Subjective Financial Situation and Financial Capability of Young Adults in Finland

Mette Ranta


Mette Ranta, University of Jyväskylä, Finland
Katariina Salmela-Aro, University of Helsinki, Finland


A key developmental task in young adulthood is gaining financial independence which requires competent life management skills. However, young adults have been often identified as economically vulnerable due to an irregular income and changing life situations, or lack of sufficient financial skills. These skills can be studied from the novel theoretical perspective of financial capability for understanding the process of acquiring financial knowledge and behaviors. This study investigated the applicability of a modified financial capability conceptual model including financial confidence (or financial self-efficacy) and financial behavior as factors contributing to subjective and financial well-being. We supplemented this model with longitudinal information on subjective financial situation.


This two-wave longitudinal study used data from the Finnish Educational Transitions Studies (FinEdu) longitudinal research project. Participants were 418 young adults aged 24–25 (at T1) and 26–27 (at T2). Path and mediation models and Structural Equation Modeling following a modified financial capability model were estimated with measures on financial confidence, financial behavior, financial well-being, subjective well-being and subjective financial situation.


The results supported the applicability of the financial capability model among young adults in Finland. Significant paths from financial confidence to financial behavior and to financial and subjective well-being were found, as from subjective financial situation at age 24–25 to financial confidence and financial wellbeing at age 26–27. However, subjective financial situation did not have a direct effect on financial behavior, providing support for the significance of financial confidence beyond financial circumstances.

The mediation model showed indirect effects of subjective financial situation at age 24–25 on financial and subjective wellbeing at age 26–27 through financial confidence and financial behavior. In this respect, the addition of subjective financial situation to the model of financial capability was supported.


This study complements previous research by investigating associations between subjective financial situation and financial capability and their respective mediation effects over time.

The importance of research on individual financial resources and personal experiences of financial capability as important for young adults’ well-being is also highlighted. The study demonstrates that while financial confidence does not directly relate to financial well-being, the mediating effect of financial confidence and financial behavior, together, from subjective financial situation to subjective and financial well-being, is the novel contribution.

With increasing youth financial problems, it is crucial to identify factors that contribute to financial capability. The past economic recession, early transitions to financial independence and the Nordic welfare state financial support emphasize the importance of studying the Finnish societal context in terms of youth financial capability.

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