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The ant and the grasshopper revisited: The present psychological
benefits of saving and future oriented financial behaviors
Soyeon Shim
a,
⇑
, Joyce Serido
a
, Chuanyi Tang
b
a
Norton School of Family and Consumer Sciences, The University of Arizona, Tucson, AZ 85721, United States
b
Warrington College of Business Administration, University of Florida, FL, United States
article info
Article history:
Received 6 December 2010
Received in revised form 16 August 2011
Accepted 18 August 2011
Available online 17 September 2011
JEL classification:
D14
PsycINFO classification:
3920
G01
G010
D14
D140
Keywords:
Saving attitude and behavior
Well-being
Theory of Planned Behavior
Young adults
abstract
This study examines the impact of saving and future-oriented financial behaviors on young
adults’ well-being. Using two-timed longitudinal data (N= 748) collected both prior to and
during the economic crisis, we tested and confirmed a psychological process model (i.e.,
financial attitude ?behavioral intention ?actual behavior ?well-being), one that
included parental norms, perceived behavioral control and financial planning horizon as
antecedent factors. Our findings indicate that the more positive a young adult’s attitude
toward financial behaviors, and the greater his/her perception of parental expectations,
then the stronger will be this young adult’s intention to perform such behaviors. We found
that behavioral intention at Time 1 contributed to actual financial behaviors at Time 2,
which in turn was positively related to a young adult’s present sense of well-being. We also
found that perceived behavioral control and financial planning horizon influenced both
behavioral intention and actual behavior. Although perceived impact of the economic crisis
moderated the link between past and present well-being, it did not affect the hierarchical
flow of the model. We discuss the theoretical and practical implications of our study per-
taining to consumer financial education.
Ó2011 Elsevier B.V. All rights reserved.
All summer long, the grasshopper sang and played while the ant worked hard, saving food for winter. When winter arrived, the
starving grasshopper begged the ant for food. The ant admonished the grasshopper for its idleness.
– from Aesop’s fable of
The Ant and the Grasshopper
1. Introduction
During the past two decades, the average savings rate for American households declined sharply, dropping from an
annual rate of 11.9% in 1982 to a rate of less than 1% in 2008 (Bureau of Economic Analysis (BEA), 2010). Similar trends were
found in Australia and the UK (Guidolin & La Jeunesse, 2006), as well as in Canada (Anderson & Nevitte, 2006). The global
financial meltdown of 2008 and the continuing recession have prompted many consumers to start saving again (Bureau
0167-4870/$ - see front matter Ó2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.joep.2011.08.005
⇑
Corresponding author. Tel.: +1 520 621 7147; fax: +1 520 621 9445.
E-mail addresses: shim@email.arizona.edu (S. Shim), jserido@email.arizona.edu (J. Serido), chuanyi.tang@warrington.ufl.edu (C. Tang).
Journal of Economic Psychology 33 (2012) 155–165
Contents lists available at SciVerse ScienceDirect
Journal of Economic Psychology
journal homepage: www.elsevier.com/locate/joep
of Economic Analysis (BEA), 2010), but whether this reversal marks the beginning of a long-term change in consumer finan-
cial behaviors remains to be seen. If it does not, then the current pessimism helping to fuel the recession could continue, for,
as UK researchers (Brown, Taylor, & Price, 2005) have demonstrated, financial well-being is not only essential to long-term
personal health but also to psychological well-being; thus it seems warranted that research seek a better understanding of
what motivates individuals to make financial decisions, especially decisions related to saving and other future-oriented
financial behaviors. Such research should also seek to measure the effects of these decisions on an individual’s sense of
well-being.
Consistent with a growing interest in understanding positive psychological adjustment, many authorities would agree
that saving is an important adaptive life skill for young adults. Certainly, the parents of previous generations knew this,
and taught their children the personal value of saving, both as a hedge against future financial uncertainty and as a way
to accumulate long term wealth. Thrift was in fact once a central tenet of the financial ethos in both the UK and the US
(Webley & Nyhus, 2001), and cautionary tales such as Aesop’s fable ‘‘The Ant and the Grasshopper’’ were familiar both at
home and in school. Yet, for young adults who have grown up in an era of increased spending and immediate gratification,
the act of saving may present a challenge. Perhaps the idea of spending one’s youthful years at diligent and steady
labor seems repugnant, or even soul-killing, as Lionni suggests in ‘‘Frederick’’ (1971), his modern version of Aesop’s tale
(Webley & Nyhus, 2001).
1.1. Young adulthood as a developmental transition period and financial development
From a developmental perspective, college students are in an important transition period, moving from dependence on
parents towards personal and financial self-sufficiency. Coincident with changing social relationships, educational goals and
career choices, college students are also cultivating economic aspirations and developing personal financial habits that will
form a basis for the financial habits practiced in adulthood (Olshavsky & Granbois, 1979).
