Financial Capability in the United States 2016

Against a relatively positive economic backdrop, it is not surprising that the 2015 National Financial Capability Study shows evidence of diminished financial stress and improved financial satisfaction among American adults in comparison to the 2012 and 2009 studies. However, some groups are still struggling. The report shows that large segments of society continue to face financial difficulties, particularly young adults, minority populations and those without a college education.


Heightened Emotional States Increase Susceptibility to Fraud in Older Adults

Financial fraudsters often attempt to evoke strong emotions in their victims to convince them to hand over money, and seniors may be particularly vulnerable to the effects of heightened emotions on decision making. With funding and research participation from AARP and the FINRA Foundation, psychologists at Stanford University found that inducing emotions in older adults—whether positive (excitement) or negative (anger)—increased their intention to buy falsely advertised items, compared to young adults. The issue brief was published by the Stanford Center on Longevity.


What Do Self-Assessments of Financial Well-Being Reflect?

Researchers at the Center for Retirement Research at Boston College used data from the National Financial Capability Study to examine the relationship between a household's self-assessment of its current financial condition and different factors that contribute to financial well-being. The working paper finds that household self-assessments of financial condition primarily reflect day-to-day (rather than longer-term) concerns. This issue brief (PDF 209 KB) summarizes this key finding. A second issue brief (PDF 286 KB) discusses the impact of age and income levels on present-mindedness.


A Snapshot of Investor Households in America (PDF 178 KB)

More than 3 in 10 U.S. households own taxable investment accounts, but black and Hispanic households are significantly less likely than white households to hold taxable accounts, according to A Snapshot of Investor Households in America, a new report issued by the FINRA Investor Education Foundation. Millennial households and those headed by single women also have low taxable account ownership rates.


Financial Education Is Not Enough: Millennials May Need Financial Capability for Healthy Financial Behaviors (PDF 881 KB)

Using data from the National Financial Capability Study, Dr. Terri Friedline from the University of Kansas examines the role of financial education and having a savings account in Millennials' financial behaviors. The paper reports that those who have had both—financial education and a savings account—are 176% more likely to afford an unexpected expense, 224% more likely to save for emergencies, 21% less likely to use alternative financial services, and 30% less likely to carry too much debt compared to Millennials who have had neither. Young adults who have had both financial education and a savings account also report significantly higher financial satisfaction than those who have had neither. This issue brief summarizes key findings.


Non-Traditional Costs of Financial Fraud (PDF 520 KB)

The FINRA Investor Education Foundation's new research report, Non-Traditional Costs of Financial Fraud, examined the broader impact of financial fraud and found that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping and depression. Beyond psychological and emotional costs, nearly half of fraud victims reported incurring indirect financial costs associated with the fraud, such as late fees, legal fees and bounced checks. Twenty-nine percent of respondents reported incurring more than $1,000 in indirect costs, and 9 percent declared bankruptcy as a result of the fraud. An interesting insight from this research is that nearly half of victims blame themselves for the fraud—an indication of the far-reaching effects of financial fraud on the lives of its victims.


State Mandated Financial Education and the Credit Behavior of Young Adults (PDF 691 KB)

Using data from the Federal Reserve Bank of New York's Equifax Consumer Credit panel in combination with detailed information on state financial education mandates, Dr. Carly Urban at Montana State University and researchers from the Federal Reserve Board and the Center for Financial Security at the University of Wisconsin-Madison examined the effectiveness of state mandates on financial education for high school students. The researchers documented notable improvements in credit outcomes for young adults who were exposed to rigorous programs. This issue brief (PDF 183 KB) summarizes the findings from the working draft of a research paper entitled State Mandated Financial Education and the Credit Behavior of Young Adults (PDF 691 KB). A second issue brief (PDF 146 KB) discusses the creation and availability of a database that provides an unprecedented level of detail about state-mandated high school personal finance and economics education requirements.


The Financial Welfare of Military Households (PDF 140 KB)

This issue brief explores military members' household finances. Using data from the 2009 and 2012 National Financial Capability Studies, it compares the financial outcomes and behaviors of military and civilian households, military members by service and military members by component. Relative to comparable civilians, the author found that military members have better solvency and savings outcomes, but worse credit card outcomes. It is based on data from a Foundation-funded academic paper entitled The Financial Welfare of Military Households: Descriptive Evidence from Recent Surveys (PDF 223 KB).


