Patterns of Household Financial Asset Ownership

Patterns of household financial asset owernship were investigated with data from the 1989 Survey of Consumer Finance. In terms of ownership associations between two assets, 22 pairs (61%) of assets showed positive effects on each other. For instance, owning a savings account increases the change of owning checking accounts and vice versa. Eight pairs (22%) did not affect each other in terms of ownership. Four pairs (11%) negatively influenced the ownership on each other. The remaining two pairs (16%) showed asymmetrical effects. These results may help planners better understand client behavior in owning various financial assets

Consumer finance / household finance: the definition and scope

Purpose: The purpose of this literature review paper is to define consumer finance, describe the scope of consumer finance and discuss its future research directions. Design/methodology/approach: In this paper, consumer finance is used as a synonym of household finance. Consumers refer to individuals and families. After defining the term “consumer finance,” we conducted a critical review of consumer finance as an interdisciplinary research field in terms of money managing, insuring, borrowing and saving/investing. Future research directions are also discussed. Findings: This paper discusses similarities and differences among several terms such as consumer finance, household finance, personal finance, family finance and behavioral finance. The paper also reviewed key studies on consumer financial behavior around four key financial functions, namely, money management, insurance, loan and saving/investment and several nontraditional topics such as fintech and financial capability/literacy. The paper also introduced several datasets of consumer finance commonly used in the United States and China. Originality/Value: This paper clarified several similar terms related to consumer finance and sorted out the diverse literature of consumer finance in multiple disciplines such as economics, finance and consumer science, which provide a foundation for generating more fruitful research in consumer finance in the future

Financial Education and Demand for Debt Counseling Advice

The purpose of this study is to examine potential effects of consumer financial education on demand for debt counseling advice using a large and representative national dataset. Previous research has examined demographic, economic, and financial capability factors on the demand for debt counseling advice. After controlling for these factors and eliminating the effect of bankruptcy, financial education, a variable not examined in previous research, is positively associated with the demand for debt counseling advice. Education attainment is similarly associated with debt counseling. These results suggest evidence of the complementary nature of financial education. Our results indicate that consumers who have been exposed to financial education are more likely to seek debt counseling advice

Losing the Future: Household Wealth from Urban Housing Demolition and Children’s Human Capital in China

Some literature observes the negative but not very significant effect of household wealth growth on children\u27s educational outcomes. This surprising finding is not easily reconciled with the traditional explanation that relaxed economic constraints caused by wealth growth can promote human capital accumulation. This paper proposes an alternative explanation for the causal relationship between wealth growth and human capital, which could be negative: individuals tend to reduce human capital investment following the decline in their labor supply induced by wealth growth, given that investing in human capital is mainly for employment competitiveness. This explanation is supported by evidence from the case of urban housing demolition in China, in which affected households could obtain substantial wealth growth by considerable demolition compensation thanks to the real estate boom in China. Specifically, using two nationally representative datasets, we find that Chinese households that have experienced demolition relatively have more wealth, less labor supply, lower propensity to accumulate children\u27s human capital, and consequently, have children with lower educational achievement. These results suggest that China\u27s economy may be losing its momentum because of the decline in labor supply and human capital accumulation brought about by the ongoing large-scale urban housing demolition

Financial Literacy Overconfidence and Financial Advice Seeking

This study examines potential effects of overconfidence on financial advice usage. Financial literacy overconfidence is defined as the gap between consumers’ subjective and objective financial knowledge. Using a representative national survey, the result shows that over 11 percent of respondents display financial literacy overconfidence: They score higher than the average on perceived financial knowledge but are unable to answer three or more financial literacy questions correctly. These overconfident consumers are less likely to seek professional financial advice in saving/investment and mortgage but more likely to exhibit demand for advice related to debt counseling and tax planning

Debt types and burdens by family structures

Purpose: The purpose of this study was to examine family structure differences in debt types and burdens of American families. Design/methodology/approach: Data was from the 2016 Survey of Consumer Finances. Eight types of family structures, five specific debts, and two debt burden indicators are examined with multivariate logistic regressions. Findings: After controlling for several socioeconomic variables, multivariate logistic regression results show that married with children families are more likely than five other family types to have any debt. In terms of specific debt, married with children families are more likely than six other types of families to have mortgages, four other types to have credit card loans, five other types to have to vehicle loans, three other types to have education loans, and one other type to have purchase loans. Married with children families are more likely than three other types of families (childless married couples, single males, and single females) to be late in debt payment for 60 or more days. Research limitations/implications: The data are limited to one-year cross sectional data. To gain more insights on this topic, panel data could be used. Practical implications: The findings can be used for financial service professionals to identify loan demand and risk associated with various family structures and develop effective marketing strategies to serve these clients. Social implications: The findings are informative for public policy makers to develop family-friendly economic policies and for consumer educators who help consumers make effective financial decisions when borrowing various types of loans. Originality/value: First, this study uses an innovative definition of family structure that counts several nontraditional family structures. Second, this study examines family structure differences in holdings of five specific debts together

Present bias and financial behavior

Present bias is an important term in the theory of self‐control in behavioral finance. Empirical research finds that present bias is associated with undesirable spending, borrowing, and saving behaviors. Unlike previous research that focuses on one domain of financial behavior, the purpose of this study is to examine associations between present bias and a set of financial behaviors in various domains: spending, borrowing, saving, and money management. With data from a national urban sample in China, results show that some behavioral patterns are consistent with theoretical predictions that present biased consumers are more likely to spend in the present and less likely to save for the future. The findings have implications for further research on present bias and help researchers better understand this important concept. The results are also informative for financial planners to better serve their clients

Financial capability and wellbeing of vulnerable consumers

Consumer financial capability can be defined variously by different researchers. In this study, financial capability is assumed to have three components, financial knowledge, financial behavior, and financial skills. This study examines relative contributions of financial capability components to financial wellbeing among vulnerable consumers. With data from the National Financial Wellbeing Survey commissioned by the Consumer Financial Protection Bureau (CFPB), results show that among financial capability components, financial behavior contributes the most to financial wellbeing of the whole sample, followed by financial skill and financial knowledge. In addition, group differences surface when subsamples in terms of age, poverty status, confidence, and fraud victim status are examined. Results suggest that for low-income consumers, encouraging them to engage in desirable financial behaviors is more important than teaching them financial knowledge and skills. Findings have implications for financial educators, practitioners, and policymakers to help them recognize the proper financial education or program to be delivered based on consumer vulnerability and components of financial capability

Debt holding and burden by family structure : patterns and trends in 1989-2007

Abstract only.Abstract only. Abstract: Financial deregulation started in the 1980s provided families both economic opportunities and risks. Rapidly increased mortgage, credit card and other debts are out of control among many families that arguably caused the recent great recession. The purpose of this study is to describe patterns and trends of debts held by American families with data from 1989-2007 Surveys of Consumer Finances. Eight family structure types were formed in terms of marital status, gender, and child status. Holding patterns and trends of five types of debts (mortgage, credit card, vehicle, education, and purchase loan) and two debt burden measures were examined. For all family types, the holding rate of credit card debt increased but that of the purchase loan decreased in the last two decades. Compared with the average, married with children families were more likely to hold mortgage, credit card, and vehicle loans. In terms of debt burdens, cohabiting couples with children and single mothers had the highest rate of the heavy debt to income ratio (over 40%) and of debt delinquency.Includes bibliographical references