB. The general finding is that financial literacy and financial efficacy improve financial perceptions, but their impact varies by financial and life circumstances. Angrisani et al. (Reference Angrisani, Burke, Lusardi and Mottola2023) primarily focused on financial literacy as an explanatory variable, but also controlled for cognitive ability and risk preferences in addition to the standard demographic controls. The perceptions under consideration include self-reported financial satisfaction, confidence in the ability to meet a financial shock, and perception of having too much debt. However, the association of financial literacy with perceptions varies systematically with other independent variables. For example, financial literacy was only correlated with confidence in the ability to meet a financial shock for respondents earning $60,000 or less per year. In the study’s sample, financial literacy was associated with the outcome of increased financial satisfaction for men, but not for women.

Asebedo and Payne (Reference Asebedo and Payne2019) showed that financial efficacy can play a moderating role in declining financial satisfaction caused by market volatility. As discussed earlier, Netemeyer et al. found that financial self-efficacy is associated with improvements in expected financial security (but not current money management stress), while Olajide et al. showed that it improves the financial satisfaction of retirees (but not pre-retirees).

As suggested by Olajide et al.’s results on personality traits, some of the findings above depend upon the accuracy of respondents’ self-assessed financial ability. As Hastings et al. (Reference Hastings, Madrian and Skimmyhorn2013) discuss in their review of the financial literacy literature, there is considerable overlap between objective financial knowledge and skill and perceived financial efficacy. Perceived financial efficacy most heavily relies on the respondent’s beliefs, and therefore, its effect on financial behaviors and outcomes depends on the alignment between perceived and objective ability. However, evidence suggests that perceptions of financial satisfaction are more closely related to perceived financial capability than objective financial capability (Xiao et al. Reference Xiao, Chen and Chen2014).

Apparent inconsistencies between self-reported perceptions of ability and perceptions of financial situations can be partially informed by the results of incentivized experiments. In addition to providing monetary incentives to answer financial literacy questions correctly, Bajtelsmit and Coats paid participants for correct self-assessment of their financial literacy. In their sample, participants were very good at estimating their financial knowledge, which resulted in better financial decision-making measured by the outcomes discussed in the previous section. This suggests that, in survey data, respondents with poor financial efficacy may be more aware of their limitations than self-reported perceptions indicate. Chowdhry and Dholakia conducted an experiment as part of a three-part study. They found that when participants were primed with a financial self-awareness survey, including items such as credit card debt and interest rates, grocery bills, and money in checking and savings accounts, they made better hypothetical financial decisions, suggesting that financial efficacy may reflect a state of mind of financial self-awareness.

In general, the research finds that perceptions of FWB depend not only on individuals’ financial circumstances but also on their beliefs about their abilities. Perceptions of financial knowledge and efficacy may or may not align with objective financial skill. As a result, reported levels can reflect both actual financial conditions and individuals’ interpretations of their ability to manage those conditions. Studies of single-item financial perceptions therefore add to the FWB literature by providing insight into how individuals evaluate their own financial situation, whether those evaluations are accurate or not.

Perceptions of financial ability influence not only how individuals evaluate their financial situations, but also how they manage them. Although some studies reviewed above treat financial behaviors as factors explaining FWB, many studies examine financial behaviors directly as indicators of FWB. The following subsection discusses research that uses financial behaviors as dependent variables when studying FWB.

3.4. Studies explaining financial behaviors

The last group of FWB papers in this review investigates factors that are related to financial behaviors. Although the behaviors themselves are not synonymous with FWB, the underlying premise for this research is that positive financial behaviors facilitate FWB. By identifying the inputs that are associated with positive financial behaviors, researchers draw inferences about factors that also are associated with higher levels of FWB. As with studies of other FWB measures, the conclusions drawn from this research are consistent with the main themes identified in this review. Despite great variation in the specific behaviors examined in these studies, the results show that financial knowledge, risk and time preferences, and psychological and personality traits have strong relationships with financial behaviors.

