Published on February 28, 2014
Saving Money: Research Insights Barbara O’Neill, Ph.D., CFP®, AFC, CHC Rutgers University email@example.com Michael Gutter, Ph.D. University of Florida firstname.lastname@example.org Tim Griesdorn Iowa State University email@example.com
Week A national social marketing campaign designed to build a culture of savings in America as a core component of financial stability
America Saves Sound Bite Set a Goal. Make a Plan. Save Automatically.
Did You Ever Wonder… Does Research Support The Three Keys to Saving? What do research studies say about saving money?
Webinar Objectives • Review the findings of recent studies about saving money • Discuss the implications of these studies for practitioners personally and professionally • Create a “one-stop” source for published research study links about saving
What Do You Want to Know Most About Savings from Research? Please insert your Twitter Tips in the Chat box
Research Study Topics • Savings behaviors of Americans • Characteristics of successful savers • Resources for saving money • Barriers to saving money Mix of government, non-profit, and academic studies; last 10 years of JFCP articles abut savings
Research About Savings Behaviors
Savings Behavior • 6th Annual Savings Survey (national) by CFA & ASEC (2013): http://www.consumerfed.org/news/644 • 54% of Americans “have a savings plan with specific goals” • 43% have a spending plan that allows them to save for goals • 50% of pre-retirees save for retirement at work • 41% preauthorize transfers from checking to savings or investments • 49% know their net worth • 65% have sufficient emergency savings Implications •Provide tools for financial goal-setting and net worth and spending plans •http://njaes.rutgers.edu/money/pdfs/goalsetting worksheet.pdf •http://njaes.rutgers.edu/money/pdfs/networthca lcworksheet.pdf •http://njaes.rutgers.edu/money/pdfs/fs421work sheet.pdf •Provide tools to sign up for employer savings plan at financial seminars and benefit fairs
Savings Behavior • 5th Annual Savings Survey (national) by Implications CFA & ASEC (2012): http://americasavesweek.org/images/as •Provide planning tools and w2012pr.pdf encourage future-mindedness • 2/3 of Americans spend < their income and save the difference and have adequate emergency funds • Having a savings plan with specific goals can have beneficial financial effects, even for lower-income families (< $25,000) • Those with a savings plan are much more likely to spend < income and save (85% of all 1,007 respondents vs 44%) – http://www.americasavesweek.org/forindividuals/picture-your-savings-goal •Provide successful savings role models…people with “street cred”
Savings Behavior • Study of 1,000 retirement plan participants indicates gaps between awareness and action: http://www.fa- Implications •Beware of using technical jargon that people don’t understand mag.com/news/gap-exists-between-savings•Break recommendations into a series knowledge-and-action-11328.html of action steps • 78% know they should determine how much to save for retirement but •Help people find and use planning and saving resources only 33% know how http://www.choosetosave.org/ballpark/ • 65% believe investment diversification is important but only 1/3 know how to do it https://personal.vanguard.com/us/insights/retire ment/tool/retirement-expense-worksheet • 67% know they should adjust investments over time but only 30% know how to do it https://www.tiaa-cref.org/public/pdf/adviceplanning/toolscalculators/A125820_budgeting_worksheet.pdf
Savings Behavior • 2013 Retirement Confidence Survey Implications (EBRI): 57% of U.S. workers have < $25,000 in total savings including 28% that •Stress the benefits of employer have < $1,000 (excluding a primary savings plans residence and DB pension plan) •Sign people up at workplace seminars or auto-enroll them •Fine line between educating people • Workers who participate in a retirement and scaring them so they say “Why savings plan at work (45%) are considerably more likely than those who bother? I’ll never be able to save are offered a plan but choose not to enough money” participate (22%) or are not offered a plan •Example: Showing the 4% (18%) to have saved at least $50,000 withdrawal rule on a low sum: $25,000 • http://www.ebri.org/pdf/surveys/rcs/2013/Finalx .04 = $1,000 a year. FS.RCS-13.FS_3.Saving.FINAL.pdf • Only 12% have saved $250,000 +