FINRA Foundation Financial Capability Insights: American Renters and Financial Fragility (PDF 131 KB)

This issue brief compares the demographic, behavioral and psychographic profiles of renters to those of homeowners. The brief offers broad, initial insight into the financial capabilities of American renters, a little explore segment of the population that may be more financially fragile and face more economic challenges than many other segments. It is based on data from the 2012 National Financial Capability Study. (Released 2014)


Millennials in the Military—An Examination of Financial Capability (PDF 175 KB)

Prepared by the FINRA Investor Education Foundation, this study explores the financial capability of millennials in the military relative to gen Xers and baby boomers. The report finds that active duty millennials exhibit higher levels of financial satisfaction, have similar savings behaviors and are equally likely to spend within their means when compared to active duty service members from the older generations. However, millennials have lower levels of financial literacy and are more likely to engage in high-cost forms of non-bank borrowing relative gen Xers and boomers. It is based on data from the 2012 National Financial Capability Study. (Released 2014)


Individual Differences in Susceptibility to Investment Fraud (PDF 1.8 MB)

This study by researchers from Stanford and Yale used multilevel data (e.g., fMRI, survey, demographic) to examine three hypotheses: 1) whether investment fraud victims exhibit more cognitive limitations than non-victims; 2) whether investment fraud victims prefer more financial risk than non-victims; and 3) whether investment fraud victims have less behavioral control in high-stakes scenarios than non-victims. The study did not find support for the first two hypotheses, but victims did report higher impulsiveness and demonstrated less cognitive flexibility, which supported the third hypothesis.


The Financial Capability of Young Adults—A Generational View (PDF 161 KB)

Prepared by the FINRA Investor Education Foundation, this study explores the financial capability of millennials relative to other generations and examines differences in financial capability among various demographic groups within the millennial generation. The study finds that in the wake of the Great Recession millennials are struggling financially—but it is millennial households with dependents that are struggling the most. It is based on data from the 2012 National Financial Capability Study. (Released 2014)


Financial Fraud and Fraud Susceptibility in the United States (PDF 417 KB)

It's estimated that consumer financial fraud cost Americans over $50 billion a year, and this number doesn't include the money used for its prevention or the social and emotional cost fraud imposes on Americans every year. The FINRA Investor Education Foundation's research report contributes to a deeper understanding of financial fraud by gauging exposure and response to traditional and Internet-based scams, and the relationships between susceptibility to fraud and various demographics. (Released 2013)


The Financial Fragility of American Families (PDF 144 KB)

This brief, prepared by Dr. Lusardi of the Global Financial Literacy Excellent Center at George Washington University, describes how American families are positioned to confront economic shocks and the resources they may—or may not—have available to help them weather crisis such as job loss or reduced property value (released 2013).


Financial Literacy Around the World (FLAT World) (PDF 150 KB)

This research brief, prepared by the George Washington University's Global Center for Financial Literacy, combines data from the National Financial Capability Study with similar data obtained from eight other countries and compares financial literacy levels across their populations. The research finds that financial literacy levels are fairly low across countries and that certain groups manage with very weak levels of financial literacy regardless of location. The brief highlights these and other findings, discusses implications and suggests that it is important to foster financial education in schools (released 2013).


Softening the Blow: Income Shocks, Mortgage Payments and Emergency Savings (PDF 140 KB)

Prepared by the FINRA Investor Education Foundation, this study finds that households without emergency savings are more likely to experience mortgage payment problems when faced with an income shock. In addition, minorities and lower-income Americans were found to be more vulnerable to unexpected drops in income (released March 2013). The study is based on data from the 2009 National Financial Capability Study.


How Employers Can Help New Hires Save for Retirement (PDF 381 KB)

A report from researchers at North Carolina State University and The George Washington University describing the top 10 best practices to help new employees build long-term financial security (released September 2012)


Testing Strategies to Increase Saving and Retention in IDA Programs (PDF 730 KB)

A team of researchers, led by Dr. Cazilia Loibl at The Ohio State University, conducted a series of field experiments to test whether saving and retention rates in a federally funded, matched savings program for low-income families—the Individual Development Account (IDA) program—could be improved through the introduction of program features inspired by behavioral economics. (released February 2016)


Using Commitment Contracts to Reduce Debt and Increase Savings

Two research briefs prepared by Innovations for Poverty Action (released 2012)


Women, Financial Literacy and Credit Card Behavior

Prepared by the FINRA Investor Education Foundation, this study finds that women with low levels of financial literacy were more likely to engage in costly credit card behaviors than men with low financial literacy. The findings suggest that increasing financial literacy can improve credit card management and reduce or eliminate gender-based differences in credit card behavior (released April 2012). The study is based on data from the 2009 National Financial Capability Study.


