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Acting for Happiness: Financial Behavior and

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Article in Social Indicators Research · May 2008

DOI: 10.1007/s11205-008-9288-6

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Acting for Happiness: Financial Behavior and Life Satisfaction of College Students
Author(s): Jing Jian Xiao, Chuanyi Tang and Soyeon Shim
Source: Social Indicators Research, Vol. 92, No. 1 (May, 2009), pp. 53-68
Published by: Springer
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Soc Indie Res (2009) 92:53-68
DOI 10.1007/sl 1205-008-9288-6

Acting for Happiness: Financial Behavior and Life

Satisfaction of College Students

* *
Jing Jian Xiao Chuanyi Tang Soyeon Shim

Accepted: 24 June 2008 /Published online: 9 July 2008

? Springer Science+Business Media B.V. 2008

Abstract Recent research on suggests that domain-specific behaviors con

well-being
tributeto domain-specific satisfactions,which in turncontribute to an individual's overall
satisfactionwith life.Our study is an attempt to add to the literatureby 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 structural
employing equation
modeling, we have found evidence suggesting thatpositive financial behaviors contribute
to financial satisfaction and financial satisfaction in turncontributes 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 tomental and physical health, job performance, interpersonalrelationships,
andmarried status (Sirgy et al. 2006). Given thepositive effectsof 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 trendamong

J. J.Xiao (El)
University of Rhode Island, Kingston, RI, USA
e-mail: xiao@uri.edu

C. Tang S. Shim
University of Arizona, Tucson, AZ, USA
e-mail: tang@email.arizona.edu

S. Shim
e-mail: shim@Ag.arizona.edu

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 54 J. J.Xiao et al.

well-being researchers is to investigateeffectso? specific behaviors on people's subjective

a few researchers have that performing a certain
well-being. Recently, argued 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 we wanted to determine the extent to
specifically,
which financial behaviors influencecollege students'financial satisfactionand itssubsequent
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 satisfactionand its impacton 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 theU.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 satisfactionof college students(Michalos 1991;Michalos and Orlando
2006). To our no research has examined the association between
knowledge, previous
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 theargument thatdomain-specific behaviors (in thiscase, financial behavior) are
associated with domain-specific satisfactions (i.e., financial satisfaction) and life satis
faction. Second, we believe thatdeveloping positive financial behaviors during the college
years increases an individual's chances of attaining a betterquality of life later in life.Of
the several pivotal learningprocesses thatcollege studentsundergo during theirfirstyears
of higher education, perhaps themost importantpertains 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 for a wage and start using credit
begin working
cards issued in theirown names. Some also borrow a sizable amount ofmoney for thefirst
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 thatupper division college studentsare less likely
than their lower division counterparts to save money butmore likely to engaging in risky
credit behaviors (Xiao et al. 2007). Given these negative behaviors and assuming that the
money managing habits formedduring college will carry throughinto 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 the framework used in a happiness

adapted 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 an act
(performing
of kindness was used in this particular study)was a significantfactor in predicting one's

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Acting forHappiness 55

happiness. Otake et al. (2006) confirmed that performing an act of kindness increased
happiness among Japanese college students.Based on the assumption thatperforming a
behavior would increase one's satisfaction, we a framework
domain-specific developed

depicting thatfinancial 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 the influences of other factors, we also included a financial

capture
statusmeasure in themodel (see Fig. 1). In the following, we discuss hypotheses we
formulated based on these assumptions and the relevant literatureof quality of life
research.
In our to refer to positive or desirable
study we use the phrase "financial behaviors"
behaviors recommended consumer economists as ways to improve financial well-being
by
(Xiao 2008). Common financial behaviors include practices related to cash, credit and
savingmanagement (Hilgert et al. 2003; Xiao et al. 2006). Since an individual's financial
can be either (as measured in terms of income, assets, etc.) or sub
well-being objective
jective (as measured in termsof financial satisfaction) (Joo 2008), it stands to reason that
positive financial behaviors should improvefinancialwell-being inboth realms.Xiao et al.
(2006) in fact found thatpositive financial behaviors do contribute to financial satisfaction
among a of consumers who use credit A study of college students'
sample counseling.
credit card use also found that positive financial behaviors decrease financial stress
(Hayhoe et al. 2000). Furthermore,as suggested byMaddux (2002), intentionalactions to
reduce financial stresscould help achieve optimal financialwell-being. Thus, the following
hypothesis is proposed:
HI Performingpositive financial behaviors would be positively associated with financial
satisfaction.