Savings Behavior • Fidelity: 401(k) plan participants save 8% of their salaries in 401(k) plans; When a typical employer match is factored in, the savings rate increases to 12% • Average 401(k) at end of 2012 had $77,300 • Younger workers use Roth 401(k)s the most: 10% for workers in their 20s vs. 6% of workers overall • http://www.fidelity.com/insidefidelity/employer-services/fidelity-analysisfinds-record-high-average-401k-balance Implications •Teach the “Kick It Up a Notch” behavior change strategy: http://njaes.rutgers.edu/sshw/workbook/21_Kick _it_Up_a_Notch.pdf •Show people the dollar benefits of an “extra notch” •1% More Calculator: http://www.nytimes.com/interactive/2010/03/24/ your-money/one-pct-more-calculator.html?_r=0 •Use a Monte Carlo calculator to show how extra savings increase the chances of retirement success
Savings Behavior • The fewer the number of savings goals, the better (Soman & Zhao): – http://connection.ebscohost.com/c/article s/67729139/fewer-better-number-goalssavings-behavior • Presenting a single savings goal leads to greater savings intention and actual savings than multiple savings goals • Multiple goals increase the likelihood of deferring action (“analysis paralysis”) Implications •“Saving is easier when multiple savings goals are integrated rather than competing among themselves” •Automate goal savings amounts so you only have to “deal” with them once
Savings Behavior Implications • Fisher (2010) studied gender differences in saving behaviors using •Understanding savings behaviors by gender can inform financial education 2007 SCF data set programs • Women less likely to save short-term if in poor health; no health effect for men •Risk tolerance affects saving behavior as well as investment decisions • Low risk-tolerance affected likelihood of women saving in the short term and •In this study, income and wealth were insignificant variables in explaining saving regularly likelihood of saving • Each year of education made men more likely to save in the short-term and save regularly •Good health habits, health insurance, and emergency funds are especially important for women http://www.afcpe.org/assets/pdf/volume_ •Targeted financial education programs 21_issue_1/pattiejfisher.pdf for women
Any Other Interesting Research Findings About Savings Behaviors? Please insert your Twitter Tips in the Chat box
Characteristics of Successful Savers Implications • Okech et al. (U of Georgia): Paying rent with cash, using VITA to prepare •Encourage parents to model good taxes, and witnessing parents save financial management practices for money in financial institutions were positively associated with likelihood of children having a motivation to save: •Foster deliberate parent-child • http://www.tandfonline.com/doi/abs/10. interaction about savings; use normal 1080/15588742.2013.766917#.UuARJ events as “teachable moments” 00o6M8 •Coordinate savings outreach programs with tax preparation outreach
Characteristics of Successful Savers • When kids have even a small savings account in their name, it increases the chance that they will persevere and do what it takes to graduate from college • Those who have an account are about seven times more likely to attend college than youth without savings • The correlation between savings and college graduation is particularly strong among young adults in families earning < $50k • http://www.newamerica.net/node/69416 • http://link.springer.com/article/10.1007/s1083 4-012-9341-0#page-1 Implications •Even modest savings can be empowering and has aspirational effects: gives people a sense that they have control over their destiny •Having money saved for college reinforces the message to go to college and work hard for good grades •Encourage youth savings and stress the psychological benefits
Characteristics of Successful Savers • Fisher & Anong (2012): 2007 SCF data: 46% saved regularly, 32% irregularly, 22% did not save Implications •Motives are strong predictors of disciplined saving • Precautionary and retirement motives, •Emphasize the importance of long-term planning horizon, and higheridentifying goals to encourage a regular income increased likelihood of saving habit of discretionary saving and regularly or irregularly vs. no saving automated saving • Retirement motive separated regular •Households in all income groups can savers from irregular savers: 1.5 times be regular savers more likely •Stress saving small amounts over long time horizons which makes goal http://www.afcpe.org/assets/pdf/v23_j4.pdf attainment more feasible
