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Financial Literacy and Financial Well-Being
The subjective nature of the measures used for financial well-being, along with the
inconsistent application of a definitional construct, has produced mixed results among historical
literature. While the relationship between literacy and well-being has been documented, it has
not always been positive. Mugenda et al. (1990) found that a negative relationship between
knowledge and perception of financial status might exist, and that increased knowledge
potentially impacts individuals differently. For example, an individual who is more aware of
finances may conclude a less favorable level of personal well-being, versus a less financially-
literate individual who may not perceive their weaker relative personal financial state, thereby
supporting the adage that ignorance is bliss (Mugenda et al., 1990). However, it is unclear in the
historical literature if the effects of reduced levels of financial well-being as a result of greater
overall financial awareness and knowledge will have a temporary or long-term effect. This is
primarily due to the lack of longitudinal historical research using quasi-experimental methods in
this area.
Financial education has also been found to confer decision-making skills, which can
improve an individual’s ability to weigh alternatives in order to achieve personal financial goals
and objectives (Bayer et al., 2008). Financial education, which is delivered in the workplace, has
been shown to create a strong influence on personal financial management decisions (Bayer et
al., 2009; Bernheim & Garrett, 1996). Self-directed financial education was found to be
significantly associated with better financial management practices, worker satisfaction, and
financial well-being (Loibl & Hira, 2005). However, financial behaviors have also been found to
influence individual well-being in both positive and negative ways (Mugenda et al., 1990; Joo,
1998).
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Among the most relevant representative research studies on financial well-being in the
workplace, was a study conducted by Garman, Kim, Kratzer, Brunson, and Joo (1999).
Employees of a Southeastern chemical company were offered a series of financial education
workshops of varying number and duration of classes, ranging from a two-hour single-topic
program to a six-hour program focused on comprehensive financial planning topics. The
differences and similarities between employee participants and non-participants were explored.
A key finding of this research was that higher levels of financial well-being were found
among participants versus non-participants on four of the six questions asked. Additionally,
participants attributed positive changes in their financial behavior to the workshops they
attended, with approximately 75% reporting improved financial decision making, improved
confidence with investment decision making, and improved investment diversification through
asset allocation. Since the comprehensive Money Basics workshop had the highest reported
attendance, the results could be inferred to be mostly attributed to those attending a
comprehensive education workshop.
Another relevant and recent study was conducted by Prawitz and Cohart (2014) to better
understand effects of worksite financial education on changes in financial behaviors and other
related measures. Perceived financial wellness, savings ratios, frequency of negative behaviors,
and the likelihood of taking positive financial action were measured. Quasi-experimental
methods were used including pre and post testing, participant and non-participant groups,
measuring variables over time, and the use of multiple test groups. Employees were incented to
participate by offering wellness points for completing one or more financial education modules
of interest over a one-year time period. While results of the financial education program delivery
did indicate improved financial well-being over time, no significance was found between the
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participant group and the non-participant group. However, significance was found in increases of
several positive financial behaviors among participants as compared to the control group of
employees.
The results suggest that comprehensive financial education programs educate
participants on how all parts of the financial aspects of their lives work together to provide well-
being through living in comfort, both now and in retirement (Prawitz & Cohart, 2014).
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