Research brief contributed by Keith Moreland

Exciting Findings:

The most exciting findings of my paper¹ are that obtaining financial advice is associated with improved (more productive) financial behaviors, such as avoiding bank overdrafts, paying credit card balances on time and in full, establishing a retirement account, and checking credit scores/reports. Further, this association is slightly stronger for individuals with somewhat lower levels of financial knowledge.

Implications:

The implications to financial advisors are that providing financial advice and counselling, even at – or perhaps especially at – basic levels – can be associated with tangible benefits in the form of better personal financial decisions by, and improved financial wellbeing for, their clients and other individuals in their communities. This advice can result in improved decision making in various life stages including students and parents planning to finance higher education, individuals looking to start a business, individuals considering a first home purchase, and retirees and those planning for retirement, to name a few.

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Download the research (available to AFCPE members or by request from the authors): Keith A. Moreland (2018) Seeking Financial Advice and Other Desirable Financial Behaviors (JFCP), 29 (2).

Research is not about numbers but rather, telling a story. In family economics it often is about the relationship of household characteristics such as income and education, to investment decisions, retirement adequacy, and general household well being. A frequently used source of data is the Survey of Consumer Finances (SCF) conducted by the Federal Reserve board every three years.The survey is conducted with a  large number of randomly selected households. A code book assists researchers by describing the variables (information collected), what they measure, and limitations of those measurements. Because the quality of  research and accuracy of the story is dependent on correctly using and interpreting those numbers, we thought it important to see whether researchers in the field are complying with guidelines and suggestions for use of SCF data and pointing out where greater attention to the underlying data is needed. Complex models of analysis and statistics often mask an underlying question of whether the underlying variables and numbers are being used and described accurately. 

In exploring this question, we found that many published articles using the Survey of Consumer Finances have not carefully followed proper procedures and guidelines for analysis of the dataset. It is important for researchers and for those reading the research to understand these procedures. There is a large amount of data in the SCF and  careful examination of the code book is needed to understand how to use the data.The amount of information for each household participating in the survey can be imagined as being comparable to the size of the household’s federal income tax return: households with low income and assets might have a return of a few pages while households with high assets and business income might have a 100 page tax return.

While there are many questions on attitudes and characteristics of household members that are answered by all respondents, the survey is especially useful for research related to higher wealth households. Out of out of an estimated 505 households in the United States with a net worth over one billion dollars, there might be eight such households in the 2016 SCF.

Researchers and practitioners alike often read articles based on analyses of complex datasets such as the Survey of Consumer Finances. To fully understand and evaluate such articles, it is important that they are aware of details of the datasets and understand what is behind those numbers.

Guest Contributor: Sherman Hanna

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Download the research (available to AFCPE members or by request from the authors): Sherman D. Hanna, Kyoung Tae Kim, and Suzanne Lindamood, Behind the Numbers: Understanding the Survey of Consumer Finances, JFCP (29) 2. 

Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults

Research brief contributed by Julie Szendrey

This study is one of the first to investigate the relationships between perceived economic mobility (Yoon & Wong, 2014) of young adults and their financial management behaviors, specifically cash management, credit management, and savings and investment (Dew & Xiao, 2011).  Unlike many past studies that only sample traditional college students at select schools who are typically under age 24, this study fully encompassed a nationally representative sample of 1,245 young adults from age 18 up to 34.

Findings showed that young adults with the belief that upward economic mobility is a possibility in life are more motivated to practice better financial management behaviors – specifically cash management and savings and investment behaviors.

Young adults with higher income indicated better cash, credit, and savings and investment behaviors. Interestingly, those of average income indicated better credit management practices with increased perception of economic mobility, while those of lower income indicated decreased credit management practices with increased perception of economic mobility.

Findings specific to cash management behaviors showed that the perception of the ability to get ahead, regardless of the circumstances of one’s birth, seemed to matter more for those who saw themselves as growing up in a family that had less than average income. The impact of one’s perception of economic mobility was more limited for those who were from families of above average income while growing up.

