Financial Self-Efficacy Scale: Development and Validation of a Measurement Tool

Abstract

Given the fact that many Americans are struggling with their daily financial management, many financial management training programs have been implemented with the aim of helping people increase their financial capability, to then lift them out of poverty. However, there is little empirical evidence about what works, what does not, and what the most effective strategy in improving individuals’ financial capability is. One of the main reasons for this is the lack of standardized measurement to design rigorous studies. This dissertation aims to develop and validate a Financial Self-Efficacy Scale (FSES) to contribute to the pool of standardized measurements. The FSES was tested on 299 women who were over 18 years old living in the United States. The split-half method and internal consistency method were used to check the reliability of the scale. Content-related validity was checked by consulting an expert panel. Construct-related validity and criterion-related validity of the scale were examined by correlating the FSES with a New General Self-Efficacy Scale (NGSES). Factor analysis was also run to assess the dimensionality of the scale and provide further evidence for the reliability and validity of the scale. Results showed that the FSES had an excellent reliability coefficient alpha (.93). The scale covered all key domains in financial management. The FSES was positively correlated with the NGSES. Factor analysis showed four factors which were consistent with the common categories in financial management curricula. The FSES will serve as a reliable and valid instrument for researchers to use in program evaluation. It will be a useful tool for practitioners to assess clients’ capability, facilitating the tailoring of programs to fit the needs of participants.