Tahira Hira Departments of Human Development and Family Studies American Association of Family and Consumer Sciences June 23, 2007 1 How Different Cultures

June 23, 2007

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Tahira Hira

Departments of Human Development and Family Studies

American Association of Family and Consumer Sciences

How Different Cultures Approach Investing

Tahira K. Hira – Iowa State University Caezilia Loibl – Ohio State University Tom Schenk Jr. – Iowa State University

June 23, 2007

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Departments of Human Development and Family StudiesTahira Hira


Objectives• Analyze characteristics of high net-worth households by racial/ethnic groups

• Explore patterns of financial socialization

• Determine primary investment decision makers

• Identify Adult Learning Preferences & Investment Information Sources

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Background• Financial Socialization

– Parental Involvement– Financial role-models

• Financial decision makers– Sole decision– Joint decisions with spouse or others

• Learning Preferences– Investment sources– Learning Preferences

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Procedures• Households with annual incomes greater than $75,000.

• Identified four racial and ethnic groups:– Whites, Blacks, Asian/Pacific Islanders, Hispanics.

• 911 Telephone interviews between 10/05 and 2/06.– National Stratified Random Sample– Average interview time: 22 minutes.

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Demographics: Race & Ethnicity

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Demographics: Gender

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Demographics: Married

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Demographics: Household Size

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Finances: Debts, Assets, Debt Ratio

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Financial Socialization• Similar findings among ethnic groups:

– Lack of parental discussion of money– Strong recollection of parental concern over money.

– School teachers have minimal impact.– Strong parental influence on financial knowledge.

• Exception:– Asian parents were most likely to discuss the importance of savings.

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Perceived Childhood Financial Security

Percentage RespondingPerceived Financial

Security White Black Asian Hispanic

1 (Not At All Secure)* 4.00% 9.86% 0.00% 5.80%2* 12.57% 14.08% 25.71% 15.94%3** 22.29% 29.58% 20.00% 34.78%4*** 33.14% 28.17% 28.57% 36.23%5 (Very Secure) 28.00% 18.31% 25.71% 7.25% *indicates 99% confidence** indicates 95% confidence*** indicates 90% confidence

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Making Financial Decisions

Percentage Responding “Often” or “Very Often”

Decision Maker White Black AsianHispani

c

You, by yourself 27.43% 30.56% 34.29% 23.19%Spouse alone 1.43% 2.78% 1.43% 4.35%You and Spouse* 56.29% 56.94% 60.00% 60.87%You with others*** 6.00% 4.17% 1.43% 4.35%Spouse with others*** 0.29% 0.00% 0.00% 1.45%Another Way*** 8.57% 5.56% 2.86% 5.80% *indicates 99%

confidence*** indicates 90%

confidence

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Investment Information Sources

Information Sources White Black Asian Hispanic

Financial Advisor

31.6% 20.8% 11.4% 17.4%

Internet 21.3% 4.2% 44.3% 14.5%TV Programs 4.0% 1.4% 12.9% 1.5%Radio 3.4% 7.0% 2.9% 1.5%Classes or Workshops

2.6% 8.3% 2.9% 5.8%

Print Media** 23.0% 16.7% 24.3% 20.3%Investment Club***

2.7% 2.8% 2.9% 1.5%

Friends*** 8.1% 13.9% 4.3% 13.1%Workplace*** 10.0% 12.5% 11.4% 7.3%** indicates 95% confidence ***indicates 90% confidence

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Learning PreferencesPercentage Who Responded "Agree" or ”Strongly Agree"

Learning Preferences White Black Asian HispanicEnjoy learning things** 85.0% 90.3% 91.4% 92.8%Seminars are useful 51.8% 80.3% 73.9% 68.2%Prefer discussing one-

on-one**86.4% 95.8% 88.6% 84.1%

Not interested in learning*

12.3% 11.1% 8.6% 13.0%

Prefer Self Research* 72.1% 80.6% 88.6% 78.3%Want to know details 71.7% 84.7% 85.7% 87.0% * indicates 99%

confidence** indicates 95%

confidence

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Summary - similarities• Little perceived influence from parents and teachers.

• Respondents perceived financial insecurity as children.

• Joint (with Spouse) investment decisions.

• Strong desire to learn.• Less likely to use radio, classes, and investment clubs.

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Summary - differences• Asians were more likely to feel financially insecure as children.

• Asians less likely to use financial advisors, more internet/TV users.

• Whites are less likely to find seminars helpful and less detail oriented.

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Implications• Individuals:

– Discuss money management with children.• Financial Professionals:

– Minorities under-utilizing financial advisors

– Discount brokers• Educators:

– Adults are typically willing to learn.– High-tech media is not being employed.

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Future Directions• Determine causal relationships• Longitudinal study• Enlarge sample size• Cohort Analysis

Documents

Tahira Hira Departments of Human Development and Family Studies American Association of Family and Consumer Sciences June 23, 2007 1 How Different Cultures