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Studia Psychologica, Vol. 59, No. 2, 2017, 84-99 doi: 10.21909/sp.2017.02.732

Financial Planning for Retirement in Young Adults:Interaction of Professional Experience, Knowledge, and Beliefs

Viera Bačová, Katarína Dudeková, Lenka Kostovičová Vladimír Baláž

The aim of the present study was to examine the impact of professional financial experience onthe relationships between financial knowledge and beliefs on financial planning for retirement(FPR) in young adults. We designed a domain-specific personal belief inventory comprising allimportant components involved in FPR. Financial professionals (n = 145) demonstrated greaterknowledge of the financial retirement system compared with non-professionals (n = 382). Thetwo groups, however, differed neither in objective nor self-rated general financial literacy. Innon-professionals, higher financial literacy was positively linked to trust in the 2nd pensionpillar, self-assessed competence in FPR, personal engagement in FPR, perceiving FPR as lessemotionally loaded and FPR task as less complex. These predicted relationships were not foundamong professionals. Thus, professional experience in financial domain seems to bring a deeperand particularized insight into the pros and cons of the pension system, and consequentlyvacillates beliefs about FPR.

Key words: financial planning for retirement, financial professional experience, financial lit-eracy, personal beliefs, young adults

Institute of Experimental PsychologyCenter of Social and Psychological Sciences,

Slovak Academy of Sciences

Introduction

Young people in Slovakia are facing a veryhigh-consequence financial decision soon af-ter entering their first job as they must decidewhether to join the 2nd pension pillar. Since 2004the 2nd pension pillar presents a new possibilityof financial planning for retirement (hereafterFPR) in Slovakia. While in the 1st pension pillar

employees can count on a defined level of re-tirement benefits based on a computation thatreflects their salary and years of service (DBpension), in the 2nd pillar employees invest theircontributions in pension funds at one of theprivate financial institutions. The 2nd pensionpillar in Slovakia represents a type of definedcontribution plan (DC pension), where retire-ment income is calculated on the basis of theworker’s level of pre-retirement contributions.Unlike the 1st state pillar, participation in the pri-vate 2nd pillar is not mandatory for Slovak em-ployees nowadays. At the same time, onlypeople up to 35 years can enroll in the 2nd pillar.

The decision of an individual employeewhether to enter the 2nd pillar has far-reachingconsequences because a process of undergo-ing finance reform comprises the massive shiftfrom defined benefit (DB) to defined contribu-tion (DC) retirement plans for young adults. The

This research was supported by grant APVV-0361-12 – ‘Decision Making of Professionals: Process,personality and Social Aspects’.Correspondence concerning this paper should be ad-dressed to Viera Bačová, Institute of ExperimentalPsychology, Center of Social and Psychological Sci-ences SAS, Dúbravská cesta 9, 84104, Bratislava,Slovak Republic. E-mail: [email protected]

Received November 4, 2016

Institute for ForecastingCenter of Social and Psychological Sciences,

Slovak Academy of Sciences

Studia Psychologica, Vol. 59, No. 2, 2017, 84-99 85

changes in the retirement income system areaimed at an increase in responsibility for one’sretirement income that will no longer be deter-mined by one’s employer and the state, but in-stead will largely depend on the saving and in-vestment decisions of an individual employee.Yet many legal and economic changes, whichaccompany the 2nd pension pillar system inSlovakia from its inception until now, make thisdecision-making environment rather unclear anddifficult to understand.

In addition to enrolling in the 2nd pillar, thereare many other decisions young people needto make with regard to FPR, such as investmentchoices in the 2nd pillar or participation in the 3rd

pillar. These high consequence choices findmost young people quite unprepared. Indeed,despite the importance of the financial decisionsthat young adults need to make, financial re-tirement planning decisions remain an areawithin which individuals receive little formal and/or informal education.

Studies on financial preparation for retirementhave focused mostly on demographic indica-tors associated with FPR among all people ofworking age or they focused on older individu-als approaching retirement. In the present studywe examine the psychological, cognitive andmotivational forces that underlie planning andsaving for retirement in young people. Factualfinancial knowledge, financial hands-on experi-ence, and personal beliefs on FPR are exploredas important psychological variables which canbroaden our understanding of the psychologi-cal forces that drive young people to preparefinancially for their retirement.

