Transformative Topics


In recognition of April being financial literacy month, this week's Transformative Topics features work by Genevieve O'Connor, Casey Newmeyer, Nancy Wong, Julia Bayuk, Laurel Cook, Yuliya Komarova, Cazilla Loibl, L. Lin Ong and Dee Warmath on "Conceptualizing the multiple dimensions of consumer financial vulnerability" that emerged from a TCR conference work group and featured in a TCR special issue.


The co-authors, Genevieve O'Connor and Nancy Wong reflect on this article and its importance and impact:


40% of Americans struggle to come up with $400 for an unexpected expense” (Federal Reserve 2018). This oft-cited statistics highlighted the precarity of many middle-class consumers, not just consumers who were living below the poverty lines. It highlights the potential that ANYONE can be financially vulnerable, not just consumers who we commonly thought of as vulnerable. Our motivation for writing this article was to reduce financial vulnerability by helping households understand their risk and providing suggestions for resources that might be right for them.


In this work, we wanted to explore the disconnect between a consumer’s level of awareness of financial vulnerability (FV) and their level of financial resources. Our research was the first to consider how a consumer’s subjective financial vulnerability, that is the degree to which a consumer is paying attention to their finances (i.e., financial awareness and financial confidence), intersects with their objective financial vulnerability, that is the degree to which a consumer has financial means at his or her disposal (i.e., financial resources). 


Drawing from research across disciplines, we propose a systematic way to assess an individual's level of FV, by classifying consumers into four potential quadrants of financial vulnerability (I) low subjective FV (high awareness and confidence) and low objective FV (high resources), (II) low subjective FV (high awareness and confidence) and high objective FV (low resources), (III) high subjective FV (low awareness and confidence) and high objective FV (low resources), and (IV) high subjective FV (low awareness and confidence) and low objective FV (high resources). Refining how FV is defined helps identify previously overlooked groups, which is an important step to reducing FV, and, in turn, improves overall financial well-being. 


Through this conceptualization we are able to offer a tool to segment consumers based on their FV while providing resources best suited for them.

Our research on understanding FV and exploring saving behavior to build financial resources has continued, resulting in numerous articles including how saving habits affects the effectiveness of saving automation programsthe connection between saving levels, Covid-19 and decisions to socially distance (or not), and the importance of considering social psychology factors when developing interventions amid at addressing vulnerability to financial hardship.


Information on the paper can be found on the TCR digital archives here. Search for other papers about financial literacy and vulnerability here.


Citation: O'Connor, Genevieve E., Casey E. Newmeyer, Nancy Yee Ching Wong, Julia B. Bayuk, Laurel A. Cook, Yuliya Komarova, Cazilla Loibl, L. Lin Ong, and Dee Warmath. "Conceptualizing the multiple dimensions of consumer financial vulnerability." Journal of Business Research 100 (2019): 421-430.



Though the majority of Americans report they are financially stable, they do not have sufficient savings to handle an unplanned emergency. There appears to be a disconnect between an individual's perception of their financial situation and their actual financial state. Nevertheless, only scant research focuses on financial vulnerability from both a subjective and objective perspective, and a clear and consistent definition of this construct is missing in the literature. To fill this gap, this review draws across disciplines to consolidate extant knowledge on financial vulnerability. First, we propose a novel definition of financial vulnerability that includes both its subjective and objective dimensions. Next, we create a framework to assess a consumer's financial vulnerability. We then identify interventions for varying degrees of financial vulnerability that are tailored to the individual's fiscal situation. Finally, we present a research agenda to guide future research on financial vulnerability.


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