This study explores the association between financial knowledge and financial fragility. Data from the 2015 National Financial Capability Study were used to create an index of financial fragility. Relationships between this index and three different measures of financial knowledge were assessed. To mitigate potential endogeneity in the financial knowledge measures, such as neighborhood effect defined as social interactions or characteristics of communities that influence socioeconomic and health behaviors or outcomes of individuals, the neighborhood average education level in US zip code units was used as an instrumental variable. The results from the baseline Ordinary Least Squares regression models and Two Stage Least Squares (2SLS) regression models indicated a negative relationship between financial knowledge and financial fragility; the effect was greater when the instrumental variable was used. Our findings with the neighborhood effect suggest which groups could be a focus for future research as well as offering practical interventions. Further, when designing and implementing educational and behavioral interventions, the knowledge-based approach should gain continued support from financial education, planning, and counseling programs.
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- Go to article: Financial Knowledge and Financial Fragility: A Consideration of the Neighborhood Effect
Given the soaring costs of higher education, financial aid is helpful to reduce the direct costs of college. Student loans are the most common financial support for college students. The purpose of this research was to estimate whether student loan holding and amounts were negatively associated with life satisfaction utilizing 2011, 2013, 2015, 2017, and 2019 waves of the Panel Study of Income Dynamics. This study utilized the fixed-effects-logit model to demonstrate the association. The results showed that holding student loans was negatively associated with life satisfaction. But there was no statistically significant association when student loans were measured as the actual amount. The existence of student loans rather than the amount was what was associated with decreased utility in the short term. This study mainly focused on the change of “within-group” effect on life satisfaction in the short run. The findings underscore the importance of education savings from parents and use of student loans on overall life satisfaction practitioners.
Financial self-efficacy is associated with positive financial behaviors. This study investigated factors associated with financial self-efficacy among student loan borrowers based on original data collected through an online national survey of student loan borrowers between age 25 and 75. Results revealed that perceived student loan literacy prior to accruing higher education debt was significantly associated with current financial self-efficacy, while general financial literacy during repayment did not appear to be correlated with financial self-efficacy. This study draws on social cognitive theory to suggest that student loan literacy prior to accruing debt may act as a mastery experience, improving financial self-efficacy when the repayment period arrives. Given the increasing prevalence of student loans across all generations, this study underscores the need for early education and mentoring from financial professionals about student loan borrowing.
- Go to article: Family Communication, Resources, and Income in Adolescence and Financial Behaviors in Young Adulthood
Family Communication, Resources, and Income in Adolescence and Financial Behaviors in Young Adulthood
This research examined how parental communication and family resources provided during adolescence relate to domain-specific financial management behaviors for a sample of 1,245 young adults age 18–34. Using data collected by an online survey administration organization, bivariate analysis results indicated that higher levels of parental communication about proper consumer skills and tangible and intangible family resources were associated with better financial behaviors. Financial behaviors were also found to vary significantly across different levels of family income. Multivariate regression analyses revealed two noteworthy interactions in which intangible resources and financial behaviors varied by level of family income. Better financial behaviors in adulthood were associated with more intangible resources for middle- and upper-income families during adolescence. The reverse was indicated for young adults from lower income families. Control variables of education level, employment status, and gender also showed significance with financial behaviors.
- Go to article: Financial Self-Efficacy: Mediating the Association Between Self-Regulation and Financial Management Behaviors
Financial Self-Efficacy: Mediating the Association Between Self-Regulation and Financial Management Behaviors
Both self-efficacy and self-regulation have been connected to financial behaviors and financial outcomes of households; however, their associations have been studied independently. This study examined the association between general self-regulation (i.e., mindfulness practice, self-care behaviors, and conflict management) and financial management behavior, mediated by financial self-efficacy. Data was gathered from 693 individuals in couple relationships residing in the Southeastern United States of America who participated in a Healthy Marriage and Relationship Education training program. Analyses of data showed that general self-regulation and financial self-efficacy were positively associated with financial management behaviors and that general self-regulation was indirectly associated with financial management behaviors through financial self-efficacy. Implications of this study suggest that by coupling financial education, counseling, and coaching interventions with broad-based self-regulation programming, such as mindfulness or relationship training, clients will realize more significant improvements in financial management behaviors.