Financial Knowledge and FPR

Factual knowledge and understanding of fi-nancial matters are arguably one of the neces-sary prerequisites of the ability to make per-sonal financial decisions efficiently (Croy,Gerrans, & Speelman, 2010; Hershey, Austin, &

Gutierrez, 2015; Lusardi & Mitchell, 2011a,2011b). There is a wealth of evidence that in-sufficient financial knowledge in adulthood re-sults in a range of negative outcomes. For in-stance, a low level of financial literacy andnumeracy have been identified as the root causeof poor retirement saving and investment deci-sions (Lusardi & Mitchell, 2011a, 2011b). Manystudies show that engagement in planning forretirement and saving rates are deeply impactedby one’s level of financial and investment knowl-edge (Croy et al., 2010; Van Rooij, Lusardi, &Alessie, 2011). According to recent research ofretirement saving across eight European coun-tries, financial literacy positively influences re-tirement savings, so that individuals with ahigher level of financial knowledge show agreater tendency to save for retirement(Fernández-López, Otero, Vivel, & Rodeiro,2010).

Practical Financial Experience

Since the field of finance is considerablybroad, when it comes to real-world personaldecisions, it is both financial knowledge andpractical skills that largely determine financialperformance of an individual. The adequatepersonal financial decision assumes not onlyknowledge of theoretical financial concepts buta hands-on financial experience. One’s finan-cial experiential knowledge, i.e. math skills, num-ber-crunching, data organization and analyses,computational skills, information search prac-tice, or decision-making scripts is likely to out-weigh the relative value of more general knowl-edge and abilities (Čavojová & Hanák, 2014;Hershey, Austin, & Gutierrez, 2015). Yet people,especially the young ones, often lack this hands-on financial experience.

The above-mentioned financial practical ex-perience and procedural knowing are likely tobe acquired in professions where individualsencounter various types of practical financial

86 Studia Psychologica, Vol. 59, No. 2, 2017, 84-99

tasks and have repeated experience with plentyof the same types of financial decisions. Weassume that practice, even in low level financialprofessions (such as accountants, invoice andpay clerks), can develop these basic financialskills and knowledge. Due to the exposure tothese types of financial tasks through perform-ing financial occupations, increased financialexpertise can be expected (Hibbert, Lawrence,& Prakash, 2012).

Personal Beliefs about FPR

Personal beliefs about certain area of theworld have been an important field of psycho-logical research for a long time since they influ-ence a variety of behaviors. Ajzen and Fishbein(2000) defined beliefs as the “subjective prob-ability that the object has a certain attribute”(p. 4). While attitudes are considered more af-fective, beliefs are supposed to be more cogni-tive (Fishbein & Ajzen, 1975). In social sciencesbeliefs are seen as understandings, premises orpropositions about the world and self thatpeople take as true. On the contrary, knowledgehas higher epistemic status than beliefs, givenits justifiable, supportable claims (Hofer &Pintrich, 1997). In fact, some authors considerattitudes and beliefs to be an integrated part ofknowledge. For example, Mayer (2009) distin-guishes five kinds of knowledge – factual, con-ceptual, procedural, strategic, and attitudinalknowledge. Attitudinal knowledge involvesbeliefs about self-efficacy, interests, attribu-tions, values, and goals which affect task per-formance (Mayer, 2009). To perform complexcognitive tasks, all types of knowledge need tobe involved and trained.

Retirement planning activities of individualsmay vary both as a function of financial cogni-tive competence, and objectively unjustifiablebeliefs about the nature of financial world andparticular norms, possibilities, tasks, and de-mands of various financial activities which an

individual holds. Hershey, Henkens, and Dalen(2010) express this very clearly: “it is one’s sub-jective world that serves to structure individu-als’ perceptions of financially-related opportu-nities and constraints” (p. 2). Beliefs about one’sown abilities, for example, can be motivating,since they encourage performance and masterygoals. Similarly, beliefs of an individual aboutthe difficulty of the task may hinder him/her toinitiate this task. Thus, personal beliefs aboutexternal and internal conditions of FPR shapebehavior in both positive and negative way,since they influence how individuals approachthe task in terms of their motivation and cogni-tion. Personal FPR beliefs may, for instance,impede motivation to persist with difficult FPRproblems, although in these the long-term ef-forts are conducive to success. Both individualabilities (knowledge and experience) and per-sonal beliefs about the FPR problems and aboutone’s own prerequisites to succeed in the re-spective tasks may account for high-quality fi-nancial preparation for retirement.

Empirical evidence of the role of psycho-logical constructs in retirement planning andsaving behavior is scarce. Hershey, Jacobs-Lawson, McArdle, and Hamagami (2007) ex-amined future time perspective, retirement goalclarity, and self-rated financial knowledge aspsychological factors involved in the retire-ment planning process. Within the frame ofthe theory of planned behavior, Croy et al.(2010) examined, among others, beliefs whichinfluence retirement saving behaviors. Partici-pants’ evaluation of the importance of retire-ment planning and self-rated preparedness forthis planning predicted behavioral intentionsto save more and to actively manage invest-ment strategy. Noone, Stephens, and Alpass(2010) developed the Process of RetirementPlanning Scale, which consists of items forretirement representation, retirement goals, thedecision to prepare for retirement and pre-paredness. Since we focus here on young


people only, for whom the idea of retirement istoo far in the future, we have developed ourown instrument to capture beliefs of youngpeople concerning all aspects of their currentconditions of FPR (see section Materials andMeasures for more details).

