Determinants of Subjective Financial Well-Being Across Three Different Household Income Groups in Malaysia

Macro level economic and social indicators indicate disengagements between objective measurements and subjective consumer perceptions of the Malaysian economy. Objective measures show positive signals while subjective consumer perceptions depict pessimistic feelings about the economy. To provide more insights on this disparity, data is collected from 1867 Malaysian households to assess their subjective financial well-being (SFWB). In this vein, this study first examines the level of SFWB, financial stress, financial behaviour, financial knowledge, and locus of control (LOC) among Malaysians across three household income groups. Second, the study examines the association between financial stress, financial behaviour, financial knowledge, and LOC, with SFWB. For both objectives, the sample is split into three household income groups (low, middle and high income households, or the B40, M40 and T20, respectively) to analyse the differences. The results show that SFWB is at an average level of 5.2 out of 10 for the overall sample, with significant differences observed between the B40, M40 and T20 groups with SFWB scores of 4.3, 5.1 and 6.2 respectively. Financial behaviour and LOC have a significant positive relationship with SFWB, while financial stress and financial knowledge have a significant negative relationship with SFWB across all households. However, among the B40 group, financial knowledge had no significant relationship with SFWB. Lastly, the findings are discussed and policy recommendations for policymakers are provided.