|
Behaviorists Closing in On Why Some Households Are Better Than Others at Wealth Accumulation and Preparation for Retirement
Due to public and governmental interest, the following is a brief summary of progress on the FINRAIEF ($341,511) funded grant awarded to Florida State University psychologists David Eccles and Paul Ward and personal finance professor Elizabeth Goldsmith. Our goal is to study the development of superior personal finance and investing performance based on previous studies of who is expert in a variety of endeavors from chess to sports to music. What makes the difference between those who are expert and those who are not?
The recession and decisions leading to it clearly indicate the need for a deeper understanding of the behavioral elements of personal finance. Currently, Americans aren’t saving enough, 75% of households carry debt, and social security and pensions are increasingly insecure, especially given the impending baby boomer retirees. Therefore, to help protect the economy in a time when its future is uncertain, the Financial Industry Regulation Authority Investor Education Foundation has enabled our team to join forces to study the financial status and practices of US households. Information gathered through the studies will be used to inform the advice provided to Americans about how to prepare financially for the future and in particular for retirement.
The objective of the funded research is to identify household personal finance and investing activities associated with wealth accumulation over a lifespan. Wealth accumulation seems in large part within the control of the individual, which leads to the research question: “What are those households that accumulate wealth doing over the household life cycle, in terms of investment and personal finance related activities, that is different from those households that accumulate little wealth?” Thus, our team will identify investment and personal finance related activities associated with high versus low household wealth accumulation. The results of the study and their implications for personal financial practices will be actively disseminated to American householders via educational outreach materials.
Households must meet certain criteria to participate in the study so that specific controls can be achieved within the project. Householders must be part of a couple that has been married for more than 10 years, and between the ages of 51 and 61. They must also be homeowners that do have not been divorced at any time, and have one or more children. Also householders must never have been legally declared bankrupt and not currently receiving any form of retirement, pension, or disability income.
The study involves two phases. The first phase, for which 300 households are being sought, is active now, and involves completing an initial survey of household net worth, which includes a consideration of forecasted wealth upon retirement. Initial interviews reveal many do not understand their pensions. The second phase will begin over the summer of 2009 and involve a more detailed survey about household personal finance and investing practices.
It is our hope that the American householder will be able to gain insight from the study into the actual activities responsible for superior wealth accumulation. The desired end result of the study is that the average householder is moved beyond any belief that superior wealth accumulation requires some mystical ability that only some possess. This move will be achieved by demonstrating that wealth accumulation is modifiable and making clear that the means to modify it involve practical activities in which anyone can engage.
For further information please go to www.financestudyfsu.org
Back to Financial Security Home Page |
