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American Journal of Business Education

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For college graduates entering the workforce, contributing to an employer-sponsored 401(k) retirement plan can be an important way of saving for the future. However, contribution rates for young people in these plans are far below recommended percentages, leading to concerns about future financial stability for these individuals. Prior work has shown that a college student’s major and academic coursework affect their general financial knowledge. However, little is known about what content within a course of study correlates with specific financial decisions. The decision of how much to save in a 401(k) plan is complex and requires thinking beyond a present-day bias. The ability to think about future, complex problems is often referred to as critical thinking skills. This study is among the first to consider the impact of both college major and critical thinking skills on chosen 401(k) saving rates of young people about to enter the workforce. We presented a hypothetical 401(k) plan enrollment scenario to 334 university upperclassmen in order to determine the impact of educational factors on elected saving rates. We found that saving contribution rates increase when individuals are exposed to financial decisionmaking information that is consistent, frequent, and ongoing, such as the learning experienced in a four-year business degree program. We also found that critical thinking skills were independently related to increased contribution rates, regardless of major. Students from both business and non-business majors were able to apply critical thinking skills to a financial planning scenario. The results suggest that development of critical thinking skills and repeated exposure to analysis of financial data would increase 401(k) saving rates and thereby benefit all students in terms of their future financial well-being.


Originally published by The Clute Institute under a Creative Commons Attribution License in American Journal of Business Education, 2015, Volume 8, Issue 4. DOI: 10.19030/ajbe.v8i4.9420.