Bridging the gap between theory and practice, this study yielded a reliable and valid measure for responsible financial behaviors with the potential to serve practitioners when working with consumers. This research utilized Bandura’s Triadic Model of Causation (Bandura, 1985) to investigate and predict responsible financial behaviors. Data from the 2009, 2012, and 2018 National Financial Capability Study surveys were used to construct a responsible financial behaviors index with five subconstructs for time horizon, money management, risk management, debt awareness, and ownership of baseline financial accounts. Results from a series of regression models identified consistent relationships between the index and variables categorized as cognitive factors (financial knowledge, financial self-efficacy, and financial risk tolerance) and background characteristics (educational attainment, income, and marital status).
- Go to article: Childhood Financial Socialization and Debt-Related Financial Well-Being Indicators in Adulthood
The purpose of this study was to explore the potential influence of childhood financial socialization on financial well-being in adulthood. Using a sample (N = 2,213) from De Nederlandsche Bank Household Survey (DHS) we modeled the likelihood of household debt/asset ratio less than or equal to 40%, and the likelihood of a household reporting a current ratio (liquid asset /short-term debt ratio) greater than or equal to 100%. Consistent with predictions of social learning theory, being encouraged to save during childhood had a positive association with meeting the financial planning industry benchmarks for these financial ratios in adulthood. The key implication is that the path to financial well-being does not begin with financial knowledge attained in adulthood, but instead begins with experiential learning and socialization during childhood.
- Go to article: Sound Financial Management and Happiness: Economic Pressure and Relationship Satisfaction as Mediators
Sound Financial Management and Happiness: Economic Pressure and Relationship Satisfaction as Mediators
This study examines the relationship between sound financial management behaviors and happiness using a national sample of adults collected in 2009 (N = 1,014). We used Maslow's hierarchy of needs (1943) as a theoretical framework to examine associations between sound financial management behavior, economic pressure, relationship satisfaction, and happiness. Findings suggested that economic pressure and relationship satisfaction both mediated the association between sound financial management and happiness, but the mediator effects were only partial. That is, even after accounting for participants' actual financial context, feelings of economic pressure, and relationship satisfaction, a positive association between sound financial management behavior and happiness remained.
Research on residential preferences has consistently orbited around their been correlation with economic and social factors. This study builds on the existing literature by investigating the personality characteristics that shape residential behavior. The specific objective is to examine the Big Five personality traits (OCEAN)—openness, conscientiousness, extraversion, agreeableness, and neuroticism—and their relationship with the value of individuals’ primary residences and mortgage debt using data collected from the Health and Retirement Study. Regression models are estimated to examine the associations between the OCEAN personality traits and home value and mortgage debt. The findings reveal the following associations: openness and conscientiousness are associated positively, and agreeableness is associated negatively, with larger home values; whereas openness and agreeableness are associated positively, and conscientiousness and neuroticism are associated negatively, with larger mortgage debts.
This study examines the associations among financial hardship, perception of situation, social support, and perceived stress using data from the second wave of the National Survey of Midlife Development in the United States. Both financial hardship and perception of situation were hypothesized to be positively associated with perceived stress, whereas social support was hypothesized to act as an intervening variable between perception of situation and perceived stress. The results from a structural equation model showed that (a) financial hardship was a precursor of perception of situation, (b) perception of situation exhibited a positive effect on perceived stress, and (c) social support was negatively related to the level of perceived stress.
- Go to article: Divorce and Asset Burn: Using Retirement Planning Techniques to Model Long-Term Outcomes of Divorce
Financial professionals involved in divorce proceedings, whether for a client or an attorney, often use software to project the ability of a dependent spouse to earn income off of her separate estate. These projections have historically relied on static inputs and use a Monte Carlo simulation to illustrate the paths a portfolio might take. Within this study, the effects on dynamic income and expense changes on outcomes were examined. A comparison was made between the traditional Monte Carlo methods and Markov Chain Monte Carlo (MCMC) methods. Results using MCMC methods more closely approximated investment return distribution, and illustrated investable assets were the primary driver of long-term success, and not items such as spousal or child support. Practical implications for financial professionals, family law attorneys, judges, and clients are discussed as well as opportunities for future research.
- Go to article: For Love or Money? Factors Associated With the Choice Between Couple-Based Versus Individual Financial Coaching
For Love or Money? Factors Associated With the Choice Between Couple-Based Versus Individual Financial Coaching
There has been much effort in recent years to address some of the damage of the recent global financial crisis with financial literacy education. Little research has been done, however, on the factors that might affect the decision to seek individual versus couples-based financial education. We used a survey instrument administered via the online labor market, Mechanical Turk, to examine factors associated with this outcome: whether members of a couple would choose individual or couples financial coaching. All participants were screened for current membership in a committed relationship for at least 6 months. Most participants reported a preference for couples versus individual financial counseling. Key factors that predicted a likelihood to opt for couples' counseling include gender, age, and satisfaction with one's relationship. Results from this study suggest that how and why consumers seek financial education may be affected by social, cultural, emotional, and relational factors as well as financial concerns. Such factors should be considered by practitioners in this field if program marketing, design, and delivery are to be relevant to participants and effective.
