Financial Quotient (FQ), sometimes also referred as Financial Intelligence (FI), Financial Intelligence Quotient (FiQ) or Financial IQ, is the ability to obtain and manage one's wealth by understanding how money works. Many people believe it is the key to achieving one's financial success. Like Emotional Quotient (EQ), FQ derived its name from IQ (Intelligence Quotient). Many people also consider IQ, EQ, and FQ equally important to one's quality of life.
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Measurement
A widely adopted measurement of FQ is based on a six-category model developed by Yu and Zhang. The six categories are,
The concept of this test is based on the following understanding:
A comprehensive FQ test includes all six categories while each category further contains multiple subjects. Test scores are obtained from each category and compiled to show the strength and weakness on each of them. A hexagon distribution of the category scores is used to provide a visualization of the FQ score.
Although the term FQ is named after IQ, the FQ score is different from an IQ score, which uses a normal distribution. On the other hand, the FQ score is an indicator of how confident one can expect when the person is making a financial decision. It is based on the person's understanding of how the money works and how to conserve and grow one's wealth with a calculated risk.
Application
The FQ score has been used to analyze people's behavior in the financial world, such as using credit cards, purchasing cars and houses, etc. It is also used to measure and improve financial literacy education or even social justice throughout the world.