The theory of consumer socialization (Moschis, 1985) posits that young people learn consumer skills and attitudes—
including attitudes about saving and investing—from socialization agents, especially from their parents. Young adults will also
encounter unique social and economic conditions that will further shape their financial attitudes. Attitude, defined as an
internal psychological tendency, is based on one’s positive or negative evaluations toward an object, or actions toward a spe-
cific object (Eagly & Chaiken, 1993). Thus, in this study, we define an individual’s attitude toward saving and future-oriented
financial behaviors as an internal psychological state influenced by his or her positive or negative evaluations regarding such
behaviors. Although conceptualizations of savings behaviors vary widely (see Katona, 1975), our interest lies in understanding
what motivates college students, who typically have limited incomes, to save and engage in future-oriented financial behav-
iors. In this study, therefore, we conceptualize the act of savings and future-oriented financial behaviors as a voluntary behav-
ior that results from a conscious, complex decision-making process involving a range of psychological, socio-psychological,
and economic factors (Fischer & Montalto, 2010). Therefore, we define savings and future-oriented financial behaviors as
three types of action: saving, investing, and learning about financial management. While saving and investing are closely re-
lated, future-oriented concepts, financial education, that is ‘‘learning skills, knowledge and attitude,’’ is also important to the
core concept of future-oriented consumer socialization for young people (Moschis, 1985). For this reason, both schools and
government agencies in the US have become more interested in establishing and/or promoting financial literacy educational
programs (e.g., the Young Adults Financial Literacy Act, H.R. 3147 2009) in recent years, particularly after the financial crisis in
2008.
1.2. The purpose of the present study
Previous researchers have examined the long-term benefits of income on life satisfaction (e.g., Johnson & Krueger,
2006). Few studies to date, however, have sought to understand either the process by which young adults choose to save
or the relationship between the act of saving, or the performing of a future-oriented financial behavior, and a present sense
of well-being. To fill this gap in our knowledge, then, we developed a conceptual framework describing the underlying psy-
chological processes by which young adults translate their attitudes and intentions into actual behavior, and how these
positive behaviors ultimately affect their present sense of well-being. A recent global study (Diener, Ng, Harter, & Arora,
2010) provides clear evidence that day-to-day well-being is more strongly affected by social psychological factors, such
as a sense of ‘‘being in control of your life,’’ and ‘‘having friends and families to rely on in a pinch,’’ and less so by having
money.
The normative financial developmental process that young people undergo can be significantly altered, particularly at a
macro-level, by unexpected, circumstantial events such as the recent economic crisis (Elder, 1974). Thus, the current
recession presents an opportunity to study the impact of global economic instability on young people’s financial attitudes,
behaviors, and sense of well-being. Consequently, and relying on a unique, longitudinal dataset pertaining to the saving and
future-oriented attitudes and behaviors of young adults, we constructed a framework to examine the link between intended
and actual saving and future-oriented financial behaviors, and also to test for their ultimate relations with present well-
being. The dataset was collected in two waves – the first coming before the economic crisis (spring 2008) and the other
1 year after the crisis (spring 2009).
156 S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165
1.3. Conceptual and theoretical framework
Our conceptual framework combines Ajzen’s Theory of Planned Behavior (1991) with the Model of Happiness (Lyubomir-
sky, Sheldon, & Schkade, 2005). The Theory of Planned Behavior (TPB) focuses on motivation and ability as antecedents of
volitional behavior (as opposed to habitual behavior). Therefore, the TPB model is a good fit for studying saving, investing,
and learning behaviors, which are volitional behaviors (being both planned and future-oriented). It is a particularly good fit
when studying college students, since they do not typically have sufficient discretionary income nor are they involved in
compulsory savings programs. Our conceptual model proposes that actual savings and future-oriented behaviors follow from
behavioral intention towards the act of performing such behaviors and that the act itself follows from three antecedent psy-
chological factors: (1) the positive or negative valence of attitudes, (2) subjective norms, and (3) perceived behavioral con-
trol. In addition to perceived behavioral control, we included ‘‘financial planning horizon’’ as an antecedent since saving
behaviors are future-oriented, decision-making behaviors that require both planning and self-control on the part of the saver
(Rabinovich & Webley, 2007). Extending the model in this way is consistent with previous studies (see Ajzen, 1991; Eagly &
Chaiken, 1993). Also, as Ajzen (1991) noted, behaviors are distinct from outcomes; that is, financial behavior is not an end in
itself, but rather a contributor to one’s sense of well-being. For this reason and because a sense of well-being is considered a
social indicator of how and why people experience their lives in positive ways (Diener, 1984), we added ‘‘sense of well-
being’’ as the outcome of our conceptual model, as conceptualized in the Model of Happiness (Lyubomirsky et al., 2005).
The Model of Happiness (Lyubomirsky et al., 2005) posits that one’s level of happiness is determined by three sets of fac-
tors: (1) intentional activity, (2) circumstances, and (3) genetics. Although happiness, as determined by genetics or basic per-
sonality, is typically fixed around a central setpoint (Lyubomirsky et al., 2005), the remaining factors (intentional activity and
circumstances) are dynamic. Therefore, we elected to consider saving and future-oriented financial behavior in the context of
these two factors, presuming that people who choose to save (an intentional activity) are taking action on their own behalf in
anticipation of a future goal. A growing body of research finds that proactive coping behavior – that is, current behavior
undertaken to avoid future problems or to attain future goals (Schwarzer & Knoll, 2003) – correlates with well-being (Cohen,
Ben-Zur, & Rosenfeld, 2008). Thus, the act of saving may boost one’s sense of well-being, because it is both intentional and
proactive. Finally, the economic crisis is an example of an external circumstantial event, and so we expected to find that an
individual’s perception of the economic impact of such an event would affect that individual’s sense of well-being. In support
of the Model of Happiness, then, we assumed that young adults’ sense of well-being is, in part, dependent on their saving and
future-oriented financial behavior and that we could expect the conventional wisdom set forth in the fable of ‘‘The Ant and
the Grasshopper’’ to be demonstrated: those who plan ahead financially are generally happier than those who do not.