The Present Research

This study is aimed to examine the differencesin financial knowledge, personal FPR beliefs andcurrent retirement saving according to profes-sional financial experience, and to clarify therole of professional financial experience withinrelationships between financial knowledge andFPR beliefs in young adults.

Firstly, we were interested whether youngpeople working in non-financial versus finan-cial employments (hereafter non-professionalsand professionals) differ in financial literacy,personal beliefs about FPR and current retire-ment savings. Professionals might be expectedto have better financial knowledge and morenuanced and realistic view of retirement finan-cial preparation, and to save more for retirement,due to competences developed in the course ofperforming their finance-related profession ona daily basis.

Next, we aimed at examining the interactionsbetween financial literacy and financial profes-sional experience in relation to personal beliefson FPR. We would expect higher financialknowledge (especially retirement financial lit-eracy) of the participants to be associated withpositive personal beliefs about FPR, such asperceiving the FPR task as more urgent and lessdemanding. Our main concern was to determinethe impact of professional financial experienceon the links between financial knowledge andpersonal beliefs in more details. In other words,we were interested whether the relationshipbetween financial literacy and personal beliefsabout FPR depends on professional experiencein the financial domain.

Last but not least, given the absence of anyinstrument to assess attitudes and beliefs aboutFPR in Slovakia, our final objective was to fillthe gap. Therefore, we designed a domain-spe-cific personal belief inventory, comprising allthe important components that are involved infinancial preparation for retirement, i.e. socio-legal environment of FPR, FPR task, and one’scapacity and motivation for FPR. The beliefsinventory has been tailored for the specific con-ditions of financial retirement planning of youngpeople, where the timing of saving start and theform it should take have been normatively de-termined.

Method

Participants

Financial Non-Professionals

In the first phase of data collection we usedan online questionnaire. A sample of 602 youngemployed adults was recruited, aged 20 to 35years. The sample was balanced with regard togeographical region, gender, and income groupquotas, representative for respective Slovakpopulation. We implemented several exclusioncriteria to enhance reliability of our results.Thus, we excluded those participants who failedto pass the control item (n = 146), whose an-swers were ambiguous (“neither agree nor dis-agree”) in more than a half of the items on FPRbeliefs (n = 39), who did not know whether theyare enrolled in the 2nd pension pillar (n = 15),and whose professions belong to the financialdomain (n = 20). Consequently, we analyzed theresponses from the remaining 382 participants(157 females, 225 males; M = 29.7 years, SD =3.9). More than a half of the sample of non-professionals (n = 224) had a university degreeand less than five percent (n = 17) completedonly primary school or a secondary school with-out graduation.


Financial Professionals

In the second phase, the data were collectedface to face. The original sample consisted of157 young adults working in the domain of fi-nance. Again, we excluded participants whoprovided ambiguous (“neither agree nor dis-agree”) answers in more than a half of the itemson FPR beliefs (n = 12). We further report re-sults based on analyses of the responses fromthe remaining 145 participants (118 females,27 males; M = 30.5 years, SD = 3.7). Gender com-position of the sample corresponds to the ac-tual ratio of men and women (2:8) among pro-fessions such as economist or accountant, ac-cording to the Statistical Office of the SlovakRepublic. The following financial professionswere included in the sample: accountants(40.7%), economists (26.9%), invoice clerks(15.2%), pay clerks and personnel managers(11.0%), financial officers (3.4%), and others(2.8%). The participants have been working intheir current positions 4.3 years on average(SD = 2.9). Half of the sample of financial pro-fessionals had a university degree (n = 73) andthe other half completed secondary school withgraduation (n = 72). They reported 1 to 18 yearsof professional experience in financial domain(M = 6.0; SD = 3.8).

Design and Procedure

The whole data collection process, includ-ing parts that are not reported here, was con-ducted by a marketing agency from December2015 to March 2016. The sample of non-pro-fessionals was recruited through an onlinepanel of the agency, which currently consistsof 13,000 active members from Slovakia, whoare rewarded for research participation withfinancial credit. After brief information aboutthe research, an informed consent and instruc-tions, participants answered a set of socio-

demographic questions. Next, they were askedto assess their understanding of financial mat-ters (i.e., self-rated financial literacy) and toanswer the items of the objective financial lit-eracy tests. Subsequently, the participants ex-pressed their personal beliefs about financialplanning for retirement on Likert scales corre-sponding to 52 statements. Finally, they an-swered questions about their current retire-ment savings (see section Materials and Mea-sures for more details).

