Money and Happiness (SOC Happiness)

Acting for Happiness: Financial Behavior and Life Satisfaction of College Students

Jing Jian Xiao Æ Chuanyi Tang Æ Soyeon Shim

Accepted: 24 June 2008 / Published online: 9 July 2008 � Springer Science+Business Media B.V. 2008

Abstract Recent research on well-being suggests that domain-specific behaviors con- tribute to domain-specific satisfactions, which in turn contribute to an individual’s overall

satisfaction with life. Our study is an attempt to add to the literature by observing these

phenomena from a financial perspective. Using data collected from a sample of under-

graduate students at a major state university in the U.S. and employing structural equation

modeling, we have found evidence suggesting that positive financial behaviors contribute

to financial satisfaction and financial satisfaction in turn contributes to life satisfaction. In

addition, positive financial behaviors contribute to life satisfaction through two more

mediating variables: academic performance and academic satisfaction.

Keywords Life satisfaction � Financial satisfaction � Academic satisfaction � Financial behavior

1 Introduction

Life satisfaction is one of the important measures of subjective well-being (Diener 1984;

Pavot and Diener 1993). Research shows that subjective well-being or quality of life is

positively related to mental and physical health, job performance, interpersonal relationships,

and married status (Sirgy et al. 2006). Given the positive effects of subjective well-being on

several dimensions of life, researchers have become increasingly interested in studying

specific factors that influence subjective well-being and life satisfaction. One trend among

J. J. Xiao (&) University of Rhode Island, Kingston, RI, USA e-mail: [email protected]

C. Tang � S. Shim University of Arizona, Tucson, AZ, USA e-mail: [email protected]

S. Shim e-mail: [email protected]

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Soc Indic Res (2009) 92:53–68 DOI 10.1007/s11205-008-9288-6

well-being researchers is to investigate effects of specific behaviors on people’s subjective well-being. Recently, a few researchers have argued that performing a certain target behavior

increases satisfaction in the same domain (Lynbomirsky 2005; Otake et al. 2006). In our

study, we applied this idea in the financial domain to examine whether financial behavior

contributes to financial satisfaction. More specifically, we wanted to determine the extent to

which financial behaviors influence college students’ financial satisfaction and its subsequent

influence on their overall life satisfaction. Because academic achievement is the most

important life aspect for many college students, we also wanted to examine the role that

financial behaviors play in academic satisfaction and its impact on overall life satisfaction.

Traditional research on college students focused on academic achievements. In the last

decade, however, researchers studying college students have taken a more comprehensive,

quality-of-life approach that examines not only students’ academic achievements but also

their social and psychological developments (Benjamin 1994; Benjamin and Hollings

1995, 1997). For instance, researchers have studied the quality of life of college students

from psychological and social perspectives, such as depression (Pilcher 1998), goals

(Schmuck et al. 2000), personality (Cha 2003; Lounsbury et al. 2005), health (Vaez et al.

2004), and culture (Yestim 2003). More recently, a quality-of-college-life (QCL) measure

has been proposed and tested in the U.S. and South Korea (Sirgy et al. 2007; Yu and Lee

2008). However, only a few previous studies have examined financial satisfaction and its

association with life satisfaction of college students (Michalos 1991; Michalos and Orlando

2006). To our knowledge, no previous research has examined the association between

financial behaviors and life satisfaction. Our research fills this research gap.

Our research is also important for several other reasons. First, we want to add evidence

to support the argument that domain-specific behaviors (in this case, financial behavior) are

associated with domain-specific satisfactions (i.e., financial satisfaction) and life satis-

faction. Second, we believe that developing positive financial behaviors during the college

years increases an individual’s chances of attaining a better quality of life later in life. Of

the several pivotal learning processes that college students undergo during their first years

of higher education, perhaps the most important pertains to personal financial issues. For

the first time, most of these young adults are managing money independently, without

parental supervision. Many at this age also begin working for a wage and start using credit

cards issued in their own names. Some also borrow a sizable amount of money for the first

time and must then manage debt. With respect to the latter, research has shown that some

college students are engaging in risky credit behaviors (Lyons 2008) that can lead to

negative outcomes. Another study shows that upper division college students are less likely

than their lower division counterparts to save money but more likely to engaging in risky

credit behaviors (Xiao et al. 2007). Given these negative behaviors and assuming that the

money managing habits formed during college will carry through into later life, we believe

that a better understanding of how college students develop desirable and undesirable

financial behaviors and how these behaviors affect their quality of life will aid those

interested in improving life satisfaction for all members of a society.