2. Hypotheses development
2.1. Attitude, planned behavior factors, and behavior
Numerous prior studies have employed the TPB to examine various human behaviors and confirm the relationships be-
tween attitude and behavioral intention. Most recently, for example, Shim, Xiao, Barber, & Lyons (2009) used the model to
confirm that young adults’ attitude toward performing various positive financial behaviors is significantly related to their
intention to perform those behaviors. On the basis of these previous studies we hypothesized the following:
H1a. Young adults’ attitudes toward saving and future-oriented financial behaviors will influence their behavioral intention
to perform such behaviors.
Previous studies have found that parents’ influence is critical in preventing their children from engaging in risky credit
behavior while in college (Palmer, Pinto, & Parente, 2001) and in predicting college students’ positive financial behavioral
intention (Shim et al., 2009). Therefore, we hypothesized the following:
H1b. The more strongly a young adult conforms to his/her parents’ expectations, the more likely it is that the young adult
will intend to perform saving and future-oriented financial behaviors.
One previous study found that perceived behavioral control is a key predictor of positive financial behavior among young
adults (e.g., Shim et al., 2009). Another found that perceived behavioral control is based on past experience as well as antic-
ipated barriers (Ajzen, 1985). In other words, when contemplating a behavior, an individual attempts to ascertain the effort
needed, taking into account both the resources and skills required and the opportunities available. In this process, then, one’s
perception of control, rather than actual control (Danes & Rettings, 1993), is likely to reflect both existing constraints and
available resources and opportunities (Ajzen & Madden, 1986). We, therefore, formed the following hypothesis:
H1c. The greater one’s perceived behavioral control, the more likely it is that a young adult will intend to perform saving and
future-oriented behaviors (behavioral intention) and will perform such behaviors (actual behavior).
People who successfully implement their saving plan generally establish longer time horizons than do those who fail to
realize their plans (Rabinovich & Webley, 2007). Other researchers have also reported a positive relation between planning
horizon and saving behaviors (Fischer & Montalto, 2010; Lusardi, 1999). Therefore, we hypothesized the following:
S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165 157
H1d. The further off the established time horizon, the more likely it is that a young adult will intend to perform saving and
future-oriented financial behavior (behavioral intention) and will perform such behaviors (actual behavior).
According to Ajzen (1985), the time that elapses between the formation of a behavioral intention and the actual execution
of a behavior must be taken into consideration when assessing the correlation. Generally, the shorter the time lapse, the
stronger the relation between the two constructs. Ajzen (1991) also demonstrated that behavioral intention, along with per-
ceived behavioral control, predicts actual behavior. Therefore, we hypothesized the following:
H1e. The stronger a young adult’s intention to perform saving and future-oriented financial behaviors, the more likely it is
that he/she will perform such behaviors.
2.2. The act of saving and future-oriented financial behaviors and a sense of well-being
There is some empirical support for the view that individuals who save fare better than those who do not, regardless of
nationality, income-level, or age. One recent longitudinal study of American workers and retirees found, for instance, that
those who began to save for retirement at the outset of the study reported greater health and well-being a decade later, as
compared to those who did not (Noone, Stephens, & Alpass, 2009). Similarly, Brown et al. (2005) found that heads of British
households who saved money each year were more likely to report a higher sense of well-being than those who did not save.
Also, Scanlon and Adams (2009) discovered that adolescents who saved perceived themselves as more confident than those
who did not. Although these studies do not confirm a causal relationship between saving behavior and well-being, it can be
assumed that saving and future-oriented financial behaviors are positively related to overall well-being and financial well-
being as follows:
H2a. A young adult who engages in more frequent saving and future-oriented financial behaviors will report a greater sense
of overall well-being and financial well-being.
A subjective sense of well-being is an individual assessment of the overall quality of life, one that encompasses both objec-
tive life circumstances and subjective factors across various life domains (Easterlin, 2006). Given the substantial genetic com-
ponent inherent to individual levels of subjective well-being (Lykken & Tellegen, 1996), it is not surprising that levels of
subjective well-being remain relatively stable across the life span. However, within specific domains of life, well-being does
tend to vary more, according to an individual’s age. Physical well-being, for one, typically declines with age, while financial
well-being remains stable until midlife and then increases as an individual passes into old age (Easterlin, 2006). While a sense
of well-being within one specific life domain (e.g., financial) does not necessarily indicate well-being in other life domains (e.g.,
career), a higher well-being within each life domain contributes to overall subjective well-being (Easterlin, 2006). Given these
findings, we examined young adults’ overall sense of well-being and also their perception of financial well-being as follows:
H2b. Young adults who report a higher overall and financial well-being at Time 1 will report a higher overall and financial
well-being at Time 2.