Table 4 provides a summary of the papers discussed in this section and the inputs that have been found to have a significant relationship with the analyzed financial behaviors. These papers examine a wide range of financial behaviors, including planning, budgeting, debt management, saving, and investing. Several of the papers discussed in this section appear in earlier tables because they also analyze composite, outcomes, or perception measures of FWB.

Table 4.

Analyses of financial behaviors influencing FWB or its components

Table 4 Long description

A table with 15 rows and 4 columns. The columns are labeled Study, Dependent variable(s), Financial, competence, and confidence variables, and Psychology and preference variables. The table lists various studies and their dependent variables, along with the financial and psychological factors considered in each study. Each row provides specific details about the study, the variables analyzed, and the factors influencing financial well-being.

Positive financial behavior often involves foregoing current consumption, and several studies include measures of the individual discount rate or other ways to account for intertemporal preferences. To better understand the relationship between individual preferences and intertemporal behavior, several studies use lab experiments which allow researchers to both survey participants and elicit discount rates. For example, Chabris et al. (Reference Chabris, Laibson, Morris, Schuldt and Taubinsky2008) measured individual cognitive ability and discount rates in their experiment and surveyed participants about their financial and other intertemporal behaviors. Compared to other traditional individual-level variables in their study, the individual discount rate was a more powerful predictor of various intertemporal decisions. Meier and Sprenger (Reference Meier and Sprenger2013) elicited discount rates for a sample that was offered a financial counseling session. They found a negative association between the discount rate and the choice to acquire financial information. Goda et al. (Reference Goda, Levy, Manchester, Sojourner and Tasoff2019) showed that contributions to employer-sponsored retirement plans were significantly higher for enrolled participants with lower discount rates. Dholakia et al. (Reference Dholakia, Tam, Yoon and Wong2016) examined the effect of individual predispositions toward saving with an index they call the Personal Savings Orientation (PSO) scale, which they distinguish from the discount rate. Respondents with higher PSO measures demonstrated higher hypothetical savings behavior and lower self-reported credit card usage. Applying two different time preference elicitation tasks across two analyses, the authors again found savings behavior to be negatively related to the discount rate. Not surprisingly, the discount rate and PSO are significantly negatively correlated, but the significance of PSO remained in effect after controlling separately for time preferences. Using survey data that included elicited discount rates, Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) analyzed a large number of financial behaviors and found that higher individual discount rates had significant negative effects on a wide variety of financial behaviors in the areas of planning, budgeting, credit management, and investing. Where direct measures of discount rates are unavailable, researchers sometimes use proxies. For example, Van Rooij et al. (Reference Van Rooij, Lusardi and Alessie2012) found the smoking and drinking behavior, which they use as a proxy for time preferences, to be associated with less retirement planning. Salamanca et al. (Reference Salamanca, de Grip, Fouarge and Montizaan2020) developed a measure of “patience” based on a series of questions asking respondents to assess their approach to delayed gratification. They found that more patience is associated with higher rates of investing and equity ownership.

In addition to time preferences, a few studies examine the relationship of risk preferences to financial behaviors. Risk tolerance primarily affects planning decisions related to saving and investing. For example, Brown and Weisbenner (Reference Brown and Weisbenner2014) show that risk preferences affect the decision to select a defined benefit plan versus a defined contribution plan. The relationship to equity allocation is documented by Cupák et al. (Reference Cupák, Kolev and Brokešová2019), Bazley et al. (Reference Bazley, Bonaparte and Korniotis2019), Tang and Baker (Reference Tang and Baker2016), Van Rooij et al. (Reference Van Rooij, Lusardi and Alessie2011), and Salamanca et al. (Reference Salamanca, de Grip, Fouarge and Montizaan2020). A recent strand of research investigates the relationship between financial efficacy and financial behaviors. For example, financial efficacy is positively related to saving behavior in older adults (Asebedo and Seay Reference Asebedo and Seay2018) and growth-oriented financial behavior (Asebedo et al. Reference Asebedo, Wilmarth, Seay, Archuleta, Brase and MacDonald2019). Other studies have found that financial self-confidence is associated with many positive financial behaviors, such as retirement planning (Van Rooij et al. Reference Van Rooij, Lusardi and Alessie2012), having an emergency fund (Lux and Kauzlarich, Reference Lux and Kauzlarich2022), goal setting (Bialowolski et al. Reference Bialowolski, Weziak-Bialowolska and Cwynar2025) and equity ownership (Bazley et al. Reference Bazley, Bonaparte and Korniotis2019). Similarly, the Coats and Bajtelsmit (Reference Coats and Bajtelsmit2026) analysis of financial behaviors finds that financial self-efficacy has a positive relationship with planning and budgeting behaviors. A model by Caliendo and Findley (Reference Caliendo and Findley2013) shows that even small improvements in retirement planning generate significant welfare gains. Another related measure, locus of control, has been found to be a significant factor for paying bills on time, saving, and credit management (Hoffmann and Risse Reference Hoffmann and Risse2020) and equity investment (Salamanca et al. Reference Salamanca, de Grip, Fouarge and Montizaan2020).

