Association Between Behavioral Life-Cycle Constructs and Financial Risk Tolerance of Low- To-Moderate-Income Households

Written By: Tim S. Griesdorn, Jean M. Lown, Sharon A. DeVaney, Soo Hyun Cho, and David A. Evans

Utilizing data from an Internet survey among low-to-moderate-income households in several states, this study examined the link between behavioral life-cycle (BLC) constructs and financial risk tolerance. The results of ordinary least squares regression indicated a positive association between financial risk tolerance and several factors that measured the BLC constructs. Respondents who scored higher in self-control had significantly higher risk tolerance scores. Smaller effects were found for the mental accounting and framing constructs. These results suggest low-to-moderate-income households can benefit from financial education and commitment strategies.

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