An Analysis of the Importance of Personal Finance Topics and the Level of Knowledge Possessed by Working Adults

By Volpe, Ronald P.; Chen, Haiyang et al. | Financial Services Review, Spring 2006 | Go to article overview

An Analysis of the Importance of Personal Finance Topics and the Level of Knowledge Possessed by Working Adults


Volpe, Ronald P., Chen, Haiyang, Liu, Sheen, Financial Services Review


Abstract

This study attempts to identify the important questions in personal financial literacy and the deficiencies in employees' knowledge in those areas. Surveying benefit administrators at 212 U.S. companies, we found that the participants rate retirement planning and personal finance basics as two important topics where there are deficiencies in employees' knowledge. We also observed deficiencies in other areas such as investments and estate planning. In contrast, employees are relatively well informed about company benefits. The results suggest that educational programs should focus on improving employees' knowledge in areas where deficiencies exist.

© 2006 Academy of Financial Services. All rights reserved.

Jel classification: D14

Keywords: Importance of personal finance topics; Financial literacy among working adults

1. Introduction

Prior studies on financial literacy have focused on how knowledgeable Americans are about personal finance. Their findings have shown that Americans possess inadequate knowledge about personal finance issues (see Chen & Volpe, 1998 for a review). However, the results of these studies are weakened because of several limitations. First, many of the past studies used surveys with only a limited number of 5 to 10 questions. Readers must question the reliability of the results. Second, there is little research and agreement among researchers on what important questions should be included in a financial literacy survey. Last, many previous studies have been conducted by financial service companies. These surveys focus on areas related to their business and fail to cover other areas in personal finance. These limitations have made the validity and reliability of past survey instruments questionable. If a person fails a five-question survey on mutual funds, the individual is not necessarily illiterate about mutual funds, let alone about the entire field of personal finance. There exists an urgent need to make improvements on these issues.

This study attempts to improve the validity and reliability of future surveys by identifying important questions that should be utilized in testing literacy in personal finance. The first purpose of this study is to identify important topics in personal finance. Benefit administrators are an excellent source of information to answer these questions in the workplace. The second purpose is to identify the current level of knowledge possessed by employees. Such information helps identify knowledge deficiencies in the workplace and, in turn, helps develop effective educational programs to correct those deficiencies.

Research conducted in the past 40 years indicates that high school and college graduates have inadequate knowledge about personal finance because this group does not have a sound personal finance education (Chen & Volpe, 1998; Vitt, Anderson, Kent, Lyter, Siegenthaler & Ward, 2000). Providing people with remedial training to improve their knowledge in personal finance is an urgent issue in the workplace, as well as in other areas of society. Some organizations recognize that financial literacy is important for one's quality of life and are willing to help educate workers. Other organizations worry that financial illiteracy would negatively impact workers' productivity (Carman, Leech & Grable, 1996), and they provide training on personal finance to improve employees' knowledge (Joo & Garman, 1998a, 1998b; Joo & Grable, 2000). Unlike high schools or colleges, these organizations' primary businesses are not to train people about personal finance but to produce and sell products or services. They can allocate only limited resources to personal finance education. These organizations need to know (1) the most important topics in personal finance and (2) the level of knowledge their employees have. To maximize the effectiveness of personal finance education programs, they should focus only on the important personal finance topics where knowledge levels are relatively low. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

An Analysis of the Importance of Personal Finance Topics and the Level of Knowledge Possessed by Working Adults
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.