As with the other FWB metrics, financial behaviors are significantly related to certain personality traits. Hoffmann and Risse (Reference Hoffmann and Risse2020) find that agreeableness and conscientiousness are both positively related to an index of beneficial financial behaviors in a large sample of Australians. However, using HRS data, Bucciol and Zarri (Reference Bucciol and Zarri2017) find that agreeableness was negatively associated with stock market participation. Equity allocation has been found to be negatively associated with anxiety (Bucciol and Zarri Reference Bucciol and Zarri2017) and positively associated with conscientiousness (Balasuriya and Yan Reference Balasuriya and Yang2019). Retirement plan participation has been found to be lower for extraverts (Balasuriya and Yan Reference Balasuriya and Yang2019).

Many studies examine the relationship between financial behaviors and financial knowledge or financial literacy. In a very extensive literature review, Mahedru et al. (Reference Mahendru, Sharma, Pereira, Gupta and Mundi2022), proposed a conceptual framework in which financial knowledge and broadly defined personality traits combine to drive financial behavior and ultimately FWB. Hwang and Park (Reference Hwang and Park2023) conducted a meta-analysis of how objective and “subjective” financial knowledge affected financial behaviors and well-being across fourteen previous studies.Footnote ¹³ They concluded that subjective knowledge enhanced both FWB and financial behaviors and that its marginal impact on financial behaviors was larger than the impact of objective knowledge. Financial literacy has been associated with a wide range of positive financial behaviors including retirement planning (Lusardi and Mitchell Reference Lusardi and Mitchell2011; Lusardi and Streeter Reference Lusardi and Streeter2023; Van Rooij et al. Reference Van Rooij, Lusardi and Alessie2012; Kim et al. Reference Kim, Anderson, Seay and Martin2019), investment in risky assets (Salamanca et al. Reference Salamanca, de Grip, Fouarge and Montizaan2020, Tang and Baker Reference Tang and Baker2016), having an emergency fund (Kim et al. Reference Kim, Anderson, Seay and Martin2019), goal-setting (Bialowolski et al. Reference Bialowolski, Weziak-Bialowolska and Cwynar2025; Lux and Kauzlarich Reference Lux and Kauzlarich2022), and saving (Tang and Baker Reference Tang and Baker2016; Hoffmann and Risse Reference Hoffmann and Risse2020; Bialowolski et al Reference Bialowolski, Weziak-Bialowolska and Cwynar2025; Marley-Payne et al. Reference Marley-Payne, Valdes, Mottola and Fontes2025; Cupák et al. Reference Cupák, Kolev and Brokešová2019).

Some studies distinguish subjective (perceived) financial literacy from objective financial literacy measured by performance on knowledge tests. In addition to the experiment discussed earlier in this review, Chowdhry and Dholokia conducted two other analyses, each focusing on specific financial behaviors. Participants with higher levels of “financial self-awareness” were less likely to spend more than they earned and made more contributions to retirement funds and other investments.Footnote ¹⁴ Furthermore, both financial literacy and financial efficacy enhanced the effect of financial self-awareness on saving and investment behavior. Based on this literature, it appears that self-perceived financial competence can generate positive financial behaviors and promote improvements in FWB.