Developing a Personal Finance Program for Students at Historically Black Colleges and Universities (PDF 502 KB)

The United Negro College Fund Special Programs Corporation developed research-based recommendations for the implementation of effective personal finance programs for students at the nation's Historically Black Colleges and Universities (released April 2012).


See also the Databook (PDF 1,035 KB) from the 2011 Personal Finance KAB Survey of Students at Historically Black Colleges and Universities.


Gain and Loss Learning Differentially Contribute to Life Financial Outcomes

Prepared by a team of researchers from the Stanford University Department of Psychology and the Kellogg School of Management, Northwestern University (released 2011)


Critical Choices: How Colleges Can Help Students and Families Make Better Decisions about Private Loans (PDF 2 MB)

Prepared by The Project on Student Debt (released July 2011)


The Development of Superior Personal Investing Performance

Under a grant to Florida State University, a team of researchers led by Dr. David Eccles identified personal financial behaviors associated with retirement wealth in households matched for lifetime income. Results revealed key differences in financial behaviors between householders with low and high financial outcomes at retirement.

The research team also produced an informational brochure and workbook (in both English and Spanish) based on the findings of the project.


Pitfalls of Investor Decision-Making in the Social Interaction Context

Prepared by researchers from Princeton University's Department of Psychology and Public Affairs (released 2010)

See also the related article, "Fast Thought Speed Induces Risk Taking," by Jesse J. Chandler and Emily Pronin (2012).


A Study of U.S. Financial Literacy: Evidence and Policy Implications

Prepared by Dartmouth College and NBER Member Professor Annamaria Lusardi and various co-authors including Harvard Professor Peter Tufano and Wharton Professor Oliva Mitchell, among others.


Individual Differences in Financial Risk Taking Across the Lifespan

Prepared by a team of researchers from the Stanford University Department of Psychology and the Kellogg School of Management, Northwestern University (released 2010)


Managing Risk and Minimizing Fees

Prepared by a team of researchers from the National Bureau of Economic Research (NBER) (released 2010)


Online Investment Education for Farm Families: Audience/Marketing Analysis (PDF 589 KB)
Research conducted by the USDA Cooperative State Research, Education, and Extension Service, and eXtension, as part of a project to create an online investment education program to meet the needs of modern farm households (released 2009)


Using Nonfinancial Measures to Assess the Risk of Fraudulent Financial Reporting and Improve Retail Investor Protection

Prepared by a team of researchers at North Carolina State University, George Mason University and Brigham Young University (released 2009)


National Financial Capability Study
In consultation with the U.S. Treasury Department and the President's Advisory Council on Financial Literacy, the FINRA Investor Education Foundation commissioned this study to establish a baseline measure of the ability of Americans to manage their money (released 2009)


Evaluation of the Stock Market GameTM

Results of a randomized controlled trial undertaken by Learning Point Associates showing substantial gains for student achievement in mathematics and financial literacy (released 2009)


Employer-Provided Retirement Planning Programs (PDF 1 MB)
Prepared by researchers from North Carolina State University (released 2011). For additional information about this research, visit the project website.


Investors' Use of Disclosure Information

Prepared by researchers at the University of Central Florida and Bentley University (released 2009)


The Use of Non-Financial Information: What Do Investors Want? (PDF 423 KB)
Prepared by researchers at the Boston College Center for Corporate Citizenship (released 2008)


An Experimental Study of Annuity Choice (PDF 8 MB)
Prepared by researchers from the College of William and Mary (released 2008)


Exploring Solutions to the Fund Assortment Problem (PDF 489 KB)
Prepared by researchers from Rutgers University School of Business (released 2008)


Effects of Visual Primes on Improving Web Disclosure to Investors (PDF 818 KB)
Prepared by researchers from University of Connecticut-Stamford (released 2007)


Overcoming Biases to Promote Wise Investing (PDF 376 KB)
Prepared by researchers from Princeton University's Department of Psychology and Public Affairs (released 2007)

Racial and Ethnic Differences in Stock Ownership, two papers from researchers at The Ohio State University published in 2007 and 2008


Who Will Own Our Children?, report (PDF 319 KB) from the National Association of State Boards of Education about financial literacy in K-12 education (released 2006)


Gender Differences in Investment Behavior, survey analysis (PDF 924 KB) conducted by researchers from Iowa State University and The Ohio State University (released 2006)


Off the Hook Again: Understanding Why the Elderly Are Victimized by Economic Fraud Crimes, survey results and analysis prepared for WISE Senior Services by The Consumer Fraud Research Group (released 2006)


Mutual Fund Purchase Practices, survey results and analysis (PDF 296 KB) prepared by the Consumer Federation of America (released 2006)