2013 Conference

Financial Services

Financial Services

This paper used data from the National Financial Capability Study (NFCS) to examine the actual and self-perceived financial knowledge of young adults ages 18 to 34.  The paper also analyzed the influence of the combination of the respondents’ actual and perceived financial knowledge on a set of financial behaviors. The findings of this study confirm that young adults with lower incomes and educational attainment, women, and nonwhite minorities were more likely to overestimate their financial knowledge than their respective reference groups. Respondents who overestimated their financial knowledge demonstrated other less desirable financial behaviors, including not having at least retirement accounts outside of work, not rebalancing their investment portfolios at least annually, and not being covered by health or auto insurance. Interestingly, respondents who overestimated their financial knowledge were more likely to seek investment, debt, and tax counseling services.