Determinants of household expected real income growth in the U.S.A.

This study explores factors related to household income growth in a two-period timeframe. using data from the 1983 and I986 Survey of Consumer Finances. Regression results explain 81% of the variation in household income. Household income in the first period, age, marital status, education, job status and occupation were found to be important determinants of various levels of household real income growth. Implications for consumer education, financial planning, family economics and welfare policy are discussed.     

The Poor in the Financial Market: Changes in the Use of Financial Products,Institutions, and Services from 1995 to 1998

The poor are in a disadvantaged position in the financial market. In this article, a review is given of public policy initiatives that are implemented to help the poor as well as an examination of how the poor are served in the financial market, using data from the 1995 and 1998 Survey of Consumer Finances provided by the Federal Reserve Board. Specifically, poor households' use of depository and credit products, the financial institutions that provide these products to the poor, and the way in which the poor conduct their financial business (e.g., visit to branch offices, ATMs, etc.) are compared to that of non-poor households. Marketing and public policy implications are drawn from the findings.     

Bank Credit Cards: Consumer Irrationality versus Market Forces

Why are bank card interest rates sticky? One explanation is bank card consumer irrationality, a potentially significant market failure requiring government intervention. Alternate explanations focus on efficient market forces. The 1989 Federal Reserve Survey of Consumer Finances data are not consistent with the consumer irrationality hypothesis. The data are consistent with a market-based model of demand for balances and suggest that consumers may rationally eschew search because small outstanding balances imply low returns to search.     

Attitude toward Risk and Risk‐Taking Behavior of Business‐Owning Families

Using data from the 1995 Survey of Consumer Finances, this study found that family business owners are more risk tolerant than nonowners. Among family business owners, age, race, net worth, and the number of employees in the business affect risk‐taking attitudes and behavior. In addition, the following factors are associated with risk‐taking behaviors: number of years of ownership, gross sales, who started the business, and sole proprietorship. Education influences risk‐taking attitudes.     

Household Savings Motives

This study proposed a hierarchy of savings motives and identified factors that influence the movement to higher levels of the hierarchy. Continuation ratio analysis utilizing data from the 2001 Survey of Consumer Finances shows the likelihood of advancing to higher levels of savings motives from the current level. Age, family size, and length of the planning horizon are important predictors for advancing from lower levels to higher levels in the proposed hierarchy. Implications are offered for public policy regarding education and programs.     

Consumers’ Use of Credit Cards: Store Credit Card Usage as an Alternative Payment and Financing Medium

This paper investigates consumers’ use of store-issued credit cards with particular attention to their function as an alternative payment and financing medium. Using 1998 Survey of Consumer Finances data, the researchers found that credit availability through bankcards is negatively correlated with consumers’ use of store cards as a financing medium, suggesting the role of store cards as a supplementary credit line. A negative relationship is also found to exist between consumers’ bankcard usage and their use of store cards for a transaction purpose, indicating that store cards function as a substitute payment medium. Consumers’ usage of store cards varies according to function and is related to a number of variables, including the use of bank cards, credit history, attitude toward credit, income, education, and ethnicity.     

The Effects of Credit Attitude and Socioeconomic Factors on Credit Card and Installment Debt

Most previous research on credit use has examined the effect of socioeconomic and attitude variables without considering the possible correlation among these factors. Also, the studies have not considered whether there is a difference between general and specific attitudes toward credit and the use of credit. This study addresses those problems and includes installment debt as well as credit card debt in the analysis. The study used data from the 1998 Survey of Consumer Finances. The findings show the higher the specific attitude index, the higher the outstanding credit card balances, and the more favorable the general attitude toward using credit, the higher the installment debt. The results suggest the need for greater awareness on the part of consumers and consumer educators on the influence of attitude in the use of credit.     

