Vol.:(0123456789) 1 3 Journal of Family and Economic Issues https://doi.org/10.1007/s10834-019-09649-9 ORIGINAL PAPER Consumer Financial Well‑Being: Knowledge is Not Enough Jae Min Lee 1  · Jonghee Lee 2  · Kyoung Tae Kim 3 © Springer Science+Business Media, LLC, part of Springer Nature 2019 Abstract This study investigated the relationship between fnancial knowledge and fnancial well-being and included the moderating role of propensity to plan. This study used the Consumer Financial Protection Bureau’s measure of fnancial well-being as it explains consumers’ subjective sense of it. Results from the 2016 National Financial Well-Being Survey showed that fnancial knowledge and a propensity to plan were associated positively with fnancial well-being. This study also confrmed that the propensity to plan plays a moderating role that enhances the positive association between fnancial knowledge and fnancial well-being. Results from this study provide insights for fnancial practitioners, educators, and policymakers who help US households improve their fnancial well-being. Keywords Financial knowledge · Financial well-being · National fnancial well-being survey · Propensity to plan JEL Classifcation D12 · D14 Introduction Financial well-being has received attention as a topic of increasing importance for many as the economy recovers from the Great Recession and more people become confdent about their household fnances. However, given the fnancial markets’ complexity, it has not been easy to improve one’s fnancial well-being, which is a salient goal of fnancial edu- cation that is consistent with the US National Strategy for Financial Literacy (Financial Literacy and Education Com- mission 2016). In general, fnancially well-informed individuals make wiser decisions for their families and therefore are in a better position to increase their economic growth. Several empiri- cal studies (e.g., Hilgert and Hogarth 2003; Joo and Grable 2004; Zulfqar and Bilal 2016) found a positive association between individuals’ fnancial knowledge and their fnan- cial outcomes. Furthermore, the lack of fnancial knowl- edge was reported as one of the main factors that reduced a person’s access to the fnancial markets (e.g., Clark and D’Ambrosio 2008). In this respect, fnancial knowledge typi- cally was an input used to model the need for better fnan- cial education and explain variations in fnancial outcomes (Huston 2010). Some studies have indicated that individuals’ tendency to plan infuences their fnancial well-being, and these results provide insights about ways to improve the relationship between fnancial knowledge and fnancial well-being. For example, Lusardi (1999) found that those who have given little or no thought to retirement had lower fnancial wealth than did those who had given the subject more thought. Ameriks et al. (2003) found that those with a higher pro- pensity to plan spent more time planning fnances and that this shift was related to their increased wealth. In addition, Lee and Kim (2016) showed that households with a greater propensity to plan tended to be better prepared for retire- ment. The literature mentioned above provides opportunities * Jonghee Lee jongheelee@kmu.ac.kr Jae Min Lee jae-min.lee@mnsu.edu Kyoung Tae Kim ktkim@ches.ua.edu 1 Department of Family Consumer Science, Minnesota State University, 102 Wiecking Center, Mankato, MN 56001, USA 2 Department of Consumer Information Studies, Keimyung University, 1095 Dalgubeol-daero, Daegu 42601, South Korea 3 Department of Consumer Sciences, University of Alabama, 312 Adams Hall, Tuscaloosa, AL 35487, USA