Study examines why consumers have confidence in making financial decisions

What instills confidence in consumers when it comes to making financial decisions?

Overall, findings in a recent study suggest that having – or not having – prior knowledge about the decision was the response most associated with confidence. Also, the youngest respondents (18-29 years old) were generally more apt to state they lack confidence in making financial decisions than other age groups.

“These results help inform decision-makers in the public and private sectors of financial services. If we are to experience growth in the financial education confidence of U.S. adults, while addressing equity issues and improving the quality of resources, it’s these data that will be the foundation for making important strategic decisions,” said Billy Hensley, Ph.D., president and CEO of National Endowment for Financial Education (NEFE), which conducted the opinion poll.

Survey findings

Additional data points include:

• Half of adults aged 18-29 years old indicate that having people to consult with in making certain financial decisions is a source of confidence.
• Male respondents are significantly more likely than female respondents to say they felt confident because they had prior knowledge (48% vs. 41%) and to say they made and learned from a similar decision in the past (45% vs. 36%). Conversely, female adults are significantly more likely to say they felt confident because they had people they could consult with in making the decision (43% vs. 28%).
• Hispanic adults (53%) cite not having prior knowledge to make a financial decision as a reason for not feeling confident. Only 37% of White non-Hispanic adults and 29% of Black non-Hispanic adults cite this as a reason.
• Adults with some college education or an associate degree (48%) or a bachelor’s degree or higher (49%) say they feel confident in making financial decisions because they had prior knowledge in making the decision. Only 36% of adults with a high school degree or equivalent felt this way.

External resources consumers use

This poll also sought to understand the external resources individuals utilize when making financial decisions***. Overall, 84% of adults use at least one external resource, with consulting family members (51%), Google or other online search engines (35%), friends (28%) and financial professionals from financial institutions (25%) being the most popular resources.

“A large majority of U.S. adults will consult a resource before making a financial decision, but the nature of where that information is consumed varies depending on age, education level, gender and race. The financial services industry must rely on this data to better serve, build trust and gain attention of key demographics,” Hensley added.

• Overall, 86% of White, non-Hispanic adults say they consult any external resource when making financial decisions, compared to 75% of Black non-Hispanic adults and 77% of Hispanic adults.
• Adult females (55%) say they consult family members when making a financial decision, compared to 47% of adult males. However, males (40%) are more likely to say they consult Google or other search engines than females (30%).
• Adults with an annual household income of <$30K are the least likely of the income groups to consult financial professionals from financial institutions (11%) or consult Google or other search engines (29%).
• Conversely, adults with an annual income of $100K+ are the most likely to consult these resources (34% and 45%, respectively).
• Adults aged 18-29 years old (59%) and 30-44 years old (56%) are more likely than those 45-59 years old (43%) and 60+ years old (47%) to say they consult family members.
• Adults aged 60+ years old are the most likely of the age groups to say they consult financial professionals from financial institutions (35%).
• Adults with a bachelor’s degree or higher are the most likely to say they consult Google or a search engine (49%) and the most likely to say they consult personal finance consultants (27%) or work colleagues (17%), compared to all other education level groups.

NEFE used AmeriSpeak to conduct its latest opinion poll, which asked respondents for details about having or lacking confidence when making a financial decision.

 

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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