Skip to main content
SpringerLink
Log in

Determinants of Subjective Financial Well-Being Across Three Different Household Income Groups in Malaysia

  • Original Research
  • Published:
Social Indicators Research Aims and scope Submit manuscript

Abstract

Macro level economic and social indicators indicate disengagements between objective measurements and subjective consumer perceptions of the Malaysian economy. Objective measures show positive signals while subjective consumer perceptions depict pessimistic feelings about the economy. To provide more insights on this disparity, data is collected from 1867 Malaysian households to assess their subjective financial well-being (SFWB). In this vein, this study first examines the level of SFWB, financial stress, financial behaviour, financial knowledge, and locus of control (LOC) among Malaysians across three household income groups. Second, the study examines the association between financial stress, financial behaviour, financial knowledge, and LOC, with SFWB. For both objectives, the sample is split into three household income groups (low, middle and high income households, or the B40, M40 and T20, respectively) to analyse the differences. The results show that SFWB is at an average level of 5.2 out of 10 for the overall sample, with significant differences observed between the B40, M40 and T20 groups with SFWB scores of 4.3, 5.1 and 6.2 respectively. Financial behaviour and LOC have a significant positive relationship with SFWB, while financial stress and financial knowledge have a significant negative relationship with SFWB across all households. However, among the B40 group, financial knowledge had no significant relationship with SFWB. Lastly, the findings are discussed and policy recommendations for policymakers are provided.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. Percentages for the Malaysian population were drawn mainly from the Department of Statistics Malaysia (2018) except for the residential area which was obtained from Trading Economics (2017). The employment status percentages were computed based on the Labour Force statistics published by the Department of Statistics Malaysia (2019) and other sources such as the Department of Public Services, and it is to be noted that these percentages are derived from the total individuals in the labour force rather than the total population.

References

  • Atkinson, A., & Messy, F. (2012). Measuring financial literacy: Results of the OECD/International Network on Financial Education (INFE) pilot study. OECD working papers on finance, insurance and private pensions no. 15. Paris: OECD Publishing.

  • Australian Securities and Investments Commission. (2014). Australia’s National Financial Literacy Strategy 2014–2017. Retrieved February 15, 2018, from https://financialcapability.gov.au/files/national-financial-literacy-strategy-2014-17.pdf. 

  • Boss, P. (2001). Family stress management (2nd ed.). Newbury Park, CA: Sage Publications Inc.

    Google Scholar 

  • Brewin, C. R., & Shapiro, D. A. (1984). Beyond locus of control: Attribution of responsibility for positive and negative outcomes. British Journal of Psychology,75(1), 43–49.

    Google Scholar 

  • Brüggen, E. C., Hogreve, J., Holmlund, M., Kabadayi, S., & Löfgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research,79, 228–237.

    Google Scholar 

  • Cantril, H. (1965). The pattern of human concerns. New Brunswick, NJ: Rutgers University Press.

    Google Scholar 

  • Cobb-Clark, D. A., Kassenboehmer, S. C., & Sinning, M. G. (2013). Locus of control and savings. IZA discussion paper No. 7837, December 2013.

  • Coleman, M., & DeLeire, T. (2003). An economic model of locus of control and the human capital investment decision. Journal of Human Resources,38(3), 701–721.

    Google Scholar 

  • Coley, R. L., & Lombardi, C. M. (2014). Low-income women’s employment experiences and their financial, personal, and family well-being. Journal of Family Psychology,28(1), 88–97.

    Google Scholar 

  • Consumer Financial Protection Bureau. (2015). Financial well-being: The goal of financial education. Report, Iowa City, IA: Consumer Financial Protection Bureau.

  • Cox, A., Hooker, H., Markwick, C., & Reilly, P. (2009). Financial well-being in the workplace. Brighton: Institute for Employment Studies, University of Sussex.

    Google Scholar 

  • Delafrooz, N., & Paim, L. H. (2011). Determinants of financial wellness among Malaysia workers. African Journal of Business Management,5(24), 10092–10100.

    Google Scholar 

  • Department of Statistics. (2017). Press release: Gross domestic product second quarter 2017. Retrieved February 18, 2018, from https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=bFNwdUlVMm5malFyYXFYdUp3THlEQT09.