2.3. The moderating effects of the perceived impact of economic crisis
External and unexpected circumstances and the adjustments they impose on the lives of individuals affected by them
increase the risk of psychological and physical illness (Dohrenwend & Dohrenwend, 1981). Economic recessions, for exam-
ple, can cause long-lasting decreases in well-being. One US study, comparing data from a sample taken both prior to and
during the 1974–1975 recession, found that psychological distress increased and job satisfaction decreased (Tsausig & Fen-
wick, 1999). And in a study of the 1991 housing recession in Great Britain, Taylor, Pevalin, and Todd (2007) found that the
inability to make housing payments, over and above financial hardship, significantly decreased psychological well-being
among heads of households. On the basis of these studies, it seems reasonable to expect that the timing and magnitude
of the recession in 2008–2009 may have affected young adults’ overall sense of well-being and domain specific financial
well-being. Hence, we proposed the following hypothesis:
H3a. Young adults who perceive a greater economic impact will report a greater decline in both overall sense of well-being
and financial well-being between Time 1 and Time 2.
Though we are aware of no studies that have examined the ability of the TPB to account for the impact of severe economic
recession, it is possible that the link between intention to save and perform future-oriented financial behaviors and such ac-
tual behaviors may be altered by one’s perception of economic impact. The findings of research on adolescents growing up in
the Great Depression (Elder, 1974) indicate that changing economic conditions prompt changes in people’s financial behav-
iors. In a more recent, nationwide, longitudinal study, Yeung and Hofferth (1998) found that Americans with more assets,
and also those living in areas with greater employment opportunities, responded more proactively (e.g. seeking employ-
ment) and recovered more quickly than did those with fewer assets. Given the magnitude of the recent financial crisis
and its potential to overwhelm a young adult’s sense of control over financial matters, we hypothesized the following:
158 S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165
H3b. A young adult who at Time 1 reports an intention to save and perform future-oriented financial behaviors and also
reports a perception of greater economic impact will report fewer such actual behaviors at Time 2.
3. Method
3.1. Procedure and sample
Over an 8-week period during spring 2008, we collected baseline data (Time 1) from first-year students enrolled full-time
(i.e., 12 or more units) at a major, land-grant university in the US. After we received the Human Subject Committee’s ap-
proval, we invited the entire freshman class (approximately 6000 students) to participate in the study, using various recruit-
ment methods. All respondents were offered a nominal financial incentive for their participation. The survey questionnaire
was posted online and an identical pencil-and-paper survey was administered in classrooms and freshman residential halls.
Students’ university identification numbers were recorded and verified to prevent duplicate survey entries. The full sample
was comprised of 2098 first-year students representing 32% of the 2007 first-year cohort.
One year later, in spring 2009, after the financial crisis, we collected follow-up data (Time 2) by asking the Time 1 par-
ticipants still enrolled at the university (1950 or 93% of the original sample) to complete a brief online survey. The first 500
respondents were offered a nominal financial incentive for their participation. The data for this study thus comes from the
748 students (34.6% male and 65.4% female) who responded to both the Time 1 survey and the Time 2 survey, a sample that
hereinafter we will refer to as the ‘‘sub-sample.’’ There were no significant differences between the two samples with respect
to socio-economic status, gender, or ethnicity. However, there was a significant difference in self-reported GPA, with 76.74%
of the sub-sample reporting a GPA greater than or equal to 3.0, as compared to 64.50% of the Time 1 respondents who did not
complete the Time 2 survey (p< .001).
3.2. Measures
At Time 1, we collected data concerning demographic characteristics, planned behavior variables (attitude, subjective
norms, perceived behavioral control) and behavioral intention, as well as financial planning horizon. Data concerning the
well-being of the respondents were collected both at Time 1 and Time 2. We measured follow-up, actual saving and fu-
ture-oriented financial behavior and perception of impact of the economic crisis at Time 2. The constructs are described
in detail below (see Table 2 for the reliability of constructs with multiple items).
To measure the respondents’ past and current overall sense of well-being, we employed a measure first used by Diener
(1984). Respondents were asked to rate their overall sense of well-being on a five-point scale ranging from 1 (poor)to5
(excellent), at Time 1 and Time 2, respectively. To measure the respondents’ past and current financial well-being, we
adopted three items from Shim et al. (2009). Respondents answered each question using a five-point scale ranging from 1
(strongly disagree)to5(strongly agree), at Time 1 and Time 2, respectively.
We measured the respondents’ financial planning horizon at Time 1. Respondents were asked, ‘‘In planning your finances,
which of the following time periods is most important to you?’’ Responses were calibrated on a five-point scale ranging from
1(next few months)to5(longer than 10 years).
Attitude was measured at Time 1 by asking respondents to rate their feeling towards three future oriented financial activ-
ities (saving, investing, and financial learning), using a five-point scale ranging from 1(very unfavorably)to5(very favorably).
To express the value of parental norms, we used a multiplication of parental expectations and students’ motivation to com-
ply (Ajzen, 1991). First, respondents were asked to indicate, on a five-point scale ranging from 1 (strongly disagree)to5
Table 1
Correlations among variables.
