Coming to Consensus:A Delphi Study to Identify the Personal Finance Core Concepts

and Competencies of

Undergraduate College Students

M.J. Kabaci, Ph.D.University of Georgia

Society for Financial Education and Professional Development Conference

October 15, 2012

Based on Dissertation Research• Identification of Personal Finance Concepts & Competencies

of 3 specific groups:• Undergraduate College Students• Student Education Loan Recipients• First-Generation College Students

• Two Questions were Addressed:1. What are the specific personal finance concepts2. What are the specific personal finance competencies

that are important for specific groups of college students?

Introduction• College is the first opportunity for young adults to make significant

financial decisions on their own. (Shim, Serido, & Xiao, 2009)

• The concern among researchers, educators, and policymakers:• College students may not have acceptable levels of financial knowledge

and skills • College students may not demonstrate appropriate financial behaviors

that exemplify positive financial decision-making to live within their means and relatively debt-free.

• Based on prior research on college students’ financial management• (Allen & Kinchen, 2009; Avard, Manton, English, & Walker, 2005; Grable

& Joo, 2006; Hayhoe, Leach, Allen, & Edwards, 2005; Lyons, 2003; Lyons, 2004c; Mandell, 2008; Markovich & DeVaney, 1997; Norvilitis & Santa Maria, 2002; Pinto & Mansfield, 2006; Sallie Mae, 2009).

Part of the College Life?• Students may acquire financial experience by the time they

graduate from college, but they also acquire debt as well. • On average, to finance their education, 2 out of every 3

college undergraduates• incur some form of conventional education debt (e.g., federal

student loans)• seek private loans• and/or turn to credit cards (Pinto & Mansfield, 2006).

• In addition to student loan debt, many undergraduates carry record-high credit card balances. • College students carry an average credit card balance of $3,173

(Sallie Mae, 2009).

However…• Not all undergraduate college students carry high levels of

debt or any debt at all. • Having debt is not necessarily a negative position for

undergraduate college students.• Education and training are the most important investments in

human capital (Becker, 1975). • College students are encouraged to establish credit histories and

build credit scores as young adults.

Literature Review• Financial Literacy and Education Commission identified 5 Core

Concepts (FLEC, 2010) • Earning• Spending• Saving• Borrowing• Protection Against Risk

• No prior studies that identified specific personal finance core concepts or competencies

• Teachable Moments• “Just-in-Time” Concept – (Mandell, 2006)• Andragogy – (Knowles, 1970)

Literature Review• Studies that measured students’ knowledge of financial concepts as pre-

determined by researchers • Concepts included borrowing, budgeting, saving, & investing

• Definitions• Financial Literacy – “Knowledge of basic economic and financial concepts, as well as

the ability to use that knowledge and other financial skills to manage financial resources effectively for a lifetime of financial well-being”1

• Financial Knowledge• Financial Behavior

• Identified studies that examined students’:• Financial knowledge• Credit knowledge• Financial behavior• Credit behavior• At-risk financial behavior• Effects of “teachable” moment1Hung, Parker, & Yoong, 2009

Literature Review• Previous studies focused on general personal finance topics• Budgeting• Savings • Insurance• Investing • Credit

• Findings found:• Students are lacking in financial knowledge• Students fail to perform proper financial behaviors• Financial knowledge increases by year in college• Students tend to have higher financial literacy regarding issues

that affect them personally.• Studies focused only on specific concepts rather than a general

scenario

Statement of Problem

There is a lack of consensus among researchers, educators, and policymakers

regarding specific core concepts and competencies of personal finance that undergraduate student education loan

recipients should possess

Methodology• Delphi Method• a combination of qualitative and quantitative research methods

to build consensus among individuals identified as experts in a particular field/industry.

• primarily used to facilitate the formation of a group judgment and tends to be used in evaluation when significant expertise exists on the subject

• Individuals invited to serve on panels based on criteria of:• Possessing knowledge and expertise in college students’ financial

literacy issues; and/or• Having taught personal financial education to college students.

• 36 individuals agreed to participate in 1 of 3 panels

Survey Instruments• First Online Survey• Identification of expertise, experience & demographics of panel

• To assign panel members to one of three groups• 21 Panelists in Undergraduate Student Education Loan Recipients

group• 17 completed all surveys

• Second Online Survey• Ranking of importance of personal finance concepts &

competencies • 3 “Rounds”

• List of competencies• FLEC• Prior studies• Input from committee and researcher

Survey #2• Round One

• Plus, 226 personal finance competencies

13 Personal Finance Concepts

Borrowing BudgetingConsumer Protection Credit ManagementDebt Management Employee Benefits /

IncomeFinancial Planning Financial ServicesInsurance InvestingSaving Student Financial AidTaxes

Sample Page from Round One

Survey #2• Questionnaire in subsequent rounds of second survey

designed based upon results of previous round.