Characteristics of Successful Savers • Grinstead et al. (2011) study of IDA program participants in American Dream Demonstration Implications • About 4 of 5 low-income working families are “asset •Learning needs vary. If resources poor” with < 3 months expenses at the federal allow, financial education should be poverty level to survive a financial crisis tailored and individualized (e.g., • Hours of participation in financial education program, higher matched cap, prior use of a savingsfinancial coaching) account, and greater educational attainment were •Peer financial counseling associated with greater likelihood of savings and saving goal achievement option to savings coaches http://www.afcpe.org/assets/pdf/vol_22_issue_2_grinstea d_mauldin_sabia.pdf is a low-cost •High match rates and match caps motivate people to save •Provide a link between people’s saving goals and financial education content
Characteristics of Successful Savers • Rha et al.(2006) study of the effect of “self-control mechanisms on saving behavior: SCF data – (e.g., saving goals, anticipation of future expenses, saving rules including saving regularly or saving one family member’s income) Implications •Behavioral variables affect savings behavior at all income levels • Household saving behavior was strongly •Help people establish realistic affected by mechanisms that help people personal “savings rules” practice self-control; 56% spent < income • Households with savings rules were •Help people anticipate future financial much more likely to spend < income than planning needs those without rules http://www.afcpe.org/assets/pdf/vol-1722-self-controlmechanisms.pdf •Teach financial goal-setting and provide tools with which to do it
Characteristics of Successful Savers • Hogarth & Anguelov (2003) study of savings by low-income households, SCF data Implications • Ability to save was associated with socioeconomic (e.g., income) & demographic (e.g., education) characteristics, expectations (e.g., about future income), motivations (e.g., a reason to save), access to resources, & institutional environment (e.g., credit checks on potential depositors) •Poor households could still probably not meet short-term emergencies • 60% of households at or below poverty level indicated they saved http://www.afcpe.org/assets/pdf/vol1411.pdf •Even poor households can save although amount is low; people at all income levels were savers •Hispanics were more likely to be savers than White households in this study; not always the case •Expectations and motivations matter •Support policies and programs that promote saving
Research About Savings Barriers and Resources
Savings Barrier: Scarcity of Attention • Urgent current expenses trump saving for future priorities Implications •Automated savings • Scarcity engrosses people in current needs •Auto escalation (e.g., Save More Tomorrow) • If financially distressed: less mental capacity to address problems & •Form 8888 for automatic tax refund future goals savings • Eldar Shafir (Princeton): Why Having •www.futureme.org (send e-mail to your future self) Too Little Means So Much: http://money.cnn.com/2013/12/01/leader •Target-date lifecycle funds ship/saving-money.moneymag/
Savings Barrier: Exponential Growth Bias • “Tendency to linearize exponential functions when assessing them intuitively” –People severely underestimate how much interest they earn on savings or pay on credit cards • Biased people borrow more, save less, and favor shorter maturities • Stango, V. and Zinman, J. (2009), Exponential Growth Bias and Household Finance. The Journal of Finance, 64: 2807–2849. Implications •Teach The Rule of 72 so people understand “doubling periods” •Use hands-on activities to illustrate the effects of compound interest on debt and savings – http://rci.rutgers.edu/~boneill/assignme nts/sliderule1.html – http://rci.rutgers.edu/~boneill/assignme nts/sliderule2.html
Savings Barrier: Time Delays • Research by Tam et al.: The longer Implications the time delay in saving (e.g., a month vs. a year), the less •Think short-term in “baby steps” accurately people can estimate their future savings •Save paycheck to paycheck instead • People overestimate what they think of hoping for a future change (e.g., raise, job change) or windfall they can save in the future • Whenever there is a delay, people think that things will get better • http://pss.sagepub.com/content/earl y/2013/12/19/0956797613512129.a bstract •Don’t focus on $1 million at retirement; focus on savings progress year to year
