Category Archives: Financial Literacy

A Thematic Literature Review on Financial Capability and the Effectiveness of Financial Education in America After the 2008 Financial Crisis

I completed this literature review on 2018-04-23 for IDS 7500: Seminar in Educational Research (self-directed study) at University of Central Florida. I will need to expound upon it in my dissertation, which will be focused on financial education.

A Thematic Literature Review on Financial Capability and the Effectiveness of Financial Education in America After the 2008 Financial Crisis
Richard Thripp
University of Central Florida

The purpose of this literature review is to investigate Americans’ financial knowledge and capability since the 2008 financial crisis (also known as the Great Recession), by synthesizing empirical research and position papers into a thematic narrative, with a focus on the refereed publications of leading researchers in the financial education space, such as Lusardi, Mandell, Mitchell, Mottola, and Willis. Articles are included based on authorship and their relevance toward this objective, with additional articles gleaned from leading researchers’ citations. Because of the breadth of the relevant literature, the focus herein is on explaining and adequately substantiating phenomena, rather than systematic coverage.


Firstly, we should discuss the meanings of financial knowledge, financial literacy, and financial capability. These terms are inconsistently defined in the literature, but, generally, they are in order of scope. Financial knowledge relates to content knowledge and is often used as a proxy for financial capability (e.g., Lusardi, Mitchell, & Curto, 2010). Financial literacy additionally includes the ability to articulate one’s knowledge and apply it to real-life decisions (Vitt et al., 2000), while financial capability more prominently emphasizes improvement of one’s actual financial behaviors. A key distinction is that having financial knowledge does not actually mean one’s financial decisions will improve, and being taught about financial concepts does not mean that information will necessarily be retained. In the literature, financial knowledge and financial literacy are conflated or treated synonymously, while financial capability is often treated synonymous to financial literacy (Remund, 2010), but consistently refers to a construct more holistic than financial knowledge.


Before the Crisis

Based on fifteen years of Survey of Consumer Finances data, Hanna, Yuh, and Chatterjee (2012) found that consumer debt increased, with 27% of households having more than 40% of their income going toward debt payments in 2007 as compared with 18% in 1992. Although the time leading up to the Great Recession was prosperous, it was also marked by financial institutions’ heavy over-extension of credit which resulted in unsafe debt proportions among American households, and particularly among more highly educated households. These debts, combined with a stock market plunge and widespread job loss, compounded the negative effects for many American households, which persist even a decade later. The crisis also brought about a renewed focus on financial education.

Financial Education Movement

A movement in support of financial education emerged in response to the Great Recession. The Jump$tart Coalition for Personal Financial Literacy, a Washington, D.C. think-tank funded by the U.S. government and corporations like Charles Schwab and Bank of America, gained increasing clout. The organization’s National Standards in K–12 Personal Finance Education, now in its 4th edition (2015), increasingly became adopted by states and school districts throughout the US. While the movement gained momentum, several commentators complained about financial education on a theoretical basis—most notably, Willis (2008, 2009) who likens the movement to teaching citizens to represent themselves pro se in court or to perform their own medical procedures. More recently, Pinto (2013) argued that the movement is misguided in both its suggested implications and underlying assumptions. Later, we will see that unfortunately, there is also empirical support for this position.

Perceived Financial Capability

The National Financial Capability Study (NFCS) is a nationwide triennial survey of over 25,000 Americans that measures their financial position, attitudes, and content knowledge (for more information, see Mottola & Kieffer, 2017). It includes several questions asking respondents to rate their mathematical and financial abilities on seven-point Likert scales—we might refer to these questions as a proxy for self-perceived financial capability. An analysis of responses to these items in the 2009 NFCS survey shows a correlation between perceptions and actual financial knowledge (de Bassa Scheresberg, 2013), but also shows that Americans grossly overestimate their financial prowess. Such overconfidence can have detrimental consequences.

Measures and Proxies of Actual Financial Capability

Here, we will look at recent research on Americans’ financial capability, or proxies thereof (i.e., numeracy, financial knowledge, and financial behavior).