- Go to article: A Financial Psychology Intervention for Increasing Employee Participation in and Contribution to Retirement Plans: Results of Three Trials
A Financial Psychology Intervention for Increasing Employee Participation in and Contribution to Retirement Plans: Results of Three Trials
Despite decades of retirement plan enrollment meetings, many employees fail to fully engage in their employer-sponsored retirement plans. Under the framework of the Transtheoretical Model (TTM) of Behavior Change, this study examines the effectiveness of a financial psychology intervention designed to increase engagement in employer-sponsored retirement plans across three employee groups: 107 employees of a regional bank, 43 employees of a custom manufacturing company, and 48 employees of a construction company. Following the intervention, significant changes in plan participation, contribution rates, and one-on-one follow-up meetings with financial advisors were observed. Thirty-eight percent of previously unengaged employees became plan participants, 68% requested and held meetings with financial advisors, and contribution rates increased by 39%, resulting in a total $199,445 increase in first-year annualized contributions and employer matching funds across the three groups.
This study used data from the 2015 National Financial Capability Study to analyze the adoption of mobile payments by U.S. households. While 24% of respondents used mobile payments, the mean rate for those under age 25 was 11 times the rate for those 65 and older. State rates ranged from about 9% in Montana to 34% in Washington, DC. Based on a logistic regression, age and an objective financial knowledge score were negatively while risk tolerance and a subjective financial knowledge score were positively related to mobile payment use. The results have implications for marketing of Fintech applications for personal finance, especially in terms of the extremely low mobile payment use by older consumers.
This study explored one aspect of household financial resilience by analyzing factors related to financial asset liquidity. Given that assets are classified on the balance sheet according to when their economic benefits are expected in time, we extend the asset allocation literature by modeling the allocation of financial assets to cash as a function of intertemporal motivations (i.e., future orientation). A sample of respondents was extracted from De Nederlandsche Bank Household Survey. Fractional logistic regression was used to model the proportion of financial assets held in cash. Consistent with theoretical predictions, future orientation was negatively associated with the proportion of financial assets held in cash. Implications for practice are discussed.
Many studies have investigated the correlation between climate change and economic growth. However, this study focuses on household saving, whereby growth may be correlated with climate volatility. This study conducts a dynamic panel analysis using data on Chinese provinces for the period of 2001–2009. Various indicators of climate volatility are employed to ensure robustness, and the Generalized Method of Moments (GMM) approach is chosen to reduce endogeneity. The estimation results show that in rural areas, temperature volatility is positively correlated with the household saving rate, but that the correlation is weaker in urban areas. This study suggests that first, to increase household welfare, risk-pooling insurance should be applied, and second, that rural areas should be the priority for development over urban areas.
This study was intended to find out whether social media could be a solution to improve personal financial literacy and ability. The authors examined the antecedents and consequences of using social media for personal finance with survey data from 359 individuals who used social media tools to view, learn, post, or ask for financial information or advice. They found that usefulness and compatibility were two reasons why people use social media for personal finance, while ease of use and concerns/risks were not. The study also revealed that social media use for personal finance were associated with positive financial outcomes and user satisfaction, which in turn prompted users' intentions to continue using social media for personal finance in the future. These findings suggested that social media could be a legitimate and fruitful source for individuals and financial industry to improve personal financial well-being.
- Go to article: Perceived Financial Needs, Income Sources, and Subjective Financial Well-Being in an Emerging Market
Perceived Financial Needs, Income Sources, and Subjective Financial Well-Being in an Emerging Market
This study investigates perceived financial needs and subjective financial well-being using data from a national survey of 2,567 households in Turkey. Financial needs are measured by consumer perceived ability to meet current living expenses in the short-term as well as their assessment for the retirement security in the long-term. We also investigate how income sources are related to subjective financial well-being. Findings show that households' daily concerns including the inability to meet short-term expenses including healthcare, daily living expenses (food and utilities), and the inability to maintain the existing living standard are highly significant factors in explaining their subjective financial well-being. We also find that having enough income during retirement and ability to find a job in the future are positively related to subjective financial well-being. Finally, when households' incomes are from work, rental properties, family, and pension, they feel more financially secure.