Savings Resource: Attitudes • 2013 BlackRock Retirement Survey: successful savers have certain psychological and emotional attitudes • Workers save more when they feel empowered, confident, and positive about savings process Implications •Teach/counsel about simultaneous goals instead of goal sequencing •Encourage automated savings •Provide retirement savings calculation • More likely to agree that “you can save tools (study found that people who for retirement and meet daily expenses “figured out their retirement picture” at the same time” saved more): • http://www.lifehealthpro.com/2013/11/22 http://www.choosetosave.org/ballpark/ /attitudes-impact-retirement-savings •Show potential growth of savings: http://apps.finra.org/calcs/1/savings
Savings Resource: Visualizing the Future • People need to visualize the future impact of their savings • Many people are not good with longterm decisions Implications •Show people what they could look like: – http://faceretirement.merrilledge.com/ – http://in20years.com/ • Hal Hershfield (NYU) et al.: people save •Show people how much money they more money after being shown digitally can lose by not saving: altered pictures of themselves at older http://rci.rutgers.edu/~boneill/assignments/sliderul age e2.html • http://www.marketingpower.com/abouta ma/documents/jmr_forthcoming/increasi ng_saving_behavior.pdf
Savings Resource: Workplace Savings Planning Aids • Lusardi et al. study: simplifying the process of enrolling in employer plan motivates employees to save Implications •Design initiatives that overcome barriers to save • Used flyer that broke the process down •Make “how to” information “sticky” into 7 steps and video program •Break down financial • 56% increase in election behavior recommendations to save into “baby within 30 days of viewing steps” communication programs vs. •Develop videos that feature actors employees not exposed to them from the target audience being • Differences were sustained after 60 and reached 90 days • http://www.nefe.org/Portals/0/WhatWeProvide/Pri maryResearch/PDF/DartmouthStudy.pdf
Savings Resource: Future Forecasts • People are motivated to save by knowing how much income they can withdraw from 401(k) in retirement Implications •Lobby employers or plan providers for personalized retirement income • Study by Gopi Shah Goda (Stanford) projections et al.: Workers who received brochure •Use retirement income calculator showing increased income from tools such as increased savings saved $1,150/year http://www.bankrate.com/calculators/r more than those that didn’t get etirement/retirement-plan-incomepamphlet calculator.aspx and http://money.cnn.com/calculator/retire • http://crr.bc.edu/wpment/retirement-need/ content/uploads/2013/04/IB_13-4508.pdf (projections help to overcome •Translate savings RATES into tendency to procrastinate) savings INCOME
Savings Resource: Prize Linked Savings (PLS) • People are more likely to save when Implications offered the chance to win cash or prizes •Combine features of savings and a • PLS products more effective at inducing lottery, especially for low-income people savings than standard interest-bearing who spend a high % of income on lottery tickets and view lotteries as a form of accounts offering the same expected return financial planning (not necessarily irrational) • Controlled experiment by Filiz-Ozbay (U •Resources: of Maryland) et al.: http://www.nber.org/papers/w19130 http://econweb.umd.edu/~ozbay/savings.pdf http://www.savetowin.org/ http://saveyourrefund.launchrock.com/ http://www.d2dfund.org/ http://blogs.wsj.com/economics/2013/06/21/promis e-of-prizes-helps-people-save/
More About PLS Programs • Savings account that pools some of the interest from all depositors (or uses sponsorship funds) and pays out a big lottery prize every month or so • Combines the thrill of a lottery with the safety of a savings account • A “no-lose lottery” because depositors have a chance to win but can’t lose their deposited savings • In 2009, Americans spent $58 billion on lottery tickets; about $200 per person • In all but a few states, PLS is illegal –Big obstacle: state-run lotteries http://freakonomics.com/2010/11/18/freakonomics-radio-could-a-lottery-be-theanswer-to-americas-poor-savings-rate/