Financial professionals were recruited usinga mixed method, based on stratified random sam-pling from databases, telephone screening, andface-to-face administration of the questionnaire.The interview lasted about 30 minutes. Twobasic criteria were set for the participants: theirprofessions had to include working with infor-mation about the pension system, and thelength of their professional experience in finan-cial domain had to be at least one year. Thecontent of the questionnaire as well as the or-der of the measures was the same as in theonline version for non-professionals, with thefollowing exceptions. The participants an-swered supplementary questions regarding theirprofessional experience, and they completed ashorter (26-item) version of the Beliefs aboutFPR scales (see section Materials and Measuresfor more details).

Materials and Measures

I. Financial Literacy and Current Retire-ment Savings

Objective Financial Literacy

The basic financial literacy subscale con-sisted of three questions which have beenwidely used in international research (e.g.,Bucher-Koenen & Lusardi, 2011; Lusardi &Mitchell, 2011a, 2011b; Van Rooij et al., 2011).The subscale aims at measuring knowledge of


rather simple economic concepts such as infla-tion, interest, and risk diversification. For a moreprecise discrimination of participants’ knowl-edge of financial matters, we used another setof three items as a measure of sophisticatedfinancial literacy. The subscale concerns com-prehension of financial operations such as com-pound interest, and complex choice of financialproducts.

Objective Retirement Financial Literacy

Knowledge of the overall retirement financialsystem in Slovakia was examined with 13 items(i.e., 1 item addressed the pension system inSlovakia, 4 items addressed the 1st pension pil-lar, 6 items addressed the 2nd pillar, and 2 itemsaddressed the 3rd pillar). We used binary cod-ing (correct/incorrect) for all the items of thetwo objective financial literacy tests. A higherscore indicates a higher level of literacy.

Self-rated Financial Literacy

For eliciting subjective estimate of one’s un-derstanding of financial matters, we used thefollowing question with respective 5-item Likertscale: “To what extent do you understand eco-nomic matters, such as interest, inflation, mort-gage and the like?” (1: “I do not understand atall”; 5: “I understand very well”).

II. Current Retirement Savings

We used an additional set of measures of sav-ing behavior. We were interested whether – andto what extent – non-professionals and finan-cial professionals actually engage in financialpreparation for retirement. As the enrollment inthe 2nd and/or the 3rd pillar necessitates long-term regular saving within selected schemes weinquired about participation in the 2nd pillar, inthe 3rd pillar, and the savings for retirement be-yond the pillars (i.e., other investments). Be-

sides the three dichotomous indicators, we cre-ated a measure representing the number of sav-ing “methods” in addition to the 1st pillar (e.g.,2nd pillar + 3rd pillar = 2).

III. Personal Beliefs about FPR

We developed our inventory of beliefs as-sumed to determine FPR. Fifty-two statementswere gathered by the research team to capturethe main components of the FPR process: socio-legal environment of FPR, FPR task, and deci-sion maker capacity and motivation for FPR.According to the decision theories (e.g., Payne,Bettman, & Johnson, 1993), these factors areinvolved in decision-making and thus we as-sumed that they also enter the decision pro-cesses on FPR.

The items concerned assessment of socialand legal environment of FPR, and trust in theeconomic system of the society, specificallyreliance on state social security in FPR. Thenext category of items focused on perceptionand evaluation of relevance, feasibility, andcomplexity of the FPR task. The final set ofstatements contained self-evaluation of partici-pants’ characteristics, such as their perceptionof the future, financial risk attitudes, motiva-tion for FPR, self-rated FPR personal compe-tence, financial stress and anxiety, and locusof control (see section Materials and Measures,and Appendix for more details).

The fifty-two items were administered to 602participants working in non-financial profes-sions. The participants expressed their level ofagreement with the statements on 5-point Likertscales (1: “strongly disagree”; 5: “stronglyagree”). After excluding participants who failedto pass the control item and those who repliedambiguously (“neither agree nor disagree”)most of the time, we entered the answers of theremaining 417 non-professionals into explor-atory factor analysis (principal componentsmethod).


A maximum likelihood extraction with varimaxrotation was used, without limitation on thenumber of factors. Thirteen eigenvalues greaterthan one resulted from this analysis (KMO =.874, Bartlett’s test of sphericity: p < .001). How-ever, the pattern of loadings, visual inspectionof the scree plot suggested and content analy-sis of the potential factors led us to end up witha five-factor solution of the „Beliefs about fi-nancial planning for retirement”: (1) The trustin the 2nd pillar – 3 items, (2) FPR task complex-ity – 6 items, (3) FPR personal engagement – 7items, (4) FPR emotional load – 5 items, and(5) FPR personal competence – 5 items. Thesefive factors explain over 40% of the total vari-ability in the data.