2 Conceptual Framework and Hypotheses

In developing our conceptual model, we adapted the framework used in a happiness study

conducted by Lynbomirsky et al. (2005). The authors of that study concluded that, of the

three proposed factors (genetics, context, and behavior), one’s behavior (performing an act

of kindness was used in this particular study) was a significant factor in predicting one’s

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happiness. Otake et al. (2006) confirmed that performing an act of kindness increased

happiness among Japanese college students. Based on the assumption that performing a

domain-specific behavior would increase one’s satisfaction, we developed a framework

depicting that financial behaviors affect financial satisfaction as well as academic satis-

faction, and these two domain-specific satisfactions in turn affect college students’ overall

life satisfaction. To capture the influences of other factors, we also included a financial-

status measure in the model (see Fig. 1). In the following, we discuss hypotheses we

formulated based on these assumptions and the relevant literature of quality of life

research.

In our study we use the phrase ‘‘financial behaviors’’ to refer to positive or desirable

behaviors recommended by consumer economists as ways to improve financial well-being

(Xiao 2008). Common financial behaviors include practices related to cash, credit and

saving management (Hilgert et al. 2003; Xiao et al. 2006). Since an individual’s financial

well-being can be either objective (as measured in terms of income, assets, etc.) or sub-

jective (as measured in terms of financial satisfaction) (Joo 2008), it stands to reason that

positive financial behaviors should improve financial well-being in both realms. Xiao et al.

(2006) in fact found that positive financial behaviors do contribute to financial satisfaction

among a sample of consumers who use credit counseling. A study of college students’

credit card use also found that positive financial behaviors decrease financial stress

(Hayhoe et al. 2000). Furthermore, as suggested by Maddux (2002), intentional actions to

reduce financial stress could help achieve optimal financial well-being. Thus, the following

hypothesis is proposed:

H1 Performing positive financial behaviors would be positively associated with financial satisfaction.

In addition to the direct effect of financial behavior on financial satisfaction, performing

positive financial behaviors may have positive spillover effects on other domain satis-

factions. For instance, one’s ability to manage and control monetary resources may be an

indicator of one’s ability to manage other resources (e.g., time), which may in turn result in

positive spillover effects on other domains of life (e.g., academic success). Therefore, we

propose the following hypothesis:

H2 Performing positive financial behaviors would be positively associated with GPA.

The most common measure of financial status is income. Many studies have examined

the relationship between income and subjective well-being. For instance, Hsieh (2004)

used data from General Social Surveys to observe the association between income and

financial satisfaction of American elders and found that different definitions of income

have different effects on financial satisfaction. Vera-Toscano et al. (2006), using data from

Financial behavior

GPA Financial status Academic satisfaction

Financial satisfaction

Life satisfaction

H1

H4

H2

H5

H7

H6

H3

Fig. 1 The theoretical framework

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a national survey in Spain, found that not only income but also income expectation affects

financial satisfaction. Sighieri et al. (2006), using data from nine European countries,

examined the relationship between income and financial satisfaction and found that income

and satisfaction have a positive relationship up to a point and variables in the environment,

such as differing household characteristics, explained 30% of the variances regarding

financial satisfaction.

Using a sample of Russian consumers, Schyns (2001) found that the relationship

between income and life satisfaction is complex. An earlier review study found that

income is associated with happiness through mediating variables (Cummins 2000a).

