Behavioural Characteristics and Financial Distress



pension needs. Against this background, the UK’s Financial Services Authority (FSA) has,
since 2003, lead a National Strategy for Financial Capability with the “aim to improve the
nation’s knowledge and understanding of personal finance.”

To facilitate its goals, the FSA commissioned a Financial Capability Survey. The pri-
mary purpose of this survey was to measure the level of financial capability prevailing in
the UK at the time that the survey was conducted. For the same reason, the Irish Fi-
nancial Regulator later undertook a Financial Capability Survey, using the UK survey as
its blueprint. The Irish survey therefore included the majority of the same questions as
the UK survey, with some minor exceptions. Both Financial Capability Surveys covered a
broad array of topics on financial knowledge and experience, but crucially, for the purposes
of this study, asked respondents about their ability to make ends meet and keep track of
their finances. When combined with demographic, socio-economic and behavioural infor-
mation that is also available from the surveys, this allows an examination of the incidence
of financial distress among respondents and the key factors relating to this distress.

The UK Financial Capability Survey was undertaken in the summer of 2005 while the
Irish survey was undertaken in late 2007 / early 2008. Full details of the sampling method-
ologies used are available in FSA (2006) for the UK survey and Keeney and O’Donnell
(2009) for the Irish survey, but here I set out some of the main features. Both surveys were
conducted to be nationally representative, with the UK survey achieving a sample size of
approximately 5,300 respondents and the Irish survey achieving 1,529 respondents.
2 The
surveys were conducted using a random location sampling approach and quota sampling,
where quotas were selected on the basis of age and working status within gender profiles
taken from the 2001 British Census (in the case of the UK) and from the 2006 Irish Census
(in the case of Ireland). On the basis of the census population totals, simple frequency
weights were subsequently designed.

Both the UK and Irish versions of the survey group their questions into four sections.
The first section, “Managing Money”, asks people about their ability to make ends meet
and keep track of their finances. The second group of questions falls under the “Planning
Ahead” heading, where people are asked about the extent to which they have prepared for
substantial future commitments. They are also asked about their provisions for unexpected
financial events. In the “Choosing Products” section, respondents are asked about their

2The primary sampling unit was a geographical unit, which was, for example, an electoral division (ED),
or combination of EDs, with at least 200 households in the Irish case.



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