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How Does Consumers' Financial Vulnerability Relate to Positive and Negative Financial Outcomes? The Mediating Role of Individual Psychological Characteristics

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  • Arvid O. I. Hoffmann
  • Simon J. McNair

Abstract

Vulnerable consumers are at particular risk of financial detriment due to, for example, low financial literacy or numeracy, high debt, low income, or impactful changes in personal circumstances. We introduce a comprehensive and formative measure of financial vulnerability that integrates these risk factors and is grounded in definitions of vulnerability from financial regulation bodies and government agencies such as the Consumer Financial Protection Bureau. Across three studies of US individuals, we assess the nomological validity of this measure of financial vulnerability through its relationship with positive and negative financial outcomes (e.g., savings levels, paying credit card balances in full each month, being in arrears) as well as relevant psychological characteristics (e.g., personal savings orientation [PSO], money management skills, financial self‐efficacy). Moreover, we examine whether and how these psychological characteristics mediate the relationship between financial vulnerability and financial outcomes. We conclude with an overview of implications for policy makers and business practitioners.

Suggested Citation

  • Arvid O. I. Hoffmann & Simon J. McNair, 2019. "How Does Consumers' Financial Vulnerability Relate to Positive and Negative Financial Outcomes? The Mediating Role of Individual Psychological Characteristics," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(4), pages 1630-1673, December.
    • Handle: RePEc:bla:jconsa:v:53:y:2019:i:4:p:1630-1673
    DOI: 10.1111/joca.12233
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    Citations

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    Cited by:

    1. Raslan Alzuabi & Sarah Brown & Mark N. Harris & Karl Taylor, 2024. "Modelling the composition of household portfolios: A latent class approach," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 243-275, February.
    2. Julia Rötzmeier-Keuper, 2020. "Consumer Vulnerability: Overview And Synthesis Of The Current State Of Knowledge And Future Service-Related Research Directions," Working Papers Dissertations 65, Paderborn University, Faculty of Business Administration and Economics.
    3. Wang-Ly, Nathan & Newell, Ben R., 2022. "Allowing early access to retirement savings: Lessons from Australia," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 716-733.
    4. 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.
    5. Elise Frølich Furrebøe & Ellen Katrine Nyhus, 2022. "Financial self‐efficacy, financial literacy, and gender: A review," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 743-765, June.
    6. Hoffmann, Arvid O.I. & Plotkina, Daria, 2020. "Why and when does financial information affect retirement planning intentions and which consumers are more likely to act on them?," Journal of Business Research, Elsevier, vol. 117(C), pages 411-431.
    7. Julia Bayuk & Hyunjung Crystal Lee & Jooyoung Park & Serkan Saka & Debabrata Talukdar & Jayati Sinha, 2022. "Mindfully aware and open: Mitigating subjective and objective financial vulnerability via mindfulness practices," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(3), pages 1284-1311, September.
    8. Riitsalu, Leonore & Uusberg, Andero, 2021. "To double, quadruple, or keep? Semi-automated service increases micro-investments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 95(C).
    9. Arvid O. I. Hoffmann & Daria Plotkina, 2021. "Let your past define your future? How recalling successful financial experiences can increase beliefs of self‐efficacy in financial planning," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(3), pages 847-871, September.
    10. Arvid O. I. Hoffmann & Leonora Risse, 2020. "Do good things come in pairs? How personality traits help explain individuals' simultaneous pursuit of a healthy lifestyle and financially responsible behavior," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(3), pages 1082-1120, September.

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