Numeracy, broadly, is the ability to understand and manipulate numbers, including basic mental arithmetic. These skills are closely associated with financial capability, yet sadly are consistently lacking among Americans, especially among those who are already financially at-risk such as senior citizens, women, and those with less educational attainment (Lusardi, 2012). A striking investigation is Lusardi and Mitchell’s (2007) analysis of 2004 survey data of Americans aged 51–56, which focused on three basic questions assessing numeracy. One asked how a $2 million lottery prize would be divided among five people, which was answered correctly ($400,000) by only 56% of respondents. More shockingly, a basic question on compound interest on a savings account over two years was correctly answered by only 18% of respondents, with most incorrect responses failing to consider the compounding effect. This shows that even older, wealthier Americans, close to retirement, have issues with basic mathematics, let alone complex financial decisions. Overall, quantitative literacy, an umbrella construct encompassing numeracy, has been shown to be significantly related to financial behaviors (Nye & Hillyard, 2013).

Financial Knowledge

Financial knowledge is often assessed by several questions first proffered by Lusardi and Mitchell (2011), which are actually quite simple, yet frequently answered incorrectly. The 2015 NFCS survey included these six content-knowledge questions:

  1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
  2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?
  3. If interest rates rise, what will typically happen to bond prices?
  4. Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
  5. A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.
  6. Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Although the answer choices are all multiple choice or true/false, in the 2015 NFCS survey, only 28% answered Question 3 correctly, 33% answered Question 4 correctly, and 46% answered Question 6 correctly (Thripp, 2017). It appears that respondents cannot mentally compute compound interest, even when correct choices are as simple as “less than five years” with respect to Question 4, requiring no computation. For Millennials, financial knowledge is even worse than older groups (Mottola, 2014), and for all Americans, the micro and macro (e.g., Lusardi & Mitchell, 2014) effects are profoundly troubling.

Financial Behavior

Lusardi (2011) puts forth a literature review alongside an analysis of 2009 NFCS data. In part, her review notes the importance of financial literacy toward outcomes such as accumulating wealth, planning for retirement, taking on reasonable mortgages, and investing in equities via low-cost index funds. Then, an analysis of survey data reveals that about half of Americans report difficulties paying month-to-month bills, 51% have less than a three-month rainy day fund or no emergency savings at all, and a quarter have used high-cost borrowing such as payday loans. These are just a few of the many findings showing that Americans are living paycheck-to-paycheck with no safety net for unexpected events like job loss, a car breaking down, or unexpected illness (see also West & Mottola, 2016).

Gender differences. Mottola (2013) also used 2009 NFCS data to look at the gender gap with respect to credit card usage, finding that women tend to pay more interest and late fees, but suggesting that when controlling for demographics and perceived mathematical ability, the gender gap disappears. This shows that the gender gap in financial knowledge is multidimensional, relating to the gender pay gap and other inequities. It was seen in Chen and Volpe’s (2002) study that female college students have less motivation and confidence for learning about finance. These feelings of disempowerment may be related to mathematical stereotypes and may contribute to maladaptive financial behaviors such as aversion to saving (Garbinsky, Klesse, & Aaker, 2014).

Effectiveness of and Recommendations for Financial Education

When financial education works, it is often given “just-in-time,” such as requiring student loan applicants to complete relevant learning modules as a prerequisite for receiving their loan (Fernandes, Lynch, & Netemeyer, 2014). In addition, curriculum may be more easily remembered if based on benchmarks (“rules of thumb”) rather than complex decision-making criteria (Drexler, Fischer, & Schoar, 2014). This may result in improved financial decision-making subsequent to the course. At first glance, these suggestions may sound like common sense. However, in actuality most financial courses present complicated information in a lengthy format (e.g., a semester or school year), far in advance of when the insights are needed. Fernandes et al. (2014) conducted a sweeping meta-analysis of 201 financial education studies, which showed only 0.1% variance in financial behavior accounted for by financial education. In fact, the effects were weaker for those with low-income—who have the most to gain from increased financial capability, and any effects that were present generally dissipated within 20 months regardless of the length of the instructional intervention.

Although not refereed and sponsored by a corporation, Menard (2018) presents a cogent narrative about the history of American financial education and its ineffectiveness toward inciting behavioral change, citing leading researchers on financial education, psychology, and behavioral economics, while leveraging her past work on behavioral healthcare interventions (e.g., smoking cessation). Overall, despite doubling as a sales pitch for Questis, Menard (2018) points to financial coaching, just-in-time teaching, and behavioral interventions as alternatives to financial education courses that lack impact (e.g., Fernandes et al., 2014).