- Go to article: Retirement Income Sources and Subjective Financial Well-Being: A Comparison of Retirees and Non-Retirees
Retirement Income Sources and Subjective Financial Well-Being: A Comparison of Retirees and Non-Retirees
This study examined whether retirement income sources matter for the subjective financial well-being of retirees and the subjective retirement savings adequacy of non-retirees. Using nationally representative data from the 2017 Survey of Household Economics and Decisionmaking, the study found that while income from a defined benefit (DB) plan, defined contribution (DC) plan, and an individual retirement account (IRA) were positively related to the subjective financial well-being of retirees, income from employment and family were negatively related to their subjective financial well-being. Also, retirement preparation with a DB, DC, and IRA was positively related to subjective retirement savings adequacy for non-retirees. The moderating role of age in the relationship between the form of retirement savings for non-retirees and their subjective retirement savings adequacy was significant. Because of the growing importance of individual responsibility for retirement planning, the present study adds to the financial planning knowledge of financial practitioners, educators, and researchers.
- Go to article: Parental Financial Education During Childhood and Financial Behaviors of Emerging Adults
The purpose of this article was to determine whether overt financial education from parents during childhood (retrospective measure collected in the same survey wave) is associated with a greater frequency of healthy financial management behaviors in emerging adulthood, and whether this relationship is dependent on gender. Using a sample of emerging adults from the Flourishing Families dataset (N = 437), we ran two multivariate linear regressions—one with and one without the interaction variable. Results suggest that financial education from parents during childhood is linked with a greater frequency of healthy financial behaviors in emerging adulthood but was not dependent on gender. Financial educators should involve parents when teaching children about money, and they should educate parents on how to teach their children about money.
Using data from the 2013 Survey of Consumer Finances, this study evaluates the potential effect of using financial planners on household portfolio performance, which was measured by Sharpe Ratio. Results revealed that households that reported using financial planners demonstrated better portfolio performance than those that did not. This lends empirical support to claims that professional financial planning services provide value to clients. Implications for investors, financial planning professionals, and researchers are discussed. Considering the direct relation between wealth accumulation and portfolio performance, financial planners should explore ways in which to work with those with limited resources to help them realize the benefits of using financial planners and improve their portfolio performance as a result.
- Go to article: Financial Literacy Types and Financial Behaviors Among Adolescents: Role of Financial Education
The mismatch between financial objective and subjective knowledge that occurs in youth and adolescents has been understudied in the literature. Based on objective and subjective financial literacy scores, this study categorizes financial literacy into four types: financial literacy overconfidence, underconfidence, competence, and naïvete in a sample of adolescents. Data were collected from 330 students aged around 15 years old in six middle schools in Hong Kong. The results indicate that adolescents who are overconfident about their financial literacy are more likely to engage in risky financial behavior and report higher levels of financial autonomy. A randomized experimental trial was conducted to assess whether financial education could change the mismatch between financial objective and subjective knowledge. The results show a significant increase in underconfidence after the financial education intervention, but no significant change in the other three categories. The findings highlight the same type of financial literacy overconfidence in both adolescents and adults and has implications for financial counselors and educators who would improve the financial engagement of adolescents.
Military spouses face employment obstacles such as relocations, leading to un- or underemployment. The Department of Defense (DoD) proposed three best practice guidelines for transfer of licenses for military spouses. In this study, we (a) reviewed state legislation on military spouse licensure portability and identified how states addressed DoD best practices, and (b) interviewed staff and reviewed websites at six occupational boards of each state. Most states have implemented at least two guidelines, while occupational boards have implemented only some of the legislated guidelines. Thirty-seven percent of boards in states with legislation supporting expedited applications for military spouses did not offer them, and not all accommodations are publicly displayed. Financial counselors should recommend military spouses call regulatory offices about accommodations.
This research sought to further understanding of factors related to low-income household saving behavior. Saving behavior, defined as whether a household spent less than income, was analyzed by applying institutional theory, which proposes that households' institutional environment has a substantial effect on financial decisions. Two logistic regression models were used to test the effects of variables on saving behavior; the first logit was based on the life cycle hypothesis and the second added noneconomic individual factors (i.e., social networks, financial literacy, and psychological variables) and institutional factors (i.e., access, incentives, and facilitation). Institutional factors, including the number of institutions used, credit access, and having an employer sponsored retirement plan, had significant effects even after controlling for the effect of variables based on the life cycle model, suggesting that promoting institutional access and facilitation—especially through employer-provided plans—may encourage saving behavior among low-income households.
