copyright. 1997, dr. t. k. hira, professor isu 1 financial attitudes, beliefs & behaviors of...
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Copyright. 1997, Dr. T. K. Hira, Professor ISU1
Financial Attitudes, Beliefs & Behaviors
Of College Students
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Copyright. 1997, Dr. T. K. Hira, Professor ISU2
Our personal financial situations
Are often better reflections of who we are
internally than of who we seem to be on the
outside
Our money behavior reflects our self-worth
which was shaped by our childhood
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Copyright. 1997, Dr. T. K. Hira, Professor ISU3
What causes excessive behaviors?
No single factor is sufficiently powerful enough to explain excessive behaviors
Multidimensional factors influence excessive behavior: – psychological, – social, – cultural,– environmental:
» economic, market, credit.
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Copyright. 1997, Dr. T. K. Hira, Professor ISU4
Debt vs. credit Credit Use
– Purpose: production/consumption– attitudes: decades of instant gratification
Credit Industry– numerous products - credit cards– technology– high risk lending
Credit Environment: past & present
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Copyright. 1997, Dr. T. K. Hira, Professor ISU5
Need for research
there has been little research on when and how one acquires knowledge of money and the economic system in general or the degree to which family influence carries over into consumption activities as adults
(Abramovitch, et al., 1991).
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Copyright. 1997, Dr. T. K. Hira, Professor ISU6
Previous studies
Credit use and payment practices
Trends and amounts of student loans
Financial socialization in the family
Personal finance knowledge
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Copyright. 1997, Dr. T. K. Hira, Professor ISU7
Objectives.. to understand..
Childhood experiences with money Sources of influence on their financial
behavior Current spending patterns, Use of credit: credit cards, student loans and
other consumer debt, Ability to handle debt repayment responsibility
in the future Feelings about current debt Need for more information
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Copyright. 1997, Dr. T. K. Hira, Professor ISU8
Samples and Data collection
Random sample - in Spring ‘97– 2000 selected – 665 completed the questionnaire– a response rate of 34 percent
Convenient sample -Fall ‘96)– 442 seniors – During student loan exit interview
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Copyright. 1997, Dr. T. K. Hira, Professor ISU9
Limitations of the study
Some information was based on memory of past experiences & their effects,
Difficult separating effects of one specific influence from others,
Cross-sectional sample does not allow to assess change within a person,
Sample drawn from one midwestern state Response rate
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Copyright. 1997, Dr. T. K. Hira, Professor ISU10
Average student - random sample(N=665)
Median age 22 years Gender (female) 51% Never married 82% Ethnicity (white) 85% Student status
– Freshmen 21%– Sophomore 17%– Juniors 23%– Seniors 38%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU11
Average student...random sample
Employed (PT) 61% Current month. income $893 Average T. Debt
$12,353 Av. Income after Grad.
$28,813
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Copyright. 1997, Dr. T. K. Hira, Professor ISU12
Two Aspects of Money Behavior
(1) The "planner"
– part that thinks carefully and plans rationally,
– knows rational decision making strategies,
– recognizes the importance of postponement of
of gratification,
– exercises self control.
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Copyright. 1997, Dr. T. K. Hira, Professor ISU13
Two Aspects of Money Behavior
(2) The "doer"
– part that acts impulsively,
– cannot implement behavior decided upon
through cool, dispassionate reflection,
– interferes with rational decision making by
seeking immediate gratification.» (Thaler and Shefrin,1981).
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Copyright. 1997, Dr. T. K. Hira, Professor ISU14
Money personalities
Spender 22% Worrier 22% Planner 37% Other 20%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU15
According to students themselves..
“Most college students are obsessed with material possessions, image, and living “high on the hog”.
They do this by taking the maximum loans possible with no regard for paying them back. Govt. loans need to be greatly reduced to prevent rapid spending by students and bankruptcy after college.
Over half of the people I know will have over $30,000 in debt upon graduation.”
