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The objective of this study is to explore whether trends in data that suggest social relationships are related to financial planning behaviors. I draw from social capital theory to define the relationships and resources analyzed. Social capital theory is most effective in producing information channels and knowledge exchanges that may influence individuals to practice certain normative financial behaviors. The financial behaviors analyzed as outcome measures are topics set forth by the Certified Financial Planner Board as comprehensive financial planning topical areas.For this study, I use the National Longitudinal Survey of Youth 1979 (NLSY79) and National Longitudinal Survey of Youth 1979 Young Adult (NLSY79YA) surveys. I analyze data on Black, Hispanic, and White males in 2008, 2010, and 2012 for the NLSY79 and in 2006, 2008, and 2012 for the NLSY79 Young Adult survey. Due to limitations of the social capital and financial outcome variables available in the surveys, I primarily use multiple years of cross-sectional data to explore and analyze the relationships between social capital and financial planning. Financial outcomes are divided into three categories: 1) planning for expected financial events in the current period (money management), 2) planning for expected future financial events (investment planning), and 3) planning for unexpected financial events that may arise from day to day or in the short-term (emergency planning). Money management consists of saving and dealing with day-to-day financial matters. Investment planning includes retirement planning and willingness to take financial risks. Emergency planning looks at individuals having a 3-month emergency fund. Three forms of social capital are considered as key independent variables: general, bonding, and bridging. Trust is used as an indicator of general social capital. Bonding social capital is derived from relationships with family and close friends and is operationalized by using a proxy of frequency of attendance at religious services. Bridging social capital is measured using information on networks acquaintances and peers outside of the circle of family and friends. Specifically, I use a measure of volunteering as a proxy measure for bridging social capital.Logistic regressions and multinomial logistic regressions are used to estimate the models. As a check of the cross-sectional results in money management, I use an ordered logistic regression to estimate a random effects, two-period panel model. Descriptive statistics are presented using weighted data. Multivariate estimates use unweighted data. Regression results suggest social capital is positively associated with money management and investment planning among Black, Hispanic, and White males, though only White males have an association between social capital and emergency planning. Results suggest financial planners should consider exploring mechanisms that build trust between client and advisor. Likewise, educators and policy makers may consider ways to increase Black, Hispanic, and White males exposure to diversity and heterogeneity within their networks. |
