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An Empirical Analysis of the Effect of Financial Education on Graduating Business Students’ Perceptions of Their Retirement Planning Familiarity, Motivation, and Preparedness

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  • Mark L. Power
  • Jonathan M. Hobbs
  • Ashley Ober

Abstract

Today's multifaceted and dynamic financial environment requires a high level of individual financial literacy to ensure that sound financial behaviors are the norm. Unfortunately, many individuals have limited knowledge regarding financial issues and are ill prepared to make sound financial choices. The purpose of this article was to benchmark and then determine if graduating business students’ perception of their retirement planning familiarity, motivation, and preparedness improved after taking a semester‐long course in Personal Risk Management and Insurance (PRMI). We discovered that business students were more financially literate than nonbusiness students and that business students’ familiarity with retirement plans and personal level of readiness to make retirement planning decisions improved significantly after taking the principles class. Specifically, we showed that only 15.8 percent and 42.3 percent of the nonbusiness and business control students, respectively, felt adequately prepared to make retirement decisions, while 82 percent of the business students who completed the PRMI class felt prepared. Ex post, graduating seniors who were exposed to coursework covering life‐cycle risks and options to treat those risks perceived that they are leaving college with a better ability to meet the financial challenges that await them. Last, we showed that significant differences existed in retirement plan and investment familiarity based on gender. Our findings provide support for including financial literacy as a general education requirement at colleges and universities.

Suggested Citation

  • Mark L. Power & Jonathan M. Hobbs & Ashley Ober, 2011. "An Empirical Analysis of the Effect of Financial Education on Graduating Business Students’ Perceptions of Their Retirement Planning Familiarity, Motivation, and Preparedness," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 14(1), pages 89-105, March.
    • Handle: RePEc:bla:rmgtin:v:14:y:2011:i:1:p:89-105
    DOI: j.1540-6296.2011.01194.x
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    File URL: https://doi.org/10.1111/j.1540-6296.2011.01194.x
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    References listed on IDEAS

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    1. Kelly D. Edmiston & Mary Gillett Fisher, 2006. "Financial education at the workplace: evidence from a survey of Federal Reserve Bank employees," Community Affairs Research Working Paper 2006-02, Federal Reserve Bank of Kansas City.
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    6. Mark L. Power & Tahira K. Hira, 2004. "University‐Provided Retirement Planning Support and Retiree Financial Satisfaction During Retirement: Differences by Gender, Job Classification, and Planning Behavior," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 7(2), pages 121-149, September.
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    1. Mark Power & Jonathan M. Hobbs, 2015. "A Comparative Analysis of Financial Professionals’ Perception of the Level of Graduating Business Student Retirement Planning Familiarity, Motivation, and Preparedness," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 18(2), pages 273-295, September.

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