Encouraging Positive Financial Behaviors in Young Adults Setting by wanghonghx

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									          After the Financial Crisis:
       Changing Financial Attitudes and
        Behaviors Among Young Adults
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             http://aplus.arizona.edu/webinar.html
   After the Financial Crisis:
Changing Financial Attitudes and
 Behaviors Among Young Adults
                  Joyce Serido,
                    Webinar
                February 18, 2010


     This study has been funded by the National Endowment for Financial Education (NEFE) in
             partnership with the Take Charge America Institute/University of Arizona
Today’s Agenda



                 Today’s Agenda
      • Economic uncertainty – A historical perspective
      • Synopsis of the Arizona Pathways to Life
        success for University Students (APLUS) project
      • Findings from the APLUS Economic Impact
        Study
      • Implications and Recommendations
The Great Recession

ECONOMIC UNCERTAINTY – A
HISTORICAL PERSPECTIVE
Adapting to
Uncertainty


       After-Effects of the Depression
      • Government spending contributed to economic
        stability - but not rapid recovery.
      • Most needy people benefited from welfare and
        public works policies
      • Among middle and professional class –
        increased fears and dashed hopes for the
        future.

                                   Lynd & Lynd, 1937
Adapting to
Uncertainty

       Managing Life’s Ups and Downs

                          Changes in
Financial     Change in    Thinking    Changes
Recession     Resources                in Doing



                          Changes in
                           Feeling
Arizona Pathways to Life success for University Students

APLUS SYNOPSIS
APLUS
Synopsis

                Research Goals


 • Short term - To understand how young adults
   form financial behaviors
 • Longer Term - How these financial behaviors
   affect their life success
APLUS
Synopsis

             Wave 1 Data Collection
             February - April, 2008
 • Focused on how family background, parental
   roles and financial socialization (both growing
   up and in the first-year at college) affected
   financial literacy and well-being.
APLUS
Synopsis

                       Method
 • Email invitations sent to all first year students
   (6000+)
 • 2,098 students completed an online or paper/pencil,
   15-minute survey
 • Roughly 85% completed the survey online
APLUS
Synopsis

                             Key Findings
Pre-college             First-year       How students think       How students
experiences             of college       about finances           are affected
Parental
                                                                   Better
teaching
                                                                   relationships
and                      Continued            More                 with parents
student                  parental             perceived
attitudes                role                 financial            Higher
                         Modeling             control              academic
Work
                                                                   Achievement
Experience Contribute    More                 More
                                     Affect               Drive
              to         financial            positive             Better
High                     knowledge            financial            physical
school                                        attitudes            and mental
financial
                                                                   health
education
APLUS
Synopsis

           Financial Socialization Processes
 • Parents, work, and high school financial education
     – an important role in explaining young adults’ financial
       learning, attitude and behavior
 • The role played by parents
     – substantially greater than that played by work experience
       and high school financial education combined.
        • Parental financial behavior
        • Parental direct/intentional teaching
        • Parental communication and financial relationships
What a difference a year makes

APLUS ECONOMIC IMPACT STUDY
Adaptation


             Wave 1.5 Data Collection
              February - April, 2009
 • Assess how the economic crisis affected financial
   literacy, behavior, coping and well-being
 • Identify factors that increased students’ vulnerability
   after the economic crisis
 • Assess students’ trust in public and private
   institutions
Adaptation


             Objective Change In Resources
 • Loss or threatened loss of tangible resources
    – Increased credit card debt
    – Increased educational loan balances
 $350
             Changes in Credit Card Debt        Doubled
 $300
                             Tripled

 $250

                                       +55%
 $200
           +60%                                            -24%

 $150
                     +64%

 $100


  $50


   $0
           Overall   White   Black     Native   Hispanic   Asian
Wave 1      $95      $72     $81       $127      $147      $161
Wave 1.5    $152     $118    $258      $197      $302      $123
$6,000
           Changes in Educational Loans            More than
                                                   tripled
                                                       5

$5,000

                                                               Doubled

$4,000

                              More
                              than       Tripled
$3,000
                              doubled
            +86%
$2,000
                      +45%