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Copyright. 1997, Dr. T. K. Hira, Professor ISU16
Spending behavior of college students
Buy things don’t need 56% Shop to celebrate 44% Buy without plan 33% Can’t resist sales 27% Buy what can’t afford 16% Hide spending habits 15% Debt creates problem 11%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU17
Compulsive buying behavior
Lisa says...
“Shopping fills an emptiness in my soul”
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Copyright. 1997, Dr. T. K. Hira, Professor ISU18
Gambling behavior
Proportion involved in gambling 33% Frequency of gambling (yr.) 6 Favorite gambling activity
– slots 11%– sports 12%– black jack/video poker 4%– power ball 3%
Mean $ spent each time $32
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Copyright. 1997, Dr. T. K. Hira, Professor ISU19
Sources of influence on consumer behavior
Socialization agents have been classified into four categories on the basis of formality of the agent and learner type: – formal agents: family or school – informal agents: mass media or peers
(Ward, 1973; Ward, 1974; Talmon, 1963).
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Copyright. 1997, Dr. T. K. Hira, Professor ISU20
Your financial behavior
Do you know your money personality? Who had the most influence on your money habits
– Mom? Dad? Others? What are your strong and weak points when it comes to handling money? What steps have you taken to assure your financial security? What role does money play in your relationships to others?
– friends --parents --siblings --spouse How easy is it for you to talk to others about your money concerns? What is your most important money concern for the:
– present and– the future?
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Copyright. 1997, Dr. T. K. Hira, Professor ISU21
Who influence their money beliefs & behaviors
Father 66% Mother 64% Friends/peers 23% Grandparents
– Grandfather 13%– Grandmother 9%
Religious teachings 9% Media
– Books/mag. 8%– TV/radio 8%
Schools 7%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU22
The Influence of Family on Money behavior
persists well into adulthood.
and it appears to become part of the
developing individual's personality
– (Chaffee et al., 1971).
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Copyright. 1997, Dr. T. K. Hira, Professor ISU23
Allowences - 10 -11 yrs. 43% Check Acts. - 15 -17 yrs 46% Credit card - 18 yrs & older 70% Personal loans -18 yrs & older 43% Particip. in FF discus.15 -17 yrs 37% Knew FFsituation 12 -17 yrs 59% Earned income - 15 -17 yrs 40% Saved money - 9 - 11 yrs 51%
Involvement in financial activities during childhood
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Copyright. 1997, Dr. T. K. Hira, Professor ISU24
Borrowing behavior of college students
Av. number of credit cards 3– 45% 1 or 2– 13% 3 cards– 16% 4 and more
Av. credit card debt $1,027 Av. student loan $5,814 Av. other loans $8,96 Debt at graduation $12,352 Av. expected income $28,813
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Copyright. 1997, Dr. T. K. Hira, Professor ISU25
Feelings about finances..
dissatisfied/VDis
Amount owed 45% Current financial situation 48% Money mgt.. skills 35% Often worry about finances 21% Ability to meet emergencies 43%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU26
Students’ beliefs about their debts...
“..Students believe that all their debts
will be paid as soon as they get their first job. This is a major misconception.
Credit cards are the problem. Most of my friends have $2,000-$4,000 credit card debts, plus $10,000-$15,000 school loans!”
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Copyright. 1997, Dr. T. K. Hira, Professor ISU27
Factors related to total debt
Personality type Family communication Involvement in financial tasks Spending behavior Satisf. w/ money mgt. skills Presence of worries about finances Satisfaction with financial situation
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Copyright. 1997, Dr. T. K. Hira, Professor ISU28
Graduating seniors - exit interviews(N= 442)
Mean amount
Total debt $14,498
Expected payment $211
Expected income $27,653
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Copyright. 1997, Dr. T. K. Hira, Professor ISU29
What are students saying...
“Student loans are my biggest anxiety.
I will graduate in May and do not look forward to all those student
loans ....”