However, other studies in the literature have shown that perceptions and awareness of financial skill have a complex relationship with financial behaviors. We return to the Angrisani et al. discussion in the previous subsection for an example of this complexity. In addition to evaluating financial outcomes discussed earlier, the authors examined the determinants of the following financial behaviors: retirement planning, use of alternative financial services over the past five years, and credit card habits. In their study, while financial literacy was associated with the outcome of increased financial satisfaction for men, but not for women, financial literacy was associated with increases in positive financial behaviors (more retirement planning, less excessive debt) for women, but not for men. Similarly, higher financial literacy was associated with a higher probability of retirement planning among their respondents earning more than $60,000 per year, but this relationship did not extend to those with lower incomes.

Angrisani and Casanova’s study, which examined the alignment of financial skill and self-perceptions of skill, found that some of the impact on financial outcomes discussed in the previous section is attributable to financial planning behavior. Individuals with high skills but low confidence engaged in less retirement planning and were less likely to participate in employer-sponsored pension plans, compared to those with high skills and high confidence. For a given level of financial knowledge, individuals who are overconfident in their knowledge were more likely to report having started retirement planning, but no more likely to actually participate in an employer-sponsored pension plan. Moreover, the overconfident were less likely than other groups to report that they would like to learn about retirement planning.

Several other studies find that misalignment between self-perceptions and actual competence (objective measurements of numeracy, financial literacy, skill, knowledge, etc.) impacts financial behavior for the worse. Allgood and Walstad (Reference Allgood and Walstad2016) and Peters et al. (Reference Peters, Tomkins, Knoll, Ardoin, Shoots-Reinhard and Meara2019) both report, unsurprisingly, that the combined impact of high actual and high perceived financial competence resulted in the largest positive marginal effect on financial behavior. However, they come to different conclusions regarding the role of alignment between self-perceptions and actual competence. Allgood and Walstad (Reference Allgood and Walstad2016) found that higher perceived financial literacy was significant regardless of whether actual financial literacy was high. Peters et al. found that low numeric confidence corresponded to lower scores on their financial behavior index, even when objective numeracy was high. However, in contrast to Allgood and Walstad’s findings, respondents whose skill and confidence were “mismatched” in a low-skill, high-confidence combination, scored lowest on the index of financial behaviors. Importantly, if objective numeracy was low, self-efficacy regarding numeracy skills worked counter to positive financial behavior. This is consistent with Lusardi and Streeter (Reference Lusardi and Streeter2023) who showed that less financially literate individuals were both more overconfident and less likely to plan for retirement, have emergency funds, or appropriately manage debt. Similarly, Goda et al., discussed above also assessed overconfidence in financial decision-making, finding that actual contributions to retirement plans were lower among enrolled participants who exhibited overconfidence.

More research is needed on the impact that education and specific interventions have on financial behavior. Lusardi and Streeter report that respondents who were offered financial education in high school or college are more likely to have planned for retirement but not more likely to have manageable debt levels. Goda et al. tested behavioral interventions among specific groups to promote savings behavior. A framing intervention to counteract exponential growth bias improved the savings behavior of targeted participants, but present-biased participants’ behavior was not differentially affected by a second intervention of incentives and deadlines. Bajtelsmit and Coats found that, compared to other experiment participants, behavioral prompts increased expected returns more for participants with lower levels of financial literacy. Reviewing the literature on financial counseling, Singh and Malik (Reference Singh and Malik2022), also observed that financial counseling is more effective for respondents with lower financial literacy.

Taken as a whole, this literature suggests that studies of financial behaviors could be improved by measuring discount rates, objectively assessing financial knowledge or skill, and gathering information on how respondents’ perceptions of their skill compare to the objective assessments. It also raises questions about the reliability of self-reported financial behaviors.