Trend is not necessarily income-based
October 1, 2015 — WASHINGTON–(BUSINESS WIRE)–More than 3 in 10 U.S. households own taxable investment accounts, but black and Hispanic households are significantly less likely than white households to hold taxable accounts, according to A Snapshot of Investor Households in America, a new report issued by the FINRA Investor Education Foundation. Millennial households and those headed by single women also have low taxable account ownership rates.
“There are some demographic groups that are under-represented in the retail investor world – most notably black and Hispanic investors. And while it can be argued that these households are under-represented because they tend to have lower incomes, the differences persist, albeit at a smaller rate, even when controlling for important demographic variables like income and education,” said FINRA Foundation President Gerri Walsh. “The report also notes the potential for targeted investor education to contribute to greater market participation among under-represented groups.”
A Snapshot of Investor Households in America found that:
- Thirty-six percent of white households own taxable investment accounts, compared to 25 percent of Hispanic and 22 percent of black households.
- A little over 2 in 10 millennial households own taxable investments compared to nearly 4 in 10 boomer households.
- Only 15 percent of households headed by single women with dependents own taxable investments.
A Snapshot of Investor Households in America found that beyond demographics, other factors are related to taxable investment account ownership as well. Higher levels of financial literacy are associated with higher levels of account ownership, and households with taxable investments have significantly higher risk tolerance levels than households without taxable investments.
The FINRA Foundation’s new study is based on an examination of data from the FINRA Foundation’s National Financial Capability Study (State-by-State Survey), which was developed in consultation with the U.S. Department of the Treasury, other federal agencies and the President’s Advisory Council on Financial Capability. The data were collected through an online survey of 25,509 American adults from July through October 2012, and were weighted to be representative of the U.S. adult population. As in all survey research, there are possible sources of error – such as coverage, non-response and measurement error – that could affect the results. The full data set, questionnaire and methodology are available at www.usfinancialcapability.org.
Excerpts from the National Financial Capability Study
- Americans demonstrate relatively low levels of financial literacy and have difficulty applying financial decision-making skills to real life situations. Study participants were asked five questions covering aspects of economics and finance encountered in everyday life. In the U.S., 61% are unable to answer more than three of the five questions correctly. Also, most Americans do not comparison shop for credit cards, with 61% saying that in obtaining their most recent credit card they did not collect and compare information about cards from more than one company. Individuals need at least a fundamental level of financial understanding. This knowledge, paired with financial decision-making skills, can best ensure an individual’s financial capability.
For data in graphs on Financial Knowledge and Decision-Making, finra study
About the FINRA Foundation
The FINRA Investor Education Foundation supports innovative research and educational projects that give underserved Americans the knowledge, skills and tools necessary for financial success throughout life. For details about grant programs and other FINRA Foundation initiatives, visit www.finrafoundation.org.