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Copyright. 1997, Dr. T. K. Hira, Professor ISU30
Types and amounts of student loans
Loan type % Mean$ DK$ Subsidized 59 11,142 30% Unsubsidized 36 6,353 16% Plus 11 3,944 4% Other* 16 2,800 3% Total debt 70 14,498
•Pell Grant, Perkins, Stafford,
financial institutions, charitable/religious org.
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Copyright. 1997, Dr. T. K. Hira, Professor ISU31
Student Loans by college
Name ofCollege
Studentreportedaverage
debt
Studentestimate of
payment
Actualpayment 3
Student'sexpectedincome
Graduate'saverage
income for1995-96
Agriculture $14,565 $2,160 $2,144 $25,477 $25,804
Business $13,278 $2,376 $1,954 $29,880 $28,191
Design $14,106 $2,136 $2,076 $22,950 $21,466
Education $16,030 $1,980 $2,359 $23,791 $23,960 4
Engineering $15,065 $2,592 $2,217 $36,146 $37,884
FCS $13,013 $2,292 $1,915 $23,062 $22,279
LAS $15,537 $2,112 $2,287 $24,198 $26,324
3 Based on 8.25% interest and a 10 year standard repayment plan, 1996-97 Student Guide.4 College of Education figures are for 1994-95.
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Copyright. 1997, Dr. T. K. Hira, Professor ISU32
Reasons to borrow....
to be able to attend college 42%
to replace parental support 29%
to support a life style 51%
Loans and employment status
– would have to work w/o loans (94%)
– worked with loans (93%)
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Copyright. 1997, Dr. T. K. Hira, Professor ISU33
Ability to attend college among those with..
Subsidized loans 12%
Unsubsidized loans 6%
Other loans 2%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU34
Feelings about student loans
Wished had borrowed less 58%
Wished had borrowed more 8%
Satisfied w/ amount borrowed 39%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU35
Concerns about repayment
Great concern 15%
Some concern 40%
No concern 45%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU36
Students need information/education
“It is unfortunate that there are not many
known resources that students can turn to for
financial help”.
“We need to take at least one class on
financial survival and company
benefits/insurance”.
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Copyright. 1997, Dr. T. K. Hira, Professor ISU37
College Assumed payment Student 's expectedincome
Payment as a % ofincome
Agriculture $2,144 $25,477 8.42%
Business $1,954 $29,880 6.54%
Design $2,136 $22,950 9.31%
Education $1,980 $23,791 8.32%
Engineering $2,592 $36,146 7.17%
FCS $2,292 $23,062 9.4%
LAS $2,112 $24,198 8.73%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU38
College Ag Bus Design Ed Eng FCS
Do notknowamountof debt
32% 26% 37% 36% 28% 29%
Unsureof theirability torepaydebt
36% 22% 50% 55% 14% 47%
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Copyright. 1997, Dr. T. K. Hira, Professor ISU39
Students debt ...according to students..
“My debt is coming from shopping and not because I have to pay for my own education.
Therefore, my theory is I will be able to pay it all off after graduation.
As of right now, I am not currently in “debt” because I always pay at least the minimum amount due.
Most kids will be deeper in debt from college loans.”
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Copyright. 1997, Dr. T. K. Hira, Professor ISU40
Customers’ ability to function
The constantly changing financial environment requires an educated consumer.
In technically advance and changing financial services industry whether the consumer will function well or not depends on– whether or not the consumer has skills
necessary to understand the options, make appropriate selections among available alternatives, and understand his/her responsibility of the selected option
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Copyright. 1997, Dr. T. K. Hira, Professor ISU41
Who is responsible to educate consumers..young and adult
Financial institutions– all lenders: educational and non educational
Commercial institutions Employers Borrowers
– themselves and their children Educators
– schools and colleges– adult and continuing education
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Copyright. 1997, Dr. T. K. Hira, Professor ISU42
for giving me the opportunity
to be with you
THANKSTHANKS