Hastings, Madrian, and Skimmyhorn (2013), in a narrative literature review exploring measurement of financial knowledge and the effectiveness of educational interventions. They note that while financial literacy is correlated with many beneficial financial behaviors, “the evidence is more limited and not as encouraging as one might expect” (p. 359) when it comes to financial education’s causal impact on financial outcomes. In fact, if we turn to Mandell’s prolific research (Mandell, 2006, 2009, 2012; Mandell & Klein, 2009), we see that high school students’ participation in lengthy financial courses failed to improve financial knowledge, let alone financial outcomes. Despite being a lifelong researcher and proponent of financial education, Mandell (2012) concedes that K–12 and college financial courses simply do not work, at least as presently conceived. This lends surprising credence to Willis’s long-held contention (2008, 2009, 2017) that financial education is useless and detrimental, standing in stark contrast to Lusardi’s (2011, 2017) conviction of its necessity. In fairness, a balanced conclusion is that financial education can be useful, but must be easily digestible and of immediate relevance (Drexler et al., 2014; Fernandes et al., 2014). Sadly, this is not a characteristic of the Jump$tart Coalition (2015) standards on which many financial courses are based.


Chen, H., & Volpe, R. P. (2002). Gender differences in personal financial literacy among college students. Financial Services Review, 11, 289–307.

de Bassa Scheresberg, C. (2013). Financial literacy and financial behavior among young adults: Evidence and implications. Numeracy, 6(2), 1–21.

Drexler, A., Fischer, G., & Schoar, A. (2014). Keeping it simple: Financial literacy and rules of thumb. American Economic Journal: Applied Economics, 6(2), 1–31.

Fernandes, D., Lynch, J. G., Jr., & Netemeyer, R. G. (2014). Financial literacy, financial education, and downstream financial behaviors. Management Science, 60, 1861–1883.

Garbinsky, E. N., Klesse, A.-K., & Aaker, J. (2014). Money in the bank: Feeling powerful increases savings. Journal of Consumer Research, 41, 610–623.

Hanna, S. D., Yuh, Y., & Chatterjee, S. (2012). The increasing financial obligations burden of US households: Who is affected? International Journal of Consumer Studies, 36, 588–594.

Hastings, J. S., Madrian, B. C., & Skimmyhorn, W. L. (2013). Financial literacy, financial education, and economic outcomes. Annual Review of Economics, 5, 347–373.

Jump$tart Coalition for Personal Financial Literacy. (2015). National standards in K–12 personal finance education, (4th ed.). Retrieved February 6, 2017, from

Lusardi, A. (2011, June). Americans’ financial capability (Working Paper No. 17103). Washington, DC: National Bureau of Economic Research. Retrieved from

Lusardi, A. (2012, February). Numeracy, financial literacy, and financial decision-making (Working Paper No. 17821). Washington, DC: National Bureau of Economic Research. Retrieved from

Lusardi, A. (2017, March 9). Remarks by Annamaria Lusardi, Academic Director of the Global Financial Literacy Excellence Center at the George Washington University School of Business. Meeting of the Security and Exchange Commission Investor Advisory Committee. Retrieved from

Lusardi, A., & Mitchell, O. S. (2007). Financial literacy and retirement preparedness: Evidence and implications for financial education. Business Economics, 10(1), 35–44.

Lusardi, A., & Mitchell, O. S. (2011). Financial literacy around the world: An overview. Journal of Pension Economics & Finance, 10, 497–508.

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52, 5–44.

Lusardi, A., Mitchell, O. S., & Curto, V. (2010). Financial literacy among the young. The Journal of Consumer Affairs, 44, 358–380.

Mandell, L. (2006, April). Financial literacy: If it’s so important, why isn’t it improving? (Issue Brief No. 2006-PB-08).

Mandell, L. (2009, January 4). The impact of financial education in high school and college on financial literacy and subsequent financial decision making. Paper presented at the meeting of the American Economic Association, San Francisco, CA.

Mandell, L. (2012). School-based financial education: Not ready for prime time. CFA Institute Research Foundation, 2012(3), 107–124.

Mandell, L., & Klein, L. S. (2009). The impact of financial literacy education on subsequent financial behavior. Journal of Financial Counseling and Planning, 20(1), 15–24.

Menard, M. B. (2018). So many courses, so little progress: Why financial education doesn’t work—and what does. Questis, Inc.

Mottola, G. R. (2013). In our best interest: Women, financial literacy and credit card behavior. Numeracy: Advancing Education in Quantitative Literacy, 6(2), 1–15.

Mottola, G. R. (2014, March). The financial capability of young adults—A generational view. Retrieved from

Mottola, G. R., & Kieffer, C. N. (2017). Understanding and using data from the National Financial Capability Study. Family and Consumer Sciences Research Journal, 46, 31–39.

