Andreea Petrea

UT in cooperation with ERSTE Foundation has launched a brand new financial well-being self-assessment tool

On June 3, the research team led by Leonore Riitsalu from the University of Tartu presented their latest financial well-being findings in Prague, in the bank Česká spořitelna. It is part of academic research where ERSTE Foundation and Johan Skytte Institute of Political Studies at the University of Tartu redefine financial well-being as having security, freedom, and pleasure in life, not just wealth. Through rigorous research, they bring a human perspective to banking and policy, and develop evidence-based strategies to enhance individuals' and societies' financial well-being, applicable across sectors and countries. In Prague, the 5th interim report from this large project was presented. 

In the opening words, Tomáš Salomon (CEO of Česká spořitelna) and Boris Marte (CEO of ERSTE Foundation) highlighted the uniqueness of this long-term partnership and the importance of this research as it is about the expansion of insight in the field of financial health and financial well-being, which both the entire Erste Group and its foundation are dedicated to.

Researchers Leonore Riitsalu, Kristiina Vain, Rauno Pello, Mihkel Solvak and Adele Atkinson focused on three main topics in their presentation. First, analysis of the 630 interviews conducted in Central and Eastern Europe redefines the relationship between financial well-being and overall well-being. The dominant well-being studies (such as the European Social Survey and Global Flourishing Study) treat financial well-being as one of the subdomains of well-being. The new analysis underscores the multifaceted ways in which financial well-being is intricately linked to various aspects of subjective well-being; happiness and life satisfaction, mental and physical health, meaning and purpose, character and virtue, close social relationships, and financial and material stability. Therefore, it is a thread running through all subdomains of well-being, not simply an element of well-being with a linear relationship to it. From the human perspective, financial well-being is not seen as the goal itself but as a means to achieve general well-being, and for fostering community and familial support. This underscores the need for policies and strategies that prioritise financial well-being to enhance life satisfaction and flourishing.

Financial Well-Being

Second, a unique study conducted in partnership with the bank Česká spořitelna allows to shed light on the relationship between subjective financial well-being and objective financial data. It is the first in the world to go into such depth in studying the relationship between self-assessed financial well-being, objective financial behaviours and situations.

First, the researchers developed a new financial well-being measure that assesses its three components – security, freedom and pleasure. Its semantic validity was assessed in qualitative testing and its reliability and validity were tested in two online panels. The validated measure was used for data collection by the bank in a sample of 6,220 customers in January – February 2024. All participants had given informed consent to share their pseudonymised data with the researchers. Their responses were linked to 14 months of data from their bank accounts and various machine-learning methods and algorithms were used for the analysis.

The first key finding from the initial analysis of the phenomenally rich data is that security is vital - one cannot have high freedom or higher pleasure without having average or higher security. The relationship between freedom and pleasure is more nuanced. The average assessment of freedom is lower than the average of security and pleasure in our sample. That means that the respondents perceive the biggest shortages to be in their freedom to change course in life without having to worry about money. 

The second key finding is that the oldest group (65-75 years of age) has the highest financial well-being and lowest financial stress. This can be at least partially explained by the local context as there is a relatively good social system and benefits for elderly people, but the younger generation is in a less beneficial state in Czechia. 

The third important fact is that men rate their financial well-being to be higher than women when they hold the same amount of assets (money on accounts, savings and investments), except for pleasure in the small group of the very wealthy where women have the higher average response. It has been evidenced in previous studies that men tend to be more confident than women in their financial knowledge; that women report lower level of subjective financial well-being even though they report more prudent financial behaviour than men, also when controlling for income, and other cognitive abilities, and that the meaning of money differs for men and women. This study is the first to observe the gender difference in the assessment of the elements of subjective financial well-being while controlling for objective financial data.

The fourth discovery is that assets have a bigger role than liabilities in financial well-being assessment. Those with more assets in this bank have higher financial well-being, although the effect is not linear. From a certain amount, every extra euro brings only a little improvement of financial well-being. It was observed that those who have high financial well-being, have more money on their account, are less likely to have consumer loans and are more likely to invest. The relationship with savings and mortgages is less evident.

The fifth key finding hints that the antecedents of the three elements of financial well-being may differ. The most important factor for all three elements of the triad is having assets (money in the current account, savings and investments). But the next categories differ in importance (not in the direction or size of the effect, those remain to be studied in the next stage of our research) – for security, the amount of money is the key; for freedom, age matters; for pleasure, spending in restaurants and hotels is important

Finally, the proportions of spending for the categories that could clearly be defined in a short time for the analysis of the transactional data are surprisingly similar across the three elements of financial well-being. Some expenditures remain on the same level, no matter how low or high their financial well-being. The groups that rate their pleasure to be higher than security and freedom spend more on things other than the necessities. More money was spent on lottery tickets and gambling in groups with relatively low security. However, these findings need to be interpreted with care as these are yet preliminary and many relevant individual and macro-level indicators could not yet be included in the analysis. The research is continuing, and more detailed findings from this study will be presented early next year.

The event in Prague concluded with the launch of a brand new financial well-being self-assessment tool, stemming from the findings of this research project and building on design science research. As Kevin Crepin (DUX Design Studio) explained, the key challenge was to keep it both engaging and educational at the same time. The multiple rounds of user testing have shown it to achieve this ambitious goal, and it is publicly available on . Take some time and try it out!

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