Financial capability, income and psychological wellbeing

Publication type

ISER Working Paper Series

Series Number

2011-18

Series

ISER Working Paper Series

Authors

Publication date

July 15, 2011

Abstract:

We examine whether financial capability has impacts on psychological health independent of income and financial resources more generally using a nationally representative survey. British Household Panel Survey data are used to construct a measure of financial capability, which we relate to respondents‟ psychological health using the 12-item General Health Questionnaire. We find that financial capability has significant and substantial effects on psychological health over and above those associated with income and material wellbeing more generally. The sizes of these impacts are considerably larger than those associated with changes in household income. Furthermore having low financial capability exacerbates the psychological costs associated with unemployment and divorce.

Subjects

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