Page 15 - Payne Research Center ~ Money Matters

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Terminology
Financial education terminology is often used interchangeably or with overlapping meanings. To clearly define relevant terms, we adopt the definition of financial well-being provided by the Consumer Financial Protection Bureau as the extent to which a person’s “financial circumstances and money choices provide financial security and freedom of choice, both in the present and the future.” (CFPB, 2015). Financial literacy generally refers to a person’s financial knowledge and skills, although it is commonly used as shorthand to encompass financial education (Lusardi & Mitchell, 2014). And financial competency is a broader term involving an integrated set of knowledge, skills, and attitudes that enable students to manage finances effectively and responsibly (Freeman, Raigosa, & Martínez, 2024).
Financial capability comprises two components, which most closely captures financial well-being:
(1) Financial literacy, the ability to act; and
(2) Financial inclusion, the opportunity to act, focusing on access to financial services and asset-building opportunities (Sherradan, 2013).
The Financial Well-Being survey is focused on component one, although the Financial Well-Being course discusses critical aspects of financial inclusion, context, and the influence of public policy.
It is important to distinguish between these terms because they represent different aspects of an individual’s relationship with money. Financial literacy is the foundation, providing individuals with the basic knowledge and skills needed to make informed financial decisions. Financial competency builds on this foundation by integrating knowledge, skills, and attitudes, enabling individuals to manage their finances effectively in real-world situations. Financial capability goes a step further by emphasizing not only the ability to act but also the opportunity to do so, highlighting the importance of access to financial services and asset-building opportunities.
This research recognizes that financial well-being is a multifaceted concept that encompasses all of these elements. While the Financial Well-Being survey focuses on assessing students’ financial literacy, the Financial Well-Being course takes a holistic approach by addressing financial inclusion and the context in which financial decisions are made. By acknowledging the interplay between knowledge, skills, attitudes, and opportunities, this research aims to provide a comprehensive understanding of the factors that contribute to the financial well-being of HBCU students.
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