- Go to article: Navigating Risky Higher Education Investments: Implications for Practitioners and Consumers
This exploratory study examines academic and labor market risks associated with investments in higher education by synthesizing the literature regarding risky higher education choices and extending the research using the 2014 National Student Financial Wellness Study, a national sample of college students. Three phenomena are analyzed to support the notion that individuals may be making suboptimal human capital investment decisions: (a) cost–benefit errors; (b) unclear educational goals; and (c) increasing time-to-degree. The study examines which students are more likely to report that the cost of college did not influence their choice, that tuition is not a good investment, or that they expect to take additional time to complete their degree. Opportunities for practitioners to help clients navigate higher education investment decisions and opportunities for future research are discussed.
An increasing number of individuals will be unable to retire comfortably amidst an international retirement savings crisis. Research suggests that behavioral factors contribute to inadequate retirement savings. We present a procedure that reframes the retirement savings decision, aimed at alleviating some of the negative effects of the behavioral factors. This procedure shifts the focus from the required wealth at retirement (the future) to the lifestyle an individual can afford to maintain now (the present). A sustainable lifestyle level (SLL) approach is expressed mathematically and illustrated with practical examples. The SLL approach offers a practical tool for retirement planning professionals to present recommendations that are simple and easy to understand for individuals faced with complex retirement planning decisions.
- Go to article: “I Think I Can Get Ahead!” Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults
“I Think I Can Get Ahead!” Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults
This research examined how perceived economic mobility (PEM) relates to domain-specific behaviors of financial management, specifically cash management, credit management, and savings and investment, for a sample of 1,245 young adults age 18–34. Using data collected by an online survey administration organization, research results indicated a significant positive relationship between PEM and the financial behaviors of cash management and savings and investment. Control variables of income level, family of origin’s perceived (FOP) income level, age, gender, education level, and employment also showed varying levels of significance across the three financial behaviors. Findings, to be considered in financial policy-making, indicated significant interactions between PEM and FOP income levels for cash management and between PEM and current income for credit management.
- Go to article: Impact of the FutureSmart Online Financial Education Course on Financial Knowledge of Middle School Students
Impact of the FutureSmart Online Financial Education Course on Financial Knowledge of Middle School Students
The increasing role of schools in promoting financial literacy underscores the need to investigate the effectiveness of school-based financial education programs. This study examined FutureSmart—a free, co-curricular, online financial education course—using a quasi-experimental design with a diverse sample of middle school students nationwide. The study assessed the impact of the course on students' financial knowledge, attitudes, and behaviors, and explored the association of program implementation factors with changes in student outcomes. Financial knowledge gains were significant, substantial, and consistent across student subgroups and implementation factors for FutureSmart participants. Gains in financial attitudes and behaviors—specifically, financial confidence, engagement with parents about financial issues, current engagement with financial products, and intended future engagement with financial products—were not significant. The fundamental implication of this research is that FutureSmart effectively conveys financial knowledge to middle school students, contributing to a foundation for their future financial well-being.
As defined contribution (DC) plans become more popular than defined benefit (DB) plans, American workers are increasingly responsible for their retirement savings. Because retirement plan participants' portfolio allocation is constrained by the available funds in the plan, the construction of a plan's investment menu has become extremely important. No research has evaluated fund selection in retirement plans or compared plans involving an advisor with self-directed plans. To fill this research gap, this study employs cross-sectional, nationwide data that include 5,570 retirement plans with 100 or more participants in 2013, 2014 and 2015. Results show that in most cases, using advisors is not related to plan performance. Plan sponsors should require advisors to periodically evaluate the performance of plans under their management using objective measures.
Explicit parent–child financial socialization is one way that parents may help children feel less stress in college and increase their academic performance. To test this assumption, we used family financial socialization theory to inform multivariate analysis of variance (MANOVA) and structural equation models (SEM). The results largely support the theory. Participants were 752 college students from a U.S. university. Specific findings indicate that students from more affluent families were more often taught to budget. Parent–child teaching/training was strongly associated with felt parental–financial influence and fewer worrisome academic behaviors because of economic pressure. Students who felt greater parent–financial influence and experienced fewer effects of economic pressure, achieved higher college grade point averages (GPAs). An implication of this study is the importance of strengthening support for financial learning in families.
