A workplace and gender-related perspective on financial planning information sources and knowledge outcomes

Abstract This paper examines financial learning in the workplace through employer provided, self-directed financial learning media, such as newsletters, print publications, software, and the Internet. Independent variables of interest also include an employee's use of family, friends, and co-workers as financial planning sources. The paper addresses whether the use of the personal sources relates to the use of the financial learning media, whether the media utilization affects an employee's financial knowledge, and whether genders influences these relationships. Results suggest that the social network influences utilization of employer-provided financial learning media which, in turn, increases actual retirement-specific and self-reported financial knowledge. Differences by gender appear for a number of variables. © 2006 Academy of Financial Services. All rights reserved. JEL classifications: D14; D83 Keywords: Personal sources; Self-directed financial learning; General financial knowledge; Retirement-specific financial knowledge; Actual financial knowledge; Self-reported financial knowledge 1. Introduction The analysis of financial learning, and the examination of the specific settings that stimulate it, is a small but growing focus of research in the personal finance field. Most recently, attention has been directed toward financial learning in the workplace because of the significant growth in employer-provided financial education since the passing of the Employee Retirement Income Security Act of 1974 (see, for instance, Mastin, 1998). Although evidence shows how important it is to improve workers' financial knowledge to help them reach long-term savings goals (see, for instance, Lusardi, 2004; Bernheim, 1994; Madrian & Seha, 2001), little is known about the effectiveness of different types of educational offerings in the workplace. This is particularly true for educational materials that are designed for self-study. The majority of studies on workplace financial education focus on interactive seminar-based formats (Kim, 2000; Joo & Pauwels, 2002; Lusardi, 2004; Madrian & Seha, 2001). Less attention has been directed toward employer-provided financial print media, financial planning software, or the Internet as a place to learn about one's own personal finances. This paper focuses on two aspects of the self-directed learning mode in the workplace setting: (1) We assess whether the use of financial learning media at the workplace is influenced by family, friends, and co-workers. (2) Further, we evaluate whether the use of financial learning media at the workplace relates to the financial knowledge of employees. In addition, we examine whether gender differences exist in these relationships. Overall, the paper proceeds as follows. In Section 2 we review literature and describe the hypotheses of the study. Section 3 describes the data. Section 4 presents the empirical analysis and Section 5 explores the various explanations that can account for the findings in Section 4. 2. Literature review and hypotheses 2.1. The use of personal and employer sources of financial planning information In adult-learning literature, learning on one's own is considered the primary mode of learning in adulthood (Tough, 1979). Commonly called "self-directed learning," it is basically any form of study in which individuals have primary responsibility for planning, implementing, and evaluating the learning effort (Knowles, 1975). Research on this concept is relatively recent (Merriam & Caffarella, 1999) and has only sporadically been closely examined with regard to financial learning. Results of these research efforts are mixed. They indicate that the type of material-both its content and the media in which it is offered-seems to matter. For example, Clark and Schieber (1998) find that company-provided written communications describing the need to save for retirement significantly increase the probability of participation in a 401(k) plan and the contribution rate to the plan. …