In addition to thedirect effectof financial behavior on financial satisfaction,performing

financial behaviors may have positive effects on other domain satis
positive spillover
factions. For instance, one's to manage and control monetary resources may be an
ability
indicator of one's ability to manage other resources (e.g., time), which may in turn result in
effects on other domains of life (e.g., academic success). Therefore, we
positive spillover
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 differentdefinitions of income
have differenteffectson financial satisfaction.Vera-Toscano et al. (2006), using data from

Financial behavior Financial satisfaction

Life satisfaction

H5

Financial status GPA Academic satisfaction H7

H4

Fig. 1 The theoretical framework

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56 J. J.Xiao et al.

a national survey in Spain, found thatnot only income but also income expectation affects
financial satisfaction. Sighieri et al. (2006), using data from nine European countries,
examined the relationshipbetween income and financial satisfactionand found that income
and satisfactionhave a positive relationshipup to a point and variables in theenvironment,
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 throughmediating 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

theyare rich, people who value material goals are less happy than thosewho do not.Diener
and Biswas-Diener also that income may have either a direct influence or an
suggested
indirect influence, throughfinancial satisfaction, on subjective well-being. Arthaud-Day
and Near (2005) reached similar conclusions in theirmore focused review of the rela
tionshipbetween income and happiness within nations and across nations. A newer study
using data collected fromfive countries indicated effects of wealth and non-durable con
sumptions on life satisfaction (Headey et al. 2008).
Using income tomeasure thefinancial statusof college studentsposes 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 would seem an option, but accurate data for this measure is not easy to
consumptions
collect. Thus debtmay be a bettermeasure of college students'financial status.According to
the2002 National StudentLoan survey,over 70% of respondents agreed thatstudent loans
are a "very" or "extremely important" means of gaining the money they need to continue
theireducation afterhigh school (Baum and O'Malley 2003). The surveyalso reported that
27% of the respondents accrue credit card debt in order to finance theirhigher education.
Furthermore, these respondents reportedhigher credit card debts and greater educational
loan debts, as compared to thosewho did not reportfinancing theireducation with credit
cards. A studyof college studentcredit card use also found thatcredit card debt increases
financial stress (Grable and Joo 2006), and thuswe propose the following hypothesis:

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

For college students,higher financial statusmay mean less time spentworking forpay
and more time spent studying. If so, then financial status may influence academic per
formance. A set of focus group studies conducted among a of students in
sample college
Scotland indicates thatmost studentswork for a wage in order tomeet financial goals
(to satisfy basic needs or to earn extra cash for various reasons) and Swanson
(Broadbridge
2006). Ross et al. (2006), afterconducting a survey among a sample ofmedical 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 thatfinancial
difficulties decrease academic performance with as a mediator (Andrews and
depression
Wilding 2004).
It seems that financial difficulties may also cause students to withdraw from college. In
a qualitative studyof officials at twelve universities, officials at seven of the 12 reported
that studentswho had decided to leave school cited financial concerns as a reason (GAO
2001). In addition, anecdotal examples that involved students dropping out of college

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Acting forHappiness 57

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

ducted byManning (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 froma 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
a national of universities and colleges, that grades are associated
surveying sample reported
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 findingcorrelates with
the findingsof a national survey of English citizens, conducted by Bowling andWindsor
(2001), which indicates thatfinancial 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 et al. 1990). Also, data
(Mugenda
compiled froma sample of college students inCanada indicate thatfinancial 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 satisfactionwould be positively associated with life satisfaction.