After administration of the scales to the groupof financial professionals and subsequent ba-sic psychometric analysis, we decided to ex-clude three items in order to reach a higher reli-ability of three scales (the trust in the 2nd pillar,FPR task complexity, and FPR personal compe-tence). Thus, the final version of the beliefsabout FPR measure contained 23 items. The al-pha coefficients for the scales within the groupof non-professionals and financial profession-als are listed in Table 1.

In the two-item scale The trust in the 2nd pil-lar participants expressed their belief that sav-ing in the 2nd pillar will result in improvement oftheir standard of living in retirement. Beliefsabout their own competence in FPR have beenassessed by four items on one’s own knowl-

edge of possibilities for financial preparationfor retirement on the scale FPR personal com-petence. The seven-item scale on the FPR per-sonal engagement in financial preparation forretirement focused on the perceived need foran early start of retirement financial prepara-tion. The demands of the task to prepare finan-cially for retirement, and difficulties of enteringand participating in the 2nd pillar, have been as-sessed by five items of the scale FPR task com-plexity. Anxiety and stress that accompaniesfinancial planning and decision making, alongwith a possible lack of financial resources wasmeasured by five items of the scale FPR emo-tional load. A higher score in the scale means ahigher level of the belief. All scales are attachedin the Appendix.

Results

Comparison of Professionals and Non-Pro-fessionals in Financial Literacy, RetirementSavings, and Beliefs about FPR

Differences in Financial Literacy and Cur-rent Retirement Savings

Table 2 depicts the comparisons of financialprofessionals and non-professionals on finan-cial literacy scales. The professionals reacheda significantly higher score in retirement finan-cial literacy compared with non-professionals.However, the two groups differed neither in

Table 1 Internal consistency of the Beliefs about FPR scales in professionals and non-profes-sionals

Items Non-professionals Professionals Trust in the 2nd pillar 2 α = .75 α = .73 FPR task complexity 5 α = .80 α = .74 FPR personal engagement 7 α = .79 α = .84 FPR emotional load 5 α = .78 α = .80 FPR personal competence 4 α = .77 α = .67


understanding of basic and sophisticated eco-nomic matters nor in self-rated financial literacy.It should be noted that half of the participantsin both groups reached at least 5 out of total 6points in the financial literacy scale, and at least11 out of total 13 points in the retirement finan-cial literacy scale. Thus, the tests did not dis-criminate well in our samples.

Moreover, as depicted in Table 3, we alsofailed to find differences between financial pro-

fessionals and non-professionals in any of themeasures of current retirement savings. Morethan seventy percent of both groups are en-rolled in the 2nd pillar (70.9% of non-profession-als and 77.2% of professionals), more than thirtypercent are enrolled in the 3rd pillar (32.2% ofnon-professionals and 40.7% of professionals),and about thirty percent save for their retire-ment beyond the pillars (28.3% of non-profes-sionals and 33.1% of professionals).

Table 2 Differences between non-professionals and professionals in financial literacy (FL) Non-professionals Professionals Comparison

FL – basic Min = 0, Max = 3 Mdn = 3.0 (1.0)**

Min = 0, Max = 3 Mdn = 3.0 (1.0)*

U = 26020.0, p = .220, rm = .05

FL – sophisticated Min = 0, Max = 3 Mdn = 2.0 (1.0)***

Min = 0, Max = 3 Mdn = 2.0 (1.0)*

U = 26387.0, p = .371, rm = .04

FL – overall Min = 0, Max = 6 Mdn = 4.0 (1.0)*

Min = 0, Max = 6 Mdn = 4.0 (1.0)**

U = 27601.5, p = .951, rm < .01

Retirement FL Min = 1, Max = 13 Mdn = 11.0 (3.0)**

Min = 4, Max = 13 Mdn = 11.0 (2.0)**

U = 23392.5, p = .005, rm = .12

Self-rated FL Min = 1, Max = 5 Mdn = 3.0 (1.0)

Min = 2, Max = 5 Mdn = 3.0 (1.0)

U = 27504.0, p = .896, rm = .01

Note. Values in parentheses stand for interquartile ranges. Values in bold represent significant differences. * Negatively skewed distribution ** Negatively skewed & Leptokurtic (thin) distribution *** Platykurtic (flat) distribution

Table 3 Differences between non-professionals and professionals in current retirement sav-

ings Non-professionals Professionals Comparison 2nd pillar 70.9% 77.2% χ2(1) = 2.1; p = .156; φ = .06 3rd pillar 32.2% 40.7% χ2(1) = 3.4; p = .081; φ = .08 Other savings 28.3% 33.1% χ2(1) = 1.2; p = .287; φ = .05

Overall savings

0: 23.0% 0: 19.3%

χ2(3) = 5.8; p = .120; φ = .11 1: 35.6% 1: 31.7% 2: 28.3% 2: 27.6% 3: 13.1% 3: 21.4%


Differences in Beliefs on FPR

Comparisons of the two groups in beliefs onfinancial planning for retirement in Table 4 re-veal that professionals rated themselves asmore competent but less personally engaged inFPR than non-professionals. However, no sig-nificant differences were observed regarding thetrust in the 2nd pillar, FPR task complexity, andFPR emotional load.