Savings Resource: Understanding the Impact of Compounding • When shown the positive effect of long-term compounding, people were motivated to increase their savings • People incorrectly assume that savings grows linearly rather than exponentially • Median estimate of what account balance would be was < 10% of what it would be after 40 years with a given rate of return • http://www.scribd.com/doc/76254607/Misunderst anding-Savings-Growth-Implications-forRetirementSavings-Behavior Implications •People have a hard time grasping the concept of exponential growth in savings •“Recency bias” of current low interest on savings doesn’t help •Need to provide hands-on experience with savings growth – Time Value of Money Problems: http://rci.rutgers.edu/~boneill/presentati ons/index.html – CEE Compound Interest Calculator: http://www.econedlink.org/interactives/i ndex.php?iid=2&type=educator
Savings Resource: Saving Goals • Regulatory Focus Theory: People exhibit a promotion inclination (motivated to seek accomplishment) or a prevention inclination (motivated by safety); savings goals can be classified this way • Cho, Geistfeld, & Loibl (2010); promotionand prevention-related goals increase the odds of saving significantly – http://www.consumerinterests.org/assets/docs/CIA/CIA2010/2010c hogeistfeldloibl.pdf Implications •“Individual regulatory orientations were important factors in explaining savings behavior” •Develop savings messages to influence either promotion or prevention focused behavior – Promotion: Save $X by [date] – Prevention: Adequate emergency fund • Prevention-oriented people more likely to •Savings promotion is enhanced by start saving if prevention-oriented goals understanding consumers’ are identified motivation
Savings Resource: Text Messages • Karlan et al. (Yale): conducted experiments with text messages Implications •Regular “nudges” can motivate people to save • Even low-income bank customers managed to save part of their income when nudged by regular text •Text messages are an effective motivational tool messages • “Reminders will be more effective when they increase the salience of a specific expenditure” •Reinforce the connection between saving and specific financial goals •Brain studies: imaging a future goal is almost as powerful a “zing” as • http://karlan.yale.edu/p/Top-of-Mind- achieving it (e.g., buying a car) April2010.pdf
Saving Resource: Automation •Behavioral Economist Richard Thaler (University of Chicago): “Having an amount deducted from your paycheck is the only thing that succeeds. If we have to decide with every paycheck how much we should put aside, the answer is often zero.” Source: Harford, T. How to Save Smarter. Parade, 5/10/09. Save More Tomorrow™ (Thaler and Benartzi) Study: http://www.jstor.org/discover/10.1086/380085?uid=3739808&uid=2&uid=4&uid=37392 56&sid=21103378462353 http://assets.aarp.org/rgcenter/econ/2007_02_savings.pdf
Savings Resource: Financial Advisors • Principal Financial Group & Harris Interactive (2011): Americans who work with an advisor are more likely to have taken steps toward financial success • Established goals for the future, created a plan, more aware of savings needed for retirement • Also more confident in their ability to achieve their financial dreams than those without an advisor http://www.principal.com/about/news/2011/crpadvisor-study071911.htm • 2013 Study: People with advisors are happier with their financial well-being (60% vs. 42%): http://www.principal.com/about/news/2013/crpwbi-workers-121213.htm Implications •Financial advisors foster goal-setting, planning, action, and confidence (similar findings from CFP Board/KRC Research studies) •Need financial advisors for the masses •Need to take “best practices” programs to scale – Example: University of Florida “Master Money Mentors” – CFPB Financial Coaching pilot project is promising
What Savings Barriers and Resources Do You Experience in Your Life and/or Work? Please insert your Twitter Tips in the Chat box
Other Relevant Research Related to Saving Money
