Consumer Financial Well-Being: Does Scale Choice Alter the Measure?

Consumer Financial Well-Being: Does Scale Choice Alter the Measure?

Patrick Heck, Caroline Ratcliffe, Elle Tibbitts

Working paper

Consumer Financial Protection Bureau Office of Research

2024

A crucial first step in helping consumers improve their financial lives is understanding their financial circumstances and well-being. The Consumer Financial Protection Bureau’s Financial Well-Being (FWB) scale measures a consumer’s subjective well-being related to financial aspects of their lives. This scale is offered in a standard-length 10-item version and an abbreviated 5-item version, but no research has directly compared how completing either version may alter consumers’ responses. A notable difference between the 5-item and 10-item scales is that the 5-item scale includes a higher share of reverse coded (i.e., negatively framed) items. We hypothesize that exposure to negatively framed items makes participants feel worse about their financial situation and that completing the 5-item FWB scale will result in more negative responses to FWB-related questions compared to completing the 10-item FWB scale. To test this hypothesis, we implement a randomized experiment using the Understanding America Study—a nationally representative survey of U.S. households. In our survey experiment with nearly 6,000 participants, we find that completing the 5-item versus the 10-item FWB scale causes declines in FWB scores, responses to the individual scale items, and a self-rated measure of FWB. This pattern is particularly evident among lower-income respondents. These findings highlight that financial well-being measurement choices, namely, the choice of which FWB scale to use, have consequences that researchers and practitioners may not expect or desire. Our research contributes to the topic of scale construction more broadly by experimentally studying the causal effects of measuring well-being using an established scale that includes a comparatively more negative collection of items. We discuss the implications of these findings for future research on financial well-being and on measurement of well-being more broadly.