For college students, study is work. Therefore, we contend that when a
conducting study
such as ours?one aimed at determining the links to life satisfaction among stu
college
dents?work satisfaction should be considered. With this in mind, we refer again to
Bowling andWindsor's (2001) national surveyof English subjects,which found thatwork
satisfaction contributes to life satisfaction. In a similar vein, Lounsbury et al. (2005)
reported that school satisfactionpredicted life satisfactionamong a sample of studentsat a
U.S. southeasternuniversity.Chow (2005), using data collected froma sample of college
students inCanada, also found thatGPA and academic satisfactionare associated with life
satisfaction.More recently,Sirgy et al. (2007) proposed a quality-of-college-life (QCL)
measure and tested it using data from threeU.S. universities.They found that academic
satisfaction contributes to satisfaction with quality of college life. Yu and Lee (2008)
extended theQCL measure using a sample of Korean studentsand found that satisfaction
with education services contributes to the quality of college life and furthermorethat 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 predominantmethod for collecting the data
used in our Data were collected from a of students at a
study. sample large

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58 J. J.Xiao et al.

southwestern state university in theU.S. In spring 2006, a survey was developed and
based on a literature review and on information from stu
pre-tested gathered college
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 and relevant literature, a survey was and pretested
input developed
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 InstitutionalReview 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 theuniversity.For thefirstrandom 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 returnrateof 15%. Thirty-fivescholarships ranging from$100 to $500 were awarded in a
random drawing as incentives for participation.

Among the 1,197 studentswho responded, 976 completed the survey.Of these, 11%
were graduate studentsand 89% were undergraduate students.We conducted ANOVA on
major demographic variables to see if therewere any differencesbetween the two samples
collected at differenttimes.The two samples differedonly 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 students. The was further
undergraduate sample
restrictedto studentswho reported theirGPAs. The final sample size in the analyses was
620. Data analysis showed that,with respect to the demographic variables and other
variables in themodel, there is no significantdifferencebetween the undergraduateswho
reported theirGPAs and thosewho did not.
We compared our sample with the undergraduate population characteristics based on
the latestavailable data from2006 to 2007 factbook of theuniversity.The distributionsof
class standing,major, and ethnicity in our sample are similar to those of the university
population. However, male students are under-represented in our sample. In
undergraduate
our sample, 35.0% aremales but themale percentage of university freshmanpopulation is
47.5%. No university data is available to compare GPA, residential status, student income,
and studentdebt.
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 studentswere from in-state,
19% fromout of state and 3.1% internationalstudents.One-third (33%) of the students in
the surveydid not have income, and of thosewho did,most had income ranging from$1 to
$749 per month. Only 8% of students reportedparental 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 $l-$499. A littlemore thanhalf (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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Acting forHappiness 59

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%)
$l-$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%)
$l-$4,999 285 (64.0%)

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60 J. J. Xiao et al.

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%)
$l-$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%)
$l-$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

3.2 Variables

Financial behavior was measured ten practices related to cash, credit and
by 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 theother set pertaining to
behavior intentions. To measure the cash and credit management items, past behaviors
were used. For items, intentions were used since many students did not perform
saving
saving behaviors. Exploratory factoranalyses resulted in threefactors,which were labeled
as "balance control" and The of these sub
"expenses management," "saving." wording
scales is presented inTable 2.

Table 2 Measurements of financial behaviors and life satisfaction

Construct Item Scale Measures

Expense management Pastbel 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
Intent 10 1-5 Contributing to an investment or retirement account
Life satisfaction Lifesatl 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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Acting for Happiness 61

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

Many
it is difficult to use this variable tomeasure financial statusof college students since they
are in a transitionfrom financial dependence to independence (see a discussion in the
Sect. 2). Therefore, in our study.financial statuswas measured by students' level of debt.
Three categorical variables were used to measure the amount of education loan, credit card
debt and other debts thateach studenthad reported.The debt variable used in this study
was operationalized by using the average of theeducation 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 unsatisfied,
(1-very 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-A0. Academic satisfaction was measured on a scale
five-point (1-very
unsatisfied, 5-very satisfied). Life satisfaction was measured a used scale
by commonly
developed by Diener et al. (1985). The wording of this scale is presented inTable 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
a factor analysis on the multi-item scales, and then
developed by conducting confirmatory
construct was evaluated. Then the single-item scales were into the
validity incorporated
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 fitwere Xas4) = 243.695, p < 0.0001;
CFI = .934; IFI = .934; RMSEA = .063. These indices were acceptable. Convergent
validitywas assessed by examining the indicator loadings: factor loadings of the indicators
foreach constructwere statisticallysignificantand sufficientlyhigh enough todemonstrate
that the indicators and theirunderlying constructswere acceptable (Table 3). Thus con
vergent validity was supported. Although the reliabilities for the constructs of expense
= and balance control = were lower than
management (a .620) (a .604) slightly 0.7,
because these two constructs reflect aspects of financial behavior, we both
important kept
in themodel. The reliabilities for the rest of the constructswere adequate (>.7).
A common conservative test of discriminant validity involves comparing models that
either freeor constrain thephi value to 1 and testingfora significantdecrease inmodel fit.
We conducted the test and for all the cases, the overall fit significantlydecreased. Thus
discriminant was
validity supported.

