Determinants of Financial Management Behaviors of Families

1. Introduction

Life satisfaction is one of the important measures of subjective well-being (Pavot & Diener, 1993). Given the positive effects of subjective well-being on several dimensions of life, researchers have become increasingly interested in studying specific factors that influence subjective well-being (Xiao et al., 2009). Environmental, social, cultural, and economic conditions are all under a permanent change due to globalization. Under these ever-changing conditions, in order for families to maintain their current well-being or to improve it, it is necessary that obstacles standing in the way towards an increased well-being for individual family members be eliminated. In this regard, economic functions of families play an extremely important role in meeting their needs and wants that impact their overall quality of living (Terzioğlu, 1990, p.112; Özmete, 2004). However financial welfare of families is a more complex issues (Bailey, 1987), and families economic behaviors and financial satisfaction are most important determinants of welfare (Raijas, 2011; Bailey, 1987; Godwin, 1993). Families act in an environment of financing system which includes the pressure of the economic powers like the changing economic balances, increasing unemployment rate, changing purchasing power of money, inflationist pressures, increasing tax load, changing government policies, increasing interest rates, complicating consumer market, and the competence gradually increasing between the businesses (Goldsmith, 2000, p.108; Godwin, 1993; Terzioğlu,1990, p.112; Bailey, 1987; Raijas, 2011). In such an environment, the behaviors of family related to usage of the income affect both of social and economic welfare of family and the national economy and welfare (Çopur & Şafak, 2000; Becker, 1988).

Much of the literature on family financial management is prescriptive in nature, including extensive discussion of what families should do in managing their financial resources. Despite the importance of effective financial management in families’ lives, relatively little empirical research has focused on what families actually do. For instance, how meet family their needs? Is their income enough for meet their needs? How they use their income? Are they making saving with their finances resources? Why don’t they make savings? Are they in debt? Are they satisfied with their financial situation? In other words, it’s obvious that the financial decisions and behaviors of families will affect the macro micro economic decisions of families’ life. Families have to manage their finance in one way or another. Some tend to save a lot, some like to collect information before each purchase, some like to follow their gut feelings (Fünfgeld & Wang, 2009). According to Gunnarsson and Wahlund (1997) households as being financial actors, more or less active and more or less conscious of their behaviors. Patterns of households' savings and debts may be viewed as expressing some sort of financial strategy, whether consciously or unconsciously practiced.

Therefore today’s family, income organization is a central resource for welfare of family members (Raijas, 2011; Heimdal & Houseknecht, 2003). Hira and Mueller (1987) reported that improved money management practices are more important than increasing the resources. Improving money management could be help families cope with financial difficulties and meet family needs. Thus, it is necessary to plan the usage of income for today and future, and to create a successful balance between consumption and saving in order to develop the quality of life and provide the financial welfare (Çopur & Şafak, 2000).