Using data from the 2001, 2004, and 2008 panels of the Survey of Income and Program Participation (SIPP), this research examines the characteristics of households that invested in rental real estate during the 2000s. Given the tumultuous real estate market during that decade, rental real estate investment was investigated during the early part of the housing market boom (2001), the height of the boom (2004), and after the market began to decline (2008). Results reveal relative stability with slight investment increases in rental real estate (4.57% in 2001 to 5.00% in 2004 to 5.08% in 2008), and several investor demographic and financial characteristics consistently associated with the investment decision. Evidence of potential over-reliance on real estate investment by some households indicates that financial planners should work to educate clients who invest, or are seeking to invest, in real estate. Education would emphasize that overweighting portfolios with real estate could be deleterious to client’s wealth goals in times of slow rental or depreciating housing markets.
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- Go to article: Retirement Goal Clarity, Needs Estimation, and Saving Amount: Evidence From Hong Kong, China
This study investigated the relationship between retirement saving needs estimation and the amount of self-reported private retirement savings amassed by working-age adults in Hong Kong, China, by focusing on the mediating role of retirement saving needs estimation between retirement goal clarity and the amount of private retirement savings. Based on the data collected from a phone survey of 958 Hong Kong workers aged 25–64 years, we found that the retirement saving needs estimation was associated with the savings of individuals over 44 years old; furthermore, it mediated the association between retirement goal clarity and self-reported private retirement savings. The findings offer theoretical contributions for financial planning conceptual frameworks and provide policy implications.
To meet college student needs for financial counseling, it is important to assess why they seek counseling and the extent to which differing financial situations are tied to financial stress. This study examined these issues with a sample of 554 college students who participated in financial counseling and found financial problems in various situations were each linked to increased financial stress. Financial stress was positively associated with having student loans and other forms of debt and was higher for female students and lower for those having investments. From a needs assessment perspective, it is apparent that college students may be able to benefit more from comprehensive financial counseling than from financial advising that is tailored primarily to a single issue.
- Go to article: The Effectiveness of Financial Literacy Instruction: The Role of Individual Development Accounts Participation and the Intensity of Instruction
The Effectiveness of Financial Literacy Instruction: The Role of Individual Development Accounts Participation and the Intensity of Instruction
We examine improvements in financial knowledge for 8th-grade participants in our financial fitness camp, part of our multifaceted financial literacy program. Eighty-three students enrolled in the camp, and 59 had individual development accounts (IDA). We address several issues raised in the literature by focusing on low-income, predominantly Hispanic students, varying the treatment intensity, comparing outcomes for students in our IDA program with those who are not, addressing the potential endogeneity of IDA participation, and testing for selection bias. Financial knowledge increased by approximately 12 percentage points from camp participation. Standardized Language Arts scores, rather than treatment intensity or IDA participation, most affected gains in financial knowledge. There was no evidence of selection bias. Parents with high “present bias” were less likely to enroll their students in the camp, implying that integrating financial literacy education in the regular school curriculum will better serve students in such families.
- Go to article: Financial Planning for Retirement: Bibliometric Analysis and Future Research Directions
This study aims to determine the status of existing research on financial planning for retirement. We used bibliometric analysis and content analysis to examine a sample of 1,116 studies conducted over a span of more than five decades. Bibliographic coupling network was developed to determine the intellectual themes in the field. Our findings suggest that the structural, economic, and cultural disparities worldwide lead to distinct pressures for savings on individuals. Further studies should be conducted considering emerging economies and the aforementioned disparities to gain deeper insights. While a few studies have examined the influence of social biases, behavioral biases, personality traits, and psychological constructs on financial literacy and the impact of this interaction on financial planning for retirement. We conclude by suggesting potential future research directions.
- Go to article: Prediction of Default Risk in Peer-to-Peer Lending Using Structured and Unstructured Data
Using data from Lending Club, we analyzed funded loans between 2012 and 2013, the default status of which were mostly known in 2018. Our results showed that both the borrower characteristics and the conditions of the loan were significantly associated with the loan default rate. Results also showed that the sentiment of a user-written loan description influenced the borrower's loan interest rates. It contributes to expanding the scope of peer-to-peer (P2P) loan research by implementing unstructured data as a new model variable. Financial counselors need to consider the growth potential of the P2P loan market using data analysis: This will reveal niche market opportunities, enabling the development of services necessary for the safe supply of small loans at reasonable interest rates.
The purpose of this study was to examine associations between saving goals and saving behavior from a perspective of Maslow's Hierarchy. Using 1998-2007 Surveys of Consumer Finance datasets, we analyzed responses given to an open ended saving reason question, and categorized responses into six saving goals. The retirement/security goal was the most frequently mentioned, and the self-actualization goal was the least frequently mentioned. We tested two models to ascertain whether the order of response differed in the likelihood of saving, measured as whether households spent less than income. Model 1 tested the effects of whether particular goals were given as the first response to the open-ended question, and Model 2 tested the effects of whether particular goals were given as any response. In both analyses, self actualization and retirement/security had the strongest associations with saving behavior.
Financial coaching is an emerging strategy to help people enhance financial capability and well-being. However, few studies of coaching practices have been completed. A survey of 273 coaches in the United States provides insight into current coaching practice. The average coach in the survey served 19 clients per month and saw each client about four times. The range of coaches varied widely; many coaches operated at a relatively small scale, often embedded in social service programs. Coaches generally reported coaching had positive impacts on clients, especially coaches with more training and those who served more clients. Overall, this study shows the financial coaching field includes an array of approaches but may benefit from capacity building and adoption of standards of practice.
This article describes the current status and trends in the past three decades (1990–2019) of the Journal of Financial Counseling and Planning (JFCP). Since its first issue published in 1990, JFCP has become a major research outlet in consumer finance. The journal publishes cutting-edge, peer-reviewed, original research papers on consumer financial counseling, planning, and education that have broad impacts on both academic research and business practices in the field of consumer finance. It is included in many major indexes such as Scopus, Emerging Source Citation Index, EconLit, among others. It has published influential papers on consumer financial well-being, financial capability, financial education, financial counseling, financial planning, retirement planning, risk tolerance, and financial behavior change.
- Go to article: Potential Consumer Harm Due to Regulation on Financial Advisory Communication in the FinTech Age
This article examines potential consumer harm that may arise due to regulating modern financial services communication technology with rules written in the early 20th century. It is argued that disparities in record keeping regulation across communication mediums disincentivizes the use of technology capable of generating records for consumer retention, while incentivizing the use of technology which shields financial advisors from accountability. Experimental evidence is provided in support of this argument. Further, it is argued that regulation disparities across communication mediums may result in more wrongful accusations of advisor misconduct, less reporting of genuine misconduct, less self-policing among industry members, and greater unrectifiable consumer harm. Objections to these arguments are considered, along with practical guidance for consumers, regulators, and policy makers.