$1,000



   $0
           Overall   White     Asian    Native      Black       Hispanic
Wave 1     $1,041    $835      $907     $920       $1,613       $2,078
Wave 1.5   $1,932    $1,212    $2,380   $2,732     $5,140       $4,205
                          Recession Harder on Men Than
                          Women, Study Says
                          Wednesday, March 11, 2009



The Recession Hits College Campuses
It could be a “turning point” in how much it costs to attend college
By Kim Clark
Posted January 27, 2009

chicagotribune.com
First jobs are hard to find for many college grads
Last year's graduates were dreading U.S. job market,
2009 may be twice as bad.
By Marcia Heroux Pounds and Scott Travis
South Florida Sun-Sentinel
Adaptation


             Subjective Change in Resources
 • Assessment of intangible losses and threats
    – Self-confidence regarding personal finances
      declined an average of 19%.
           Gender Differences in Financial Self-Confidence
High        4




                           3.28




Moderate    3
                          3.07                       Male, 2.91




                                                     Female, 2.39



Low         2
                        Wave 1                  Wave 1.5
Adaptation


        Resource Differences by Ethnicity
 • Native American - dropped 25% (3.19 to 2.58)
 • Hispanic students - dropped 23% (3.16 to
   2.43)
 • African American – dropped 19% (2.71 to
   2.19)
    – lowest self-assessments in both waves
Adaptation


             Self-Assessed Impact
 • … on family finances (95%)
 • … on personal finances (93%)
 • … on ways you manage money (95%)
Adaptation


               Perceived Impact
 • Women - more impact on their financial
   situation, the way they manage money
 • African American - most impact overall
 • Lower-SES - more impact than higher-SES in all
   areas
 • Middle-SES - more impact on their financial
   situations than higher-SES
                Declines In Well-Being

Very good   4
                                         Psychological   -5%


                                         Health          -3%


                                         Relationship with -6%
                                         friends
Good        3
                                         Academics       -3%


                                         Finances        -8%




Fair        2
                Wave 1        Wave 1.5
Adaptation


             Changes In Coping
 • Adaptive Coping: Typical cost-cutting
   behaviors, increased an average 16%
 • Risky Coping: Extreme behaviors with the
   potential for higher future consequences,
   increased an average of 78%
                                       Changes in Financial Coping Behaviors
                                  90    81.5
                                  80 72.6      76.7
         Percentage of Students                       72.3
                                  70       61.2    60.5
                                  60
                                                                                          Wave 1
                                  50                                                      Wave 1.5
                                  40                         34.5
                                                          26.3
                                  30                               23.5
                                  20                            13.2         14.5
                                  10                                       5.4      4.3 3 3.1 3.9 1.7 3.5
                                   0




------Typical --------                         -------- Extreme --------
What We Learned


G       Economic Impact, Student Financial Well-being, and Coping Strategies
L
O                          Greater
B                         Perceived                                More
A
                          Economic                              Preventive
L                                                                 Coping
                           Impact
F
I
N                                                                    More
A                         Negative                                 Negative
N   Greater               Financial                                Reactive
C    Debt                 Well-being
I                                                                   Coping
A
L
                             Negative                                Less
C
                             Well-being                            Proactive
R
I                          (Overall, Physical,                      Coping
S                             Relational,
I                             Academic )
S
Trust




    Declining Social Capital

    TRUST IN INSTITUTIONS
Trust


            Trust and Confidence
  Regarding the people running these institutions, would
  you say you have:

  1) a great deal of confidence,
  2) only some confidence, or
  3) hardly any confidence at all in them?
Trust and Confidence in Institutions
     0 = Don't Know     3 = Hardly Any                        2 = Only some         1 = A great deal

                             7.7
  Major companies                                      22.7
                                                                                                    57.8
                                     11.8
                             7.0
Banks/Financial Inst                              19.4
                                                                                             54.5
                                                 19.1
                              7.9
              Press                                                               44.9
                                                                              41.8
                        5.3
                              8.6
          Congress                                            26.3
                                                                                              54.9
                                   10.2
                                   10.3
    Supreme Court                               17.4
                                                                                            52.7
                                                  19.7
                                   9.6
  Executive Branch                                20.1
                                                                                     48.4
                                                       22.0
                       4.0
          Education                      13.4
                                                                                             53.8
                                                                28.8
         Relative Trust and Confidence