Variables 1234567891011121314
Past financial well-being
1
1.00 .05 .23
**
.13
**
.09 .67
**
.35
**
.35
**
.22
**
.24
**
.06 .11
**
.12
**
.36
**
Attitude
2
1.00 .32
**
.46
**
.13
**
.05 .11
*
.14
**
.14
**
.05 .04 .09
*
.12
**
.02
Parental norms
3
1.00 .37
**
.20
**
.19
**
.36
**
.12
**
.13
**
.07 .07 .05 .14
**
.00
Behavioral intention
4
1.00 .29
**
.14
**
.09
*
.17
**
.11
**
.08
*
.03 .04 16
**
.01
Actual behavior
5
1.00 .26
**
.19
**
.15
**
.07 .14
**
.02 .03 .15
**
.11
*
Current financial well-being
6
1.00 .24
**
.31
**
.16
**
.30
**
.02 .11
**
.11
**
.57
**
Parent SES
7
1.00 .06 .14
**
.10
**
.03 .27
**
.13
**
.20
**
Perceived financial control
8
1.00 .17
**
.15
**
.04 .07
*
.10
**
.20
**
Past sense of overall well-being
9
1.00 .42
**
.05 .16
**
.01 .02
Current sense of overall well-being
10
1.00 .01 .09
**
.03 .16
**
Gender
11
1.00 .05 .02 .11
**
Ethnicity
12
1.00 .06 .07
*
Financial planning horizon
13
1.00 .11
**
Perceived impact of economic crisis
14
1.00
*
p< .05.
**
p< .01.
S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165 159
(strongly agree), the extent to which their parents thought they should engage in each of the three future oriented financial
behaviors (savings, investing, and financial learning). The respondents were then asked to indicate on a five-point scale
(1 = not influenced at all; 5 = significantly influenced) the extent to which their own financial behaviors were influenced
by their parents. Finally, the total scores for parental subjective norms were computed by multiplying the numerical value
of each of three measures of parental expectations by the numerical value of students’ motivation to comply.
To measure the respondents’ perceived financial control at Time 1, we adopted a question from Shim et al. (2009).
Respondents were asked, ‘‘When it comes to managing your money, how easy or difficult is it for you to stick to your plans?’’
Responses were calibrated on a five-point scale ranging from 1 (very easy)to5(extremely difficult). The variable was reverse
coded for the data analyses, with higher scores meaning easier to control.
We measured financial behavioral intention at Time 1 by asking respondents to indicate on a five-point scale, ranging
from 1 (very unlikely)to5(very likely), how likely they would be to engage in three future-oriented financial activities (sav-
ing, investing, and financial learning) within the following 6 months.
We measured actual saving and future-oriented financial behaviors at Time 2 by asking respondents to indicate on a
five-point scale ranging from 1 (never)to5(very often) how often they engaged in each of three future-oriented financial
activities (savings, investing, and financial learning) within the past 6 months. At Time 2, we measured the respondents’
perception of the impact of the economic crisis, using three items rated on five-point scale ranging from 1 (not at all)to5
(a great deal).
Because several studies have demonstrated that associations exist between demographic characteristics (gender, family
socioeconomic status, ethnicity), and financial knowledge and behavior (i.e., Lyons, Rachlis, & Scherpf, 2007), we included
these three as control variables in all analyses, measured as follows: (1) parental socio-economic status, which we calculated
using the CSI (Computerized Status Index) method (Coleman, 1983) to index the education levels of both parents and the
total household income; (2) gender (1 male or 2 female); and (3) ethnicity (1 white or 2 non-white). All control variables were
obtained at Time 1.
4. Results
To test the conceptual model and investigate the hypothesized relationships, we used Lisrel 8.0. in conjunction with the
two-step, structural-equation modeling procedure proposed by Anderson and Gerbing (1988).Table 1 presents the correla-
Table 2
Result of measurement model.
Construct/indicator Unstandardized loading
(standard error, Wald statistic)
Completely
standardized loading
Reliability
a
Past financial well-being .83
I am satisfied with the way I pay my bills .90(.04, 23.03)
**
.76
**
I have difficulty paying for things (R) .96(.04, 26.04)
**
.84
**
I am constantly worried about money (R) .97(.04, 24.23)
**
.79
**
Current financial well-being .80
I am satisfied with the way I pay my bills .82(.04, 21.41)
**
.73
**
I have difficulty paying for things (R) .89(.04, 24.26)
**
.80
**
I am constantly worried about money (R) .92(.04, 23.83)
**
.79
**
Attitude .74
Saving money each month for the future .67(.03, 21.24)
**
.75
**
Investing for long-term financial goals regularly .98(.04, 28.11)
**
.96
**
Learning about money management regularly .60(.04, 13.88)
**
.50
**
Parental norms (expectancy value) .92
Saving money each month for the future 5.59(.18, 30.34)
**
.89
**
Investing for long-term financial goals regularly 6.22(.18, 34.57)
**
.96
**
Learning about money management regularly 5.16(.20, 26.30)
**
.81
**
Behavioral intention .77
Saving money each month for the future .72(.04, 19.57)
**
.69
**
Investing for long-term financial goals regularly 1.17(.04, 27.83)
**
.94
**
Learning about money management regularly .73(.05, 16.13)
**
.58
**
Actual savings and future-oriented behaviors .67
Saving money each month for the future .75(.06, 13.45)
**
.55
**
Investing for long-term financial goals regularly 1.08(.06, 18.82)
**
.84
**
Learning about money management regularly .68(.05, 13.25)
**
.54
**
Parental SES .69
Father education .94(.05, 19.59)
**
.80
**
Mother education .71(.05, 15.95)
**
.64
**
Parent income .52(.04, 13.80)
**
.55
**
Note: R, Reversed.
p< .05.