  • Department of Statistics Malaysia. (2018). Demographic statistics of Malaysia 2017. Retrieved February 18, 2019, from https://www.dosm.gov.my/v1/index.php?r=column/ctwoByCat&parent_id=115&menu_id=L0pheU43NWJwRWVSZklWdzQ4TlhUUT09.

  • Department of Statistics Malaysia. (2019). Malaysia’s economic performance fourth quarter 2018. Retrieved March 1, 2019, from https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=100&bul_id=aHRydmZMSmtNL0lTbW43SjVOSlZkQT09&menu_id=TE5CRUZCblh4ZTZMODZIbmk2aWRRQT09.

  • Dew, J., & Xiao, J. (2011). The financial management behaviour scale: Development and validation. Journal of Financial Counseling and Planning,22, 43–59.

    Google Scholar 

  • Drentea, P., & Lavrakas, P. J. (2000). Over the limit: The association among health, race and debt. Social Science and Medicine,50(4), 517–529.

    Google Scholar 

  • Drever, A. I., Odders-White, E., Kalish, C. W., Else-Quest, N. M., Hoagland, E. M., & Nelms, E. N. (2015). Foundations of financial well-being: Insights into the role of executive function, financial socialization, and experience-based learning in childhood and youth. Journal of Consumer Affairs,49(1), 13–38.

    Google Scholar 

  • Economic Planning Unit. (2015). Rancangan Malaysia Kesebelas 2016–2020. Pertumbuhan Berpaksikan Rakyat. Putrajaya: Percetakan Nasional Malaysia Berhad.

    Google Scholar 

  • Economic Planning Unit. (2017). Business Conditions Index and Consumer Sentiments Index, 1998–Current. Retrieved January 30, 2018, from http://epu.gov.my/sites/default/files/12.2.1.pdf.

  • Economic Planning Unit. (n.d.). Gini coefficient by ethnic group, strata and state, Malaysia, 1970–2014. Retrieved January 30, 2018, from http://epu.gov.my/sites/default/files/Jadual%206%20-%20Pekali%20Gini%20Mengikut%20Kumpulan%20Etnik%2C%20Strata%20dan%20Negeri%2C%20Malaysia%2C%201970-2014.pdf.

  • Falahati, L., Sabri, M. F., & Paim, L. H. (2012). Assessment a model of financial satisfaction predictors: Examining the mediate effect of financial behaviour and financial strain. World Applied Sciences Journal,20(2), 190–197.

    Google Scholar 

  • Fam, S. F., Ismail, N., & Jemain, A. A. (2014). Where are Peninsular Malaysia’s most deprived areas? In International Statistical Institute, South East Asia regional statistics conference, pp. 1–10.

  • Fam, S. F., Jemain, A. A., & Ibrahim, K. (2011a). The association between material deprivation and relative risk of infant mortality in Peninsular Malaysia. International Journal of Arts & Sciences,4(17), 257–269.

    Google Scholar 

  • Fam, S. F., Jemain, A. A., & Zin, W. Z. W. (2011b). Spatial analysis of socioeconomic deprivation in Peninsular Malaysia. International Journal of Arts & Sciences,4(17), 241–255.

    Google Scholar 

  • Garman, E. T., Kim, J., Kratzer, C. Y., Brunson, B. H., & Joo, S. H. (1999). Workplace financial education improves personal financial wellness. Journal of Financial Counseling and Planning,10(1), 79–88.

    Google Scholar 

  • Gerrans, P., Speelman, C., & Campitelli, G. (2014). The relationship between personal financial wellness and financial well-being: A structural equation modelling approach. Journal of Family and Economic Issues,35(2), 145–160.

    Google Scholar 

  • Godwin, D. D. (1994). Antecedents and consequences of newlyweds’ cash flow management. Financial Counseling and Planning,5, 161–190.

    Google Scholar 

  • Gorham, E. E., DeVaney, S. A., & Bechman, J. C. (1998). Adoption of financial management practices: A program assessment. Journal of Extension,36(2), 1–9.

    Google Scholar 

  • Grable, J. E., Archuleta, K. L., & Nazarinia, R. R. (2011). Financial planning and counseling scales. Berlin: Springer.

    Google Scholar 

  • Greninger, S. A., Hampton, V. L., Kitt, K. A., & Achacoso, J. A. (1996). Ratios and benchmarks for measuring the financial well-being of families and individuals. Financial Services Review,5(1), 57–70.