• Panelists’ suggestions for additional concepts/competencies encouraged

• Concepts and competencies that gained consensus removed from consideration• Identified with mean ranking

• Remaining Concepts & Competencies• Range of responses between 1st & 3rd Quartile• Panel members’ own responses

Sample Pages from Survey #2 (Round Three)

Data Analysis• Descriptive Statistics• Mean• Median• Standard Deviation• 1st and 3rd Quartiles• Interquartile Range (IQR)

• IQR used to determine consensus• IQR < 1 (Automatic Consensus)• IQR = 1 and majority of panel members in agreement with

median (Acceptable Consensus)

• Relevance of consensus items ranked by mean

Results• In Consensus• 7 Personal Finance Concepts (mean rankings)

• Borrowing* (1.4)• Saving* (1.4)• Budgeting* (1.5)• Student Financial Aid* (1.7)• Insurance * (1.8)• Financial Services (2.6) • Consumer Protection (2.7)

• 140 Personal Finance Competencies

* - “Most Important”

Results• Borrowing Competencies• Explain the use of credit reports in credit applications*• Explain how to compare terms of credit card offers*• Compare and contrast types of loans to finance college expenses*• Describe the costs and benefits of borrowing*• Identify the criteria used to assess qualifications for credit*

• Saving Competencies• Explain why it is important to save money for an emergency fund*• Compare instruments for short- and long-term saving*• Describe the effects of inflation on savings and personal income*• Explain the risk of inflation on savings products*• Compare and contrast saving instruments*

* - “Most Important”

Results• Budgeting Competencies• Construct a budget*• Describe the function of an emergency fund in money

management*• Define and calculate time value of money*• Explain how one’s income and spending and saving choices

determine one’s standard of living*• Explain the difference between fixed and variable expenses*

• Student Financial Aid Competencies• Compare and contrast various types of student education loans

including federal loans, parent loans, and private loans*• Describe the consequences of defaulting on student loans*• Explain student loan consolidation*• Describe deferment and forbearance**• Complete a FAFSA form** * - “Most Important”

** - “Very Important”

Results• Insurance Competencies• Explain the impact deductibles have on premiums and the

consumer’s loss*• Explain health insurance*• Explain vehicle insurance*• Explain risk and how insurance can mitigate losses due to risk*• Explain property insurance

• Financial Services Competencies• Explain simple and compound interest*• Explain debit and ATM cards**• Identify risks and protections associated with debit and ATM cards**• Identify the types of fees charged for financial services**• Compare and contrast banks, credit unions, savings and loan

institutions, brokerage firms, insurance firms, asset management firms, and other types of financial institutions.** * - “Most Important”

** - “Very Important”

Results• Consumer Protection Competencies• Describe policies that protect consumers from identity theft**• Explain purchase and marketing techniques to stimulate impulse

buying**• Describe policies that protect consumers from fraud**• Describe policies that protect consumers from deception**• Define terms used in consumer protection**

* - “Most Important”** - “Very Important”

What Didn’t Gain Consensus?• Personal Finance Concepts• Credit Management (1.6)• Taxes (1.7)• Debt Management (1.8)• Financial Planning (2.1)• Investing (2.2)• Employee Benefits/Income (2.4)

• Competencies• Identify resources (published, online, and human) to refer to for help in (name of

concept)• Explain consumer rights and responsibilities• Explain techniques to manage a credit card• Compare and compute regular wages and overtime wages• Demonstrate basic skills for use of a checking account, including withdrawals and

deposits, debits, and reconciling statements• Compare and contrast various forms of financial aid including loans, grants, work-

study programs, and veterans’ programs.

Future Research• Establish new Delphi panels • Examine select current undergraduate personal finance

curricula using content analysis • Identification of personal finance education programs and

materials appropriate for “best practices” • Identify college students’ perceived needs of personal finance

concepts and competencies

Final Thoughts• A college degree is a good investment in human capital. • Positions and careers for college graduates are expected to be the

fastest growing category of employment in the country. • Graduates have more accessibility to benefits

• 401(k) retirement plans • health insurance

• Are more likely to be involved in financial decisions involving financial planning and investments.

• The benefits of a financial education are greater for college graduates, who will have more money to manage over their lifetimes than non-college graduates.

• A college education is not cheap.

Coming to Consensus:A Delphi Study to Identify the Personal Finance Core Concepts and

Competencies

Undergraduate College Students

M.J. Kabaci, Ph.D.Lecturer

Housing and Consumer Economicsmjkuga@gmail.com