Young Adults Financial Well -being Its not just about Money. Its - - PowerPoint PPT Presentation

Soyeon Shim, Dean School of Human Ecology UW-Madison

Young Adults’ Financial Well-being

It’s not just about Money. It’s about Life

June 18, 2014 Presented to:

Young Adults’ Financial Well-being

It’s not just about Money. It’s about Life

Guiding Research Questions for APLUS

• Why some were managing their finances well,

while more and more of them were failing to do?

• Why this was so and what distinguished the

good managers from the bad?

?

Early financial behaviors, attitudes, & knowledge that drive lifetime returns?

DEFINING GENERATIONS

How I prefer to communicate with you

Generation Age I prefer….

Millennials 25 Facebook/Tweet to me Y 30 Text me X 35 Send me an email Boomers 50 Call me on my cell

Traditionalists

60 Let’s have a conversation

APLUS Project Recap

1st Year Wave 1 Data: 2008 Economic Crisis Wave 1.5 2009 4th Year Wave 2 Data: 2010 6th Year Wave 3 Data: 2013

N=2000+ N=1,500+ N=1,100+

Final Report President’s Advisory Council on Financial Capability January 29. 2013

President’s Advisory Council – established by Bush (2008) and continued by Obama

Selected Wave 1 Findings

• In the transition to college:

–Early financial socialization strengthens college students’ financial behaviors. – Parental communication and expectations matter more than parental finances (e.g. SES).

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 Recession Harder on Men Than Women, Study Says Wednesday, March 11, 2009

Overall White Black Native Hispanic Asian Wave 1 $95 $72 $81 $127 $147 $161 Wave 1.5 $152 $118 $258 $197 $302 $123 $0 $50 $100 $150 $200 $250 $300 $350

Changes in Credit Card Debt

+60% +64% Tripled +55% Doubled

• 24%

The Model of Happiness

Lyubomirsky, Sheldon, & Schkade (2005). Pursuing happiness: The architecture of Sustainable change. Review of General Psychology, 9(2), 111-131.

3.Attitude 4. Parental Norm 5. Perceived Control 6. Planning Horizon 2.Past Financial Well-being

• 1. Past Sense of

Overall Well- being

7. Behavioral Intention

• 8. Actual

Saving Behaviors Current Financial Well-being Current Sense of Overall Well- being Wave 1 Wave 1.5

• 9. Financial

Crisis (moderator)

Control variables: Gender Ethnicity Parental SES Perceived impact of economic crisis

Wave 2

Three years and one financial crisis later

Effects of Cumulative Financial Education

3% + 11% + 14% +

Wisconsin

Wave 2 - Emerging Financial Identity

One’s understanding and expression of who one is in relation to managing and practicing personal finance

Emerging Financial Styles

Pathfinder (31%) Follower (39%) Drifter (30%)

Financial Style and Capability

1 2 3 4 5

Subjective Knowledge Objective Knowledge Financial Behavior Followers Pathfinders Drifters High Low

Shim, Serido, & Tang (2013). Financial Identity-processing styles among young adults. Journal of Consumer Affairs

Wave 3

Life After College: Drivers for Young Adult Success

L

49% 20% 6% 9% 9% 7%

Fig.1 Employment Status Two Years Out

• f College

FTE PTE/Self-Employed Unemployed Grad School/PTE Grad School/Not Working Late Launchers

FTE = 49%

PTE =20%

How Self-Sufficient are Today’s (College Graduated) Young Adults ?

• 32% - Self-Sufficient
• 51% - Helped by Family

Members

• 17% - Borrowing

Elsewhere Even 50% of Full- Time Employed Adults relying on some support from parents No or little SES differences

3 3.5 4

Physical well- being Psychological well-being Life satisfaction Financial well- being

• Fig. 18: Debt & Well-Being

No Debt Debt

Impact of Employment x Debt:

• n Overall Well-being

A > C >B >D

No Debt Debt Full-Time No Job Full-Time No-Job Well- being? A B C D

12% 61% 26%

• Fig. 24: Young Adult Financial Behavior

Categories

High Functioning Rebounding Struggling

High Functioning 12%

• The most progress toward adult self-

sufficiency

• Highest career status
• A head-start and a competitive advantage

Normative progress Normative career status Wake-up call &Trajectory rising

Rebounding 61% Struggling 26%

Least progress Lowest career status Transition to adulthood may be drawn out Competitive disadvantage – risk factor

Higher Parental Expectation More Financial Education More Positive Financial Attitude Higher Perceived Control STRUGGLING HIGH FUNCTIONING

What Can You Do?

Just-in-Time Financial Parenting (and grand- parenting)!

• Be intentional in your interactions
• Engage in adult dialogue about financial matters -

“Why” not just “Facts”

• Expect more…do less
• Model positive financial behaviors, especially ongoing

learning

• Help them become a path finder and/or a follower (not

a drifter)

What can we do at UW?

SoHE Big Idea #1

21st Century Citizen Initiative – Financial Capabilities for Life Success

School of Human Ecology Center for Financial Security

UW Credit Union – UW-Madison Partnership for Financial Capability Initiative

Thank you!

Your are cordially invited to The School of Human Ecology for a Fellowship Lunch hosted by Majid Sarmadi & Soyeon Shim Wednesday, July 9th, 2014