Pinto, L. E. (2013). When politics trump evidence: Financial literacy education narratives following the global financial crisis. Journal of Education Policy, 28, 95–120.

Remund, D. L. (2010). Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. The Journal of Consumer Affairs, 44, 276–295.

Thripp, R. X. (2007, April 4). Relationships between financial capability and educational attainment: An analysis of survey data from the 2015 National Financial Capability Study. Poster session presented at the University of Central Florida’s 14th Annual Graduate Research Forum, Orlando, FL. Retrieved from

Vitt, L. A., Anderson, C., Kent, J., Lyster, D. M., Siegenthaler, J. K., & Ward, J. (2000). Personal finance and the rush to competence: Financial literacy education in the U.S. Middleburg, VA: Fannie Mae Foundation.

West, S., & Mottola, G. R. (2016). A population on the brink: American renters, emergency savings, and financial fragility. Poverty & Public Policy, 8, 56–71.

Willis, L. E. (2008). Against financial-literacy education. Iowa Law Review94, 197–285.

Willis, L. E. (2009). Evidence and ideology in assessing the effectiveness of financial literacy education. San Diego Law Review46, 415–458.

Willis, L. E. (2017). The Consumer Financial Protection Bureau and the quest for consumer comprehension. The Russell Sage Foundation Journal of the Social Sciences, 3(1), 74–93.

Launching a new website on personal finance: Tippyfi

A few days ago, I started a new WordPress website called Tippyfi, with the tagline “making financial independence typical, one person at a time.” This will be a financial education website that I eventually hope to turn into a venture that provides financial advice in an innovative way. While I wrap up my Ph.D. in Education at University of Central Florida over the next 18 months, my goal is to write 100 really useful articles for the site (so far, I have three).

I have written quite a bit about personal finance here on, but I often write in a manner that is not accessible to the public. With Tippyfi, I am writing more accessible, edgy, image-laden pieces that develop, extend, and provide concrete examples for the financial benefit of my readers. Some of my articles will be “deep dives,” such as my new article on how credit card interest is actually calculated (hint: it’s unfavorable to the customer).

Join me over at Tippyfi as I start this new journey.

Graph of typical version of timing the market where people wait for a bigger drop, the market goes up a lot, the investor gives in and buys high, and then the market dips and the investor sells in a panic

Tax-Exempt Retirement Contributions and the Bucket Analogy

Here, I am continuing my prior post and other writings. Even though I am financially competent, tax-exempt retirement accounts are complex and I have only just discovered that Roth 401(k)s, which have only been available since 2006, actually have different contribution limits from Roth individual retirement accounts (IRAs; which have been available since 1997). Before, I had incorrectly thought that the combined limits between the two were $5500. Actually, the limit for a Roth IRA is $5500 per year (under Age 50) and for a Roth 401(k), an additional $18,000 (under Age 50; increasing to $18,500 in 2018). For Americans Age 50 and above, the limits are $6500 and $24,000 (the latter increases to $24,500 in 2018), respectively. Although I work for a university on a stipend (not fellowship) consisting of earned income via an assistantship (graduate teaching associate), I did not discover until recently I can contribute to a 403(b), the non-profit equivalent of a 401(k), in addition to a Roth IRA.

For the uninitiated, Roth accounts require you to have earned income for which you pay income tax now, but in retirement (above Age 59.5), all capital gains taxes are waived. There are also a few other situations such as medical expenses, education expenses, and first-time home-buying that allow you to make withdraws with waived capital gains taxes before Age 59.5. Depending on your tax bracket when the withdraws are made, under the new 2018 tax laws, your capital gains tax (which would be long-term due to investments being held over one year) could be 0%, 15%, or 20% depending on your income, but most likely 15%.

Roth 401(k)s can only be contributed to via employee contributions, which come out of your paycheck. Notably, your contribution is tax-exempt while any employer matching funds are tax-deferred like with a traditional 401(k). Employers usually have retirement programs with companies such as Fidelity whereby employees can pick a percentage of their pay to contribute. Roth accounts are especially applicable to low-income workers (i.e., in the 12% tax bracket) because they might be in a higher tax bracket at Age 59.5+, so tax exemption benefits them more. However, even for those with higher incomes, capital gains can far outstrip the initial contribution over many decades. Furthermore, anyone who has cashed out a U.S. savings bond knows the IRS gives no consideration to inflation when calculating the unearned interest income derived forthwith. Monetary inflation is also not considered for capital gains, which is a reason tax-exempt accounts are especially valuable.

