Download - Financial Illiteracy: Educated Women Too?
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by Mahnaz MahdaviProfessor of EconomicsAnn F. Kaplan ‘67 Faculty Director, Center for Women & Financial Independence
Financial Illiteracy: Educated Women Too?
June 20, 2012
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Demographic Statistics
Age Groups Percentage (%)
20s (n=970) 22.33
30s (n=870) 20.03
40s (n=717) 16.51
50s (n=737) 16.97
60s (n=624) 14.36
70+ (n=426) 9.81
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Demographic Statistics
Household Income Groups Percentage (%)
<$40,000 (n=687) 15.81
$40,001- $80,000 (n=953) 21.94
$80,001- $100,000 (n=467) 10.75
$100,001- $150,000(n=741) 17.06
$150,001- $200,000(n=526) 12.11
$200,001- $500,000(n=755) 17.38
>$500,000 (n=215) 4.95
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Demographic Statistics
Degree Types Percentage (%)
BA (n=1,870) 43.05
MA (n=1,282) 29.51
JD (n=389) 8.95
MBA (n=347) 7.99
MD/PhD (n=456) 10.50
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Demographic Statistics
Marital Status Percentage (%)
Single (n=1,001) 23.04
Married (n=2,727) 62.78
Divorced/Widowed (n=616) 14.18
Children Percentage (%)
Don’t Have (n=2,084) 47.97
Have (n=2,260) 52.03
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Demographic Statistics
Employment Status Percentage (%)
Student/Unemployed (n=362) 8.33
Employed/Self-Employed (n=3,013) 69.36
Retired (n=969) 22.31
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Demographic Statistics
Parents’ Education Percentage (%)
Mother HS/SC (n=1,583) 36.74
Mother BA/MA (n=2,414) 56.04
Mother PhD/PD (n=311) 7.22
Father HS/SC (n=1,072) 25.26
Father BA/MA (n=1,875) 44.18
Father PhD/PD (n=1,297) 30.56
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Demographic Statistics
Sources of Financial Information Percentage (%)
Formal Only (n=943) 21.73
Informal Only (n=285) 6.57
Both (n=3,112) 71.71
Formal = Education, Employment, Financial Advisors/Institutions, Financial Press, Internet/Media
Informal = Friends, Parents, Spouse/Partner, Other Family, Colleagues
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Demographic Statistics
Influences on Money Attitudes Percentage (%)
Any Formal (n=2,104) 48.50
No Formal (n=2,234) 51.50
Any Formal = Includes education and employment
No formal = Parents, Spouse/Partner, Non-Professional Affiliation, Society/Politics/Religion, Particular Event
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Financial Knowledge Index
Q1(F) Which one of the following types of assets has earned the lowest average annual return over the past 80 years?
a) US. Treasury bills
b) Small-company stocks
c) Large-company stocks
d) Corporate bonds
e) Don’t Know
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Financial Knowledge Index
Q2(M) Suppose you invest $1,000 in an account that earns 10% simple (non-compounding) interest annually. After 5 years, how much money will you have?
a) $1,150
b) $1,500
c) $2,100
d) Don’t Know
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Financial Knowledge Index
Q3(F) When agencies such as Standard & Poor’s assess corporate bond risk, the rating is paid for by
a) the government
b) the investors
c) the bond issuers
d) Don’t Know
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Financial Knowledge IndexQ4(F) Suppose that a corporate bond has a rate of return of
6% and a similar municipal bond has a rate of return of 4.2%. If you are in the 30% tax bracket, which of the following statements is correct?
a) After-tax corporate bond rate of return is actually 4.2%
b) After-tax municipal bond rate of return is actually 2.9%
c) After-tax corporate bond rate of return is actually 6%
d) Don’t Know
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Financial Knowledge Index
Q5(M) Suppose that you invested $100K in an asset that earns 10% compound interest annually. If you earn 10% in the first year and lost 10% in the second year, at the end of year 2 how much money will you have?
