Financial Education is not Enough: Millennials May Need Financial Capability to Demonstrate Healthier Financial Behaviors

Friedline, Terri; West, Stacia

doi:10.1007/s10834-015-9475-y

Cited by 95 publications

(114 citation statements)

References 46 publications

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“…Studies of financial inclusion have found that financial product access and incentives are positively associated with asset accumulation in savings programmes in the United States such as the Individual Development Account programme and the Child Development Account programme (Han & Sherraden, ; Nam, Kim, Clancy, Zager, & Sherraden, ). In the context of emergency savings, research has found that access to a bank account is positively related to emergency savings behaviour among millennials (Friedline & West, ) and low‐income households (Hogarth & Anguelov, ). In addition, an exploratory study of an emergency saving scheme, which included access to an account and matched saving, provides preliminary support for the use of these financial inclusion mechanisms in promoting emergency savings among low‐income individuals (Adams & West, ).…”

Section: Review Of Literaturementioning

confidence: 99%

Financial capability and emergency savings among South Africans living above and below the poverty line

Reyers

2019

Int J Consumer Studies

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Emergency savings provide a buffer against financial shocks, particularly among low‐income households. Despite the importance of these funds in lessening financial hardship, many households have not set aside emergency funds. It has been suggested that financial capability may play a role in financial behaviour. Therefore, this study considers whether financial capability is associated with saving for emergencies and whether there are differences in factors that predict emergency savings behaviour among those living below and above the poverty line. Using data from a sample of South Africans, logistic regression is used to determine the predictors of emergency savings. The study finds that those with higher levels of financial capability, related to financial self‐efficacy and having access to a bank account, are more likely to have emergency savings compared with those with lower levels of financial capability. However, no evidence is found to suggest a relationship between objectively measured financial knowledge and emergency savings. Therefore, the findings suggest that self‐assessed financial ability, as measured by financial self‐efficacy, might be more important than objectively assessed ability in the context of individuals making responsible financial choices. Differences in the predictors of emergency savings for those living above and below the poverty line related to socioeconomic and demographic differences, whereas the same financial capability predictors were significant predictors in both samples. The study provides unique insights into the predictors of emergency savings in a developing market context and identifies the characteristics of those who are likely to be financially resilient to unexpected economic shocks. The importance of the broader financial capability construct in predicting emergency savings, for both those living above and below the poverty line, suggests that programmes aimed at encouraging emergency savings should focus on enhancing financial self‐efficacy and financial inclusion.

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Section: Review Of Literaturementioning

confidence: 99%

Financial capability and emergency savings among South Africans living above and below the poverty line

Reyers

2019

Int J Consumer Studies

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“…Given their younger age and lower household income, they could be struggling more to pay their bills than older generations. Financial education is important, but financial capability can be even more important for Millennials (Friedline & West, 2016;Lusardi, 2011). More Millennials have reported being offered financial education, but fewer of them have participated in these programs compared to other generations (Mottola, 2014).…”

Section: Millennials and Their Financial Statusmentioning

confidence: 99%

“…Economic downturns have influenced young adults, as they began their careers (Dimock, 2018;Mykyta, 2012;Xu et al, 2015). Recently, about 85% of them had some kind of debt (Friedline & West, 2016) and they were falling behind on saving and investing (Babiarz & Robb, 2014). According to the TD Ameritrade 2018 Millennials and Money Survey, two in ten Millennials reported that they will never be able to pay off their student loans.…”

Section: Millennials and Their Financial Statusmentioning

confidence: 99%

“…Consequently, many Millennials have attended higher education institutions to put themselves ahead in the job market; however, this has led many of them to accrue even more debt (DeVaney, 2015). Therefore, some Millennials are faced with a high debt burden and as a result they might engage in adverse financial behaviors such as delaying their debt payments (Chiteji, 2006;Friedline & West, 2016;Hodson & Dwyer, 2014). Different age groups (e.g., generations) tend to differ in many ways with respect to saving, investing, financial capability, and debt management (Fry, Igielnik, & Patten, 2018;Mottola, 2014).…”

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confidence: 99%

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Loan Type and Debt Delinquency among Millennial and Non‐Millennial Households

Lee

Kim

2019

Family & Consum Sci Res J

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This study used the 2016 Survey of Consumer Finances (SCF) and focused on whether holding different types of loans influenced debt delinquency among Millennial and non‐Millennial households. When the total sample was analyzed, there was a difference in debt delinquency between the two groups, and holding different types of loans was associated with debt delinquency. In subsample models, the logistic results showed that while auto loans’ effect on debt delinquency was negative, student loans and other installment loans’ effects on debt delinquency were positive for both groups. In addition, Millennials who held housing loans were less likely to be delinquent on debt payments overall. These findings have implications for debt management education and attention from policymakers in assisting households with a debt burden.

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“…On the other hand, another stream of the literature questioned these conclusions. In particular, Friedline and West () argued that financial education without hands‐on experience is insufficient to facilitate sound financial behaviors in the millennial generation in the United States; Mandell and Klein () also negated the impact of financial education on the financial behavior of high school students. Above all, a meta‐analysis of 168 papers conducted by Fernandes et al () negated the causal connection between financial education and sound financial behaviors; only 0.1% of the variance in financial behaviors was explained as an effect of financial education.…”

Section: Literature Reviewmentioning

confidence: 99%

Effects of financial education on sound personal finance in Korea: Conceptualization of mediation effects of financial literacy across income classes

Son¹,

Park²

2018

Int J Consumer Studies

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This study analyzed the role of financial literacy as a mediator between financial education and sound personal finance to assess how financial education affects the soundness of personal finance. In particular, this study conducted three sets of mediation analyses using data from the 2014 Consumer Empowerment Index survey of the Korea Consumer Agency to verify whether the mediating relationship is valid across different income classes of the Korean population. The results suggest that financial literacy works as a mediator between financial education and sound personal finance in the high‐income class and the middle‐income classes. Therefore, policymakers should consider the limitations of financial education and financial literacy when addressing low‐income consumers.

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Financial Education is not Enough: Millennials May Need Financial Capability to Demonstrate Healthier Financial Behaviors

Cited by 95 publications

References 46 publications

Financial capability and emergency savings among South Africans living above and below the poverty line

Financial capability and emergency savings among South Africans living above and below the poverty line

Loan Type and Debt Delinquency among Millennial and Non‐Millennial Households

Effects of financial education on sound personal finance in Korea: Conceptualization of mediation effects of financial literacy across income classes

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