Personal Financial Knowledge Research Articles

Creating Financial Capability in the Next Generation: An Introduction to the Special Issue

The Great Recession revealed the financial vulnerability of millions of US households. In its aftermath, researchers and policymakers have turned their attention to improving the next generation's knowledge of personal finance and its access to secure financial offerings (US Department of the Treasury 2014). Nearly all experts agree that such efforts should start early in children's lives. Less clear, however, is the age or stage at which to start these processes, and no consensus has identified the programs and policies best suited to accomplish this important goal. This special issue of The Journal of Consumer Affairs, which we developed in collaboration with the Financial Literacy and Education Commission (FLEC), presents a collection of studies that explore starting early to develop financial capability. The concept of financial capability combines people's ability to act with their opportunity to act in their best financial interests (Sherraden 2013, 3). It takes into account what people know and the skills they have to manage their financial affairs. And it also takes into account opportunities to improve their financial well-being. People need both--financial ability (i.e., knowledge and skills) and financial inclusion (i.e., safe and appropriate financial policies, products, and services)--to build financially secure and hopeful lives. THREE TRENDS Efforts to increase financial capability are occurring in the context of three trends. The first is the rising complexity of everyday financial decision making. Recent national surveys show that the financial knowledge and skills of Americans, including those of young people, are not keeping pace with the demands of financial life (FINRA Investor Education Foundation 2013; Lusardi, Mitchell, and Curto 2010; Mottola 2014). People are often unprepared to use the quickly expanding array of available financial products and services. These include mainstream and alternative financial products as well as emerging technologies in financial services. With the entrance of big box stores and mobile technology into financial services, the landscape is changing and it is becoming easier for people to conduct financial transactions without a traditional bank account, yet these new offerings add to the complexity (Tabuchi and Silver-Greenberg 2014). Although young people likely have an advantage over older generations in making sense of emerging technologies, the proliferation of products and platforms challenges the understanding and skills of many. A second trend is that young people confront high-stakes financial decisions earlier in life than was common a generation ago. For example, many take on levels of student debt and other debt that their parents did not experience at their age. They are often unprepared to make such critical financial decisions, which can have profound impacts on educational, vocational, and financial well-being over the life span (Emmons and Noeth 2014). For example, the share of young households (headed by someone under age 40) with student loan debt increased from 22.4% in 2001 to 38.8% in 2013, and average debt levels nearly doubled during the same period, rising from $16,900 to $29,800 (Bricker et al. 2014). Although the economic advantages of postsecondary credentials are clear and some loan programs consider a borrower's income in setting payment levels, the age at which a youth takes on student debt is correlated with the size of the debt, and high debt makes it difficult to develop a solid financial footing (Elliott and Nam 2013; Huang et al. 2015). The difficulty is even greater for youth who accumulate education debt but do not graduate. A third trend is that many families with children are struggling financially. Young and minority families fared poorly in the Great Recession (Emmons and Noeth 2014), and one in five children lives in poverty (Gabe 2014). In the low-wage job sector, many families lack workplace benefits such as insurance and retirement savings (Crain and Sherraden 2014). …

A Delphi Study to Identify Personal Finance Core Concepts and Competencies of First‐Generation College Students

The purpose of this study was to gain consensus among researchers and college educators using the Delphi method about the personal finance knowledge, skills, and actions/behaviors that are important for all first‐generation college students. A group of five experts who had knowledge of college students’ financial literacy needs participated as panelists. Three rounds of questionnaires elicited responses from the panelists to identify personal finance core concepts and competencies that are most crucial for first‐generation college students. All 14 personal finance concepts and 234 competencies gained consensus. The mean rankings by importance of each personal finance concept and competency were identified.

The features and effectiveness of the Keys to Financial Success curriculum

The global financial crisis of 2007–2009 generated a renewed interest in including personal finance in the secondary curriculum in the United States and in many countries around the world. This paper explains the features of a successful and unique high school personal finance curriculum, Keys to Financial Success, which is offered by a consortium of partners in Delaware, Pennsylvania, and New Jersey, and is available to teachers from the Federal Reserve Bank of Philadelphia. Using the Financial Fitness for Life High School Test (FFFL-HS Test), pre- and posttest results are reported for 967 students who participated in a one-semester Keys course during the 2011–2012 and 2012–2013 academic years. The survey results indicate that the training of teachers in the Keys curriculum, and the implementation of a one-semester Keys course, significantly improve the average personal finance knowledge of students in each of the standards and concept areas of the FFFL-HS Test. These results contribute to the growing literature showing the positive effects of a well-designed personal finance course, taught by properly trained teachers, on the financial knowledge of high school students, and should be of interest to an international audience.

Financial Literacy and Financial Behavior among Young Adults: Evidence and Implications

This paper uses data from the 2009 National Financial Capability Study to examine financial literacy and financial behavior in a sample of approximately 4,500 young adults age 25 to 34. The paper finds that most young adults lack basic financial knowledge. Financial literacy is especially low among certain demographic groups, such as women, minorities, and lower-income or less-educated people. A high level of education, however, is not a guarantee of financial literacy. Only 49% of young respondents with a college education and 60% of young respondents with postgraduate education could correctly answer three simple questions designed to assess financial literacy. Results show that respondents who display higher financial literacy or higher confidence in their math or personal finance knowledge have better financial outcomes: they are less likely to use high-cost borrowing methods, and they are more likely to plan for retirement or have set aside savings for emergencies.

