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The purpose of this study was to examine the relationship between financial literacy and financial behaviors among various age groups. Financial literacy was measured in three ways: objective financial knowledge, subjective financial knowledge or confidence, and subjective financial management ability. The age groups were 18-24, 25-34, 35-44, 45-54, 55-64, and 65 and older. Long-term financial behavior referred to retirement saving and investing behavior, whereas short-term financial behavior referred to spending and emergency saving behavior. In the full sample, both objective and subjective financial literacy variables were positively associated with long- and short-term financial behaviors. In the age subsamples, subjective financial knowledge or confidence was more strongly related to long- and short-term financial behavior than either objective financial knowledge or subjective financial management ability in the younger age groups. In the older age groups, objective financial knowledge was more strongly related to long-term financial behavior than either of the other two measures of financial literacy.
Keywords: age groups, financial behavior, financial knowledge, financial literacy
The recent economic downturn, known as the Great Recession, has magnified overall awareness of financial illiteracy and its impact on our economy. One response has been increased academic research focusing on financial literacy as well as renewed interest in financial education and related policy (Schuchardt et al., 2007). Financial education is increasingly prevalent in high schools, colleges (Hira, 2012; Mandell, 2008; Mandell & Klein, 2009), and workplaces (Servon & Kaestner, 2008). Greater attention to financial literacy is reflected in increased interest in state mandates for financial education in high schools as well as the creation of entities addressing financial literacy, such as the Financial Literacy and Education Commission and the Consumer Financial Protection Bureau.
Financial decisions at any stage in life can have lasting effects on the consumer and the household. Indeed, James, Boyle, Bennett, and Bennett (2012) suggested that increased levels of financial literacy in the younger years facilitate better decisions that lead to a higher quality of life in later years. Age and experience change an individual's perspective. Recent studies have shown that consumers in different age groups display different financial behaviors (Robb, Babiarz, & Woodyard, 2012; Zick, Mayer, & Glaubitz, 2012). Each age group has its own perspectives, influences, and pressures (Zick et al., 2012). These differences are...