    Google Scholar 

  • Hellriegel, D., Slocum, J. W., & Woodman, R. W. (2010). Organizational behaviour. Mason: South-Western Cengage Learning.

    Google Scholar 

  • Hira, T. K., Fanslow, A., & Vogelslang, R. (1992). Determinants of satisfaction with preparations for financial emergencies. Journal of Financial Counseling and Planning,3, 43–62.

    Google Scholar 

  • Hoffman, D. L., Novak, T. P., & Schlosser, A. (2000). Consumer control in online environments. Working paper, eLab, Owen Graduate School of Management, Vanderbilt University.

  • Howlett, E., Kees, J., & Kemp, E. (2008). The role of self-regulation, future orientation, and financial knowledge in long-term financial decisions. Journal of Consumer Affairs, 42(2), 223–242.

    Google Scholar 

  • Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs,44(2), 296–316.

    Google Scholar 

  • Jacobson, B. H., Aldana, S. G., Goetzel, R. Z., Vardell, K. D., Adams, T. B., & Pietras, R. J. (1996). The relationship between perceived stress and self-reported illness-related absenteeism. American Journal of Health Promotion,11(1), 54–61.

    Google Scholar 

  • Johnson, E., & Sherraden, M. S. (2007). From financial literacy to financial capability among youth. Journal of Sociology & Social Welfare,34(3), 119–204.

    Google Scholar 

  • Joo, S. H., & Grable, J. E. (2004). An exploratory framework of the determinants of financial satisfaction. Journal of Family and Economic Issues,25(1), 25–50.

    Google Scholar 

  • Kidd, J. (2005, February 20). Money problems enough to make you sick. Chicago Tribune Online Edition. Retrieved January 30, 2018, from http://pqasb.pqarchiver.com/chicagotribune.

  • Kim, J., & Garman, E. T. (2003). Financial stress and absenteeism: An empirically derived research model. Financial Counseling and Planning,14(1), 1–12.

    Google Scholar 

  • Kim, J., Garman, E. T., & Sorhaindo, B. (2003). Relationships among credit counseling clients’ financial well-being, financial behaviours, financial stressor events, and health. Journal of Financial Counseling and Planning,14(2), 75–87.

    Google Scholar 

  • Kim, J., Sorhaindo, B., & Garman, E. T. (2006). Relationship between financial stress and workplace absenteeism of credit counseling clients. Journal of Family and Economic Issues,27(3), 458–478.

    Google Scholar 

  • Lefcourt, H. M. (1976). Locus of control and the response to aversive events. Canadian Psychological Review/Psychologie Canadienne,17(3), 202–209.

    Google Scholar 

  • Lusardi, A. (2008a, February). Household saving behaviour: The role of financial literacy, information, and financial education programs. NBER working paper 13824.

  • Lusardi, A., Mitchell, O. S., & Curto, V. (2010). Financial literacy among the young. Journal of Consumer Affairs,44(2), 358–380.

    Google Scholar 

  • Lusardi, A., & Mitchelli, O. S. (2007). Financial literacy and retirement preparedness: Evidence and implications for financial education. Business Economics,42(1), 35–44.

    Google Scholar 

  • Lyons, A. C. (2008). Risky cedit card behaviour of college students. In J. J. Xiao (Ed.), Handbook of consumer finance research (pp. 185–207). New York: Springer.

    Google Scholar 

  • Lyons, A. C., & Yilmazer, T. (2005). Health and financial strain: Evidence from the survey of consumer finances. Southern Economic Journal,71(4), 873–890.

    Google Scholar 

  • Mahdzan, N. S., & Tabiani, S. (2013). The impact of financial literacy on individual savings: An exploratory study in the Malaysian. Transformations in Business and Economics, 12(1/28), 41–55.

    Google Scholar 

  • Malaysian Institute of Economics Research (MIER). (2017). Consumer Sentiments Index: CSI3Q2017. Retrieved February 10, 2018, from https://www.mier.org.my/old/csi/.

  • Masud, J., Haron, S. A., Hamid, T. A., & Zainaludin, Z. (2006). Economic well-being of the elderly: Gender differences. Consumer Interest Annual,56, 426–431.

    Google Scholar 

  • McNamara, J. M. (2007). Long-term disadvantage among elderly women: The effects of work history. Social Service Review,81(3), 423–452.