Medical bankruptcy refers to individuals with serious medical conditions who feel compelled to file for bankruptcy to seek relief from their medical debts. Noticeably lacking in the literature is a consistent, evidence-based criterion to define who may be classified as medically bankrupt. A more concrete definition would allow policy makers to understand the magnitude of the problem and allow financial counselors to better inform certain households about seeking bankruptcy protection when faced with medical bills. This study uses data drawn from the U.S. Bankruptcy Court’s Eastern Washington District to create an empirical profile of bankruptcy petitioners with medical debt. We then identify those characteristics statistically associated with being “at-risk” of a medical bankruptcy to better understand and define medical bankruptcy.
- Go to article: Exploring Perceptions of Graduates' Experiences That Impact Certified Financial Planner Certification: A Multiple Case Inquiry
Exploring Perceptions of Graduates' Experiences That Impact Certified Financial Planner Certification: A Multiple Case Inquiry
This study utilized qualitative methods to explore perceptions of graduates from Certified Financial Planning Board of Standards, Inc. Registered Programs regarding experiences that impact Certified Financial Planner (CFP) certification completion. Participants (N = 16) were classified into four different groups: Certified, In Progress, With Intentions, and No Intentions. In general, the themes that emerged from within case analyses and across cases related to four areas, including preservice experience, intrinsic motivation, employment, and respect for the CFP marks. The results of this study suggest that financial service firms have a number of opportunities to strengthen the interest in a financial planning career and assist recent graduates in their pursuit of CFP certification with time and financial support of the examination process.
In terms of future revenue stream, the potential of young adults is considered to be significant. The study is relevant to India as the segment dominates the population. The objective of the study is to examine the antecedents to financial management behavior for young adults. One hundred and sixty responses were obtained from respondents. While employing structural equation modeling, we found that variables such as help-seeking behavior, financial knowledge, and electronic banking, positively affect financial management behavior. The findings suggest that financial educators and counselors need to incorporate electronic banking along with other dimensions such as financial knowledge and help-seekers. Financial educators can benefit from innovative technology features.
- Go to article: Stock Market Volatility and Changes in Financial Risk Tolerance During the Great Recession
This study investigated the degree to which the financial risk tolerance of individuals was influenced by volatility in the U.S. equities market during the period of the Great Recession. Based on data from a valid and reliable risk tolerance scale and return information for the Standard and Poor’s (S&P) 500 index, there does appear to be some associations between daily market volatility and changes in risk tolerance scores. Changes in risk tolerance scores were also calculated using short- and intermediate-term volatility measures. The relationships do vary, however, with evidence supporting the relationship only 64% of the time. Overall, changes in financial risk tolerance scores were found to be modest. Although not following hypothesized directions at all times, risk tolerance was not influenced by the length of volatility measurements.
This article argues for the establishment of a defined benefit and partially funded universal pension system. The characteristics of this system represent a publicly managed mandatory contributory pension plan and the coverage of its benefits for all Hong Kong elderly aged above 65. By applying a mathematical model which links up the periodic savings during people’s working life, level of interest rates, average length of time in retirement, and the amount of retirement benefit payments, we calculated the possible scenarios for Hong Kong to reform its pension system. Research results suggest that the proposed system will be financially viable and sustainable provided both the government and its citizens are willing to pay for it.
This study examined how retirement planning information search was related to retirement savings of working women. By controlling for sociodemographic variables, the study further explored factors associated with individual information sources for retirement planning. An online survey was developed to collect data from a national population, obtaining 591 valid responses. The results showed that women who learned about retirement planning through discussions with friends/relatives tended to save less in their personal retirement savings, whereas those who obtained information from financial advisors tended to save more. Personal income was positively associated with seeking information from financial advisors. The study concluded by discussing the implications for financial service providers, retirement plan marketers, financial educators, researchers, and policymakers.
- Go to article: Associations of Health and Financial Resources With Stress: Applying the Theory of Conservation of Resources
Associations of Health and Financial Resources With Stress: Applying the Theory of Conservation of Resources
Health and financial resources are two important resources when individuals experience stress. The conservation of resources (COR) theory was used to view how health and financial resources relate to stress. The purpose of this study was to test how the perceived accumulation and loss of financial and health resources influences general life stress and financial stress. Participants were recruited through Facebook and LinkedIn pages of the primary investigator and paper flyers posted in the breakroom of a New England financial institution. Additional participants were purchased through Qualtrics, a research panel provider, in order to increase the sample size. The sample consisted of individuals between the ages of 19 and 65 years. The data analysis explored the association between financial stress, general life stress, resources, and several demographic variables using the Statistical Analysis Software (SAS) program. Respondents were primarily White, female, and averaged less than two dependents. Annual household income ranged between $50,000 and $100,000. Results indicate that health resources, along with being White, make significant contributions to the variance in general life stress. Financial resources, success resources, being White, and level of household income make significant contributions to the variance in financial stress.