Subsequently, Diener and Biswas-Diener (2002) reviewed studies on the relationship

between income and subjective well-being and concluded that there are at most small

correlations between income and subjective well-being within nations and also that, unless

they are rich, people who value material goals are less happy than those who do not. Diener

and Biswas-Diener also suggested that income may have either a direct influence or an

indirect influence, through financial satisfaction, on subjective well-being. Arthaud-Day

and Near (2005) reached similar conclusions in their more focused review of the rela-

tionship between income and happiness within nations and across nations. A newer study

using data collected from five countries indicated effects of wealth and non-durable con-

sumptions on life satisfaction (Headey et al. 2008).

Using income to measure the financial status of college students poses special difficulties.

Most students’ incomes come from diverse sources—their parents, their own work, their

student loan lenders, etc. For the same reason, wealth is not an appropriate measure. Non-

durable consumptions would seem an option, but accurate data for this measure is not easy to

collect. Thus debt may be a better measure of college students’ financial status. According to

the 2002 National Student Loan survey, over 70% of respondents agreed that student loans

are a ‘‘very’’ or ‘‘extremely important’’ means of gaining the money they need to continue

their education after high school (Baum and O’Malley 2003). The survey also reported that

27% of the respondents accrue credit card debt in order to finance their higher education.

Furthermore, these respondents reported higher credit card debts and greater educational

loan debts, as compared to those who did not report financing their education with credit

cards. A study of college student credit card use also found that credit card debt increases

financial stress (Grable and Joo 2006), and thus we propose the following hypothesis:

H3 Higher debt level would be negatively associated with financial satisfaction.

For college students, higher financial status may mean less time spent working for pay

and more time spent studying. If so, then financial status may influence academic per-

formance. A set of focus group studies conducted among a sample of college students in

Scotland indicates that most students work for a wage in order to meet financial goals

(to satisfy basic needs or to earn extra cash for various reasons) (Broadbridge and Swanson

2006). Ross et al. (2006), after conducting a survey among a sample of medical students in

Scotland, reported that those students who perceive debt as a problem are also likely to

carry more debt and rank lower academically than their classmates who do not perceive

debt as a problem. A study of a sample of UK college students also found that financial

difficulties decrease academic performance with depression as a mediator (Andrews and

Wilding 2004).

It seems that financial difficulties may also cause students to withdraw from college. In

a qualitative study of officials at twelve universities, officials at seven of the 12 reported

that students who had decided to leave school cited financial concerns as a reason (GAO

2001). In addition, anecdotal examples that involved students dropping out of college

56 J. J. Xiao et al.

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because of unbearable credit card debts were also reported in qualitative interviews con-

ducted by Manning (2000). Thus, we propose the following hypothesis:

H4 Higher debt level would be negatively associated with GPA.

It seems entirely reasonable to assume that academic performance relates to academic

satisfaction, and this assumption is in fact supported by several empirical studies. For

example, Aitken (1982), after examining several factors and using data from a sample of

first-year students at University of Massachusetts, found that academic performance is the

most powerful predictor of academic satisfaction. Likewise, Noel-Leviz (2007), after

surveying a national sample of universities and colleges, reported that grades are associated

with student satisfaction. Thus, we propose the following hypothesis:

H5 Higher GPA would be positively associated with academic satisfaction.

Pavot and Diener (1993) concluded that life satisfaction is a self-evaluation of a per-

son’s life and that it should be related to domain satisfactions. This finding correlates with

the findings of a national survey of English citizens, conducted by Bowling and Windsor

(2001), which indicates that financial satisfaction contributes to life satisfaction. Financial

satisfaction is also associated with overall satisfaction of quality of life according to a

survey among a sample of U.S. Midwest consumers (Mugenda et al. 1990). Also, data

compiled from a sample of college students in Canada indicate that financial satisfaction is

associated with three out of four variables related to life satisfaction (Michalos and

Orlando 2006). Thus we propose the following hypothesis:

H6 Higher financial satisfaction would be positively associated with life satisfaction.

