Hannah Lim, assistant professor of finance in the School of Business and Economics at California State University, Fullerton, received the Best Research Award from the Financial Planning Association. This award was given for her research on emergency savings for achieving goals.
Lim examined the role of emergency savings across three different dimensions: mental attitudes such as financial anxiety, other financial behaviors such as stock allocation, and beliefs about achieving financial goals.
The study used data from the 2021 National Financial Capability Survey, a triennial survey by the FIRNA Investor Education Foundation that examines U.S. adults' financial attitudes, behaviors, knowledge of, and access to financial products and services. The study analyzed 2,279 non-retirement account investors who were the primary or shared decision-maker for their investments.
She found that emergency savings affects all three aspects.
“We have a lot of rules of thumb and common sense when it comes to financial planning,” says Lim.
“For example, the advice is to have three to six months worth of emergency savings. These rules are often supported by personal experience and anecdotes, but they are not widely accepted. Nevertheless, it has not been the subject of rigorous empirical examination. The focus of this article is to test whether this conventional wisdom about financial planning is empirically correct; that is, it actually The question is, does it help? And can it be proven statistically?”
How will this impact the financial planning field?
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