The Power of Social Norms • Goldsten et al, (2008) study of social norms to change behavior; experiment about environmental conservation program in hotels Implications •Provide positive financial frames of reference such as % of employees participating in an employer’s retirement savings plan • Telling people “the majority of guests reuse their towels” proved superior to traditional appeals used by hotels that •Provide relevant research findings focus solely on environmental about financial behaviors of Americans protection benefits • Even more superior results for the setting that closely matched participants’ immediate circumstances (“the majority of guests in this room reuse their towels”) • http://www.carlsonschool.umn.edu/as sets/118359.pdf •Use the “Wealth Test” from The Millionaire Next Door: formula based on age and income: http://www.bauer.uh.edu/drude/Net.Wo rth.Worksheet.pdf
The Marshmallow Test: Delayed Gratification and Self-Control • Mischel et al. study of delayed gratification (late 1960s/early 1970s) Implications •When people are put in situations • 4-year old children offered a choice between where they trust in a clearly defined one small reward now or 2 rewards if they long-term gain, they are more likely to pursue it waited 15 minutes • Children who waited had better life outcomes including higher SAT scores and scholastic performance, less substance abuse, fewer behavior problems, and better social skills and stress coping skills http://harbaugh.uoregon.edu/Readings/UGBE/Mischel%20 1989%20Science,%20Delay%20of%20Gratification.pdf •Willpower appears to breed long-term success in life (strategic reasoning skills and trust too?) •Teach long-term gains of saving •Develop learning activities that encourage people to develop willpower •Foster trust by learners
Recent ASEC Partner Meeting Research TakeAway Messages • People over-estimate time TO retirement and underestimate time IN retirement • Workers want to see projections of account balances at retirement (current saving rate and increased %) • Reframe retirement savings from “a number” to monthly income: what will a pot of money buy you? • Help people translate savings balance into income • People take Social Security benefits SOONER- not later- when they are shown “break-even age”
Recent CFA National Savings Forum Research Take-Away Messages • People don’t know their goals; it’s a barrier • People need to have hope for the future to save • Hispanics’ capacity to save is evidenced by the amount of remittances sent back to home countries • Savings has economic benefits for credit unions: lower loan delinquencies and charge-offs • Low interest rates are a barrier to saving; matching (by employer or IDA program) provides a boost
America Saves Sound Bite: Not Just a Slogan but Saving Strategies Informed by Research Set a Goal. Make a Plan. Save Automatically.
Key Research Take-Away: Not Everything is in Your Hands But You Can Control a Lot! • Developing a spending plan (budget) • Personal “Restrictor Plates” • Taking “free money” from • Reducing debt employer • Developing SMART • Tax avoidance financial goals (minimization) • Developing “savings rules” • Commitment devices (policies) • Automated savings
Encouraging Healthy Financial Behavior with Worksite Wellness Tim Griesdorn – Iowa State University Kira Werstein – Iowa State University
Importance • Affordable Care Act provides incentives for companies to participate in worksite wellness programs. • Additional research is needed to understand which programs are effective
Literature Review • Health & Wealth overlap in 6 areas – employers can increase worker productivity. O’Neill (2009) • As BMI increases, Net worth decreases. Zagorsky (2004) • Those in financial distress also report poorer health. Bagwell & Kim (2003)
What is the Research Question? • Does participation in a holistic worksite wellness program improve an individual’s Personal Financial Wellness™ score? • Can this improvement be sustained over time?
Dependent Variable • Personal Financial Wellness™ Scale (Prawitz, Garman, Sorhaindo, O’Neill, Kim, & Drentea, 2006) 8 Question Scale (10 point Likert scale) 1=overwhelming financial distress/lowest financial well-being to 10=no financial distress/highest financial wellbeing 2012 National survey using the scale indicated an average score of 5.2. Cronbach’s alpha of scale = .95
Personal Financial Wellness™ Scale Questions (Measured using a 10-point Likert Scale) • What do you feel is the level of your financial stress today? • How satisfied are you with your present financial situation? • How do you feel about your current financial condition? • How often do you worry about being able to meet normal monthly living expenses?
