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By Barbara O’Neill, Ph.D., CFP®

Personal finance research informs high-quality financial education briefings, publications, and 1:1 financial counseling sessions with clients. Below are findings and implications for practice from four recent studies:

Workplace Financial Education – This quasi-experimental study by Horwitz et al. (2021) investigated associations between participation in a workplace financial education program and changes in financial knowledge levels. A positive association was found between program participation and changes in financial knowledge, even when controlling for demographic and socioeconomic differences between participants and non-participants. There was not a significant association, however, between perfect program attendance and financial knowledge, suggesting there are diminishing returns associated with financial education programs.

  • Implications: Study results speak to the impact of work being done by financial educators and the value of quality programs that incorporate multiple class sessions versus “one-and-done” workshops (the program used in the study had 10 weekly sessions). The extended format provided an opportunity to cover many personal finance topics and gave participants time to assimilate the content.

Money and Relationships – Wilmarth et al. (2021) studied the association of individuals’ perceptions regarding their own and their partner’s positive financial behaviors (measured with a 6-item scale) and shared financial values (measured with an 8-item scale). Results indicated a positive association, as hypothesized. Respondents’ own positive financial behaviors and their perceptions of their partner’s each independently predicted higher shared financial values. Findings suggest, as per Interdependence Theory, benefits from coordinating behaviors.

  • Implications: Financial practitioners should use tools and discussion questions that promote shared financial values between partners to enhance couples’ financial and relational well-being. In addition, practitioners can help individuals recognize their partner’s positive financial behaviors and help couples reduce conflict due to mismatched financial orientations. They can also show couples the rewards of positive financial behaviors.

Health Shocks – This study by Streeter (2021) explored the impact of work-limiting health shocks on financial planning time horizons. Results indicated that, during the 10 years following a health shock, individuals are more likely to focus on the near term (i.e., the next few months) than baseline levels. People with lower socio-economic status or poor general health are more prone to switching to myopic planning after a health shock.

  • Implications: Time horizons are a key component of financial planning. Use the finding that adverse health shocks shorten financial planning time horizons as a “lens” to view clients’ mindsets and behaviors. Poor health can affect people’s time preferences and increase myopic planning (a preference for near-term time frames). This is especially relevant due to health-related hazards associated with military service.

Postponing Cognitive Decline – This study by Hale et al. (2021) explored associations between postponing retirement and cognitive decline in later life. The results indicated that waiting to retire until age 67 (the full retirement age for those born in 1960 and later) lessened the rate of cognitive decline in retirement. The researchers cautioned that those who retired at 67 had a slowed rate of cognitive decline and not necessarily a “boost” in functioning. This “insulation” from decline did not vary across education, gender, or occupation.

  • Implications: Retirement timing decisions are typically made on the basis of factors such as financial asset accumulation (or lack thereof), health status, and workplace challenges or layoffs. This study adds another factor to discuss with clients as they consider the best age to exit the labor force. It could change some minds!

Hale, J.M., Bijlsma, M.J., & Lorenti, A. (2021). Does postponing retirement affect cognitive function? A counterfactual experiment to disentangle life course risk factors. SSM Population Health.

Horwitz, E., Seay, M.C., Archuleta, K.L., & Anderson, S.G. (2021). Workplace financial education and change in financial knowledge. Journal of Financial Counseling and Planning, 32(3), 449-463.

Streeter, J.L. (2021). Do adverse health shocks induce myopic financial planning? Financial Planning Review, 4(4).

Wilmarth, M.J., Totenhagen, C.J., Serido, J., & Shim, S. (2021). Young adult relationships: Perceived financial behaviors and shared financial values. Journal of Financial Counseling and Planning, 32(3), 507- 515.

Photo by Mohammad Danish from Pexels