Financial Freedom Perception Scale (FFPS): Construction and validation

Abstract

The main motivation of this study is the absence of consolidated measures to evaluate individuals' perceptions of financial freedom. So, this study has the objective of constructing and validating a Financial Freedom Perception Scale (FFPS). Furthermore, it seeks to provide the first evidence for differences in the perception of financial freedom according to gender, age, race and formal education. The research was developed by two main phases. The qualitative phase consisted of interviews, expert validation, and pre-test used to define the scale and the construction of the items. In the quantitative phase, two samples were collected: one with 1020 cases for exploratory analysis and another of 2293 respondents for confirmatory validation. The tests validated the FFPS as a one-dimensional scale consisting of nine items assessing the individual's financial freedom perception. We also present an application methodology for FFPS. We identified that a significant portion of the population perceives itself as financially free, but this perception is quite distinct among citizens of different profiles. The FFPS can be useful for academics, researchers, public managers, and financial agents. It can also indicate the results of public policies on financial inclusion, income transfer, and financial literacy.