The Relationship Between Personal Financial Wellness and Financial Wellbeing: A Structural Equation Modelling Approach

We examined the construct of financial wellness and its relationship to personal wellbeing, with a focus on the role of financial literacy. Gender comparisons are made using a structural equation modeling analysis including personal wellbeing, financial satisfaction, financial status, financial behavior, financial attitude, and financial knowledge. Males ranked higher in financial satisfaction and financial knowledge whereas females ranked higher in personal wellbeing. Joo’s (2008) concept of financial wellness as multidimensional is supported though the result is improved when a causal model of sub-components is estimated. The relationship of all variables to personal wellbeing is mediated by financial satisfaction, with gender differences: In females the main source of financial satisfaction is financial status whereas in males it is financial knowledge.

Developing a framework to investigate the personal financial management knowledge of individuals

This article focuses on the development of a framework for investigating the personal financial management knowledge of individuals. Content analysis is used to derive the components included in the personal financial management requirements framework. The framework developed includes six components, namely basic concepts in personal finances, management of personal finances, risk management, future planning, investing in financial resources and miscellaneous factors. A qualitative validation process revealed that the framework indeed covers what the average South African citizen is required to know about personal financial planning. The real test of this framework will be to use it in developing an instrument to test individuals’ knowledge of personal financial management. This process of empirically testing the framework, using such an instrument, warrants a separate article.

Personal Finance Knowlegde and Practice: An Opinion Survey with Employed and Self-employed People in Pokhara

The ability to manage personal finances has become increasingly important in today's world. People must plan for long - term investments for their retirement and children's education. They must also decide on short - term savings and borrowing for daily life like a down payment for a house, a car loan, and other big - ticket items. Additionally, they must manage their different risk and insurance needs. This is might be the first survey about 'Personal Financial Knowledge and Practice' survey was conducted in 2011 with employed and Self-Employed people in Pokhara, Nepal. The survey revealed encouraging findings about how Employed and Self-Employed people of Pokhara approach money matters. This Personal financial literacy modeling research has been attempted to measure the literacy of Personal Finance with respect to their financial knowledge of different financial instrument and their practice or investment decisions. This study is based on stratified random sampling method with the help of financial literacy related parameters. This study has the intention to explore the skills of financial literacy; hence the objective was to test the basic financial knowledge of key products that is common to current society. In general, both categories have fairly healthy attitudes towards basic money management, financial planning and investment matters. Minorities of respondents of both categories save, monitor their spending and are generally responsible in the use of credit. Most of the respondents recognize the importance of financial planning and have done some basic financial planning.The Journal of Nepalese Business Studies Vol. Vii, No. 1, 2010-2011Page : 80-99Uploaded date: July 8, 2012

Students’ production of curricular knowledge: perspectives on empowerment in financial capability education

The aim of this article is to extend our understanding of the relationship between knowledge of personal finance and empowerment. The analysis is based on interview data obtained as part of a longitudinal study of students, aged 16–19, who completed a financial capability course in the UK. The analysis presents a set of cultural models or storylines implied in student discourse about what it means to be financially capable. Possibilities for empowerment are interpreted from these cultural models with implications for how we define the boundaries of financial capability education. References to empowerment in terms of having a voice and feeling confident to make consumer decisions and to advise others in matters of finance were common across the interview data. However, a form of knowledge and empowerment that positioned students not as aware consumers but as individuals with a critical awareness of financial and economic systems was less evident.

Financial Knowledge and Credit Card Behavior of College Students

This study examined the relationship between financial knowledge and credit card behavior of college students. The widespread availability of credit cards has raised concerns over how college students might use those cards given the negative consequences (both immediate and long-term) associated with credit abuse and mismanagement. Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use. Specific behaviors chosen have been associated with greater costs of borrowing and adverse economic consequences in the past.

The Effects of Financial Education on the Financial Knowledge of High School Students

This study investigated the effects of a financial education program on high school students' knowledge of personal finance. A comparison of pretest and posttest scores achieved on a reliable and valid thirty‐item instrument suggested that the Financing Your Future curriculum increased financial knowledge across many concepts. The scores increased regardless of the course in which the curriculum was used and across student characteristics. The assessment contributes to the growing literature showing that a well‐specified and properly implemented program in financial education can positively and significantly influence the financial knowledge of high school students.

An Analysis of First Experience Students' Financial Awareness and Attitude to Debt in a Post‐1992 UK University

AbstractWhile students have always found balancing their finances difficult, the current generation are faced with unprecedented debt burdens during and on completion of their studies. Student debt is now an expected outcome of attending university and, apart from the negative consequences it may have on participation in higher education, it may have a detrimental impact on the academic performance and psychological well‐being of students as they strive to fund their education and reduce their debt through part‐time working patterns. However, student debt can be managed better if students possess adequate personal financial awareness, have a responsible attitude to debt and are able to budget carefully. This study attempts to measure the personal financial awareness, attitude to debt and budgeting capabilities of 149 first‐year business school undergraduates using a specially developed test. The mean test score of 34 per cent on the financial awareness section indicates significant gaps in their personal financial knowledge and it appears that they are entering a critical stage of their lives ill‐equipped to cope with the severe cash restrictions they will encounter. This study is a valuable starting point in understanding the financial challenges faced by students in higher education in the UK and highlights how academic institutions can provide support to increase the financial awareness of students so that they can manage better their personal finances while at university.

State Curriculum Mandates and Student Knowledge of Personal Finance

This study analyzes the relationship between high school students’ scores on a test of personal financial literacy and their state's personal finance curriculum mandate. At the time of the testing, twenty of the thirty‐one states included in the study had some kind of educational policy in the area of personal financial management. The results of the study show that curriculum mandates, broadly defined, are not generally associated with higher students’ scores. However, students in states that required specific financial education course work scored significantly higher than those in states with either a general mandate or with no mandate.