Implications for Practice:

Several implications for practitioners can be drawn from this research to help improve the cash, credit, and savings and investment behaviors of young adults. Understanding what factors influence individual behaviors, specifically beliefs about the ability to be socio-economically mobile in our society, should be addressed by financial planners and counselors when helping young adults shape their financial futures.

Policy makers should consider the factors associated with financial management behaviors, specifically the finding that low-income young adults with high levels of perceived economic mobility exhibit better cash management behaviors but lower credit management behaviors.  Policy may focus on encouraging the perception that upward mobility is possible while also educating about how to build and maintain good credit.

Additionally, this study supports the belief in educating young adults, particularly those who are first in their families to obtain college degrees or who come from low-income families, in order to influence their perceptions about economic mobility and improve their financial behaviors.  Educational outlets within the community environment may include organizations such as Junior Achievement and United Way Income and Financial Stability Initiatives. Funding for the online survey data collection of this study was sponsored by the Acton Institute.

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Download the research (available to AFCPE members or by request from the authors): Julie Szendrey and Laci Fiala (2018) “I Think I Can Get Ahead!” Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults (JFCP), 29 (2).

Ashley LeBaron is a family finance researcher at the University of Arizona. As a researcher, she runs statistical tests and writes papers focusing on how money influences couple relationships and how parents teach their kids about money. She and her colleagues were recently published in the latest issue of the Journal of Financial Counseling and Planning (JCFP), for their work on  “Teaching Children About Money: Prospective Parenting Ideas From Undergraduate Students”. Learn how Ashley is bridging the gap by utilizing feedback from undergraduate students to inform her research.

AFCPE: What inspired you to enter this field?

Ashley: I have always been a researcher at heart. From the time I was five, I was polling my family members on their opinions (e.g., rank ordering candy bars) and doing simple calculations with that “data”. One of my incredible mentors, Jeff Hill, helped me discover my passion for family finance and gave me my first experiences with real research. He let me lead his research team when I was an undergraduate sophomore with no research experience. I’m sure I was the cause of many headaches and gray hairs at first, but he was patient and nurturing, and his confidence in me helped me gain the confidence I needed to make it my career.

AFCPE: Tell us about your recent paper published in the Journal of Financial Counseling and Planning: “Teaching Children About Money: Prospective Parenting Ideas From Undergraduate Students”.

Ashley: The fundamental purpose of the paper is to help improve financial education (particularly from parents) and thereby increase the financial well-being of future emerging adults. The paper is part of a larger project, the “Whats and Hows of Family Financial $ocialization” project. We interviewed 126 undergraduate students, 17 parents, and 8 grandparents about what and how their parents taught them about money (and, for parents and grandparents, what and how they taught their kids about money). As we began coding the data, we noticed that many of the students (76% of them) had, without being prompted, talked about what/how they wanted to teach their own future kids about money. We thought this demonstrated remarkable prospective thinking about financial parenting, and the students had some really excellent ideas that financial educators, researchers, parents, clinicians, etc. could learn from. So, we coded for various themes and wrote a paper to highlight these wonderful ideas! The themes we found include (a) “Communicating Family Finances,” (b) “Opportunities for Responsibility,” (c) “The Value of Hard Work,” and (d) “The Process of Saving.” It was really important to us to let the participants speak for themselves, so we tried to include as many direct quotes as possible in the Findings section.

AFCPE: This project sounds amazing! As a researcher, how important is it to bridge the gap between research and practice?

Ashley: This is so important! It’s something I need to work on, and as a field, we could be doing better. I think organizations such as AFCPE are a great way to bridge the gap, as practitioners and researchers alike read JFCP, and as researchers present their findings and practitioners present their experiences and questions at the annual conference. Ideally, researchers’ studies should stem from the experiences and questions of practitioners, and then researchers’ findings should inform practitioners. As we talk to and listen to each other, the research and the practice are both improved.

AFCPE: What’s next for you? What has you most excited?

Ashley: The next major project for me will be taking the qualitative findings from the Whats and Hows of Family Financial $ocialization project and translating them into quantitative measures. I hope to create new, more nuanced items that can be used in financial socialization research. After creating the items, I hope to collect data and explore how various financial socialization topics, methods, processes, and meanings are associated with various outcomes.

