The Importance of Habits and Behavior

Knowledge Vs Behavior

There’s been a long-standing school of thought that personal finance is “80% behavior and 20% knowledge.” A recent study by two University of Rhode Island professors confirmed that thinking, as they determined that personal behavior is the most important factor, regardless of consumers’ skill and knowledge.

URI Human Development and Family Science professors Jing Jian Xiao and Nilton Porto recently won a ‘Best Paper’ award from the Journal of Consumer Affairs for their paper, “Financial capability and well-being of vulnerable consumers.” Their research suggested that encouraging low-income consumers to learn good financial habits trumped financial literacy education.

As a result of their study, the researchers recommend financial educators focus on building skills while teaching young and middle-aged consumers. For older consumers, educators should encourage them to share their financial skills with others the same age and younger.

So, how can partners put this to work?

One idea is to recruit seasoned clients from your organization to join your next workshop or webinar and offer some practical tips on what money management techniques have worked for them. Here at BALANCE, we’ve had a lot of positive feedback from our Forums where partners have shared ideas and best practices; people like to hear their peers talk about what works and what doesn’t.