Personality and Young Adult Financial Distress

Yilan Xu, Andrea Beller, Brent W. Roberts, Jeffrey R. Brown

NBER Retirement Research Center Paper No. NB 15-03
Issued in September 2015

Researchers have become increasingly interested in understanding the sources of heterogeneity in individual financial behaviors. In this paper, we examine how the Big Five personality traits are related to measures of young adults’ financial distress. Using data from the National Longitudinal Study of Adolescent to Adult Health in the United States, we find that conscientiousness is negatively correlated, and neuroticism positively correlated with financial distress. These correlations are robust to controlling for early life background and other demographic and socioeconomic factors. Young adulthood sets the stage for financial security in later life; as such, this study provides insight for lifelong financial well-being. Based on the empirical results, we discuss potential behavioral and policy interventions that can be used to improve financial well-being.

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