© 2019 by Anke Plagnol. All rights reserved

Abstract

 

Anke C. Plagnol. "Financial satisfaction over the life course: The influence of assets and liabilities".

Journal of Economic Psychology. 32(1), pp. 45-64 (2011). (journal)(download)

 

Money does not buy happiness, but various studies have shown that financial satisfaction is, among other domains, an important determinant of overall individual well-being. Contrary to the common belief that financial satisfaction mainly depends on an individual's income, evidence for the U.S. indicates that life cycle financial satisfaction steadily increases from the thirties onwards, whereas life cycle income shows an inverted U-pattern with a peak at midlife. To judge from studies in Germany and Norway, this pattern for financial satisfaction is not unique. The aim of the present analysis is to explore the determinants of this life cycle financial satisfaction pattern, taking into account not only income but also the possible impact of assets and liabilities. The analysis suggests that while income has the expected positive relation, increasing financial satisfaction at older age can be partly explained by decreases in liabilities and increases in financial assets, and that assets and liabilities considered separately provide a better explanation than net wealth. In addition, reduction in the dependency burden at old age leads to increased financial satisfaction while the deterioration of health has a negative impact.