4.1.1 Structural Model Test and Results

Table 4 and Fig. 2 present the results of the structuralmodel. Statistical testing of the
initiallyproposed structuralmodel yielded the following indicators of the overall model:
= = .907; IFI = .908; RMSEA = .065. Thus theoverall
X020) 430.422, p < 0.0001; CFI
model fit is acceptable. The paths y3\(a direct link fromexpense management toGPA), y34
(a direct link fromdebt toGPA), y14 (a direct link fromdebt to financial satisfaction), and

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62 J. J.Xiao et al.

Table 3 Factor loadings for constructs

Construct/indicator Unstandardized solution (/-value Completely Reliability

in parentheses; all at p < 0.01) standardized
solution

Expense management (d) a = 0.620

Tracking monthly expenses (x0 .482 (8.671) .416

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

Review bills each month for .540 (10.010) .478
accuracy (x3)
Balance control (?2) a = 0.604

Maintaining sufficient balances .684 (16.524) .708

in your bank account (x4)

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

Paid off credit card balances .809 ( 13.717) .592
in full each month fo)

Saving (f6) a = 0.760

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

Setting aside money for 1.188 (23.146) .854

emergencies (x8)

Contributing to an investment .558 (10.968) .450

or retirement account (x9)

Overall life satisfaction (n4) a = 0.844

In most ways my life is close to .647 (17.379) .677
my ideal (y4)
The conditions of my life are .675 (18.262) .703
excellent (y5)

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

So far I have gotten the important .712 (18.895) .714
things I want in life (y7)
If I would live my life over, I .688 (15.328) .605
would change almost nothing (y8)

yn (a direct link fromexpense management to financial satisfaction), are not significant.

This finding indicates that students' debt does not exert a significant effect on their
financial satisfactionwhen 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 theirGPA. In addition, expense
management does not influence students' financial satisfaction and GPA. This indicates
that such financial behaviors as tracked expenses,
having 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, themodification indices suggested adding the path y41 (a direct
link fromexpense management tooverall life satisfaction).After adding thispath, thefitof
the adjusted model was acceptable (X(U9)= 425.282, p < .0001; CFI = .909; IFI = .910;
RMSEA = .064). Compared to the original model, the overall fit of the adjusted model

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Acting for Happiness 63

Table 4 Path tests in the structural model

Path Path coefficients (/-value Completely

in parentheses) standardized

<- Debt
GPA -.038 (-.459, p < .646) -.039
GPA <- -.273 -.148
Expense management (-1.294, p<. 196)
GPA <- Balance 1.569 (3.328,p<.001) .550
management
GPA <- -.138 -.160
Saving (-2.067,/? <.039)
Satisfaction with academic ?- GPA .474 (12.549, p<. .446
performance 001)
Satisfaction with financial status <- Debt -.116 (-1.389, p<. 165) -.104
Satisfaction with financial status <- Expense -.413 (-1.842, p<. 065) -.194
management
Satisfaction with financial status ?- Balance 1.176 (2.545, p<. 011) .358
management
Satisfaction with financial status <- Saving .158 (2.337, p<. 019) .160
Overall life satisfaction <- Satisfaction with financial .153 (6.111,/? < .001) .262
status

Overall life satisfaction ?- Satisfaction with academic .203 (7.401, p<. 001) .320
performance
Overall life satisfaction ?- .143 (2.247, p<. .115
Expense management 025)

expenses trackN,

-.186

satisfaction wit!
*2=.349*>
Balance contron Financial Status Overall
n, ^y ?W^ Life satisfaction
52

^=.334>
Academic
satisfaction
n2
Saving >l/^~16 ^3=446*
?3

GPA
YU=-.109>
n3
r*4=--C
Debt

*
Significant at the level of .05

Fig. 2 Results of the original model

was improved, as indicated by a significant reduction in Chi-square (A/2= 5.140,

Adf = 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

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64 J. J.Xiao et al.