**
p< .01.
160 S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165
tions among all variables. First, we developed our measurement model by conducting a confirmatory factor analysis (CFA) on
multi-item scales and then evaluating the construct validities of the variables in the measurement model. We then incorpo-
rated all single-item scales and established a structural model. Next, we examined if the relationships we had hypothesized
existed among the constructs of the structure model. Finally, we used multiple group analysis to test the hypothesized mod-
erating effects.
4.1. Measurement model
The CFA results for overall measurement model fit were
v
2
ð168Þ
¼1107:12, p= .00, CFI = .90, RMSEA = 0.09 (90% C.I. = .09;
.10). These indices were acceptable. The reliabilities for most scales were adequate (
a
> 0.70); however, there were two
exceptions: actual financial behavior (
a
= .67) and parental SES (
a
= .69). Despite the marginal reliabilities of these two
scales, we kept the two constructs in the model because both were important to our theoretical framework and because
the latent variable representation corrects for unreliability (Little, Lindenberger, & Nesselroade, 1999). We assessed the con-
vergent validities by examining the indicator loadings. Results, displayed in Table 2, show that all loadings were statistically
significant and sufficiently high. Thus, convergent validity was supported. To test discriminant validity, we compared those
models that either freed the phi value or constrained it to 1, and then tested for a significant decrease in the fit of the models.
In every case, the overall fit significantly decreased. Thus, discriminant validity was supported.
4.2. Structural model and hypotheses testing
Having established the adequacy of the measurement model, we next evaluated a structural model’s ability to specify
hypothesized predictive paths. Specifically, we expected factors derived from TPB to predict behavioral intention, which
in turn would predict actual behavior, and in both cases our expectations were justified. We also determined that saving
and future-oriented behaviors would predict changes in students’ sense of well-being (i.e., Time 2 current well-being con-
trolling for initial levels at Time 1). Lastly, to control for rival explanations and unexplained variance, the paths from each
control variable to all focused outcome variables were freely estimated in specifying the structure model. Thus, the structural
model fit the data well:
v
2
ð473Þ
¼1358:45, p= 0.00, CFI = .90, and RMSEA = .08 (90% C.I. = .08; .08). All modification indices
were examined, particularly regarding a potential bidirectional relationship between the construct of saving and future-ori-
ented financial behavior and current well-beings, which were measured at Time 2. However, such concerns were lessened,
given that modification indices did not suggest the possibility of a link between the two constructs (additional justifications
.08*
.26**
.36**
.11**
.21**
.25**
.38**
.66**
.10*
.08*
.09*
.15**
Time 1
Financial
Crisis
•
•
•
•
Time 2
`Note: Values shown are standardized coefficients. ** p<.01; *p<.05
Fig. 1. A longitudinal model of the psychological process of attitude–intention–behavior toward savings and future-oriented financial behavior and its
impact on current well-being.
S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165 161
are provided in Section 5). Therefore, we accepted the model, as presented in Fig. 1. All hypothesized paths were apparently
significant.
4.2.1. Predictors of behavioral intention and actual behavior
As hypothesized, the four antecedent constructs (attitude, parental norms, perceived behavioral control, and planning
horizon) predicted behavioral intention. Attitude produced the highest coefficient, followed by parental norms. Perceived
behavioral control and planning horizon produced a similar coefficient on behavioral intention. As hypothesized, behavioral
intention predicted actual behavior, as did perceived behavioral control and planning horizon. Therefore, all hypotheses
(H1a–H1e) related to the TPB were supported.
4.2.2. Predictors of current well-being
As hypothesized, actual saving behavior predicted both current financial well-being and current sense of well-being at
Time 2. Therefore, H2a was supported. Moreover, Time 1 past financial well-being had a significant influence on Time 2 cur-
rent financial well-being and also had some influence on Time 2 current sense of well-being. In addition, Time 1 past sense of
well-being influenced Time 2 current sense of well-being. Therefore, H2a and H2b were supported.
4.2.3. Direct, indirect, and total effects
One of the goals of the study was to determine the extent to which Time 1 variables predicted the student’s Time 2 cur-
rent well-being. We found that, in terms of total effects, Time 2 current financial well-being was mainly determined by two
factors: Time 1 past financial well-being, which played the most important role, and saving and investing behaviors. Time 2
current sense of well-being was mainly determined by Time 1 past sense of well-being, Time 1 past financial well-being, and
actual behavior. In addition, we found that the effects of the predictors on a student’s current well-being were exerted
mainly along direct paths, and the indirect effects did not play an important role in the relationships. This indicates that
the students’ sense of well-being) involves a psychological process involving three phases of attitude, behavioral intention,
and actual behavior.