Household Debt Quintiles: Explaining Changes 1983–1989

Households' changes in consumer debt from 1983–89 were examined using the panel dataset of the Survey of Consumer Finances. Logit models of the odds of an increase and a decrease in debt quintile revealed four factors hypothesized by Bryant (1990) to be symmetrically related—household size, respondents marital status, inflationary expectations, and time preferences. Asymmetrical effects of other variables, including life cycle consumption needs, present resources, expected future resources, and preferences were found for either the odds of an increase or decrease in consumer debt, but not both. Households' access to credit markets and changes in economic status between 1983 and 1989 also significantly affected the odds of change in consumer debt status, albeit not consistently across models. Household level change in consumer debt and the factors that affect it are more complex than hypothesized.     

Contributing to the Delinquency of Borrowers

What contributes most to borrower delinquency—“excessive”borrowing that results in greater financial stress or unforeseen negative income and wealth shocks? Using data from the 1998 Survey of Consumer Finances, this paper provides evidence that consumer delinquency problems are mainly the result of unexpected negative events that neither the lender nor the borrower could have anticipated at the time the credit request was evaluated. The size of the household payments burden has an insignificant effect on delinquency risk and very little effect on default risk. Finally, household financial assets that can be used as a buffer against negative shocks also serve as a very important predictor of delinquency risk.     

If You Build It,Will They Come? A Simulation of Financial Product Holdings Among Low-to-Moderate Income Households

The 1995 Survey of Consumer Finances was used to determine holdings of selected financial products by low-to-moderate income households, defined as households with incomes less than or equal to 80% of median household income for their region. First, we estimated determinants of holding bank accounts. Next, we estimated determinants of holding other selected products, contingent on holding a transaction account. Finally, we estimated the potential demand for these other products by households without accounts, should they become account holders. We found that if non-account holding households were to obtain accounts, they would increase their demand for credit cards, first mortgages, car loans, consumer loans, certificates of deposit, and IRA/Keogh accounts. The implications for financial institutions, policy makers, and consumer educators are presented.     

The increasing financial obligations burden of US households: who is affected?

The purpose of this paper is to examine factors associated with changes in the proportion of households with high financial obligations ratios in the United States. The proportion of households paying more than 40% of income for debt, rent, vehicle leases, property taxes and homeowners’ insurance, which we refer to as having a heavy burden, increased from 18% in 1992 to 27% in 2007. Multivariate analysis of a combination of six Survey of Consumer Finances data sets indicates that the likelihood of having a heavy burden was positively associated with homeownership, self‐employment and retirement status. Those with an optimistic 5‐year expectation of the economy were more likely to be in a household with a heavy burden. Education was positively related to having a heavy burden, suggesting that having a heavy burden is not simply a cognitive error.     

Limitations of Combining Hispanics and African Americans for Analysis of Credit Problems

This study uses a combination of six Survey of Consumer Finances data sets to examine whether factors affecting credit delinquency differ by the racial/ethnic identity of households. Hispanic households are less likely than white households and white households are less likely than African American households to be delinquent. Our full model with interaction terms shows that the effects of financially adverse events, financial buffers and debt burden on the debt delinquency differ across racial/ethnic groups. Combining African American and Hispanic households into one racial/ethnic minority group as previous studies have done can be problematic.     

Accounting for Complex Sample Designs in Analyses of the Survey of Consumer Finances

We examined the effects of using bootstrap weights to account for the complex sample design in analyses of Survey of Consumer Finances (SCF) datasets. No article published in this journal that has used the SCF has mentioned the issue of complex sample designs. We compared results obtained without weights and with application of population and bootstrap weights in a logistic regression, and found no substantial differences between the unweighted and the weighted analyses. We also compared results for an ordinary least squares regression, and found few differences between unweighted and weighted models. Unweighted regressions produced more conservative significance tests than the counterpart, and some econometricians have suggested that unweighted analyses are better for hypothesis testing. If estimation of the magnitudes of effects is important, weighted regression may be better because it produces consistent estimators. Researchers should be cautious in drawing conclusions when weighted and unweighted effects are substantially different.     

How Credit Access Has Changed Over Time for U.S. Households

The financial industry made a number of efforts throughout the 1990s to provide additional borrowing opportunities to households traditionally constrained by the credit markets. Using data from the Survey of Consumer Finances (SCF), this study investigates the degree to which household liquidity constraints relaxed between 1983 and 1998. The gap between actual and desired borrowing is estimated. The findings indicate that the ability of all households to obtain their desired debt levels increased after 1983 and most dramatically between 1992 and 1998. The findings hold true across all households regardless of permanent earnings, age, gender, or race. Those experiencing the greatest gains in credit access were black households and households with low permanent earnings.     

Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis

There is evidence of a large and growing student debt burden over the last decade. Previous research has shown that the presence of student debt jeopardized the short‐term financial wealth of U.S. households during the Great Recession. We examine the effects of student loan use on the wealth of U.S. households post‐recession, using recent data from the 2013 and 2016 Survey of Consumer Finances. We find that mean 2016 wealth for households with no outstanding student debt is more than four times higher than households with student debt. We find that living in a household at the 15th, 30th, 50th, 70th, and 85th percentile of the wealth distribution with student debt is associated with an 80%, 49%, 37%, 35%, and 36% wealth loss compared with a similar household with no student debt. Our decomposition results suggest that student loan use can explain between 3% and 7% of the Black‐White wealth gap across the wealth distribution but is insignificant in explaining the Hispanic‐White wealth gap.     

Effects of Low Income Families' Ability and Willingness to Use consumer Credit on Subsequent Outstanding Credit Balances

This study investigates consumer credit use of 618 low income families selected from the 1983 and 1986 Survey of Consumer Finances. The low income family's ability and willingness to use credit along with selected interaction variables are tested in a hierarchical multiple regression model. Significant determinants of the amount of credit outstanding in 1986 were household head's employment status and age, credit balance in 1983, and two interaction variables: specific attitude toward credit with head's educational level and with debt balance in 1983. Implications of the use of consumer credit by low income families are discussed.     

Saving behaviours: first wave baby boomers

The combination of lower saving rates in the 1980s, high consumer debt, and the impact of the baby boomer generation moving into retirement in an uncertain economic environment creates increasing concern for the financial state of the American household. This study explored the saving behaviours of baby boomers. The family management-systems model was used as the framework for the study. Research questions included whether saving behaviours were related to income, education and presence of dependent children. Data are from the 1983 National Survey of Consumer Finances. The 1980s represent a decade critical to first wave baby boomers and their continued influence on American society. A study of their saving behaviours provides information necessary to help plan for their future needs. Frequency counts and cross-tabulations of demographic data provide a profile of saving behaviours and attitudes toward risk and liquidity. Marital status and presence of children were significantly related to reasons for savings. Income, marital status, education and presence of children indicated a significant effect on net worth and attitude towards risk. Income and presence of children affected attitude towards liquidity. Income level was the strongest predictor of net worth as a measure of saving behaviours.     

Household characteristics and the change of financial risk tolerance during the financial crisis in the United States

This study examines how household financial risk tolerance is affected during the period of 2007 and 2009, which covered the eve and trough of the financial crisis in the United States and what types of households are associated with the change of risk tolerance. Risk tolerance is measured by two objective indicators, narrowly and broadly defined stock ownership, and a subjective indicator, risk taking attitude. Using panel data from 2007 to 2009 Survey of Consumer Finances, results show that during the financial crisis, the households in general are more risk averse, indicated by withdrawing from stock markets and holding a less risk taking attitude. In addition, Black and Hispanic households are more likely and households with higher education are less likely to withdraw from stock markets. Older households are less likely to change in risk tolerance during the financial crisis, as are richer households. The findings show panel data could generate novel results and contribute to the literature of financial risk tolerance.     

Dynamics of Households' Income,Debt, and Attitudes Toward Credit, 1983–1989

Using the panel data from the 1983–1989 Survey of Consumer Finances, this research examines the shifts in households' income and debt quintiles and changes in respondents' attitudes toward credit. Households exhibited considerable income mobility during the 1980s, almost as much as during the more volatile decade of the 1970s previously reported by Duncan (1986). Except for a committed group of “no debt” households, there was even more mobility in households' debt status, that is, a majority of households were in a different debt quintile in 1989 than in 1983. Respondents' attitudes toward debt also changed considerably with more respondents' becoming more negative toward credit than more positive. Trend analyses of American households' debt underestimate the extent and variability of such changes.