From Capability to Wellbeing: A Structural Model of Financial Capability, Behaviour, and Wellbeing among College Students

Abstract

Financial wellbeing among young adults is increasingly recognized as a policy priority, yet the mechanism through which financial capability translates into subjective financial wellbeing remains under-specified in the higher-education context. This study tests a structural model in which financial capability (FC) predicts financial behavior (FB), which in turn predicts financial wellbeing (FWB), among a sample of 400 college students (STEM and Non-STEM programmes) drawn from four family-income strata. Each construct was measured with a five-item Likert scale; internal consistency was excellent (Cronbach's alpha = .91, .88, and .88 for FC, FB, and FWB respectively). A two-step structural equation approach (measurement model followed by structural path estimation) showed that financial capability was strongly associated with financial behavior (beta = .74, p < .001, R-squared = .56), and that financial behavior was the dominant predictor of financial wellbeing (beta = .61, p < .001), with a smaller but significant direct effect of capability on wellbeing (beta = .18, p < .001; total R-squared = .58). Female students reported marginally higher financial wellbeing than male students (t = -2.57, p = .011, Cohen's d = -0.26), while family income showed no significant association with wellbeing in this sample (F = 0.74, p = .53). These findings support a behavior-mediated model of financial wellbeing and suggest that financial education interventions on campuses may be most effective when they target actionable financial behaviors rather than capability alone. Implications for financial education curricula, limitations of the cross-sectional design, and directions for future longitudinal and multi-group research are discussed.