New study buys into money-happiness dichotomy

New research exploring the relationship between money and happiness has found that “financial resilience” plays a significant role in enhancing life satisfaction among Indigenous Australians.

Economics academic Dr Maneka Jayasinghe from Charles Darwin University’s Asia Pacific College of Business and Law said that results of her recent research showed that “running out of money” had a significant negative impact on life satisfaction, as did “difficulties in accessing financial services”.

“While having a secure source of income may enhance life satisfaction, our findings showed that income itself was not a significant factor in terms of life satisfaction, although ‘culture’ most certainly does,” Dr Jayasinghe said.

“Equally important was the ability to get support in times of crisis from outside the household and the ability to raise funds in an emergency, which means having strong social networks.

“Overall, these findings will translate into the fact that financial knowledge and behaviour – the ability to plan, manage and use money wisely – were more likely to help achieve increased life satisfaction.

“This is significant because of the negligible improvement in financial literacy and capability among Indigenous Australians in recent years.”

Dr Jayasinghe said the flow-on effects of Covid-19, such as pay cuts, job losses and uncertainty about the future, had given rise to questions about financial resilience, which underpinned the study.

“Financial resilience is the capacity to adapt positively and achieve good outcomes despite exposure to severe adversities. We break it down into four parts – economic resources, financial inclusion, financial capability and social capital. The sum of the these, financial resilience, plays a very important role in enhancing life satisfaction.

“Life satisfaction, in simple terms, comprises such broad domains in life as health, finance, family, work and leisure.”

Dr Jayasinghe said that other studies had produced mixed results; some say money leads to happiness while others say it doesn’t.

“Our research, which encompasses several subjective criteria, such as the ability to manage money and the ability to cope with financial shock, is the first attempt to understand the link between financial resilience and overall life satisfaction of Indigenous Australians.

“By increasing the understanding of what makes Indigenous Australians content about life, our study contributes to on-going conversations about policy and action towards enhancing Indigenous well-being.

“Ultimately, we call on policymakers and financial service providers to provide increased support services and flexibilities that allow Indigenous people to access financial services and support services and resources that encourage financial behaviour such as saving for an emergency.”

The article “The financial resilience and life satisfaction nexus of Indigenous Australians”, co-authored by Professor Eliyathamby Selvanathan and Professor Saroja Selvanathan of Griffith University, was published in the Australian journal “Economic Papers”.

The article is online here: W: https://onlinelibrary.wiley.com/doi/full/10.1111/1759-3441.12296?af=R