Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults
Research brief contributed by Julie Szendrey
This study is one of the first to investigate the relationships between perceived economic mobility (Yoon & Wong, 2014) of young adults and their financial management behaviors, specifically cash management, credit management, and savings and investment (Dew & Xiao, 2011). Unlike many past studies that only sample traditional college students at select schools who are typically under age 24, this study fully encompassed a nationally representative sample of 1,245 young adults from age 18 up to 34.
Findings showed that young adults with the belief that upward economic mobility is a possibility in life are more motivated to practice better financial management behaviors – specifically cash management and savings and investment behaviors.
Young adults with higher income indicated better cash, credit, and savings and investment behaviors. Interestingly, those of average income indicated better credit management practices with increased perception of economic mobility, while those of lower income indicated decreased credit management practices with increased perception of economic mobility.
Findings specific to cash management behaviors showed that the perception of the ability to get ahead, regardless of the circumstances of one’s birth, seemed to matter more for those who saw themselves as growing up in a family that had less than average income. The impact of one’s perception of economic mobility was more limited for those who were from families of above average income while growing up.
Implications for Practice:
Several implications for practitioners can be drawn from this research to help improve the cash, credit, and savings and investment behaviors of young adults. Understanding what factors influence individual behaviors, specifically beliefs about the ability to be socio-economically mobile in our society, should be addressed by financial planners and counselors when helping young adults shape their financial futures.
Policy makers should consider the factors associated with financial management behaviors, specifically the finding that low-income young adults with high levels of perceived economic mobility exhibit better cash management behaviors but lower credit management behaviors. Policy may focus on encouraging the perception that upward mobility is possible while also educating about how to build and maintain good credit.
Additionally, this study supports the belief in educating young adults, particularly those who are first in their families to obtain college degrees or who come from low-income families, in order to influence their perceptions about economic mobility and improve their financial behaviors. Educational outlets within the community environment may include organizations such as Junior Achievement and United Way Income and Financial Stability Initiatives. Funding for the online survey data collection of this study was sponsored by the Acton Institute.
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Download the research (available to AFCPE members or by request from the authors): Julie Szendrey and Laci Fiala (2018) “I Think I Can Get Ahead!” Perceived Economic Mobility, Income, and Financial Behaviors of Young Adults (JFCP), 29 (2).