*
Significant at the level of .05

Fig. 3 The results of the extended model

their lives, a perception thatwould thereby increase theiroverall life satisfaction. This
effectwould not necessarily be mediated by financial satisfaction.The final adjusted model
is presented inFig. 3.

5 Discussion

This study provides new evidence to the literatureof well-being research in several
respects: domain behavior contributes to domain satisfaction;domain behavior contributes
to satisfaction inother domains; domain satisfactioncontributes to life satisfaction;domain
behavior contributes to life satisfaction directly; and the financial domain needs to be
considered inmeasuring quality of college life.
The idea thatdomain behavior contributes to domain satisfactionwas firstproposed by
Lynbomirsky et al. (2005). They argued thatdoing nice things is an importantway for an
individual to increase happiness. Lynbomirsky tested this hypothesis on a sample of U.S.
college studentsand 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 theirfinancial satisfaction.Thus itwould seem that
intentional domain behavior may be an effective way to increase domain
encouraging
satisfactions.
Our study also provides evidence to show that behavior in one domain may contribute
satisfaction in another domain. We found thatfinancial behaviors contribute to academic
performance, which in turn contributes to academic satisfaction. This line of study is
limited in the literatureof well-being research.Why do positive financial behaviors con
tribute to academic satisfaction? The reason may be related to personal
possible

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Acting for Happiness 65

abilities that are transferable across domains. In other words, the management
management
skills required to engage in positive financial behaviors may also help people better
manage other resources (such as time) and thus achieve goals inother domains. Generally
speaking, positive behaviors inone domain may produce spillover effectson satisfaction in
other domains if the skills and abilities are transferrableto other domains. More future
research should be conducted in this area.
Not only common sense supports the notion thatdomain 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 once we showed that two domain
study, again,
satisfactions contribute to life satisfaction. For college students, academic satisfaction is no
doubt an importantdomain. We argue thatfinancial domain is also importantfor college
students since they are going througha transitionperiod 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 termcoined 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 relationshipmay
be mediated by consumers' other well-being related domains, such as enhanced perceived
life control or self-esteem. The underlyingmediating mechanisms of the relationship
between financial behavior and overall life satisfaction deserve future research.

Well-being of college studentshas been studied since last two decades (For example,
seeMichalos 1991). In recentyears, researchers started todevelop 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
importantdomain 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 futuredevelopment of quality of
college lifemeasures, the financial domain should be considered.
The limitationsof this study should be acknowledged. First, the sample was drawn from
one student Future studies should draw from student
only university's population. samples
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 relationshipdomain, for example, is importantto 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 to the rela
paid
tionship between thesemeasures. 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

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66 J. J.Xiao et al.

thatdomain behavior contributes todomain satisfaction,we have constructed a conceptual

model thatspecifies the relationshipbetween financial behaviors, financial status,academic
performance and satisfaction, and life satisfaction.We have used structural equation
modeling and found evidence suggesting thatfinancial behaviors contribute to life satis
faction through such mediating variables as financial satisfaction and academic
satisfaction. Three financial behavior management, balance control,
variables?expense
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
(throughGPA), and both financial satisfaction and academic satisfactioncontribute to life
satisfaction; and expense management contributes to life satisfactiondirectly.
These results imply thatfinancial 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 thatacademic satisfaction has on overall life satisfaction.These
findings could be used to develop action-orientedfinancial education programs thatwould
not only provide students the knowledge and skills to bettermanage theirfinances and
improve theirfinancial well-being but also help increase theiracademic satisfaction and
life satisfaction.One example of action-oriented financial education program isMoney
2000. This program was firstoffered by theU.S. Department of Agriculture cooperative
extension educators inNew Jerseyand New York in 1995 and then adopted by 27 other
states. The program used the transtheoreticalmodel 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,
therewere 13,338 participants and a totaldollar 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 col
programs targeting
lege students.

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