Roth IRAs can only be contributed to via a person with earned income setting up one on his/her own, such as with Vanguard. Employers cannot offer Roth IRAs. Those with earned income can contribute up to $5500 per year to Roth IRAs, tax exempt, in addition to contributing up to $18,000 to a Roth 401(k) if their employer offers one.

Both traditional and Roth retirement accounts are wrappers for other types of investments. You could put your money in a money market account or certificate of deposit, bonds, or equities. Over long time periods (e.g., 15+ years), stocks are the best of these three types of investments. You can change how your retirement fund is invested at any time. Many financial advisers advocate for putting most of your money in an index fund of the S&P 500 or whole U.S. stock market while young, with a transition toward bonds as you near retirement, which offer less risk of loss but less potential for gains.

Sadly, both traditional and Roth retirement accounts grossly favor the wealthy and well-informed, perpetuating wealth inequality. Most Americans cannot being to approach the $18,000 annual limits on 401(k) contributions. Many do not even have an emergency fund. Wages are too low and expenses too high for them to contribute anywhere near $5500 per year to an IRA, as well. Nonetheless, every year that goes by is a missed opportunity to contribute, because there is no “catching up” on prior years’ annual contribution limits (besides being allowed to contribute for a prior year up until tax day—even after you have filed your taxes for Roth IRAs).

The ideal way to build wealth would be to contribute annually to your IRA as follows, and to your 401(k) too if you have the funds available:

Full annual contributions

However, even financially savvy Americans do not typically have enough money available to put $5500 in their IRAs nor $18,000 in their 401(k)s per year. If they are above-average, their contributions might look like this:

Varying partial annual contributions

However, the rules to withdraw retirement monies are complex and fraught with taxes and penalties. Most Americans cannot say with assuredness that they won’t “need” thousands of dollars until Age 59.5+. Contributing to a retirement account only to cash it out a few years later is common, often with penalties. Even without penalties, such behavior harshly perpetuates wealth inequality because there is no way to put the piggy bank back together after hammering it open (i.e., one cannot withdraw money and then make up for this later, and taking a loan from your retirement account comes with unsavory fees). Consequently, the statistical mode for American retirement contributions is as follows:

No annual contributions

Stocks go up and down. When we look at this S&P 500 chart from Wikipedia, it is clear that one could invest at a market peak and be upside-down for many years:

66-year S&P 500 chart

However, being invested over a long duration of time results in a near-guarantee of returns that exceed money market accounts, certificates of deposits, or bonds. Without thinking about tax-advantaged retirement accounts, one would think that late-bloomers to retirement saving can simply catch up by putting in a lot of money now. However, the annual contribution limits for these accounts, shown through the imagery of buckets, prevent late bloomers from catching up. Although one can contribute the maximum per year starting now, there is no way to go back and contribute for prior years—even at current market levels. Therefore, the typical American suffers the double whammy of missing out on tax-exempt or tax-deferred retirement savings and market gains. This situation is insufferable.

When you retire the chances are good that you will suddenly be receiving far less income than when you were working. If you apply for a reverse mortgage you can fix that problem by borrowing cash from your home’s equity. One reason such a loan is so popular is the lack of a monthly bill. If you were to apply for a traditional home loan you would increase your monthly bills by one. However, with a reverse-mortgage you can repay the loan long after you borrow the money. The only major stipulation is that you cannot move out of the home during the loan period. If you do so the balance must be repaid in full within a short period of time. Alternatively, the balance can be taken out of the sale price if the home is sold after you vacate it.

Updated 2018-01-30 to note graduate assistants can contribute to a 403(b) and to note $500 increase to 401(k) annual contribution limits in 2018.

Thoughts on Financial Education, Retirement, Starbucks Partners

These are ideas I wrote on 2018-01-27 about financial education and retirement accounts for Starbucks partners (employees). I am thinking about starting a financial education corporation or not-for-profit after finishing my Education Ph.D. in August 2019.

