MyMoney Resources - Life Events

This descriptive analysis examines the importance of personal financing sources, especially mortgages secured by residential property, to small businesses from 1998 through 2007. About 80 percent of the total debt owned by small business-owning house-holds is held in mortgages and installment loans. The likelihood of holding a residential mortgage increased from 64.7 percent in 1998 to over 73 percent in 2007, and the share of total debt held in residential mortgages increased from 67.3 percent in 1998 to 70.6 percent in 2007 for small business-owning households. After controlling for owner characteristics, small business-owning households did not hold a larger share of total debt in residen-tial mortgages than other households from 1998 through 2007. However, small business-owning households did hold a larger share of total debt in other loans secured by residential property and line of credit loans secured by residential property than other households. These loans comprise less than 18 percent of the value of total debt held by small business-owning households in 2007, suggesting that while financial intermingling does occur, it repre-sents a relatively small share of total debt.

This article reviews research on the effectiveness of general financial literacy training to draw implications for literacy training related to predatory lending. The article concludes that training offered by high schools and workplaces is associated with improved financial knowledge and behavior, especially for low-income or less-educated recipients. Although evidence on homeowner education and counseling is less clear cut, the article concludes that financial literacy training has the potential to curb predatory lending.

This study examines the relationship between bank account ownership and student knowledge of personal finance. To assess financial knowledge, the study relies on national data collected every two years by the JumpStart Coalition for Personal Finance. Using test scores from the 2008 JumpStart survey, I assess whether scores are significantly higher among students that have bank accounts, relative to those students that have no formal banking relationship, controlling for demographic and socio-economic variables that might influence financial knowledge. The underlying research question is whether student experience with “real world” financial products is associated with higher levels of knowledge in personal finance. I find that student bank account ownership is significantly associated with higher scores on the test of financial knowledge, even after controlling for significant factors such as race, educational aspirations, and parental education. While the findings do not suggest causality, the results are informative for financial education delivery, particularly the importance of providing interactive opportunities for the application and practice of skills and knowledge.

The Federal Reserve Bank of San Francisco, the Take Charge America Institute at the University of Arizona, and the Federal Reserve Bank of Minneapolis invited a small group of researchers and practitioners to discuss how to improve the evaluation and metrics of youth financial education programs. The meeting focused specifically on youth — which we defined as individuals under the age of 25 – in an effort to distinguish this effort from others that have discussed financial education research more broadly. The goal for the meeting was to help create a research agenda that would move the field towards the development of clearly defined outcomes for youth financial education, metrics for capturing ROI, and quality standards for curriculum and delivery that would serve as "best practices" for educators seeking to offer effective financial education interventions.

About 10 million American households do not use any aspect of the banking system. A large body of research provides evidence that limited involvement in the mainstream financial sector is most common among low- and moderate-income (LMI) households. Although their income may be relatively low, these individuals hold assets and regularly conduct financial transactions, frequently with nonbank financial companies. Estimates of nonbank financial company transaction volume as high as $250 billion annually suggest a reasonable business case for insured institutions trying to attract the banking business of low- and moderate-income consumers. A relatively low-risk way for banks to introduce low- and moderate-income households to the banking system is through a particular type of savings account—the Individual Development Account (IDA). This article explains how IDAs operate, discusses banks’ experience with IDAs, and provides resources for bankers who want to know more about these programs.

The importance of investment portfolio allocation has become more apparent since the onset of the late 2000s Great Recession. Individual willingness to take financial risks affects portfolio decisions and investment returns among other factors. Previous research found that people of different ages have dissimilar levels of risk tolerance but the effects of generation, period, and aging were confounded. Using the 1998–2007 Survey of Consumer Finances cross-sectional datasets, this study uses an analytical method to separate such effects on financial risk tolerance. Aging and period effects on financial risk tolerance were statistically significant. Implications for researchers and financial planning practitioners and educators are provided.

Research concerning the financial well-being of Chinese American households is extremely limited. This article examines factors that affect the probability that Chinese American households will hold debt. Analysis of data from a survey of Chinese Americans in five Midwestern states in the U.S. indicated that 80.5% of the sample households held some type of debt. Factors associated with the probability that a Chinese American household would be a debtor included age, presence of children under 18, health, annual income, and amount of financial and non-financial assets.

This report presents the results of a nationwide survey of rent-to-own customers. The survey found that most rent-to-own merchandise is ultimately purchased by the customer, most customers are satisfied with their rent-to-own transactions, and most customers are treated well if they are late making a payment, although some customers are subject to possibly abusive collection practices. The report recommends that the total cost of purchasing merchandise through a rent-to-own transaction be disclosed on product labels that the consumer can see while shopping, in addition to disclosures in rental agreements and advertisements.

This study presents the results of 36 in-depth interviews with recent mortgage customers, and quantitative consumer testing with over 800 mortgage customers, that examined how consumers search for mortgages, how well consumers understand current mortgage cost disclosures and the terms of their own recently obtained loans, and whether better disclosures could improve consumer understanding of mortgage costs, consumer shopping for mortgage loans, and consumers’ ability to avoid deceptive lending practices. The results of the study show that current mortgage cost disclosures fail to convey key mortgage costs to many consumers, and that prototype disclosures developed for the study significantly improved consumer recognition of mortgage costs, demonstrating that better disclosures are feasible.

This study examines the effect of credit-based insurance scores on the price and availability of automobile insurance and the impact of such scores on racial and ethnic minority groups and on low-income groups. Using a large database of insurance policies, the study shows that scores are effective predictors of risk under automobile policies. At the same time, scores are observed to be distributed differently among racial and ethnic groups, and this difference is likely to have an effect on the insurance premiums that these groups pay, on average. Nonetheless, scores appear to derive a relatively small amount of their predictive power from their correlation with race and ethnicity. Finally, the Commission could not develop an alternative scoring model that would continue to predict risk effectively, yet decrease the differences in scores among racial and ethnic groups.