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Key Terms

Financial Well-Being

(aka Financial Wellness)

Self-defined by the individual.

Typically includes factors such as satisfaction with ability to manage current situation, ability to exercise choice and feel in control, and future prospects.


Financial Actions and Outcomes

The decisions made–and actions taken–by the individual as well as the resulting outcomes and the impacts of any external shocks.

Outcomes can be objective (e.g., credit score) or subjective (e.g., confidence). Shocks can be positive (e.g., work raise) or negative (e.g., large health care bill, victim of fraud).

There is a feedback loop between actions and outcomes.

Idiosyncratic factors materially impact an individual’s behavior–and satisfaction. They include motivation, affect, financial stress, cognitive bias, values, beliefs, attitudes, time discounting, risk tolerance and related factors.


Financial Capability

The individual’s ability to act in their own self-defined best interest.

It is comprised of two key elements:

  • The knowledge and skill to decide or act (aka financial literacy) — knowledge and skill can be built through external knowledge interventions or self-directed inquiry and experience
  • The ability to exercise choice or take action (e.g., access to appropriate financial instruments)

Foundational Factors

The individual’s general skills and abilities (e.g., critical thinking) and external factors (e.g., economic inequality, health).

Foundational factors are critical to an individual’s financial well-being and are impacted externally by basic education as well as regulation, policy and protection.


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