a) More than $100K
b) Less than $100K
c) Exactly $100K
d) Don’t Know
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Financial Knowledge Index
Q6(F) Which of the following states about load versus no-load mutual funds is correct?
a) Load mutual funds usually earn higher returns than no-load mutual funds.
b) Load mutual funds usually do not charge management fees.
c) Load mutual funds cost more than no-load mutual funds.
d) Don’t Know
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FKI Summary Statistics
Number of Questions Answered Correctly
Percentage (%)of Respondents
0 (n=355) 8.171 (n=726) 16.712 (n=889) 20.473 (n=799) 18.394 (n=732) 16.855 (n=520) 11.976 (n=323) 7.44
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FKI Summary Statistics
Correct (%)
Don’t Know (%)
Q1(F): Historical Rates of Return 38.14 55.80
Q2(M): Multi-period Simple Interest 83.72 10.20
Q3(F): Bond Ratings 36.88 55.43
Q4(F): Tax Implications on Bonds 34.39 61.12
Q5(M): Multi-period Compound Interest 55.25 20.63
Q6(F) – Mutual Funds 38.31 56.56
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FKI Descriptive Statistics
Mean (Standard Deviation)
Overall FKI 47.44 (28.39)
Age Groups
20s 34.66 (25.48)
30s 43.68 (26.61)
40s 51.19 (28.16)
50s 55.04 (28.16)
60s 57.37 (27.99)
70+ 50.31 (27.82)
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FKI Descriptive StatisticsMean (Standard Deviation)
Overall FKI 47.44 (28.39)
Household Income Groups
<$40K 31.76 (23.82)
$40-80K 42.01 (26.96)
$80-100K 45.61 (27.17)
$100-150K 50.47 (27.51)
$150-200K 52.47 (27.68)
$200-500K 58.54 (27.31)
>$500K 64.03 (29.02)
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FKI Descriptive Statistics
Mean (Standard Deviation)
Overall FKI 47.44 (28.39)
Degree Type
BA 43.06 (27.42)
MA 43.46 (27.73)
MD/PhD 48.10 (26.45)
JD 57.80 (27.48)
MBA 73.39 (22.05)
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FKI Descriptive Statistics
Mean (Standard Deviation)
Overall FKI 47.44 (28.39)
Marital Status
Single 40.74 (28.02)
Married 49.69 (28.07)
Divorced/Widowed 48.43 (28.75)
Children
Don’t Have 42.67 (28.01)
Have 51.85 (28.04)
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FKI Descriptive Statistics
Mean (Standard Deviation)
Overall FKI 47.44 (28.39)
Employment Status
Student/Unemployed 37.80 (25.98)
Employed/Self-Employed 46.18 (28.18)
Retired 55.01 (28.24)
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FKI Descriptive Statistics
Mean (Standard Deviation)
Overall FKI 47.44 (28.39)
Parents’ Education
Mother HS/SC 47.60 (28.29)
Mother BA/MA 47.82 (28.35)
Mother PhD/PD 44.48 (28.57)
Father HS/SC 44.51 (28.37)
Father BA/MA 49.38 (28.32)
Father PhD/PD 47.19 (28.13)
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FKI Descriptive StatisticsMean (Standard Deviation)
Overall FKI 47.44 (28.39)
Sources of InformationFormal Only 51.75 (28.52)
Informal Only 28.54 (23.79)
Both 47.90 (28.046)
Influences on AttitudesAny Formal 50.94 (28.73)
No Formal 44.17 (27.68)
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Regression AnalysisMain Effects Model (MEM)*• FKI score increases with Age: 60s know the
most, 70+ have higher FKI scores than those in 20s and 30s
• FKI score increases with HHI: impact is greater than Age for incomes $200K+
• Respondents with MBAs have the highest FKI score followed by JDs
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA
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+ Marital Status and Children
• No statistically significant impact on FKI scores
Regression AnalysisMain Effects Model (MEM)
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA; Marital Status = Single; No Children
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Regression AnalysisMain Effects Model (MEM)
+ Employment Status
• Combination of Employment Status and HHI impacts FKI score
• Combination of Employment Status and Degree Type impacts FKI score
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA; Employment Status = Student / Unemployed
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Example of Employment Status Impact