For college students, study is work. Therefore, we contend that when conducting a study

such as ours—one aimed at determining the links to life satisfaction among college stu-

dents—work satisfaction should be considered. With this in mind, we refer again to

Bowling and Windsor’s (2001) national survey of English subjects, which found that work

satisfaction contributes to life satisfaction. In a similar vein, Lounsbury et al. (2005)

reported that school satisfaction predicted life satisfaction among a sample of students at a

U.S. southeastern university. Chow (2005), using data collected from a sample of college

students in Canada, also found that GPA and academic satisfaction are associated with life

satisfaction. More recently, Sirgy et al. (2007) proposed a quality-of-college-life (QCL)

measure and tested it using data from three U.S. universities. They found that academic

satisfaction contributes to satisfaction with quality of college life. Yu and Lee (2008)

extended the QCL measure using a sample of Korean students and found that satisfaction

with education services contributes to the quality of college life and furthermore that the

quality of college life contributes to overall quality of life, a measure similar to life

satisfaction. Thus, our final hypothesis is below:

H7 Higher academic satisfaction would be positively associated with life satisfaction.

3 Method

3.1 The Sample

A web-based survey was employed as the predominant method for collecting the data

used in our study. Data were collected from a sample of students at a large

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southwestern state university in the U.S. In spring 2006, a survey was developed and

pre-tested based on a literature review and on information gathered from college stu-

dents, using focus group techniques. Two focus groups with seven students in each

were conducted to collect information about their money management practices. Based

on the student input and relevant literature, a survey was developed and pretested

among ten students. The students provided insightful suggestions for the readability,

wording, and question order of the survey. Upon receiving approval from the univer-

sity’s Institutional Review Board (IRB), we finalized the questionnaire and posted it

online in summer 2006.

In October and November of 2006, in conjunction with the university’s Financial Aid

Office, we administered the survey online, via an email invitation sent to two consecutive

random samples of students (4,000 each) at the university. For the first random sampling,

one follow-up reminder was sent 2 weeks later. For the second random sampling, a follow-

up reminder was sent one week later. Overall, 1,197 students responded to the survey, with

a return rate of 15%. Thirty-five scholarships ranging from $100 to $500 were awarded in a

random drawing as incentives for participation.

Among the 1,197 students who responded, 976 completed the survey. Of these, 11%

were graduate students and 89% were undergraduate students. We conducted ANOVA on

major demographic variables to see if there were any differences between the two samples

collected at different times. The two samples differed only with respect to student status.

The first sample contained more graduate students than the second one (106 graduate

students in the first sample compared to five in the second sample). In this paper, we

focused on financial behaviors of undergraduate students. The sample was further

restricted to students who reported their GPAs. The final sample size in the analyses was

620. Data analysis showed that, with respect to the demographic variables and other

variables in the model, there is no significant difference between the undergraduates who

reported their GPAs and those who did not.

We compared our sample with the undergraduate population characteristics based on

the latest available data from 2006 to 2007 fact book of the university. The distributions of

class standing, major, and ethnicity in our sample are similar to those of the university

undergraduate population. However, male students are under-represented in our sample. In

our sample, 35.0% are males but the male percentage of university freshman population is

47.5%. No university data is available to compare GPA, residential status, student income,

and student debt.

Table 1 presents descriptive statistics of the sample. Within the sample, 22% were

freshmen, 23% sophomores, 26% junior and 29% seniors. Females accounted for 65%.

Whites accounted for 64%, Hispanics 18%, Asians 10%, and all other races 8.2%. About

17% were business majors. Most students in the sample reported a 3.0–3.5 or 3.6–4.0 GPA

range (42 and 36%, respectively). Seventy-eight percent of students were from in-state,

19% from out of state and 3.1% international students. One-third (33%) of the students in

the survey did not have income, and of those who did, most had income ranging from $1 to

$749 per month. Only 8% of students reported parental income of less than $25,000 per

year. Percentages of other parental income groups were similar, about 20%, except for the

group of $75,000–$99,999, which was 13%. Less than a third (29%) did not have credit

card debt, but most (64%) had debt ranging from $1-$499. A little more than half (54%)

did not have education loans while 15% of those who did reported a loan amount of

$10,000 or more. Most students (77%) did not have other debts, but 2.7% had other debts

in the amount of $10,000 or more.