Giving financial advice is largely unregulated, but investment advice as basic as “put 50% of your money in VTSMX” is regulated. A firm must be an Registered Investment Adviser (RIA) with one or more Investment Adviser Representatives (IARs) to proffer such advice. Becoming an IAR requires passing the FINRA Series 65 exam for $175, and an RIA can have just one IAR. The RIA must be registered with FINRA and the U.S. states it does business in (or, for huge firms RIAs, with the SEC), which costs several hundred dollars more. For instance, LearnVest, Inc. has a subsidiary called LearnVest Planning Services LLC that is an RIA. Becoming a Certified Financial Planner (CFP) or other achievement is not required. The Series 65 exam can be studied for in a week or less and only 72% is required to pass. It is offered at Prometric testing centers. LearnVest, and my venture, would share the characteristic of just advising clients on what to do with their money, but not managing their money. We would both have zero assets under management (AUM) meaning we just advise on what type of accounts to open, what companies to use (e.g., Vanguard), and what moves to make. These “moves” would largely be related to general financial planning and tax avoidance, but not timing the market or picking sectors or individual stocks.

In particular, the mobile apps available for learning about personal finance are shockingly pathetic. Most focus on particular areas (e.g., You Need a Budget, Mint, Personal Capital) rather than being comprehensive. LearnVest’s mobile app is particularly egregious, being available only for iOS and not having been updated for four years.

An example: A Starbucks employee should probably have a Fidelity Roth IRA (“Partner Roast“) contributing at least 5% of each paycheck for the 100% “safe harbor” employer match on up to 5% contributed, but then additionally should have a Vanguard Roth IRA to contribute more money each year. If they can only muster $1000, they can use the STAR fund (VGTSX, $1000 min), or more preferably the total stock market index fund (VTSMX) if they have $3000 to spare (note: Vanguard ETFs may be an option for smaller balances). The additional Roth IRA is needed because a Starbucks employee who makes $25,000 per year would only be contributing $2500 to their Roth IRA even with the partner match, while the max per year to contribute to Roth IRAs is $5500. While the partner could contribute more than 5% of income, it can be difficult to predict one’s future financial situation or exact income at the start of the year. If a Starbucks partner starts out contributing 15% of income + 5% match but then has to reduce to zero later in the year, they lose out on the safe harbor match for the duration of pay periods where they reduced their contribution to zero. However, like most employer-sponsored retirement savings plans, the Starbucks–Fidelity offering does not allow Starbucks partners to contribute from their checking account! They can only contribute from payroll by setting the percentage in advance. However, it is perfectly lawful to have two Roth IRA accounts as long as the combined contributions don’t exceed $5500 for the year (or $6500 if Age 50+). Further, Americans can contribute for the prior year up to the tax deadline (e.g., until 2018-04-17 for Year 2017). I speculate that 95%+ Starbucks partners don’t know this. Further, the majority probably don’t even have a 3-month emergency fund. Finally, Starbucks offers many benefits, but not a financial wellness program.

Qualitative Research Proposal on Attitudes Toward the Working Poor

This is a research proposal that I completed on 2017-12-06 for the class, EDF 7475: Qualitative Research in Education taught by David Boote, Ph.D. at University of Central Florida. Note that I do not intend to conduct this research.

EDF 7475 Qualitative Research Proposal on Attitudes Toward the Working Poor
Richard Thripp
University of Central Florida

Financially, many Americans are not only unprepared for retirement, but also the day-to-day surprises of life. When Americans are asked whether they can “come up with” $2000 within 30 days, nearly half say they could “probably not” or “certainly not” do so (Lusardi, 2011). While this is troubling, one way we can shed light on this phenomenon is to research Americans’ approach to saving and perceptions toward others who are financially struggling.


My proposed study is to conduct semi-structured interviews with working-class and privileged Americans about their approach toward saving and their perceptions of others who are struggling financially. My interest here was crystallized from analyzing employee–employer reviews of Rent-A-Center (Glassdoor, 2017) that I selected for complaints about taking advantage of customers (e.g., repossessing children’s beds). However, to my surprise, when coding these interviews, there were more statements deriding the customers as “liars and thieves,” the “worst specimens of humanity,” and as deserving their fates due to their lack of personal responsibility. While in part, this may be due to racism toward African Americans (Gilens, 1996), surprisingly, welfare recipients themselves may tend to consider other welfare recipients “dishonest and idle” (Bullock, 1999). The purpose of this study is to learn, via qualitative methods, about attitudes toward people with financial difficulties from individuals of two socioeconomic strata. A semi-structured interview approach will yield richer data and useful insights that would not appear in a simple questionnaire.

Research Questions

1. What are privileged and working-class Americans’ thoughts toward others who are financially struggling, and how do these attitudes differ between group?
2. How do privileged and working-class Americans differ in their approaches to saving?

