300 Rhode Island students will participate in study
Posted on September 13, 2016
KINGSTON, R.I. — September 13, 2016 –Research has shown that effective financial education strongly predicts a young adult’s overall financial capability and well-being. Yet, the research also shows that financial literacy is not as resilient as other learned skills.
“Much like wandering around a new city without a map, when we make financial choices without financial literacy we are prone to get lost,” said URI College of Business Assistant Professor Stephen Atlas, who focuses on marketing and consumer behavior and is principal investigator of URI’s Mental Accounting and Pricing Lab.
“There are many spending, credit, debt and risk management options available to people today, yet only one in five young adults has high financial literacy. This opens the door to predatory practices and is a recipe for lifelong financial suffering,” he said.
To address this issue and propose possible means to improve the outcomes, Atlas has received a $176,522 research grant from the National Endowment for Financial Education. For the grant, entitled “Understanding Financial Literacy Decay to Improve Financial Behaviors of Young Adults, ” Atlas has teamed with URI College of Health Sciences professors Nilton Porto and Jing Xiao, who specialize in personal and family finance.
The 18-month project, which begins this month, will study relationships between financial education, financial capability and financial behaviors. The project aims to understand why financial education has a diminishing effect on financial behaviors over time and seeks to develop alternative methods to increase persistence of financial education.
The research will expose a part of a group of 300 college students in Rhode Island to a financial education curriculum, and track knowledge, confidence, and financial prudence over 12 months. The project will consider the influence of individual and family history, educational experiences, personality, and aptitude to help inform when financial education is most effective.
After the financial education, researchers will measure participants’ experiences with the curriculum then follow up at specific intervals to measure knowledge, confidence, financial intentions and behaviors. At each of these checkpoints, participants will be asked about behaviors, such as credit card management and saving for emergencies, to test whether timely education interventions actually improve financial choices.
The results will help inform new ideas and timely financial education interventions to improve the financial behaviors and well- being of young adults, their families and communities.
“We are thrilled to have this opportunity to study how financial education relates to financial capability, behaviors, and well-being,” said Atlas. “We hope this will advance the national conversation about how financial knowledge and confidence evolve over time. This project will produce insights to help financial educators and advisers improve consumer well-being among young adults in Rhode Island and the nation.”
A co-principal investigator Professor Xiao, who brings 30 years of research into consumer financial literacy, said: “Improving financial capability of young adults not only helps them to manage money, but also enhances their ability to manage other resources such as time and to successfully achieve life goals.”
Xiao is also editor-in-chief of the Journal of Financial Counseling and Planning.
The National Endowment for Financial Education (NEFE) is the leading private nonprofit 501(c)(3) national foundation dedicated to inspiring empowered financial decision making for individuals and families through every stage of life. The foundation provides research funding for exploratory projects on personal finance and financial behaviors.