Hardly                                   A great
  any                                    deal of
 trust                                    trust
Summary




• College students
   • Not immune to the effects of the Great Recession.
• Well-Being
   • Declined in every domain
• A greater immediate impact:
   • More women, more minority students, students with lower
     academic achievement and those from lower and middle
     SES families
Summary



• Financial self-confidence:
   • Declined substantially, especially for women and minority
     students
• An expected increase in the use of cost-cutting
  strategies:
   • Overshadowed by a dramatic increase in extreme financial
     coping strategies.
• Students’ trust and confidence:
   • Nearly 20% indicated hardly any confidence at all in public and
     private institutions.
What does it mean?

IMPLICATIONS AND RECOMMENDATIONS
Implications



                    Implications

       • Class differences
       • Eroding social trust
       • Changed life trajectory
Implications



               Middle Class Split?

       • Diminished hopes – and increased fears for the
         future.
       • Reluctance to spend
       • Hijacked American Dream
Recommendations




         Back to Basics Financial Literacy

        • Emphasize cyclical nature of economy
        • Go beyond financial knowledge to financial
          competence
        • Use current economic situation as a teaching
          tool
Implications



          Trust and Trustworthiness?

       • Reciprocal nature of trust
       • Restoring trust takes time and effort
Recommendations



            Agreeing to Disagree

     • Educate young people about assessing the
       security and safety of banking and financial
       products
     • Promote opportunities for team activities and
       mixed group interactions
     • Model distinguishing between “knowledge”
       and “values”
Implications



                  Lost Generation?

       •   Fewer job opportunities
       •   Lower wages
       •   Reduced job satisfaction
       •   Changed life trajectory for an entire generation
Recommendations



           Invest in Young Adults

     • Initiate opportunities to dialogue with young
       adults about the challenges they face
     • Encourage them to explore career options and
       alternatives
     • Help them distinguish between “short-term
       options” and “dead ends”
Concluding Remarks

TAKE HOME MESSAGE
Take Home
Message

• Adolescents and Young Adults:
  – Financial knowledge matters
  – Enhance your financial knowledge to boost self-confidence
  – Understand do’s and don’ts about money management
    101
  – Avoid costly mistakes
• College administrators:
  – Consider formal and informal financial education as part
    of the college curriculum and orientation experience
  – Pay particular attention to ethnic minority students and
    students from lower AND Middle SES families
Take Home
Message

• Financial Educators:
  – Include alternative solutions for coping with common
    financial problems young adults encounter
  – Teach students how to balance the cost/benefits of their
    financial decisions today vs. future financial well-being
• Parents, Administrators, Educators
  – Maintain an open and ongoing dialogue with young adults
    to help them navigate the financial challenges of the next
    few years.
What’s Next?



        Future Plans for the APLUS Study

  • Fall 2010 (APLUS students' senior year) - Study changes in
    financial attitudes and behaviors as they prepare to leave
    college.


                   http://aplus.arizona.edu
                      The APLUS Team
             Soyeon Shim, Principal Investigator (PI)
              Joyce Serido, Co-PI/ Project Manager

Co-Investigators:        Bonnie L. Barber, Murdoch University
                         Noel Card, University of Arizona
                         Jing Xiao, University of Rhode Island
                         Michael Staten, TCAI
Graduate Research Associates: Chuanyi Tang, Chiraag Mittal, Sunyoung Ahn
NEFE encourages innovative, practical research
projects on providing meaningful, relevant financial
education to the public.

If you have expertise with researching successful
outreach and education interventions for young adults
ages 18-35, we invite you to submit a Concept Inquiry
Form for our next funding cycle (June 1, 2010
deadline).

Learn more at www.nefe.org/Grantmaking.
NEFE’s Great, Free, Noncommercial Materials:

NEFE’s High School Financial Planning Program® (HSFPP)
http://hsfpp.nefe.org

CashCourse: Web-based financial education for college
students. www.CashCourse.org

SmartAboutMoney: One-stop shop for consumers
www.SmartAboutMoney.org

Spendster: Confess what you shouldn’t have bought.
www.Spendster.org
Questions and Answers

OPEN FORUM

								
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