Relationships Between Knowledge and Be-liefs about FPR

In the subsequent analyses, we looked closelyat the relationships between financial literacyand beliefs about FPR, according to profes-sional experience (Table 5). Among non-profes-sionals, all types of financial literacy were posi-tively correlated with the trust in the 2nd pillar,perceived FPR personal engagement and FPR

personal competence, and negatively correlatedwith perceived FPR task complexity and FPRemotional load. Interestingly, we did not iden-tify any association between objective measuresof financial literacy and beliefs about FPR amongfinancial professionals. However, the more pro-fessionals rated themselves as financially liter-ate, the less emotional load they felt, consid-ered themselves more competent for FPR, andperceived the higher FPR personal engagement.In addition, subjective and objective measuresof financial literacy correlated only among non-professionals.

Role of Professional Experience in Relation-ships Between Knowledge and Beliefs aboutFPR

Since the presence of significant relation-ships in one group and its absence in the otherdoes not guarantee a central role of profes-sional experience, we proceeded with series of

Table 4 Differences between non-professionals and professionals in beliefs about FPR

Non-professionals Professionals Comparison Trust in the 2nd pillar

Min = 1.0, Max = 5.0 Mdn = 3.5 (1.0)*

Min = 1.0, Max = 5.0 Mdn = 3.5 (1.5)

U = 27634.0, p = .968, rm < .01

FPR task complexity

Min = 1.0, Max = 5.0 M = 2.6 (0.9)

Min = 1.0, Max = 4.6 M = 2.6 (0.8)

t(525) = 0.7, p = .487, d = 0.07

FPR personal engagement

Min = 1.4, Max = 5.0 Mdn = 3.7 (1.0)*

Min = 1.3, Max = 5.0 Mdn = 3.4 (1.4)**

U = 24166.5, p = .024, rm = .10

FPR emotional load

Min = 1.0, Max = 5.0 Mdn = 2.6 (1.4)

Min = 1.0, Max = 4.8 Mdn = 2.6 (1.8)**

U = 26064.0, p = .295, rm = .05

FPR personal competence

Min = 1.0, Max = 5.0 M = 3.2 (0.8)

Min = 1.5, Max = 5.0 M = 3.5 (0.7)

t(525) = -3.8, p < .001, d = 0.37

Note. All values were standardized to an identical range – 1 to 5 – in line with the original 5-point Likert scale. Values in parentheses stand for standard deviations or interquartile ranges. Values in bold represent significant differences. * Negatively skewed distribution ** Platykurtic (flat) distribution


moderation analyses using the SPSS macroPROCESS (Hayes, 2013). Moderation analysisin a regression-based analytical approachaimed at investigating whether a certain vari-able is related to the size of one variable’s ef-fect on another. Identifying a moderator helpsto establish the boundary conditions of aneffect or the circumstances or type of peoplefor which the relationship is absent versuspresent, weak versus strong, negative versuspositive. In all our moderation analyses, pro-fessional experience acted as a potential mod-erator of the relationships between financialknowledge and FPR beliefs. In addition, giventhe different proportion of men and womenamong financial professionals and non-profes-sionals, we added gender into the analyses asa covariate.1

Prior to testing the models, we checked thedata for multicollinearity, presence of outliersand influential cases, and autocorrelation in theresiduals. We placed financial literacy in the roleof focal predictor in the first set of tested mod-

els and changed it for retirement financial lit-eracy in the second set and for self-rated finan-cial literacy in the last set. We found three sig-nificant models, as described below.

Professional experience moderated the effectof retirement financial literacy (RFL) on FPRpersonal competence (Figure 1), and the ef-fects of self-rated financial literacy (SFL) onFPR personal competence (Figure 2) and FPRtask complexity (Figure 3). The effects of thetwo indicators of financial literacy on FPR per-sonal competence and FPR task complexitywere substantially higher among non-profes-sionals, and non-significant in the first andthe last model among professionals. The firstmodel based on interaction of RFL and pro-fessional experience, controlling for the effectof gender, explained 12% of variance in per-ceived FPR personal competence (p < 0.001).The other two models based on interaction ofSFL and professional experience, controllingfor the effect of gender, explained 31% of vari-ance in perceived FPR personal competence(p < 0.001) and 13% of variance in perceivedFPR task complexity (p < 0.001). Gender, asthe covariate, was a significant predictor ofFPR emotional load only.

1 We would like to thank the anonymous reviewersfor this suggestion and all their valuable commentswhich helped us refine the manuscript.

