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Modelling financial satisfaction across life stages: A latent class approach

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  • Brown, Sarah
  • Durand, Robert B.
  • Harris, Mark N.
  • Weterings, Tim

Abstract

We explore the determinants of financial satisfaction using a modelling framework which allows the drivers of financial satisfaction to vary across life stages. Given that financial satisfaction is measured as an ordered variable, our modelling approach is based on a latent class ordered probit model with an ordered probit class assignment function. Our analysis of household survey data indicates that four life stages are supported by the data. Our results suggest that such flexibility is important in understanding the drivers of financial satisfaction over the life cycle since there is a substantial amount of parameter heterogeneity across the four classes.

Suggested Citation

  • Brown, Sarah & Durand, Robert B. & Harris, Mark N. & Weterings, Tim, 2014. "Modelling financial satisfaction across life stages: A latent class approach," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 117-127.
    • Handle: RePEc:eee:joepsy:v:45:y:2014:i:c:p:117-127
    DOI: 10.1016/j.joep.2014.09.001
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    2. Hassan F. Gholipour & Reza Tajaddini & Farhad Taghizadeh-hesary, 2022. "Individuals’ Financial Satisfaction and National Priority: A Global Perspective," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 160(1), pages 159-177, February.
    3. Etilé, Fabrice & Frijters, Paul & Johnston, David W. & Shields, Michael A., 2020. "Psychological Resilience to Major Socioeconomic Life Events," IZA Discussion Papers 13063, Institute of Labor Economics (IZA).
    4. Fanny Salignac & Myra Hamilton & Jack Noone & Axelle Marjolin & Kristy Muir, 2020. "Conceptualizing Financial Wellbeing: An Ecological Life-Course Approach," Journal of Happiness Studies, Springer, vol. 21(5), pages 1581-1602, June.
    5. Derek T. Tharp & Martin Seay & Cherie Stueve & Somer Anderson, 2020. "Financial Satisfaction and Homeownership," Journal of Family and Economic Issues, Springer, vol. 41(2), pages 255-280, June.
    6. Paul Dolan & Kate Laffan & Alina Velias, 2022. "Who’s miserable now? Identifying clusters of people with the lowest subjective wellbeing in the UK," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 58(4), pages 679-710, May.
    7. Gagandeep Kaur & Manjit Singh, 2024. "Pathways to Individual Financial Well-Being: Conceptual Framework and Future Research Agenda," FIIB Business Review, , vol. 13(1), pages 27-41, January.
    8. Edsel L. Beja, 2018. "The U-shaped relationship between happiness and age: evidence using world values survey data," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(4), pages 1817-1829, July.
    9. Etilé, Fabrice & Frijters, Paul & Johnston, David W. & Shields, Michael A., 2021. "Measuring resilience to major life events," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 598-619.
    10. Roger Wilkins, 2021. "Economic Wellbeing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(4), pages 469-481, December.
    11. Fabrice Etilé & Paul Frijters & David W. Johson & Michael A. Shields, 2017. "Modelling Heterogeneity in the Resilience to Major Socioeconomic Life Events," Working Papers halshs-01485989, HAL.
    12. Kim, Sung Hoo & Mokhtarian, Patricia L., 2018. "Taste heterogeneity as an alternative form of endogeneity bias: Investigating the attitude-moderated effects of built environment and socio-demographics on vehicle ownership using latent class modelin," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 130-150.

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    More about this item

    Keywords

    Financial satisfaction; Latent class; Life cycle; Ordered probit;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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