4.3. Moderating effects
Using multiple group analysis, we evaluated the moderating effects of perceived impact of economic crisis on the paths that
link between Time 1 and Time 2. We fit two-group models in which the participants were divided into two groups, depend-
ing on whether the impact of the economic crisis had been high or low (based on median splits). The first model was an unre-
stricted version in which the paths were freely estimated for each group. By examining the increase in misfit (i.e.,
D
v
2
)
introduced by this constraint, we then fit a series of models in which each path was constrained as equal across the two
groups. Whenever the equality constraint introduced a significant misfit, we concluded that the two groups differed on that
path (i.e., that perceived impact of economic crisis moderated that path).
The model comparison was significant with respect to the path from the Time1 past financial well-being to Time 2 current
sense of well-being (
D
v
2
ð1Þ
¼4:22, p< .05). This result indicates that perceived impact of current economic crisis moderated the
path, thus weakening the relationship between past financial well-being and present sense of well-being (see Fig. 2). The
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
0.4
-10 1
Past Financial Well-being
Current Subjective Well-being
Low Impact of Economic Crisis
High Impact of Economic Crisis
Note: Values shown are standardized effects.
Fig. 2. The moderating effects of perceived impact of economic crisis. Moderating effect on the link between past financial well-being and current sense of
well-being.
162 S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165
moderating effects on the remaining two paths (Time 1 past financial well-being ?Time 2 current financial well-being and
Time 1 past sense of well-being ?Time 2 current sense of well-being) were not significant. Therefore, H3a was partially sup-
ported. Finally, the path from behavioral intention to actual behavior was not significant ((
D
v
2
ð1Þ
¼2:88, ns), and therefore,
H3b was not supported.
5. Discussion
5.1. The psychological process model of financial attitude, intention, and behavior and its impact on well-being
In order to better understand young adults’ saving and future-oriented financial behaviors as a decision-making process,
we developed and tested a model of positive financial behavior and well-being, combining the Theory of Planned Behavior
(Ajzen, 1991) with the Model of Happiness (Lyubomirsky et al., 2005). A primary contribution of our findings is support that
saving and future-oriented financial behavior involve a psychological process comprised of three phases (attitude ?behav-
ioral intention ?actual behavior). In addition, we found that the act of performing such behaviors is positively related to
present well-being. Because we controlled for students’ socioeconomic status, gender and ethnicity in the model, we can
conclude that this psychological process model is independent of students’ socioeconomic and demographic background.
Still, caution is warranted in applying our findings to populations of youth and young adults whose opportunities for edu-
cation and financial independence are not distributed equally, nor populations outside the US.
We found that, as expected, perceived economic impact moderated changes in well-being; however, the link between
financial intention and financial behavior lacked moderation, suggesting that this relationship withstands even the strain
of a severe recession. Because our research was undertaken while historical changes were occurring in the global economy,
it provides a number of insights about the ways that psychological factors as well as external conditions contribute to peo-
ple’s financial decision-making behaviors and their sense of well-being.
As indicated in our hypothesis section, our model (patterning the flow from savings and future-oriented financial behav-
iors to current well-being) is based on theoretical notions of Theory of Planned Behavior and the Model of Happiness, both of
which endorse the notion that current well-being is an outcome of intended behavior. It is recommended that theory guide
the decision on the direction of relationships between the constructs (Schreiber, Stage, King, Nora, & Barlow, 2006). Still, it is
possible that the association could be bidirectional; that is, a respondent’s current well-being measured at Time 2 caused a
reverse relationship on actual behavior at Time 2. However, we concluded that concerns about the potential bidirectional
relationships between these two constructs should be alleviated for several reasons. First, although both actual saving
and both of the current well-beings at Time 2 were measured simultaneously, the former (i.e., saving and future-oriented
financial behavior) was measured with respect to past behavior (e.g., within the past 6 months), while the latter was mea-
sured with respect to present status of well-being. Second, there was no correlation (.07, p> .05) between past well-being at
Time 1 and actual behavior at Time 2. This lack of correlation implies that past well-being may not necessarily lead to future
saving, but, as found in the model, savings may indeed lead to future well-being. Despite all of these reasons, we used cau-
tion in interpreting the relationships between the two variables as ‘‘related’’ constructs, and we avoided causality in our dis-
cussion. Further longitudinal studies should be conducted to verify the causality.
5.2. The act of saving and future-oriented financial behaviors as a life strategy for well-being and psychological benefits
Actual savings and future-oriented financial behavior were positively related to current financial well-being and current
overall sense of well-being and, too, the more actively the young adults in our sample engaged in such behaviors, the happier
they were about their financial situation and their lives in general. Our findings substantiate an earlier study’s finding that
individual savings behavior may play a role as a change agent, enhancing one’s current well-being, and these findings also
support the contention that one can intentionally change his/her level of happiness through intentional behavior (Sheldon &
Lyubomirsky, 2006).
Our study also adds to a growing interest in the benefits of a positive psychology, in this case, the value of a future-oriented
coping behavior as a way to maintain or enhance one’s psychological well-being (e.g., Schwarzer & Knoll, 2003). More specif-
ically, our measure of saving behavior focused on the act of saving rather than the amount saved, a focus we deem appropriate
when sampling college students. Our findings suggest that future-oriented behaviors, which include investing and learning
about financial management in addition to the act of saving, provide immediate psychological benefits. Therefore, the tradi-
tional message–that saving a portion of one’s earnings will pay off in the future by providing financial security – might be revised
to also emphasize the more immediate psychological benefits of saving. Adding such a message might also emphasize the value
of saving as an adaptive life strategy and further encourage saving and other future-oriented financial behavior. Certainly our
findings suggest that such a revision of the moral emphasized by Aesop’s ‘‘The Ant and the Grasshopper’’ would be beneficial.
