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

Summary

This paper develops and validates a new, consumer-centred scale for Consumer Financial Well‑Being (CFW). The authors propose CFW as a second‑order reflective construct measured by four first‑order dimensions: Financial Wisdom, Financial Security, Financial Preparedness & Satisfaction, and Financial Resilience. The scale was produced through a rigorous five‑study programme (qualitative item generation, EFA, CFA with maximum‑likelihood and Bayesian SEM, PLS‑SEM nomological testing, and an experiment on regulatory focus) and tested across two countries — India (emerging) and the United Kingdom (developed).

Key empirical findings: a stable four‑factor, 20‑item solution; prevention regulatory focus predicts higher CFW engagement than promotion focus; CFW positively predicts mindful consumption and life satisfaction. Methods include focus groups, interviews, large‑scale surveys, item‑response techniques, EFA/CFA, Bayesian SEM and PLS‑SEM.

Key Points

The CFW scale comprises four validated dimensions: Financial Wisdom, Financial Security, Financial Preparedness & Satisfaction, and Financial Resilience (20 items in total).
Development followed a five‑study, multi‑method protocol: literature review, focus groups/interviews, EFA (India), CFA (India and UK), nomological tests (mindful consumption, life satisfaction) and an experiment on regulatory focus.
Both maximum‑likelihood and Bayesian SEM supported the factor structure; the model showed convergent, discriminant and nomological validity across contexts.
Prevention focus (loss‑avoidant orientation) is a significant antecedent — prevention‑focused participants scored higher on all CFW dimensions than promotion‑focused ones.
CFW predicts mindful consumption and life satisfaction, signalling links between financial capability, sustainable consumption and broader subjective well‑being.

Context and relevance

In an era of inflation, geopolitical instability and rising household financial strain, the need for robust, multidimensional measures of financial well‑being is acute. Existing scales overemphasise indebtedness or neglect downstream consequences. This study fills that gap by adding a novel “financial wisdom” dimension and by empirically linking CFW to behaviour (mindful consumption) and life satisfaction, tested across an emerging and a developed economy.

Author style

Punchy: the authors present a methodologically thorough, practically useful instrument. For researchers, it extends dual‑process and multiple‑discrepancies theories into consumer finance; for practitioners and policymakers, it supplies a validated tool to assess and design interventions that foster security, resilience and wiser financial behaviour.

Why should I read this?

Quick and real — if you work on financial education, consumer policy, behavioural interventions or wellbeing metrics, this paper gives you a ready‑tested scale and evidence of what actually moves people: prevention framing, wiser decisions and preparedness. We’ve saved you the heavy reading: it’s the toolkit you can plug into surveys, advice programmes and evaluation studies.