Personal Financial Wellness™ Scale Questions (Measured using a 10-point Likert Scale) • How confident are you that you could find the money to pay for a financial emergency that costs about $1,000? • How often does this happen to you? You want to go out to eat, go to a movie or do something else and don't go because you can't afford to? • How frequently do you find yourself just getting by financially and living paycheck to paycheck? • How stressed do you feel about your personal finances in general?
Method • 178 participants from 3 Iowa manufacturing companies • Online employee survey • Focus groups with employees • Structured interviews with management • Health Risk Assessment Pre / Post / 6 mo. Follow-up • Random assignment to control or treatment groups
Program • 14 Learning Modules in Program – 5 related to financial literacy education – 5 related to health & nutrition education – 4 general topics (stress management, behavioral change, understanding Health Risk Assessment results, and exercise education) • Each Learning Module approx. 30 minutes • Program timeframe Jan 2013 – Jun 2013
Data Collection • Prior to program (January, 2013) – 10 page survey on health, nutrition, personal financial wellness, self-efficacy, and life satisfaction – Physical evaluation – height, weight, blood pressure, blood glucose, wall sit, flexibility, body mass composition, waist to hip ratio, triglyceride, cholesterol, grip test, and step test. • Conclusion of program (July, 2013) – Survey • Follow-up after 6 months (January, 2014) – Survey – Physical evaluation
Sample Characteristics • 154 participants completed survey at completion of program • Pre-PFW mean score = 6.14 (sd 2.37) • Post-PFW mean score = 6.43 (sd 2.38) (Higher than national average for personal financial wellness)
Demographic Variables Age Female Sat. w/ Life Self Control Education High School Some College Bachelor’s Graduate 40.6 years mean, 13 years standard deviation 52% 4.52 (1-7 scale) Slightly Satisfied 2.53 (1-5 scale) Average Ability 27% 35% 34% 3%
Pair Samples t-test PFW Scores Pre-test Post-test Treatment M=6.42, sd=2.30 M=6.73, sd=2.24 (n=76) t(75) = -2.21, p=.03, d=.14, Ƞ2=.066 Significant Improvement in PFW Scores Control (n=78) M=5.95, sd=2.43 M=6.10, sd=2.48 t(77) = .96, p=.34 No Change in PFW Scores
DV - Individual Item Analysis Control group (n=76) Personal Financial Wellness Level of financial stress today Satisfaction with financial situation Feelings about current financial condition Worry about meeting monthly living expenses Pre 6.37 S.D. 2.21 Post 6.67 S.D. 2.16 6.09 2.42 6.11 2.49 6.10 2.27 6.37 2.20 6.57 2.59 6.93 2.51 1=High financial distress/low financial well-being 10=No financial stress/high financial well-being
DV - Individual Item Analysis Control group (n=76) Personal Financial Wellness Could handle $1,000 emergency Can’t afford to go out to eat Living paycheck to paycheck General level of financial stress Pre 7.09 6.76 6.07 6.34 1=High financial distress/low financial well-being 10=No financial stress/high financial well-being P<.05**, P<.10* S.D. 3.06 2.78 3.13 2.29 Post S.D. 7.50** 2.82 7.21* 2.67 6.33 2.88 6.76** 2.21
Summary of the Findings Participation in the Worksite Wellness program had a small but significant effect on PFW scores. High correlation between satisfaction with life scale and PFW scale (r=.53) Moderate correlation between self-control scale and PFW scale (r=.35)
Discussion • PFW scores can be improved with education • Financial well-being should be included in worksite wellness programs
Implications • Programs should include self-control strategies to assist with behavior change. • Financial wellness might be considered more quantifiable, therefore more easily measured and influenced.
Questions or Comments ?