1. 65 year old + $145,000 HHI + PhD + Employed+ Combined impact of Employed / $145,000 HHI+ Combined impact of Employed / PhD
Predicted FKI Score = 50.78%
2. 65 year old + $145,000 HHI + PhD+ Retired+ Combined impact of Retired / $145,000 HHI+ Combined impact of Retired / PhD
Predicted FKI Score = 64.14%
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+ Parent’s Education
• Father’s Education has statistically significant impact on FKI score
• Combination of Father’s Education with Respondent’s Degree Type impacts FKI score
Regression AnalysisMain Effects Model (MEM)
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA; Parents’ Education = High School/Some College
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Example of Father’s Education Impact
1. 34 year old + $82,000 HHI + JD + Father with HS/SC+ Combined impact of JD / Father HS/SC
Predicted FKI Score = 42.43%
2. 34 year old + $82,000 HHI + JD + Father with BA/MA+ Combined impact of JD / Father BA/MA
Predicted FKI Score = 53.83%
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Regression AnalysisMain Effects Model (MEM)
+ Sources of Financial Information(Formal/Informal)
• Statistically significant impact on FKI score
• Combination of Sources and Age impacts FKI score
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA; Sources = Informal only
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1. 43 year old + $210,000 HHI + MD + Informal Only+ Combined impact of 43 year old / Informal only
Predicted FKI Score = 32.89%
2. 43 year old + $210,000 HHI + MD + Formal Only+ Combined impact of 43 year old / Formal only
Predicted FKI Score = 51.81%
Example of Sources of Information Impact
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Regression AnalysisMain Effects Model (MEM)
+ Influences on Money Attitudes(Formal/Informal)
• Statistically significant impact on FKI score
• Combination of Influences and HHI impacts FKI score
• Combination of Influences and Degree Type impacts FKI score
Reference group: Age = 20s, HHI = <$40K, Degree Type = BA; Influences = No formal
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1. 52 year old + $54,000 HHI + MA + No Formal+ Combined impact of No Formal / $54,000 HHI+ Combined impact of No Formal / MA
Predicted FKI Score = 38.76%
2. 52 year old + $54,000 HHI + MA + Any Formal+ Combined impact of Any Formal / $54,000 HHI+ Combined impact of Any Formal / MA
Predicted FKI Score = 48.56%
Example of Influences on Money Attitudes Impact
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Some Concluding Thoughts
FKI score increases with Age
• Young women need financial education: 20s / 30s average score on FKI is 39%
• Yet…the highest mean FKI score for educated women in 60s is only 57%
• Financial education needs to be continuous
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Regardless of Age, Educated Women are Worried About Their Financial Security
AgeGroups
Percentage (%)
20s 85
30s 86
40s 81
50s 78
60s 68
70s 55
80+ 55
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Other things matter
FKI score for HHIs under $40K is 34% compared to HHIs over $200K at 61%
Education: type of degree and using educational sources of information
Any type of degree that has a financial component improves financial knowledge
Formal sources of financial information can significantly improve financial knowledge
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Household Income Groups
Percentage (%)
< $40K 88
$40-80K 83
$80-100K 79
$100-150K 78
$150-200K 75
$200-500K 68
$500-$1,000K 64
> $1,000K 55
Regardless of HHI, Educated Women are Worried About Their Financial Security
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Degree Type
Percentage (%)
BA 79
MA 78
MBA 76
MD/PhD 73
JD 81
Regardless of Degree, Educated Women are Worried About Their Financial Security
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Educated women need education … financially speaking
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Thank You.
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