Table 5 Correlations between knowledge and beliefs about FPR among non-professionalsand professionals

Financial literacy Retirement financial literacy

Self-rated financial literacy

N-P FP N-P FP N-P FP Trust in the 2nd pillar .17* -.01 .35* .23 .25* .12 FPR task complexity -.20* -.03 -.39* -.15 -.39* -.08 FPR personal engagement .21* .15 .34* .16 .29* .26* FPR emotional load -.25* -.13 -.30* -.14 -.39* -.29* FPR personal competence .30* .11 .36* .03 .58* .31* Financial literacy - - .42* .34* .34* .19 Retirement fin. literacy - - - - .32* .02 Note. N-P = non-professionals, FP = financial professionals * p < .0028 (after applying Bonferroni correction)


Figure 2 Professional experience as a moderator of the effect of self-rated financial literacy onFPR personal competence

Figure 1 Professional experience as a moderator of the effect of retirement financial literacy onFPR personal competence


Discussion

What is the role of professional experiencewith financial matters in preparation of youngpeople for retirement? Since within any experi-ence, one’s knowledge, skills, attitudes, andbeliefs are being synchronously threaded, themost direct route to acquire all these compo-nents is to perform the relevant activities pro-fessionally. This was the reason which led usto examine financial professionals and to com-pare them with non-professionals in their finan-cial knowledge and beliefs.

We found that our samples of people work-ing in financial versus non-financial professionsexhibited similar levels of general financial lit-eracy – both self-rated and objectively mea-sured. Engagement of the two groups in the

current retirement savings did not differ either.However, financial professionals demonstratedgreater knowledge of the overall retirement fi-nancial system in Slovakia, which suggests thatperforming finance-related professions mightprovide better familiarity with financial planningfor retirement (FPR).

Further, we were interested whether profes-sional experience of young adults in financialdomain is reflected in their beliefs about FPR.Financial professionals expressed being morecompetent but less personally engaged in FPRcompared with self-assessment of their coun-terparts. Trust in the 2nd pillar as well as per-ceived FPR task complexity and FPR emotionalload did not differ by professional experience.

As for the link between financial knowledgeand beliefs about FPR, the patterns in the twosamples were fundamentally different. The ab-

Figure 3 Professional experience as a moderator of the effect of self-rated financial literacy onFPR task complexity


sence of professional experience in financialdomain induced that financial knowledge andFPR beliefs of our participants were congruentand in a predicted manner. Thus, the higher fi-nancial literacy of non-professionals (especiallywith regard to knowledge of the local retirementfinancial system), the more they evaluated the2nd pillar in a positive manner, felt more compe-tent and personally engaged in FPR, and con-sidered FPR as less complex and emotionallyloaded. The surprising finding was that objec-tive financial knowledge and beliefs about FPRwere not interconnected in the sample of finan-cial professionals. However, the more profes-sionals rated themselves as financially literate,the less anxious and the more competent theyfelt regarding FPR, and the higher FPR personalengagement they perceived.

For a deeper insight into the conditions offinancial preparation for retirement we examinedthe impact of professional experience on thelink between financial literacy and FPR beliefsvia moderation analyses, controlling for the ef-fect of gender. Professional experience moder-ated the effects of both self-rated and retire-ment financial literacy on FPR personal compe-tence, and the effect of self-rated financial lit-eracy on FPR task complexity. The three effectswere substantially higher among non-profes-sionals. However, the rest of the models showedthat professional experience does not affect thestrength of the relationships between financialknowledge and trust in the 2nd pillar, FPR per-sonal engagement and FPR emotional load. Wehypothesize that the groups of professionalsand non-professionals might have differed insome aspects beyond the scope of our studywhich are relevant for congruency betweenknowledge and beliefs in FPR domain.

We believe that explanation of our findingsshould be sought mainly in the professionalexperience character and the level of educationof our participants. In our case, being a finan-cial professional meant approximately six years

work experience with calculation of wages andsalaries and other similar medium-range eco-nomic matters. At the same time, more than halfof the financial professionals and non-profes-sionals completed a university degree whichdoes not correspond to the proportion of uni-versity-educated people in Slovak population.All participants were regular internet users, sotheir computer literacy was also high. Thismight be the reason why both professionalsand non-professionals in our study exhibitedexceptionally good performance in the objec-tive financial literacy tests, which differentiatesufficiently in general population.