 

Ashley Answers the Friday 5:

1. My Why: The two most precious things to me are my family and my faith. They give purpose and meaning to everything I do. I have found that as I put them first, everything else works out.
2. My Favorite Quote: My favorite quote is by Thomas S. Monson: “Never let a problem to be solved become more important than a person to be loved.”
3. My Hero: One of my heroes is Jeff Hill, the mentor I talked about before. Aside from being one of my best friends, he is the most selfless, giving person I know. He is always looking out for others and what he can do to help them. Life has dealt him his fair share of hardships, but he greets them all with a smile. My ongoing goal is to become more of the mentor, friend, and person that he is.
4. My Favorite Personal Finance Resource: Parents! I study financial socialization, so I’m a little biased, but I believe that parents are (and should be) the #1 source of pre-adulthood financial learning.
5. My Best Advice:
   1. For someone starting the journey to financial well-being: Decide on your values and priorities, and then act accordingly. Make sure your budget, your saving, your spending, your giving, etc. are in line with what you actually care about. If not, you might have regrets later.
   2. For a new professional entering the field: To those starting out in research, the best advice I could give is to find yourself the best mentor you can and learn from them. In my opinion, the best mentors are those who 1) give you responsibility and let you lead out on projects and papers, and 2) give you ample encouragement and support. My choice of masters’ program and doctoral program were both made almost entirely based on who my advisor would be. Both times, my advisor (MS: Jeff Hill; PhD: Melissa Curran) has been exceptional and has made all the difference in my experience and success.

Download the research (available to AFCPE members or by the request from the authors): LeBaron et al. (2018) Teaching Children About Money: Prospective Parenting Ideas From Undergraduate Students (JFCP), 29(2).

Follow Ashley at:

Email: lebaronashley@gmail.com

Google Scholar: https://scholar.google.com/citations?user=dTPJXPQAAAAJ&hl=en

ResearchGate: https://www.researchgate.net/profile/Ashley_Lebaron

Her Vita: https://cals.arizona.edu/fcs/grad/ashley_lebaron

• Though there is much attention paid to overcrowded prisons, criminal justice reform, and recidivism, little has been done to address how men and women who have experienced incarceration relate to money. There is so much not known that it’s difficult to know where to start the conversation. In my recent article published in the Journal of Financial Counseling & Planning (JFCP), I went back to education—in my opinion, the very foundation of how we function—and I endeavored to answer the question: 

   

  Does basic financial education increase knowledge for men within two years of release in a work-release program?

  I must say, I wasn’t disappointed by the results!

  However, before we jump in, let me back up and give you a little history. I had been teaching financial education at a Transitional Center for about a year when it occurred to me – “Even though I was convinced I was teaching the right information; how did I actually know what my students didn’t know or needed to know?” Sure, I had numerous years of financial training and education, and I had taught on numerous academic levels, but this was my first time working with the incarcerated. For all I knew, they were in class paying attention and asking questions because I was someone different and they didn’t want to get in trouble for being disrespectful. After much thought, I determined that in order for my curriculum to be effective I needed to make sure it was addressing topics that were going to be beneficial to my students.

  Low and behold, it turns out that I WAS teaching the right topics. We now have statistically significant evidence that a curriculum covering certain topics DOES increase financial knowledge for men who have recently transferred from state prison into a work release facility, and who are within two years of release back to society.

  If you want the science behind my research and how it’s significant, I encourage you to read the whole article. If you don’t care for the science, then read everything except the results section—just look at Table 3 (the asterisks show the significant increases in knowledge).

  There is so much more to be done; however, this article is an important step forward. As we continue to increase our knowledge about the ways we can more effectively teach underserved populations, we help provide the men and women who are re-entering society with the tools and knowledge they need to be successful. Even more importantly, we lessen the chances that they will return to crime after they leave prison.

  An increase in knowledge is always a good step toward forward progress.

   

  Continue the Conversation:

  Tell us what you think in the comments below or on Twitter.

  Download the research (available to AFCPE members or by request from the authors): Mielitz et al. (2018) Financial Literacy Education in a Work Release Program for an Incarcerated Sample (JFCP), 29 (2).