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Table 1 Descriptive statistics of the sample

Item Sample University population

Class standing

Freshman 135 (21.8%) 6,922 (24.34%)

Sophomore 145 (23.4%) 6,162 (21.67%)

Junior 160 (25.8%) 6,301 (22.15%)

Senior 180 (29.0%) 8,625 (30.32%)

Gender

Male 217 (35.0%) 13,504 (47.48%)

Female 403 (65.0%) 14,938 (52.52%)

Ethnicity

While 396 (63.9%) 18,333 (64.46%)

Hispanic 111 (17.9%) 4,599 (16.17%)

Asian 62 (10.0%) 1,740 (6.12%)

All others 51 (8.2%) 3,770 (13.26%)

Major

Management (Business) 104 (16.8%) 4,343 (15.27%)

Non-business 516 (83.2%) 24,099 (84.73%)

GPA

Lower than 2.0 9 (1.5%)

2.0–2.5 48 (7.7%)

2.6–2.9 82 (13.2%)

3.0–3.5 259 (41.8%)

3.6–4.0 222 (35.8%)

Residential status

In-state student 484 (78.1%)

Out-of-state student 117 (18.9%)

International student 19 (3.1%)

Student income

$0 207 (33.4%)

$1–$249 101 (16.3%)

$250–$499 144 (23.2%)

$500–$749 104 (16.8%)

$750–$999 33 (5.3%)

$1,000–$1,999 24 (3.9%)

$2,000–$2,999 7 (1.1%)

Parent income

Less than $25,000 52 (8.4%)

$25,000–$49,000 127 (20.5%)

$50,000–$74,900 112 (18.1%)

$75,000–$99,000 79 (12.7%)

$100,000 or more 125 (20.2%)

Credit debt

$0 130 (29.2%)

$1–$4,999 285 (64.0%)

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3.2 Variables

Financial behavior was measured by ten practices related to cash, credit and saving management based on previous studies (Hilgert et al. 2003; Xiao et al. 2006). Two sets of

questions were asked, one set pertaining to past behaviors and the other set pertaining to

behavior intentions. To measure the cash and credit management items, past behaviors

were used. For saving items, intentions were used since many students did not perform

saving behaviors. Exploratory factor analyses resulted in three factors, which were labeled

as ‘‘expenses management,’’ ‘‘balance control’’ and ‘‘saving.’’ The wording of these sub-

scales is presented in Table 2.

Table 1 continued

Item Sample University population

$5,000–$9,999 10 (2.2%)

$10,000 or more 10 (2.2%)

Education loan

$0 325 (54.4%)

$1–$4,999 64 (10.7%)

$5,000–$9,999 80 (13.4%)

$10,000 or more 92 (15.4%)

Other debt

$0 454 (76.9%)

$1–$4,999 99 (16.8%)

$5,000–$9,999 12 (2.0%)

$10,000 or more 16 (2.7%)

Note: Data about the first four variables of the university population are from 2006 to 2007 fact book of the university. Comparative population data of other variables are unavailable

Table 2 Measurements of financial behaviors and life satisfaction

Construct Item Scale Measures

Expense management Pastbe1 1–5 Tracking monthly expenses

Pastbe2 1–5 Spend within the budget

Pastbe6 1–5 Reviewed bills each month for accuracy

Balance control Pastbe4 1–5 Maintaining sufficient balances in your bank account

Pastbe5 1–5 Paying bills on time each month

Pastbe7 1–5 Paying off credit card balance in full each month

Saving Intent8 1–5 Saving money regularly

Intent9 1–5 Setting aside money for emergencies

Intent10 1–5 Contributing to an investment or retirement account

Life satisfaction Lifesat1 1–5 In most ways my life is close to my ideal

Lifesat2 1–5 The conditions of my life are excellent

Lifesat3 1–5 I am satisfied with my life

Lifesat4 1–5 So far I have gotten the important things I want in life

Lifesat5 1–5 If I would live my life over, I would change almost nothing

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Many studies of subjective well-being use income to measure financial status. However,

it is difficult to use this variable to measure financial status of college students since they

are in a transition from financial dependence to independence (see a discussion in the

Sect. 2). Therefore, in our study, financial status was measured by students’ level of debt. Three categorical variables were used to measure the amount of education loan, credit card

debt and other debts that each student had reported. The debt variable used in this study

was operationalized by using the average of the education loan, credit card debt and other

debt, or (education loan + credit card debt + other debt)/3.