People who work long enough in the sameprofession are customarily expected to have asufficient amount of experience in the field.Shanteau, Weiss, Thomas, and Pounds (2003)stated accordingly: “presumably, no one canwork as a professional for any length of time ifthey are incompetent” (p. 622). The presump-tion also implies that a person working in theprofession for a long time is endowed with astructured knowledge, distinguishes betweenrelevant and irrelevant knowledge, perseveresin seeking and processing information to a fargreater extent than beginners in the field, etc.However, as demonstrated by recent researchstudies, a wealth of experience in certain field isnot necessarily related to the quality of profes-sional performance in this field. The knowledgeof long-term employees can be superficial andinadequate in volume and depth, and thereforeinsufficient for a high level of performance andexpertise (Ericsson, 2009; Shanteau et al., 2003).Therefore, we might expect a great variability inthe group of professionals or even a low levelof specific performance.

Our sample of financial professionals did notperform better in general financial literacy testscompared with non-professionals. This iscounterintuitive, since they were expected topossess higher skills in working with numbers,financial procedures, etc., as well as to be more


knowledgeable in financial matters. Interest-ingly, unlike the consistency of the objectiveand subjective measure of financial literacy inthe non-professional group, self-reported levelof financial knowledge did not correspond tothe actual performance among professionals. Itis not clear whether they expressed a lack ofself-reflection or whether the common rule ap-plies here: the more knowledgeable people are,the more they realize how little they actuallyknow.

However, our professionals knew more aboutthe local retirement financial system comparedwith their counterparts. We assume that theyare more familiar with the complexity and uncer-tainty associated with FPR as well. It also seemsthat the specific financial professions includedin the study brought beliefs about a retirementsystem, which were more nuanced, more differ-entiated and more ambiguous. These youngadults employed in financial positions may pos-sess a more realistic and maybe more skepticalview on FPR possibilities. We speculate that itwas this particular insight into the pensionscheme that evoked vacillation of beliefs aboutfinancial planning for retirement and resulted inweak associations between financial knowledgeand beliefs about FPR. It is possible that therelationship knowledge–beliefs diminishes (oreven reverses) after retirement financial literacyreaches some threshold in other populationsas well. Perhaps a more targeted sample of pro-fessionals and inclusion of “real” financial ex-perts could be beneficial in answering thesequestions. Further evidence is also needed as acontribution to the debate on crucial factors inFPR.

Some limitations of our present study shouldbe addressed in future research. Only educatedyoung people participated in the study. In ad-dition, a different approach to data gathering inthe two samples might also be taken into ac-count. Nevertheless, we believe that we shedlight on the role of professional experience in

processes of financial planning for retirement.Moreover, our Beliefs about FPR scale mightserve as a useful instrument for further studiesin this field. From an applied perspective, ourfindings highlight the need to carefully con-sider the character of financial experience ofindividuals and to define precisely whatprofessionality in financial domain means.

Conclusion

Not only knowledge, but also beliefs aboutthe domain and interconnections between themcome into play in financial decision making. Pro-fessional experience in financial domain doesnot necessarily increase factual financial knowl-edge or positive beliefs. It may even disrupt thecoherent combination of the two components.And therefore, educating, counseling, and in-tervention efforts aimed at promoting financialpreparation for retirement should be tailored todifferent target groups on the basis of their pre-vious experience.

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Appendix

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Items that comprise the five subscales of Beliefs about financial planning for retirementscale:

TRUST IN THE 2nd PILLAR1. Saving in the second pillar does not improve my standard of living in retirement. (R)2. Saving in the second pillar is useless because it is only filling the treasure chest of

private institutions. (R)

FPR PERSONAL COMPETENCE3. I understand the information about saving for retirement, available to me.4. I know very well how to plan my personal finances to sustain my pension.5. I know more than my peers about how to financially prepare for retirement.6. In financial matters I am not confident enough to prepare myself adequately for

retirement. (R)


FPR PERSONAL ENGAGEMENT7. Financial planning for retirement is necessary since entering the first employment.8. That’s enough to start in middle age, i.e. in my forties, with my financial preparation for

retirement. (R)9. If I do not deal with my financial preparation for retirement now, I squandered a chance

for a decent pension.10. It is still too early for me to address the issue of financial preparation for retirement. (R)11. I look at what I can do now to make financially secure retirement for me.12. I do not address financial preparation for retirement, because I now have too many

other problems to deal with. (R)13. I delay deciding on the financial preparation for retirement for as long as possible. (R)

FPR TASK COMPLEXITY14. The decision to participate in the second pillar requires a lot of effort.15. Participation in the second pillar requires tracking changes in laws.16. It seems to me that entering into second pillar is difficult paperwork.17. Saving in the second pillar is discouraging for me as it requires more knowledge about

investing than I have now.18. Choosing the option of financial preparation for retirement is very difficult for me.

FPR EMOTIONAL LOAD19. The long-term financial planning is stressful for me.20. The daily decisions about money are a great burden for me.21. I do not have sufficient income to save for my retirement.22. Thinking about retirement makes me nervous.23. In the area of my personal finances I live from day to day.

Note. Items marked with (R) were reverse coded.