Beyond Traditional Metrics: Developing and Validating a Multidimensional Scale for Consumer Financial Well‐Being

Summary

This paper develops and validates a new, multidimensional Consumer Financial Well‑Being (CFW) scale and tests it across two national contexts (India and the United Kingdom). The authors frame CFW as a second‑order reflective construct composed of four first‑order dimensions: Financial Wisdom, Financial Security, Financial Preparedness & Satisfaction, and Financial Resilience. They run five studies—qualitative item generation, exploratory and confirmatory analyses (including Bayesian SEM), PLS‑SEM nomological tests and an experiment on regulatory focus—to produce a 20‑item, four‑factor scale that shows strong psychometric properties and external validity.

The scale links CFW to two downstream outcomes (mindful consumption and life satisfaction) and one antecedent (regulatory focus). Key findings: the four‑factor structure is stable across India and the UK; CFW positively predicts mindful consumption and life satisfaction; and prevention‑focused consumers (loss‑avoiding, risk‑averse) score higher on CFW than promotion‑focused consumers.

Key Points

The CFW scale is a validated, 20‑item instrument with four dimensions: Financial Wisdom, Financial Security, Financial Preparedness & Satisfaction, and Financial Resilience.
Development followed robust multi‑stage methods (literature review, focus groups, interviews, expert validation) and large empirical samples with EFA, CFA (maximum‑likelihood and Bayesian), PLS‑SEM and experimental tests.
CFW is modelled as a second‑order reflective construct — the four dimensions load onto an overarching financial‑wellbeing factor.
CFW predicts mindful consumption and life satisfaction (PLS‑SEM results: β = 0.468 for mindful consumption; β = 0.595 for life satisfaction; both p < 0.001).
Regulatory focus matters: prevention‑focused participants scored significantly higher on all four CFW dimensions than promotion‑focused participants.
The scale was validated in contrasting contexts (emerging economy: India; advanced economy: UK), supporting broader applicability.
Managerial and policy implications include using the scale for financial education, advisory practice, marketing interventions and policy campaigns to foster responsible consumption and wellbeing.

Context and relevance

The paper responds to contemporary financial shocks (post‑2008 crisis, pandemic, geopolitical instability, inflation and cost‑of‑living pressures) that heighten the need for reliable measures of consumer financial well‑being. Existing instruments tend to overemphasise indebtedness or omit consequences; this scale broadens the lens by introducing the novel dimension of financial wisdom and by explicitly linking CFW to mindful consumption and life satisfaction. It therefore fills a methodological and theoretical gap useful for researchers, advisors and policymakers working on financial resilience, consumer behaviour and wellbeing policy.

Why should I read this?

Quick take: if you deal with financial education, advice, policy or consumer research, this paper saves you time — the authors built and tested a practical 20‑item tool that actually predicts better life outcomes and mindful buying. It also tells you which audience to target (prevention‑focused people) and why financial “wisdom”, not just literacy, matters. Short, sharp and useful for real‑world interventions.

Author style

Punchy: the authors do the heavy lifting—triangulated qualitative work, robust psychometrics, cross‑country tests and an experiment—so practitioners get a ready‑to‑use, empirically backed scale. If you care about measuring or improving consumer financial wellbeing, read the full paper; the scale and findings are directly actionable.

Limitations & next steps (brief)

Scope is limited to India and the UK; authors recommend cross‑national adaptations, deeper policy stakeholder perspectives and further tests of bidirectional links (e.g. whether mindful consumption can also improve CFW). Future research could apply the scale across investor types, demographic groups and policy experiments.