An Exploratory Factor Analysis of the Financial Hope Scale with Low-Income Public Housing Residents

Background and Purpose: The purpose of this study is to examine the factor structure of the financial hope scale (FHS) with a sample of low-income public housing residents. Most of previous studies are mainly focused on financial literacy as the means to change client’s financial behaviors. . However, Fernandes, Lynch Jr, and Netemeyer (2014) conducted a meta-analysis study and found that financial literacy interventions, including counseling, financial education, exposure to financial education resources, and participation in workshops or financial literacy programs, explained only 0.1 percent of the variance of financial behaviors. Despite the importance of psychological empowerment in individuals’ finances (De Meza, Irlenbusch, & Reyniers, 2008; Mandell & Klein, 2007), there is a lack of measures that adequately capture the intrinsic motivational aspect of financial capability.

Methods: Surveys were collected from a community-based non-profit organization which provides comprehensive programs such as individual financial coaching, tax assistance, credit workshops, and financial education training. Using a convenience sample of 265 participants, this paper deductively constructed the items for FHS. The definition of financial hope was adopted from the psychological self-sufficiency (PSS) theory (Hong, 2013). Employment hope scale (EHS) (Hong, Polanin, & Pigott, 2012), which is one of the components of PSS, was modified to create the financial hope scale. The questionnaires consist of empowerment, self-motivation, utilization of skills and financial knowledge, goal orientation, and financial behavior using a Likert scale. The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy test and Bartlett’s test of sphericity was conducted using Stata 15. Next, exploratory factor analysis (EFA) was conducted to reveal any latent variables in the financial hope scale. Cronbach’s coefficient alpha was examined as evidence of internal consistency reliability for a multi-item scale (Tavakol & Dennick, 2011).

Results: A total of 242 surveys were analyzed. The descriptive statistics revealed that 90.64% of respondents were female and 89.32% were Black or African American. The age range were between 22 to 68 years of age (Mean= 40.98, SD =10.139). The KMO sampling adequacy was .954 and Bartlett’s test of sphericity was statistically significant at a=.001 (p=.000). As a result of EFA, 14 items (items 11-24) loaded onto factor 1 with an eigenvalue 13.72, and the 9-items (items 1-3 and 5-10) onto factor 2 with an eigenvalue 1.36. Only one item (item 4) was significantly loaded onto both factors and was dropped from further analysis. The financial hope scale was determined to comprise two factors—financial goal-orientation (item 11-24) and psychological empowerment (factor 2, items 1-3 and 5-10).

Implications: Engagement of clients in financial capability work is critical as many discontinue participating in programs that support asset development to combat poverty. Financial hope is an indicator of how empowered individuals are to push through the barriers to achieve financial goals. Thus, social workers who work as financial coaches can help improve clients’ financial hope to learn the knowledge and skills needed to gain access to and utilize financial products and institutions and to commit to the attitude and behaviors that lend themselves to financial capability.