Determinants of financial worry

• Published date: 01 January 2023
• Author: Frank M. Magwegwe,Maurice M. MacDonald,HanNa Lim,Stuart J. Heckman
• Date: 01 January 2023
• DOI: http://doi.org/10.1111/joca.12496

RESEARCH ARTICLE

Determinants of financial worry

Frank M. Magwegwe

1

| Maurice M. MacDonald

2

|

HanNa Lim

2

| Stuart J. Heckman

2

1

Gordon Institute of Business Science,

University of Pretoria, Johannesburg,

South Africa

2

Department of Personal Financial

Planning, College of Health and Human

Sciences, Kansas State University,

Manhattan, Kansas, USA

Correspondence

Frank M. Magwegwe, Gordon Institute of

Business Science, University of Pretoria,

26 Melville Road, Illovo,

Johannesburg, 2146, South Africa.

Email: magwegwef@gibs.co.za

Abstract

Grounded in the transactional stress-coping theory

and the Tallis and Eysenck (1994) model of non-

pathological worry, the present study sought to

advance the conceptual and empirical understand-

ing of financial worry (FW). We positioned objec-

tive financial stressors (OFS), subjective financial

stressors (SFS), and coping resources as key vari-

ables in understanding the determinants of finan-

cial worry (FW). The cross-sectional data consisted

of responses from a representative sample of 19,385

adults, aged 18 and older, drawn from a large

U.S. survey. Hierarchical linear regression results

revealed that OFS, SFS, household income, and

financial capability (FC) are all key determinants of

FW. Furthermore, the results revealed adverse

effects of OFS and SFS on FW. These effects were

moderated by household income, FC, age, and gen-

der. Implications for future research, employers,

practitioners, and policymakers are discussed.

KEYWORDS

coping resources, financial capability, financial worry,

moderators, objective and subjective financial stressors,

perceived threat

Received: 29 September 2020 Revised: 26 June 2022 Accepted: 27 July 2022

DOI: 10.1111/joca.12496

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.

© 2022 The Authors. Journal of Consumer Affairs published by Wiley Periodicals LLC on behalf of American Council on Consumer

Interests.

J Consum Aff. 2023;57:171–221. wileyonlinelibrary.com/journal/joca 171

1|INTRODUCTION AND BACKGROUND

Financial worry (FW) is a major issue for many consumers in developed economies. In Canada,

adults aged 18 and older spend at least 1.40 hours a day worrying about their finances (Scotia

Bank, 2019). In Australia, 55% of adults aged 18 and older reported that not having financing

for retirement was their greatest financial worry (NAB, 2020). In the United Kingdom (UK),

36% of employees reported having financial worries (Salary Finance, 2020). In the

United States, according to Gallup (2019), 46% of Americans reported being moderately or

highly worried about their finances, and 54% reported not having enough money for retirement

as their number one financial worry. Figure 1illustrates the percentage of Americans reporting

high or moderate financial worry between 2001 and 2019.

Given the high prevalence of FW among consumers, two important questions arise: first,

does the high prevalence matter, and second, what factors contribute to the high prevalence?

Research studies to date are in unequivocal agreement about the detrimental effects of

FW. Consumers with elevated levels of FW reported poor self-rated health (Lenton &

Mosley, 2008), poor psychological health (Salari & Zhang, 2006), low financial satisfaction

(Hira & Mugenda, 1998), low financial well-being (Bayuk & Altobello, 2019), low life satisfac-

tion (Tay et al., 2017), and saved less for retirement (Neukam & Hershey, 2003). Furthermore,

they performed poorly at work (Meuris & Leana, 2018), showed reduced cognitive capacity

(Mani et al., 2013; Meuris & Leana, 2018), and greater difficulties processing retirement con-

cepts (Gutierrez & Hershey, 2013). This paper investigates the determinants of FW, and thus

answers the second question posed above.

