Consumer Knowledge and Financial Decisions: Lifespan Perspectives

340 Pages·2012·2.397 MB·English

by  Cliff A. Robb (auth.), Douglas J. Lamdin (eds.)

International Series on Consumer Science
Series Editor:
Jing Jian Xiao
University of Rhode Island
For further volumes:
http://www.springer.com/series/8358

Douglas J. Lamdin
Editor
Consumer Knowledge
and Financial Decisions
Lifespan Perspectives
Editor
Douglas J. Lamdin
Department of Economics
University of Maryland Baltimore County
Baltimore, MD 21250, USA
[email protected]
ISSN 2191-5660 e-ISSN 2191-5679
ISBN 978-1-4614-0474-3 e-ISBN 978-1-4614-0475-0
DOI 10.1007/978-1-4614-0475-0
Springer New York Dordrecht Heidelberg London
Library of Congress Control Number: 2011939212
© Springer Science+Business Media, LLC 2012
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Preface
Financial decisions by individuals and households are pervasive. The use of credit,
purchasing a home, paying for higher education, saving for retirement, and purchasing
insurance are among the prominent decisions. These decisions are affected by the
knowledge possessed by the decision-makers. The fi nancial markets, institutions,
and instruments, as well as the regulations that govern them, also affect these decisions.
This edited volume was undertaken with the goal of bringing together research that
refl ects current thinking on a wide variety of fi nancial decisions.
The book’s title, Consumer Knowledge and Financial Decisions , suggests that
each chapter is concerned with some aspect of fi nancial decisions. What do or should
individuals know? How are fi nancial decisions made? How does fi nancial knowledge
affect decisions or outcomes? How might we improve the state of fi nancial knowl-
edge and the quality of fi nancial decisions with policies, programs, or fi nancial inno-
vations? In each chapter, one or more of these questions are addressed, either in a
general sense or as it pertains to a particular demographic group, fi nancial decision,
instrument, or asset.
The fi nancial marketplace is increasingly complex. Recent turmoil in housing
and stock markets, changes in the way retirement is fi nanced, and a welter of new
fi nancial products and programs are evidence of this increasing complexity. Public
policies that affect fi nancial markets and fi nancial decisions continue to change and
evolve. This constellation of events, to a great extent, motivated this book, and
attests to its timeliness.
Each chapter is self-contained and thus the 20 chapters can be read in any order.
However, to provide some organization for the reader, the chapters have been
grouped into three parts. Part I, Understanding and Enhancing Financial Knowledge,
contains chapters on defi ning fi nancial literacy, fi nancial mindfulness, children’s
fi nancial knowledge development, fi nancial education for college students, and
fi nancial education for minority populations. Parts II and III are organized around
particular fi nancial decisions, instruments, or outcomes. Part II, Credit, Home
Purchase, and Bankruptcy, contains chapters that examine consumers’ knowledge
about or decisions regarding credit card debt, mortgages and home-buying, and
v
vi Preface
bankruptcy. Part III, Retirement, Insurance, and Investing contains chapters on
Social Security knowledge, long-term care insurance, Medicare Part D, fi nancial
investments, and investment in higher education.
It is hoped that this book will provide a useful reference for those with an interest
in fi nancial knowledge and decisions, broadly defi ned. This could include under-
graduate and graduate students studying this topic, experienced researchers in this
fi eld from a wide range of disciplinary perspectives, policymakers who wish to have
a better understanding of the current thinking on a variety of topics related to fi nancial
literacy and fi nancial decisions, and practitioners in fi nancial services who would
like to further their understanding of the environment in which they actively participate,
and the clients that they serve.
Baltimore, MD Douglas J. Lamdin
Acknowledgments
The following expert reviewers are gratefully acknowledged for their assistance in
providing comments on drafts of the chapters:
John Caskey; Lisa Dickson; Gerry Fogarty; Craig Gundersen; Donald Heller; Jack
Hoadley; Jessica Howell; Craig Israelson; Nigel Lewis; Rita Littrell; Bill Lord;
Ezro Luttmer; David Mitch; Anthony Pennington-Cross; Robert Quercia; Janneke
Ratcliffe; Richard Serlin; Luis Viceira; Jing Jian Xiao; Tansel Yilmazer; Todd
Zywicki.
I wish to thank Jing Xiao for encouraging this undertaking. I also thank the chapter
contributors. Without them, of course, this book could not have been produced.
Their prompt and conscientious work is refl ected in their chapters. Marc Zerfas
provided me with research assistance with numerous aspects of the book.
Douglas J. Lamdin
vii

Contents
Part I Understanding and Furthering Financial Knowledge
1 Coming to Terms with Financial Literacy ........................................... 3
Cliff A. Robb
2 Cultivating Financial Mindfulness: A Dual-Process Theory ............. 15
Dan Stone
3 Cognitive Development and Children’s Understanding
of Personal Finance ................................................................................ 29
Laura Scheinholtz, Karen Holden, and Charles Kalish
4 Financial Education for College Students ........................................... 49
Brenda J. Cude and M.J. Kabaci
5 The Current State of Financial Education in the US:
How is Higher Education Helping? ...................................................... 67
Thomas D. Corrigan
6 An Overview of Contemporary Financial Education
Initiatives Aimed at Minority Populations .......................................... 77
Anya Olsen and Kevin Whitman
Part II Credit, Home Purchase, and Bankruptcy
7 Credit Cards as a Market Instrument:
Consumer Understanding and Use....................................................... 101
Cliff A. Robb and Russell N. James III
8 Financial Education, Financial Knowledge, and Risky
Credit Behavior of College Students .................................................... 113
Jing Jian Xiao, Joyce Serido, and Soyeon Shim
ix
x Contents
9 Charging Ahead: An Exploratory Study of Financial
Decision-Making among Millennial Consumers ................................. 129
Vanessa Gail Perry
10 Pre-purchase Homebuyer Education and Counseling:
Diverse Strategies for Diverse Homebuyers ........................................ 145
Stephanie Moulton
11 The Role of Default Counseling for Mortgage Borrowers
in Financial Distress ............................................................................... 165
J. Michael Collins
12 Nontraditional Mortgage Products: Innovative or Toxic? ................. 183
Darryl E. Getter
13 Debtors’ Assessments of Bankruptcy Financial Education ............... 197
Deborah Thorne and Katherine Porter
Part III Retirement, Insurance, and Investing
14 Social Security Knowledge .................................................................... 217
Jason Barabas
15 Financial Preparedness for Long-Term Care Needs
in Old Age ............................................................................................... 239
Brenda Spillman
16 The Impact of Numeracy on Medicare Part D Insurance
Choice in Older Adults .......................................................................... 255
Stacey Wood and Yaniv Hanoch
17 Target-Date Mutual Funds .................................................................... 269
John J. Spitzer and Sandeep Singh
18 Measuring the Performance of Life-Cycle Asset Allocation .............. 285
Thomas Post and Joan T. Schmit
19 Stock Market Investing: Lessons from History ................................... 303
Susan White
20 Individual Investments in Higher Education ...................................... 315
Lisa M. Dickson
Index ................................................................................................................ 331