Method: A subset of respondents aged 55 and older (N = 9,888) from the 2015 National Financial Capability Survey was selected. Confirmatory factor analysis was used to evaluate the measurement model for four latent factors: (1) financial literacy (ability, confidence, and knowledge), (2) financial access (accounts of checking, saving, investment, retirement, and credit card), (3) financial functioning (precautionary saving, planning ahead, and long-term financial goals), and (4) economic hardships (difficulties covering expense, bank overdraft, and counts of medical hardship). Financial education (whether receiving financial education) and financial socialization (whether being taught by someone to handle finance) were measured by a single binary indicator. Structural equation modeling (SEM) via Mplus 7.4 was used to examine whether financial capability mediated the relationship between financial education, socialization, and economic well-being. Weighted least square (WLSMV) estimation was used to handle categorical and binary indicators.
Results: The results indicate that both measurement model (CFI=0.965, TLI=0.954, RMSEA=0.043, 90% CI: 0.042, 0.045) and SEM model (CFI=0.966, TLI=0.957, RMSEA=0.041, 90% CI: 0.039, 0.042) have a good fit. Standardized results from the SEM model showed that financial socialization was positively associated with financial literacy (β=0.15, p<.001) and financial access (β=0.10, p<.001), whereas financial education was only associated with financial literacy (β=0.20, p<.001) not financial access. Further, financial literacy was positively associated with financial access (β=0.50, p<.001). In addition, older adults with higher financial literacy (β=0.21, p<.001) and financial access (β=0.75, p<.001) had higher financial functioning, which in turns, had lower economic hardships (β=−0.85, p<.001).
Conclusion: This study demonstrates that financial capability is a key factor to economic well-being in later life. Further, financial socialization and financial education have an important contribution to financial capability. To help older adults build stronger financial capability, policy and practice efforts could be paid to provide financially inclusive programs through education and socialization. Further, strengthening older adults’ financial literacy and financial access could enhance positive financial behavior, which in turn, leads to better economic well-being in later life.