    Google Scholar 

  • Nielsen. (2017). Malaysian consumer confidence improves in Q2 2017. August 23, 2017. Retrieved February 15, 2018, from http://www.nielsen.com/my/en/insights/news/2017/malaysian-consumer-confidence-improves-in-q2-2017.print.html.

  • O’Neill, B., Sorhaindo, B., Xiao, J. J., & Garman, E. T. (2005). Financially distressed consumers: Their financial practices, financial well-being, and health. Journal of Financial Counseling and Planning,16(1), 73–87.

    Google Scholar 

  • O’Neill, B., Xiao, J. J., Bristow, B., Brennan, P., & Kerbel, C. M. (2000). Successful financial goal attainment: Perceived resources and obstacles. Journal of Financial Counseling and Planning,11(1), 1–12.

    Google Scholar 

  • Perry, V. G., & Morris, M. D. (2005). Who is in control? The role of self-perception, knowledge, and income in explaining consumer financial Behavior. Journal of Consumer Affairs, 39(2), 299–313.

    Google Scholar 

  • PEMANDU. (2017). Malaysia on track to become high income nation by 2020, Says Idris Jala 9 May 2017. Retrieved January 3, 2018, from http://www.thesundaily.my/news/2017/05/10/malaysia-track-become-high-income-nation-2020-says-idris-jala.

  • Porter, N. M., & Garman, E. T. (1992). Money as part of a measure of financial well-being. American Behavioural Scientist,35(6), 820–826.

    Google Scholar 

  • Porter, N. M., & Garman, E. T. (1993). Testing a conceptual model of financial well-being. Financial Counseling and Planning,4, 135–164.

    Google Scholar 

  • Prawitz, A. D., & Cohart, J. (2016). Financial management competency, financial resources, locus of control, and financial wellness. Journal of Financial Counseling and Planning,27(2), 142–157.

    Google Scholar 

  • Prawitz, A. D., Garman, E. T., Sorhaindo, B., O’Neill, B., Kim, J., & Drentea, P. (2006). InCharge financial distress/financial well-being scale: Development, administration, and score interpretation. Journal of Financial Counseling and Planning,17(1), 34–50.

    Google Scholar 

  • Prawitz, A. D., Kalkowski, J. C., & Cohart, J. (2013). Responses to economic pressure by low-income families: Financial distress and hopefulness. Journal of Family and Economic Issues, 34(1), 29–40.

    Google Scholar 

  • Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behavior Research Methods, Instruments, & Computers,36(4), 717–731.

    Google Scholar 

  • Pudney, S. (2011). Perception and retrospection: The dynamic consistency of responses to survey questions on wellbeing. Journal of Public Economics,95(3–4), 300–310.

    Google Scholar 

  • Rao, A., & Barber, B. L. (2005). Financial well-being: Descriptors and pathways. Take Charge America Institute (TCAI) working paper-5-2.

  • Rotter, J. B. (1966). Generalized expectancies for internal versus external control of reinforcement. Psychological Monographs: General and Applied,80(1), 1–28.

    Google Scholar 

  • Sabri, M. F., & Falahati, L. (2012). Estimating a model of subjective financial well-being among college students. International Journal of Humanities and Social Science,2(18), 191–199.

    Google Scholar 

  • Sabri, M. F., Hayhoe, C. R., & Goh, L. A. (2006). Attitudes, values and belief towards money: Gender and working sector comparison. Pertanika Journal of Social Sciences & Humanities,14(2), 121–130.

    Google Scholar 

  • Sabri, M. F., MacDonald, M., Hira, T. K., & Masud, J. (2010). Childhood consumer experience and the financial literacy of college students in Malaysia. Family and Consumer Sciences Research Journal,38(4), 455–467.

    Google Scholar 

  • Salamanca, N., de Grip, A., Fouarge, D., & Montizaan, R. M. (2016). Locus of control and investment in risky assets. IZA Discussion Paper No. 10407. Retrieved December 3, 2018, from https://ssrn.com/abstract=2886778.

  • Shim, S., Xiao, J. J., Barber, B. L., & Lyons, A. C. (2009). Pathways to life success: A conceptual model of financial well-being for young adults. Journal of Applied Developmental Psychology,30(6), 708–723.