Financial satisfaction was measured on a five-point scale (1-very unsatisfied, 5-very satisfied). GPA was measured by five GPA categories: lower than 2.0, 2.0–2.5, 2.6–2.9, 3.0–3.5, and 3.6–4.0. Academic satisfaction was measured on a five-point scale (1-very unsatisfied, 5-very satisfied). Life satisfaction was measured by a commonly used scale developed by Diener et al. (1985). The wording of this scale is presented in Table 2, and

detailed evaluation can be found in Pavot and Diener (1993).

4 Results

To conduct structural equation modeling, we employed AMOS 6.0 and the two-step

procedure proposed by Anderson and Gerbing (1988). The measurement model was first

developed by conducting a confirmatory factor analysis on the multi-item scales, and then

construct validity was evaluated. Then the single-item scales were incorporated into the

structural model, and path analysis was conducted to test associations between the

constructs.

4.1 Measurement Model Testing and Results

The CFA results for overall measurement model fit were v(254) 2

= 243.695, p \ 0.0001; CFI = .934; IFI = .934; RMSEA = .063. These indices were acceptable. Convergent

validity was assessed by examining the indicator loadings: factor loadings of the indicators

for each construct were statistically significant and sufficiently high enough to demonstrate

that the indicators and their underlying constructs were acceptable (Table 3). Thus con-

vergent validity was supported. Although the reliabilities for the constructs of expense

management (a = .620) and balance control (a = .604) were slightly lower than 0.7, because these two constructs reflect important aspects of financial behavior, we kept both

in the model. The reliabilities for the rest of the constructs were adequate ([.7). A common conservative test of discriminant validity involves comparing models that

either free or constrain the phi value to 1 and testing for a significant decrease in model fit.

We conducted the test and for all the cases, the overall fit significantly decreased. Thus

discriminant validity was supported.

4.1.1 Structural Model Test and Results

Table 4 and Fig. 2 present the results of the structural model. Statistical testing of the

initially proposed structural model yielded the following indicators of the overall model:

v(120) 2

= 430.422, p \ 0.0001; CFI = .907; IFI = .908; RMSEA = .065. Thus the overall model fit is acceptable. The paths c31 (a direct link from expense management to GPA), c34 (a direct link from debt to GPA), c14 (a direct link from debt to financial satisfaction), and

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c11 (a direct link from expense management to financial satisfaction), are not significant. This finding indicates that students’ debt does not exert a significant effect on their

financial satisfaction when positive financial behaviors are performed. Also, actual debt

does not directly influence students’ GPA. It seems that, because of the coping benefits of

financial behaviors, the existence of debt does not necessarily induce students to work

more or become depressed, both of which might influence their GPA. In addition, expense

management does not influence students’ financial satisfaction and GPA. This indicates

that such financial behaviors as having tracked expenses, spent within budget and reviewed

bills, do not directly increase a student’s satisfaction with his/her financial situation, nor

does it directly influence the student’s academic performance. The other paths in the model

are significant as proposed.

During data analyses, the modification indices suggested adding the path c41 (a direct link from expense management to overall life satisfaction). After adding this path, the fit of

the adjusted model was acceptable (v(119) 2

= 425.282, p \ .0001; CFI = .909; IFI = .910; RMSEA = .064). Compared to the original model, the overall fit of the adjusted model

Table 3 Factor loadings for constructs

Construct/indicator Unstandardized solution (t-value in parentheses; all at p \ 0.01)

Completely standardized solution

Reliability

Expense management (n1) a = 0.620

Tracking monthly expenses (x1) .482 (8.671) .416

Spent within your budget (x2) .653 (13.604) .689

Review bills each month for accuracy (x3)

.540 (10.010) .478

Balance control (n2) a = 0.604

Maintaining sufficient balances in your bank account (x4)

