CFPB Releases Tool to Help Measure Financial Well-Being
Resource Will Provide Questions Financial Educators Can Use to Assess the Financial Wellness of Consumers
WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) is releasing a tool to measure consumer financial well-being, based on a definition that the Bureau released in January 2015. This first-of-its-kind tool provides questions that educators and others working to build financial capability can use to accurately and consistently quantify the financial well-being of consumers.
“A key part of our mission is providing resources that aid and empower people to lead stable and healthy financial lives,” said CFPB Director Richard Cordray. “Our financial well-being tool will give financial educators an important means by which to evaluate and support consumers’ financial health.”
In January 2015, the CFPB released a report that provided a definition of financial well-being, drawing on interviews with consumers across the country, relevant research, and consultations with leading financial education experts. The report defined financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”
The new tool is comprised of 10 questions that financial educators can use when working with clients to measure their financial security and overall sense of financial well-being. The questions that make up the scale are built around the four elements of financial well-being that were published in the January 2015 report. The four elements are:
- Financial security in the present: This element focuses on whether consumers feel they have control over their day-to-day and month-to-month finances.
- Financial security in the future: This element focuses on whether consumers feel they have the capacity to absorb an unexpected financial shock.
- Present financial freedom of choice: This element focuses on whether consumers feel they have the ability to make choices that allow them to enjoy life.
- Future financial freedom of choice: This element focuses on whether consumers feel they are on track to meet their longer term financial goals.
While consumers already have a sense of their financial well-being, this tool is designed to allow educators and others who are working with consumers to quantify the consumer’s financial well-being. Financial educators can use the scale in a variety of ways:
- Initial assessment: The scale can be used to assess a person’s financial well-being when a financial educator first begins working with a consumer, and help guide an initial conversation about the consumer’s financial situation.
- Tracking progress over time: The scale can be used at different intervals to track a consumer’s financial well-being over time. Changes in answers to certain questions can provide additional insights to how a consumer’s financial well-being is evolving.
- Assessing program outcomes: The scale can be used to gauge how well a program is improving the financial well-being of the individuals it is designed to serve.
- Financial well-being survey research: The scale can be used in survey research to analyze the relationship between financial well-being and other factors.
A copy of the financial well-being guide is available at: https://www.consumerfinance.gov/financial-well-being
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.