Soft landings: Extending the cushion hypothesis to financial well‐being in collectivistic cultures

Abstract

Abstract This study extends the cushion hypothesis to examine cultural differences in the role of willingness to take financial risk in an individual's objective financial outcomes (e.g., the experience of material hardship) and in an individual's assessment of their financial well‐being. Using data collected in South Korea, Taiwan, and the United States, we find support for a cushion (i.e., weaker relationship) in the association between material hardship and present and future financial well‐being. A cushion was also observed in a weaker association between willingness to take financial risk and expectations for future financial security but not in the experience of material hardship or current money management stress. Our results suggest that cultural context influences an individual's objective situation as well as their subjective assessment of that situation. This paper adds to existing literature by documenting a cushion effect beyond risk taking to include a person's objective financial situation and financial well‐being.