.684 (16.524) .708

Paying bills on time each month (x5) .355 (12.104) .529

Paid off credit card balances in full each month (x6)

.809 (13.717) .592

Saving (n6) a = 0.760

Saving money regularly (x7) 1.116 (23.039) .851

Setting aside money for emergencies (x8)

1.188 (23.146) .854

Contributing to an investment or retirement account (x9)

.558 (10.968) .450

Overall life satisfaction (g4) a = 0.844

In most ways my life is close to my ideal (y4)

.647 (17.379) .677

The conditions of my life are excellent (y5)

.675 (18.262) .703

I am satisfied with my life (y6) .716 (22.920) .830

So far I have gotten the important things I want in life (y7)

.712 (18.895) .714

If I would live my life over, I would change almost nothing (y8)

.688 (15.328) .605

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was improved, as indicated by a significant reduction in Chi-square (Dv2 = 5.140, Ddf = 10, p \ .05). Since it is possible that the successful management of expenses can directly increase consumers’ overall life satisfaction, the path seems reasonable. For

example, expense management may make students think that they have more control over

Table 4 Path tests in the structural model

Path Path coefficients (t-value in parentheses)

Completely standardized

GPA / Debt -.038 (-.459, p \ .646) -.039 GPA / Expense management -.273 (-1.294, p \ .196) -.148 GPA / Balance management 1.569 (3.328, p \ .001) .550 GPA / Saving -.138 (-2.067, p \ .039) -.160 Satisfaction with academic performance / GPA .474 (12.549, p \ .001) .446 Satisfaction with financial status / Debt -.116 (-1.389, p \ .165) -.104 Satisfaction with financial status / Expense

management -.413 (-1.842, p \ .065) -.194

Satisfaction with financial status / Balance management

1.176 (2.545, p \ .011) .358

Satisfaction with financial status / Saving .158 (2.337, p \ .019) .160 Overall life satisfaction / Satisfaction with financial

status .153 (6.111, p \ .001) .262

Overall life satisfaction / Satisfaction with academic performance

.203 (7.401, p \ .001) .320

Overall life satisfaction / Expense management .143 (2.247, p \ .025) .115

Fig. 2 Results of the original model

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their lives, a perception that would thereby increase their overall life satisfaction. This

effect would not necessarily be mediated by financial satisfaction. The final adjusted model

is presented in Fig. 3.

5 Discussion

This study provides new evidence to the literature of well-being research in several

respects: domain behavior contributes to domain satisfaction; domain behavior contributes

to satisfaction in other domains; domain satisfaction contributes to life satisfaction; domain

behavior contributes to life satisfaction directly; and the financial domain needs to be

considered in measuring quality of college life.

The idea that domain behavior contributes to domain satisfaction was first proposed by

Lynbomirsky et al. (2005). They argued that doing nice things is an important way for an

individual to increase happiness. Lynbomirsky tested this hypothesis on a sample of U.S.

college students and found supportive evidence. This notion is also supported by another

study of Japanese students (Otake et al. 2006). Our study provides evidence in a new

domain, the financial domain, and found evidence suggesting that students who adopted

positive financial behaviors increased their financial satisfaction. Thus it would seem that

encouraging intentional domain behavior may be an effective way to increase domain

satisfactions.

Our study also provides evidence to show that behavior in one domain may contribute

satisfaction in another domain. We found that financial behaviors contribute to academic

performance, which in turn contributes to academic satisfaction. This line of study is

limited in the literature of well-being research. Why do positive financial behaviors con-

tribute to academic satisfaction? The possible reason may be related to personal

Fig. 3 The results of the extended model

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management abilities that are transferable across domains. In other words, the management

skills required to engage in positive financial behaviors may also help people better

manage other resources (such as time) and thus achieve goals in other domains. Generally

speaking, positive behaviors in one domain may produce spillover effects on satisfaction in

other domains if the skills and abilities are transferrable to other domains. More future

research should be conducted in this area.

