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Although research on financial management behavior is common, few financial management behavior scales exist that are simultaneously multi-dimensional, psychometrically validated, and validated using nationally representative data. Using data from a nationally representative sample of adults, this study developed and examined the psychometric properties of a new scale of financial management behaviors. The Financial Management Behavior Scale (FMBS) displayed adequate reliability (alpha = .81). The FMBS was highly associated with other measures of financial management behaviors and was predictive of participants' actual levels of savings and consumer debt. These findings suggest that the full FMBS is a reliable and valid measure of financial management behaviors, though the subscales need refinement.
Key Words: financial behavior, measurement, psychometrics
Introduction
Individuals in the U.S. engage in financial behaviors nearly every day and these behaviors influence their financial well-being. For example, the more consumer credit households assume, the more likely they are to default on their loans and the less likely they are to have established an individual retirement account (IRA) (Bernstein, 2004; Sullivan, 1987). Thus, of necessity, personal finance researchers and financial planners and counselors measure financial management behaviors.
Unfortunately, few validated financial management behavior scales exist. Researchers typically use proxies of financial management behavior such as actual levels of consumer debt (e.g., Bernstein, 2004; Sullivan, 1987) rather than assessing the behaviors themselves. Although some scales do exist, most lack one (or more) of the following three characteristics: assessment of multiple domains of financial management behavior (Xiao, 2008), psychometric validation, and validation using a nationally representative sample of adults. In other words, many scales measure only one or two dimensions of financial management behavior; few have been subjected to tests of validity that examine whether they measure what they purport to measure, and those that have been validated have used non-representative samples.
A comprehensive and psychometrically strong measure of financial management behaviors could assist researchers and practitioners in many fields. For example, in addition to the obvious financial benefits, sound financial management behaviors have both personal and interpersonal consequences. Consumer debt levels are positively related to anxiety (Drentea, 2000). Further, assets and consumer debts are associated with relationship quality among married couples (Dew, 2007). Finally, positive financial management behaviors are associated with physical health, mental health, academic success,...