Significance of the Project

This study will contribute to research on financial psychology, such as with respect to spending behavior (e.g., Soman, 2001). A wealth of survey data shows a lack of financial literacy in the United States, Europe, and beyond (Lusardi & Mitchell, 2014). Educators and policymakers erroneously presume that financial education is efficacious (Fernandes, Lynch, & Netemeyer, 2014). Meanwhile, inequity in the United States is growing at a breakneck pace, which financially disenfranchises a large proportion of the population (Lusardi, Michaud, & Mitchell, 2017). Looking at differences between the rich and poor in their beliefs about the financially downtrodden may yield useful insights.

Literature Review

When comparing the working poor to the financially privileged, it is important to recognize the two groups are not at all on equal footing. For instance, while using a tangible or immediate payment method like cash or a debit card results in reduced spending (Soman, 2001), the tendency for the working poor to use debit cards, rather than credit or charge cards, engenders delinquency and overdraft fees. Stango and Zinman (2009, 2014) lament that consumers pay an annual average of about $150 per checking account in overdraft fees, and more than half of these are “avoidable,” meaning the consumer has funds available elsewhere that could have paid for their purchase. Moreover, the working poor are disproportionately affected, which may be due to a lack of attention due to many other pressing financial concerns (Stango & Zinman, 2014), and because a $35 overdraft fee does not scale with financial privilege. In fact, banks may be more willing to refund such a fee for those who need it least.

Lusardi and Mitchell (2014) discuss a saddening finding from the U.S. Financial Capability Study ( While 70% of Americans rate their financial knowledge highly, only 30% can actually answer a small number of quite basic financial questions correctly. Less education and being in a vulnerable group, such as African Americans, women, young or old, and rural residence, are all correlated with less financial literacy and by consequence, financial struggles. At a macro level, this undermines American economic stability and perpetuates wealth inequality, including the subjugation and disenfranchisement of vulnerable and protected groups (Lusardi et al., 2017).

Sadly, financial education courses, at least in their present form, do not have lasting beneficial impact on financial behaviors (Fernandes et al., 2014; Mandell, 2012). On the other hand, regulatory reforms (Grubb, 2015) and “nudging” the working poor toward better choices (Thaler & Sunstein, 2008) have merit. However, a complete analysis of the plight of the financially disadvantaged must include our attitudes and attributions. Financial education may implicitly embody these perceptions, thereby patronizing and alienating its intended population, or at the very least, lacking relevance.

Americans tend to have negative attitudes toward the poor. If they believe in the Protestant work ethic or the “just-world” hypothesis, which claims that good and evil actions are eventually rewarded or punished, they may be more likely to blame the poor for their situation (Cozzarelli, Wilkinson, & Tagler, 2001). Individuals who are homeless have been shown to be stigmatized as much or more than the mentally ill, with a general attitude that they should blame themselves for their situations (Phelan, Link, Moore, & Stueve, 1997). “Black welfare mothers” are stigmatized and derided far more than their white counterparts, in part because of availability bias due to politicization (Gilens, 1996). While welfare recipients tend to blame structural rather than individual factors for poverty, they surprisingly view other welfare recipients as dishonest and lazy to a greater extent than middle-class respondents (Bullock, 1999). This finding is in line with my observation of Rent-A-Center employees’ (Glassdoor, 2017) derogatory views toward customers, given Rent-A-Center is not a high-paying job and thus most employees could be classified among the working poor. Attitudes toward poverty, including differences between the poor and financially advantaged, deserve further inquiry.

Research Methods

My research will be organized around in-person semi-structured interviews from purposefully sampled participants who volunteer for this research by responding to solicitations.

Research Site

The research site will be my office, Education Complex, Room 123L, at the University of Central Florida. I share an office with other doctoral students, but will coordinate with their schedules to conduct interviews when I have the room to myself. Because personal finances can be a sensitive topic, this setting may be preferable to a public setting (e.g., a cafeteria) because it offers more privacy. In the office, I will interview participants across a small desk. I will use an audio recording app on my smartphone and a printed interview protocol attached to a clipboard, with space to jot down notes with a pen. This is much less intrusive than taking notes on computer or mobile device during the interview.

Researcher’s Role

I will be interviewing the participants using a semi-structured interview protocol that I developed, conducting brief follow-up contacts with participants for member checking, and conducting analysis and interpretation of the data which will include my rough notes, field notes, and audio recording of the interviews (Creswell & Poth, 2017). Overall, my positionality is as a financial expert and researcher who advocates for educational interventions and industry reforms that benefit the working poor. One weak spot is that I am not personally familiar with having financial difficulties, so it is somewhat challenging to relate to the working poor.