Although we defined savings and future-oriented financial behaviors appropriately in the context of studying college stu-
dents, we acknowledge that the definition and measures we used with regard to savings (attitude, intention and actual
behavior) were somewhat simplified. Future researchers are encouraged to investigate various aspects of definitions and
methodological approaches employed in the field of economic psychology when studying savings behavior (see Wärneryd,
1999 for details).
S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165 163
5.3. Attitudes, parental expectations, perceived control and planning horizon
As the TPB model demonstrated, a young adult’s attitude toward saving and future-oriented financial behavior was the
most important predictor of his/her behavioral intention, followed by his/her perception of parental expectation (and will-
ingness to conform). These findings are consistent with previous research regarding college students’ financial behavior (e.g.,
Shim et al., 2009). Also, given that parents are significant socialization agents for children and young adults’ consumer skills
and attitude (Moschis, 1985), we can speculate that parents could play a significant role in shaping young adults’ saving atti-
tude by expecting them to save and engage in future-oriented financial behavior.
As we predicted, perceived behavioral control had a positive effect on both behavioral intention and actual saving and
future-oriented financial behavior. Apparently, the more strongly that a young adult believes himself/herself able to adhere
to a savings and future-oriented financial plan, the more likely it is that he/she will form an intention to engage in such
behaviors and, too, the more likely it is that he/she will follow through with actual behavior. Interestingly, planning horizon
produced an effect similar to that of perceived behavioral control, at least regarding the paths taken and the ability to predict
both behavioral intention and actual behavior. Thus our finding corroborates the findings of previous studies (Lusardi, 1999;
Rabinovich & Webley, 2007). However, a saving and future-oriented financial behavior clearly requires a distant planning
horizon; therefore, we suggest that a financial planning horizon factor be added to the TPB model when it is applied to saving
behavior.
6. Conclusions, implications and future studies
We found evidence that the act of saving and future-oriented financial behavior has a present value as well as a future one.
Our research makes an important contribution to the literature in that it supports previous research linking intentional
behaviors to improved well-being (Lyubomirsky et al., 2005). Thus, parents, educators and practitioners could promote
the financial well-being of young people by first clarifying the value of this combination of intention and follow-through
and then by providing opportunities for young people to develop behavioral control in their own financial practices.
Our findings should also aid public policy and government-run financial literacy education and research programs de-
signed for young adults in the US (i.e., the Young Adults Financial Literacy Act (H.R. 3147 2009). Young adults who choose
to invest in a college education might, for example, be encouraged to see their investment as part of a proactive coping strat-
egy that not only promises future wealth and security but also offers immediate psychological benefits, for, as Brobeck
(2008) discovered, those who build even a small, emergency savings fund experience an increase in psychological well-
being. Certainly, this message should be promoted as part of current saving initiatives, such as American Saves and Choose
to Save.
Although previous research holds that an individual’s level of happiness is generally fixed over a lifespan (Lykken & Telle-
gen, 1996), our findings suggest that happiness might also be influenced by the cumulative impact of small changes over
many years (Abelson, 1985). In other words, while saving and future-oriented financial behavior might make a person only
a little happier right away (by increasing his/her sense of well-being), a small change in behavior might encourage a small
change in saving behavior the following year and with it another small increase in well-being. Over a life time, those small
changes may create a positive cycle, culminating in a much happier person. A longitudinal study based on this topic could
demonstrate the cumulative impact of one’s savings behavior on one’s long-term sense of well-being.
Our findings point to a need for new avenues in research on the long-term effects that a severe economic recession can
have on saving and buying behaviors. Just as the saving and buying practices of those who came of age during the Great
Depression were formed by their experiences, so, too, might the Great Recession produce a similar effect, changing the finan-
cial habits of this current generation of adults. Many will economize because they lack the resources (e.g., job, money or
other assets) to do otherwise. Some will allow these changes in their financial behaviors to lead to permanent lifestyle
changes. Future research might look beyond demographics and life-cycle patterns to consider whether people possess a
financial identity and how that identity contributes to financial behaviors.
For future studies, we recommend that the model from the study be tested among diverse populations of young adults to
examine whether the model can be generalized across the board.
In this study, we relied exclusively on students’ own reports, so the associations we found might be in part due to a
shared-reporter variance. A dyadic or triadic study, for example one involving both students and their parents, would likely
provide further insights into the process by which young adults develop financial behaviors. Future studies should also
examine the extent to which college students actually adopt the role-modeling behaviors they learn from friends, since they
typically come into contact with friends more frequently than parents. Finally, additional longitudinal research is needed to
confirm the causal nature of the relationships found in the model.
Acknowledgments
This study has been made possible through a research grant awarded by the National Endowment for Financial Education
(NEFE). The authors would like to thank NEFE for its dedication to research, education and outreach in promoting financial
literacy.
164 S. Shim et al. / Journal of Economic Psychology 33 (2012) 155–165
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