- Go to article: Factors Associated With Hiring and Firing Financial Advisors During the Great Recession
From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic situation of households using the National Longitudinal Survey of Youth (NLSY) and analyzes the financial advisor–client relationship during the Great Recession to determine who fired or hired a financial advisor during this period. The results indicate that losing money, measured by a decrease net worth, was not the main reason why clients fired their financial advisor during the Great Recession. Interestingly, the results also show that experiencing a decrease in net worth was not the main reason why individuals pursued the services of a financial adviser during this period. Instead, current income and an increase in income were the primary factors that impacted the client–advisor relationship during the financial crisis. These results are consistent with consumer demand theory in which financial services are a normal good that people purchase less of when their income falls.
This study examines the timing of financial education and its impact on short-term and long-term financial behavior. We also explore the power of financial education on financial knowledge and examine the link between financial knowledge and positive financial behavior. Exposure to financial education during multiple life stages leads to a better financial outcome. Financial education taught via multiple channels, including high school, college, the workplace, and at home, is the most optimal in the long run. For those who did not attend college, being exposed to financial education in high school is significantly associated with positive financial behavior. We cite implications for all financial education advocates. Policymakers in the financial capability arena can stay abreast of the channels of financial education that produce the most fruitful economic and societal gains.
The purpose of this study was to identify barriers and facilitators of saving behavior in low- to moderate-income households within a framework of predisposing, enabling, and reinforcing factors. Data used were from a U.S. Department of Agriculture/National Institute for Food and Agriculture–sponsored multistate project. With a sample of 757 low- to moderate-income households and hierarchical logistic regression, results indicated that enabling factors and reinforcing factors reduced the significance of predisposing factors such as household income and financial knowledge on the likelihood to save. In the full model, significant predisposing factors included net worth, attitude toward saving, learned about saving from formal sources, marital status, gender, and race. Among the enabling factors, constraints on resources and lack of comfort with financial institutions were perceived as barriers to saving as well as unemployment. Of the reinforcing factors, concern for loss of benefits increased the odds of saving.
The purpose of this study is to examine the debt burdens, perceived capabilities, and mental health of young adults. Panel data constructed from the 2009 to 2013 waves of the Panel Study of Income Dynamics (PSID) and its Transition to Adulthood (TA) supplement are used in this study. The multinomial logistic regression analysis findings showed that the amount of revolving debt was negatively associated with young adults' mental health. On the other hand, perceived abilities in acting responsibly, in solving problems, and in managing money were positively associated with the mental health of young adults. The fixed effects regression analysis results indicate that the amounts of credit card and student loan debt from the previous period were negatively associated with an increase in the mental health continuum scores of young adults over time. A discussion of the implications of this study's key findings for scholars, policymakers, and practitioners is included.
- Go to article: Purposive and Unintentional Family Financial Socialization, Subjective Financial Knowledge, and Financial Behavior of High School Students
Purposive and Unintentional Family Financial Socialization, Subjective Financial Knowledge, and Financial Behavior of High School Students
Using the family financial socialization theory, this study investigated the financial knowledge and behavior of high school students' contextualizing unintentional and purposive family financial socialization. The sample of 4,473 high school students were 51% females, 45% seniors, and ethnically diverse. A path analysis tested conceptual relationships between variables. Results indicated that the two unintentional socialization indicators were positively associated with subjective financial knowledge and financial behavior. Those indicators were also indirectly associated with financial behavior through knowledge. Student-earned income, a purposive indicator of socialization, was positively associated with behavior through knowledge. Exclusively obtaining money through parents was negatively associated with behavior through knowledge. Knowledge was positively associated with behavior.