Sampling Method

I will solicit participants via advertisements posted in the Education Complex at UCF and at a nearby country club or other place where privileged people congregate. I may also use email or web solicitations. All solicitations will funnel prospective participants into a Qualtrics questionnaire which will use deception (with approval from the UCF Institutional Review Board) to hide the primary purpose of the research; namely, searching for differences in attitudes toward the financially disadvantaged between working class and privileged individuals. The Qualtrics questionnaire will frame the purpose of the research in general terms about Americans’ attitudes toward saving. Several questions about prospects’ financial and work situations will be included, ostensibly to gauge the financial situation of Americans. I will use responses to these questions to select a number of privileged and working-class participants to contact.

To define the construct of privileged versus working class, I will ask these questions:

1. What is your annual income?
a. $1 – $29,999
b. $30,000 – $74,999
c. $75,000 – $149,999
d. $150,000 or more

To what extent do you agree with the following statements? [Each question will be on a 1-5 Likert-type scale from Strongly Disagree to Strongly Agree]

2. I could come up with $2000 within 30 days (Lusardi, 2011).
3. I could stop working for a year and live comfortably on either accumulated savings or income from a pension, gifts from family, et cetera without going into debt.
4. I have not had significant financial difficulties in life.

Participants who have higher incomes and agree who tend to agree with the latter three questions will be considered privileged, while others will be considered working class. Participants may be any age 18 or older. I may aim for rough parity in age between groups, but am not specifically interested in age differences (nor gender, ethnicity, etc.) so this would not be preeminent.

Data Collection Methods

When contacting prospects, I will offer participants an incentive of $20 to participate in a 30-minute face-to-face interview at my UCF office. This will be explained as furthering research on financial literacy, education, and attitudes for the public’s benefit. I would likely invite 10 participants per group (privileged and working class) with a goal of five final interviews per group. Because these would already be “warm” prospects who completed a Qualtrics questionnaire that mentioned an in-person interview, conversion rates should be relatively high. For certain participants on an as-needed basis, I may conduct some interviews via recorded telephone call or Skype video chat.

Interviews will be semi-structured, first with the icebreaker question, “what would you do if you received $10,000 unexpectedly right now?” There may be interesting differences between groups in their approach to handling a small windfall. The remainder of the interview will use these guiding questions:

1. Tell me about your approach to saving money.
2. Have you had significant financial struggles in your life?
3. How do you feel about others who are financially struggling?

I will listen carefully to what participants say. Although my research questions are the primary interest, if the interview diverges, this may also be of interest. At the conclusion I will ask them to verify what I have written down (member checking) and I will take notes or make corrections as appropriate. Immediately after I will write up field notes. Later, I will transcribe the audio recording. Subsequently, I will perform thematic coding on the interviews. I anticipate an emergent coding process whereby one or several interviews are coded prior to conducting the rest of the interviews with an interview protocol that may be revised based on prior findings.

I will also be asking participants if they are interested in an optional follow-up interview which can be in-person, by phone, or Skype. Then, I hope to conduct at least one follow-up interview per group to collect more data based on findings that emerge from initial interviews.

Analysis and Trustworthiness

Data analysis plan. I will set the stage for data analysis with detailed field notes and transcripts. Then, I will code the interviews iteratively for meaningful and noteworthy statements. These will be clustered into themes regarding participants’ attitudes toward the financially struggling, in–out group bias, approaches to saving, feelings of self-determination or external locus of control, et cetera. The goal will be to reach thematic saturation, thereby exhaustively describing the phenomenon and enabling analysis of its structure (Creswell & Poth, 2017). This will be an iterative process with revisions between interviews, as I do not expect to conduct all 10 interviews at once.

Establishing validity and trustworthiness. These will partly be established from member checking at the conclusion of interviews, iterative revisions between interviews to address shortcomings, and in at least one follow-up interview per group (privileged and working poor). Conducting interviews in a private, in-person setting may enable trustworthiness by encouraging participants to be frank about their attitudes toward the working poor. Participants will have already completed a sorting questionnaire via Qualtrics, and will be assured their responses will be kept anonymous by use of aliases and, when published, masking or alteration of information that might give away their identities. In particular, this may be important for privileged participants who may be community figures. Overall, the insights from this qualitative investigation should be both practical and entertaining, with a level of validity and trustworthiness comparable to or exceeding that of similar qualitative research.


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