    Google Scholar 

  • Starrin, B., Åslund, C., & Nilsson, K. W. (2009). Financial stress, shaming experiences and psychosocial Ill-health: Studies into the finances-shame model. Social Indicators Research,91(2), 283–298. https://doi.org/10.1007/s11205-008-9286-8.

    Article  Google Scholar 

  • Steen, A., & MacKenzie, D. (2013). Financial stress, financial literacy, counselling and the risk of homelessness. Australasian Accounting, Business and Finance Journal, 7(3), 31–48.

    Google Scholar 

  • Subramaniam, G., Ali, E., & Maniam, B. (2014). Subjective financial well-being and incidence of indebtedness among young workers in Malaysia. Business Studies Journal,6, 57–65.

    Google Scholar 

  • Sumarwan, U., & Hira, T. K. (1993). The effects of perceived locus of control and perceived income adequacy on satisfaction with financial status of rural households. Journal of Family and Economic Issues,14(4), 343–364.

    Google Scholar 

  • Tang, N., & Baker, A. (2016). Self-esteem, financial knowledge and financial behavior. Journal of Economic Psychology,54, 164–176.

    Google Scholar 

  • Trading Economics. (2017). Malaysia—urban population (% of total). Retrieved December 30, 2018, from https://tradingeconomics.com/malaysia/urban-population-percent-of-total-wb-data.html.

  • Van Praag, B. M., Frijters, P., & Ferrer-i-Carbonell, A. (2003). The anatomy of subjective well-being. Journal of Economic Behaviour & Organization,51(1), 29–49.

    Google Scholar 

  • Vlaev, I., & Elliott, A. (2014). Financial well-being components. Social Indicators Research,118(3), 1103–1123.

    Google Scholar 

  • Vosloo, W., Fouché, J., & Barnard, J. (2014). The relationship between financial efficacy, satisfaction with remuneration and personal financial well-being. The International Business & Economics Research Journal (Online),13(6), 1455–1470.

    Google Scholar 

  • Voydanoff, P. (1990). Economic distress and family relations: A review of the eighties. Journal of Marriage and the Family,52(4), 1099–1115. https://doi.org/10.2307/351841.

    Article  Google Scholar 

  • Xiao, J. J. (Ed.). (2008). Applying behavior theories to financial behavior. In Handbook of consumer finance research (pp. 69–81). New York: Springer.

    Google Scholar 

  • Xiao, J. J., Chen, C., & Chen, F. (2014). Consumer financial capability and financial satisfaction. Social Indicators Research,118(1), 415–432.

    Google Scholar 

  • Xiao, J. J., Sorhaindo, B., & Garman, E. T. (2006). Financial behaviours of consumers in credit counselling. International Journal of Consumer Studies,30, 108–121. https://doi.org/10.1111/j.1470-6431.2005.00455.x.

    Article  Google Scholar 

  • Xiao, J. J., Tang, C., & Shim, S. (2009). Acting for happiness: Financial behaviour and life satisfaction of college students. Social Indicators Research,92(1), 53–68.

    Google Scholar 

  • Yates, J. (2007). Housing affordability and financial stress. Research Paper, 6.

Download references

Acknowledgements

The authors would like to thank the Malaysian Ministry of Education under the Fundamental Research Grant Scheme for providing the financial resources that assisted in the conduct of this study (Research Grant No. FP025-2016). The authors are also grateful to all colleagues who had given constructive feedback on the instrument and to Ms Siti Amirah Hassan who had diligently rendered assistance throughout the conduct of this project.

Author information

Authors and Affiliations

  1. Department of Finance and Banking, Faculty of Business and Accountancy, University of Malaya, 50603, Kuala Lumpur, Malaysia

    Nurul Shahnaz Mahdzan, Rozaimah Zainudin, Mohd Edil Abd. Sukor, Fauzi Zainir & Wan Marhaini Wan Ahmad

Authors
  1. Nurul Shahnaz Mahdzan
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Rozaimah Zainudin
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Mohd Edil Abd. Sukor
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Fauzi Zainir
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Wan Marhaini Wan Ahmad
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Nurul Shahnaz Mahdzan.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Mahdzan, N.S., Zainudin, R., Sukor, M.E.A. et al. Determinants of Subjective Financial Well-Being Across Three Different Household Income Groups in Malaysia. Soc Indic Res 146, 699–726 (2019). https://doi.org/10.1007/s11205-019-02138-4

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11205-019-02138-4

Keywords

Search

Navigation