Consumer Financial Capability and Quality of Life: a Global Perspective

The international movement promoting consumer financial capability started in developed countries and gradually spread to the developing world. Improving consumer financial capability has been perceived as an approach to reducing world poverty and inequality. However, considering the development stages of countries, the best stage for promoting financial capability remains understudied. This study attempts to answer an important question: At what stage of economic development is financial capability promotion the most beneficial, with the highest returns measured in terms of quality of life? This study examines the association between consumer financial capability and quality of life at the international level and draws implications for policymakers for developing consumer financial capability. The data for this study originate from four diverse sources provided by the World Bank and United Nations. The final dataset includes data from 137 countries. Financial capability is measured using an index that combines financial knowledge and financial behavior. Quality of life is measured by the Human Development Index (HDI) and Life Evaluations provided by the World Happiness Report. The HDI comprises the components of life expectancy, expected number of years of schooling, number of mean years of schooling, and per-capita gross national income. Life evaluations are based on country averages for life assessments based on a ladder image. The results show that financial capability and quality of life are strongly correlated. However, the relationships are non-linear, and development and financial capability seem to be much more strongly linked in highly developed countries.