Subjective financial knowledge, prudent behaviour and income The predictors of financial well-being in Estonia

Purpose - The purpose of this paper is to study how subjective and objective knowledge of finance, behaviour in managing personal finances and socio-economic status affect financial well-being. Design/methodology/approach - The financial well-being score is constructed in quantitative financial literacy survey data from Estonia as the arithmetic mean of four statements on a five-point scale. Four hypotheses are tested in multiple regression analysis. Findings - Subjective knowledge has a stronger relation with financial well-being than objective knowledge. Financial behaviour score and income level correlate with financial well-being. Research limitations/implications - The paper contributes to literature on financial literacy, subjective financial knowledge and financial well-being. In future research, psychological factors and future orientated financial well-being should be included, and their relationship to subjective well-being could be analysed further. Practical implications - The results highlight the importance of subjective knowledge and sound behaviour for improving financial well-being. Providers of financial services should address these more in the design of their services and communication. Social implications - Policymakers developing national strategies for financial education need to address subjective financial knowledge for increasing financial well-being in society. Originality/value - Knowledge, behaviour and subjective knowledge have not been used simultaneously in the analysis of financial well-being in Europe before.