FW is a concept within the broader construct of worry. Worry, a pervasive human activity,

is broadly defined as repetitive negative thoughts about uncertain future events

(Borkovec, 1994; Borkovec et al., 1983) and exists on a continuum from low to high (Olatunji

et al., 2010). Based on Borkovec et al.'s (1983) conceptualization of worry, de Bruijn and Anto-

nides (2020) defined FW as negative repetitive thoughts about the uncertainty of one's future

financial situation. Defined this way, FW is conceptually related to, though it is not identical

with financial well-being, conceptualized by Netemeyer et al. (2017) as consisting of two com-

ponents: (1) current money management stress, “which encompasses feelings of being stressed/

worried about one's current financial situation”and (2) expected future financial security,

“which encompasses perceptions of having financially secure future and meeting financial

goals”(p. 71). There is emerging evidence for a relationship between FW and financial well-

being. For instance, in a recent study, Bayuk and Altobello (2019) found that FW was negatively

related to financial well-being. Consumer financial well-being has received increased attention

from policymakers (Netemeyer et al., 2017) who have stressed the importance of investigating

psychological factors to better understand consumer financial well-being (e.g., Consumer

Financial Protection Bureau, 2015). We posit that one such factor is FW. Thus, it is clearly of

importance to examine the determinants of FW.

The nascent body of literature on FW is incommensurate with its prevalence and the range

of negative outcomes for individuals. Although FW has not received serious prior attention

from consumer researchers, the present interest (e.g., de Bruijn & Antonides, 2020; DeRigne

et al., 2019; Kiso et al., 2019; Weissman et al., 2020) suggests that this is starting to change.

Another indicator of this growing research interest is the voluminous research on FW during

the global pandemic of COVID-19 (e.g., Horesh et al., 2020; Wilson et al., 2020). Although there

is growing research interest in FW, most studies (1) examined FW without offering a definition

of the concept; (2) lack a theoretical framework and thus did not explain the phenomenon of

172 MAGWEGWE ET AL.

FW; (3) did not simultaneously consider the effect of objective financial stressors

1

(OFS) and

subjective financial stressors (SFS); and (4) failed to examine the moderating role of coping

resources. Our study seeks to fill these important gaps in the understanding of the phenom-

ena of FW.

There are several reasons why it is important to study the phenomena of FW. First, to date,

little remains known about the phenomena of FW, with the existing studies (e.g., Hershey

et al., 2010; Kiso et al., 2019; Litwin & Meir, 2013; Lusardi & de Bassa Scheresberg, 2017) mostly

being atheoretical and descriptive in nature. Second, there is increasing recognition among

policymakers such as the Consumer Financial Protection Bureau of the importance of con-

sumer financial well-being and the need for enhanced understanding of the psychological fac-

tors (e.g., FW) that influence financial well-being. Prior research (Bayuk & Altobello, 2019) has

indicated that high FW is associated with lower consumer financial well-being. Third, enhanc-

ing understanding of the factors that influence FW may help to identify factors that are most

crucial to target during interventions designed to reduce FW. For example, since our results

indicate that higher financial capability (FC) is associated with reduced FW, financial profes-

sionals (e.g., advisers, counselors, and coaches) and consumer educators could set reducing FW

as one of their client outcomes and implement interventions that enhance financial self-efficacy

(FSE), a component of FC that is malleable to interventions (Modestino et al., 2019). Prior

research has indicated that interventions such as financial coaching

2

(Modestino et al., 2019)

can enhance FSE. Finally, the high prevalence of FW among consumers and its associated neg-

ative outcomes (e.g., low life satisfaction and low financial well-being), suggests that FW is a

concept worthy of study in its own right.

In order to achieve our research aims, we conducted an empirical study that developed a

transactional conceptual model of FW that is theoretically grounded in both the transactional

theory of stress and coping (TTSC; Lazarus & Folkman, 1984) and a theoretical model of nor-

mal or nonpathological worry

3

developed by Tallis and Eysenck (TEMW, 1994). We then tested

the hypotheses of the current study using a nationally representative sample of US adults age

18 and above.

65

55

45 44

40

43

46

51

56 56

59

57

61

41

352001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Percentage

Yea r

45

53

49 50

54

48

52

46

FIGURE 1 Percentage of Americans reporting high or moderate financial worry. The data were obtained

from Gallup (2013) and Gallup (2019)

MAGWEGWE ET AL.173