The Complex Nature Of Savings: Results From Multistate Research Project NC1172
NC 1172 Brief History • Began in 2008 – Actually began even earlier under NC 1013 • Finishing its current 5 year research plan which emphasized the complex nature of savings behavior in low to moderate income families
Full Research Committee • • • • • • • • • • • • • • Chair: Michael Gutter Chair Elect: Soo Hyun Cho Secretary: Sheri Worthy Teresa Mauldin Michael Cheang Sharon A. DeVaney David Evans Tim S. Griesdorn Elizabeth Kiss Jinhee Kim Catherine Solheim Cathy Bowen Liz Gorham Jean M. Lown
Data Collection • Survey Sampling International • Sample criteria: – Income < $80,000 – Ages 24-66 – Target size was 1000 completes • Took two weeks as web survey • Some cleaning was required leaving a sample of 826
Data for These Studies • Hayhoe & Gutter (2012) – Reliability of the Scales in the NC1172 Complex Nature of Saving Data Set. FCSRJ 40(30) 284-294 • Age 18-75 – Mean – 45.6 • 49% female respondents
Behaviors Scale # items Cronbach’s Alpha Mean or Freq Min Max Impulsivity 8 .93 20.39 8 40 Self efficacy 17 .91 61.40 29 85 materialism 7 .69 18.06 7 33 Distrust 4 .77 12.61 4 20 Anxiety 4 .86 13.14 4 20 Financial Risk Tolerance 5 .78 16.83 5 25 Fin Beh Score 4 2.55 0 11
Origins Measure Reference Impulsivity Rook & Fisher (1995) Self-efficacy Sherer et al, (1982) Materialism Richins & Dawson (1992) Distrust & Anxiety Roberts & Sepulveda (1999) Financial Risk Tolerance Grable & Joo (2004)
FBS 1. How would you describe your (if you have no spouse–partner) or your family’s spending over the past year? – Spending exceed income coded 0. – Spending equaled income coded 1. – Spending was less than income was coded 2. 2. How often does your family make plans on how to use your money? – coded 0 = Never to 4 = Most of the time. 3. How often does your family monitor your spending? – coded 0 = Never to 4 = Most of the time. 4. Does you or your family have written goals such as owning a home, retirement, children’s education, or starting a business that require savings? – coded 1 = Yes and 0 = No.
Exploring the Relationship of Economic, Sociological, and Psychological Factors to the Savings Behavior of Low-to-moderate Income Households Gutter, Hayhoe, DeVaney, Kim, Bowen, Cheang, Cho, Evans, Gorham, Lown, Mauldin, Solheim, Worthy, & Dorman, (2012) FCSRJ 41(1), 86-101
Likelihood of Having Savings Accounts Vs. Having No Accounts • Demographics – Age positive • Financial Behavior Score – Positive
Likelihood of Having Savings Accounts Vs. Having No Accounts • Sociological – Number of information sources used • Psychological – Planning horizon • Negative • Positive – Number of perceived barriers • Negative
Likelihood of Having Savings & Investment Accounts Vs. Having No Accounts • Income (reference is 20001-60K) – Income < 20 K Negative • Net Worth Positive • Education (reference BS/BA or +) – High school or less Negative
Likelihood of Having Savings & Investment Accounts Vs. Having No Accounts • Sociological Factors – Number of information sources Positive
Discussion • Strong support for economics – Life cycle factors – Education – Net worth, income – Financial management behaviors
Discussion • Sociology – Consistent role of number of information sources • Active information searching – Information needs to be available on multiple channels/platforms
Discussion • Psychological factors – Perhaps many of these factors, not with this population group – Barriers • To using financial services • To saving themselves • Some are situational and only time or external support will help
Financial Behavior Score and Outreach • FBS is positive related to savings – This is an important aspect to some of what is done in Extension, think of the behaviors that were captured in FBS. Often related to what we teach!
NC 1172: Future Research • Behavioral economics and financial decision-making and information management across the lifespan – Student loan borrowing – Home ownership – Social Security Benefits – Quasi-experimental design • http://lgu.umd.edu/lgu_v2/homepages/home.cfm?trackID=15376
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