Not only common sense supports the notion that domain satisfactions contribute to life

satisfaction, but also a number of previous studies (see studies cited in the Sect. 2) have

reached the same conclusion. In this study, once again, we showed that two domain

satisfactions contribute to life satisfaction. For college students, academic satisfaction is no

doubt an important domain. We argue that financial domain is also important for college

students since they are going through a transition period from financial dependence to

independence when they are in college. Transitioning from financial dependence to

independence is one of three top criteria of becoming adulthood perceived by emerging

adults, a term coined by Arnett (2000) to describe young adults age 18–25.

In addition, it is interesting that this paper found that the effect of one financial

behavior, expense management, on overall life satisfaction is not mediated by financial

satisfaction. There may be other mediating mechanisms underlying the relationship

between financial behaviors and overall life satisfaction. For example the relationship may

be mediated by consumers’ other well-being related domains, such as enhanced perceived

life control or self-esteem. The underlying mediating mechanisms of the relationship

between financial behavior and overall life satisfaction deserve future research.

Well-being of college students has been studied since last two decades (For example,

see Michalos 1991). In recent years, researchers started to develop a quality of college life

measure (Sirgy et al. 2007; Yu and Lee 2008). Our study is not to develop this kind of

comprehensive measure but to provide evidence to show that the financial domain is an

important domain for college students. Our study show that financial behaviors and

financial satisfaction, along with academic performance and satisfaction, contribute to life

satisfaction of college students. We suggest that in the future development of quality of

college life measures, the financial domain should be considered.

The limitations of this study should be acknowledged. First, the sample was drawn from

only one university’s student population. Future studies should draw samples from student

populations nationwide or, even better, from international pools. Second, this study only

focused on the effects of financial behaviors on two of college students’ life domains:

financial and academic. Future research studies should consider additional domains. The

social relationship domain, for example, is important to college students. Third, this study

only focused on the subjective measures of college students’ quality of life. To study the

quality of life among college students comprehensively, not only subjective measures but

also objective measures need to be considered, with particular attention paid to the rela-

tionship between these measures. On this topic, Cummins (2000b) provides a valuable

discussion, certain points of which should be taken into account by researchers when

designing their studies in the future.

6 Conclusion

To summarize, this paper reports the results of our study on the relationship between

financial behavior and life satisfaction. We draw our conclusions from data collected from

a sample of students at a southwestern university in the U.S. Working from the premise

Acting for Happiness 65

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that domain behavior contributes to domain satisfaction, we have constructed a conceptual

model that specifies the relationship between financial behaviors, financial status, academic

performance and satisfaction, and life satisfaction. We have used structural equation

modeling and found evidence suggesting that financial behaviors contribute to life satis-

faction through such mediating variables as financial satisfaction and academic

satisfaction. Three financial behavior variables—expense management, balance control,

and saving—have been used in the study. Two of these, balance control and saving,

suggested by the findings, contribute to financial satisfaction and academic satisfaction

(through GPA), and both financial satisfaction and academic satisfaction contribute to life

satisfaction; and expense management contributes to life satisfaction directly.

These results imply that financial behaviors broadly may influence not only financial

satisfaction but also academic performance and satisfaction. Furthermore, the magnitude of

financial behaviors’ overall impact on students’ life satisfaction is equal to or close to the

magnitude of the impact that academic satisfaction has on overall life satisfaction. These

findings could be used to develop action-oriented financial education programs that would

not only provide students the knowledge and skills to better manage their finances and

improve their financial well-being but also help increase their academic satisfaction and

life satisfaction. One example of action-oriented financial education program is Money

2000. This program was first offered by the U.S. Department of Agriculture cooperative

extension educators in New Jersey and New York in 1995 and then adopted by 27 other

states. The program used the transtheoretical model of behavior change (TTM) as its

framework and asked participating consumers to make a commitment themselves to save

or reduce debts to certain amount by the end of year 2000. Participating consumers also

received periodic newsletters to enhance their self commitments and to provide them

practical money management tips. In the 29 states that reported program participation,

there were 13,338 participants and a total dollar impact of almost $20 million reported in

savings and debt reduction (O’Neill et al. 2000; Xiao et al. 2004). This program could be

served as a model to develop action-oriented financial education programs targeting col-

lege students.

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