Determinants of financial worry and rumination (original) (raw)

2019, Journal of Economic Psychology

Significant parts of populations in developed countries frequently worry and ruminate about their finances. Financial worry and rumination can have serious psychological consequences, resulting in lower psychological well-being, mental-health problems, and impaired cognitive functioning. The literature lacks studies investigating the socio-demographic antecedents of and the financial processes underlying financial worry and rumination. The purpose of our study was to investigate the socio-demographic and financial antecedents of financial worry and rumination (FWR) and the financial factors mediating these relationships. We collected online self-administered survey data from a sample of the Dutch population (N = 1040). Using confirmatory factor analysis, we found that a bifactor model, including a strong and reliable general factor, provided the best explanation of the structure underlying FWR. We developed a parallel mediation model and investigated its structural relationships using structural equation modeling. After controlling for multiple hypotheses testing, our results show that income, past positive changes in one's finances, and age are negatively related to FWR. We found no support for education level and only weak support for expected changes in one's finances as antecedents. Furthermore, the explained variance in FWR substantially improved after adding the mediators of making ends meet, financial buffer, and perceived debts. Among these mediators, making ends meet played a key role explaining respectively half and two-thirds of the total effects of income and past changes in one's finances on FWR. These results were robust under several specifications and were generalizable to the Dutch population. We discuss the implications of our results for future research and government policy. 1. Introduction Significant parts of populations in developed countries are concerned about and preoccupied with their finances. According to the Gallup-Sharecare Index, daily surveyed in the period 2013-2017, 32-40 percent of US-citizens worried about their finances in the last seven days (Gallup, 2018). In the UK, one in five adults report they are drowning in worries about money and debts (Money Advice Services, 2017). Low-income individuals worry and ruminate more about their finances than higher income people (Gallup, 2017; Johar, Meng, & Wilcox, 2015). For example, while respectively 34 and 14 percent of middle-and high-income American households reported being moderately or very worried about not having enough money to pay monthly bills, these rates were strikingly higher (63 percent) for low-income families (Gallup, 2017). Financial worry and financial rumination are the target constructs of interest in this paper. We define financial worry as repeated and negative thinking about the uncertainty of one's (future) financial situation, while financial rumination refers to repetitive, passive, and pessimistic thinking about the possible causes and consequences of one's financial concerns. These constructs belong to a