- Go to article: The Utilization of Robo-Advisors by Individual Investors: An Analysis Using Diffusion of Innovation and Information Search Frameworks
The Utilization of Robo-Advisors by Individual Investors: An Analysis Using Diffusion of Innovation and Information Search Frameworks
This study examines the roles of internal and external search characteristics and attitudinal factors in investors' decisions to utilize robo-advisor-based platforms. Using the 2015 state-by-state National Financial Capability Study and Investor Survey, this study finds that the need to free up time, higher risk tolerance, higher subjective financial knowledge, and higher amounts of investable assets were positively associated with individual investors' adoption of robo-advisors. Additionally, the results from the interaction model indicates that individuals under 65 with a higher risk tolerance and greater perceived investment knowledge were more likely to use robo-advisors. Implications of the key findings for scholars, practitioners, and industry leaders are included.
Although risk preferences and inheritance expectations should affect annuitization decisions, few studies have empirically tested these relations. This study bridges the gap in the prior literature by investigating potential effects that consumer risk aversion and inheritance expectations have on annuitization. Using data from the 2012 wave of the Health and Retirement Study, this study finds that consumers who are more risk averse have a higher likelihood of owning household annuity income compared to consumers who are less risk averse. Consumers with a higher inheritance expectation are more likely to have household annuity income compared to those with a lower inheritance expectation. Finally, when risk aversion is interacted with inheritance expectation, it increases the likelihood of household annuity ownership.
- Go to article: More Than a Score? Indirect Associations Between Credit Score and Romantic Relationship Quality in Emerging Adulthood
More Than a Score? Indirect Associations Between Credit Score and Romantic Relationship Quality in Emerging Adulthood
Higher credit scores have unique financial benefits that may aid in emerging adults’ efforts toward financial independence. Yet, it is unknown if higher credit scores may also yield romantic relationship benefits. In a sample of 916 U.S. emerging adults, we used structural equation modeling to test the indirect associations between credit score and romantic relationship quality. Credit score was positively associated with financial self-efficacy and negatively associated with financial deception. Additionally, credit score was indirectly associated with romantic relationship quality through financial self-efficacy and financial deception. We encourage educators and clinicians working with emerging adults in romantic relationships to help these emerging adults learn how to establish credit and raise their credit scores, which might improve financial and relational outcomes.
- Go to article: Financial Management Competency, Financial Resources, Locus of Control, and Financial Wellness
Guided by a proactive coping theory, this online, cross-sectional study examined whether income, savings, debt service-to-income ratio, reluctance to think about finances, locus of control, and financial management competency were related to financial wellness. Based on data from a United States sample (N = 1,039), results of hierarchical regressions indicated that financial management competency, internal locus of control, and savings were positively associated with financial wellness, explaining 43.5% of the variance. Results suggest that, rather than resources themselves, resource allocation and perceived usefulness of financial actions are most critical to financial wellness. Educators and practitioners can emphasize proactive coping through behavioral approaches to financial management that foster greater internal locus of control and financial wellness.
This research examined the prevalence and amount of care-related out-of-pocket expenditures of family caregivers and the factors that influence this spending. Secondary analysis of 2007 General Social Survey (Cycle 21) data yielded population estimates for Canadians age 45 years and older. Thirty-five percent of respondents—1.2 million Canadians—reported care-related out-of-pocket expenditures, which amounted to almost $12.6 million. Caregivers who were more likely to incur these costs reported higher levels of stress, were caring for a family member or friend with more complex health conditions, were providing more intense levels of care, and lived further away from the care receiver. We find that care-related out-of-pocket spending is common among Canadian caregivers, that it can be substantial, and that relatively few caregivers receive financial supports that can defray these costs.
This article studies the financial decision-making behavior of U.S. families that have difficulties paying for their medical bills and investigate what alternatives they have to avoid filing for formal bankruptcy and what influence their motivation to do so. Using household financial and demographic information from the Health Tracking Household Survey in 2007 and 2010, this article finds that families with younger age members, minority ethnic background, more doctor visits, and without insurance made more diverse and severe choices to finance the payments before resorting to personal bankruptcy. Interestingly, households with better education seek more diverse but easier financing methods, suggesting that financial literacy may play a dual role in undertaking financial planning—strategic default and bankruptcy avoiding.
- Go to article: Patterns and Factors Associated With Medical Expenses and Health Insurance Premium Payments
This study sought to investigate household sociodemographic characteristics as predictors of patterns of health insurance premiums and medical expenses of consumers using the 2014 Consumer Expenditures Survey. This study found that age, being married, educational attainment, and log of family salary income were associated with higher family spending on both health insurance premiums and medical expenses. Government employment status was associated with lower spending on health insurance premiums and medical expenses. Findings from this research are informative for both households in determining health insurance premiums and medical expenses throughout the life course as well as financial advisors in personal financial planning and counseling focused on health care.
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.