Conscientiousness counts

This research, co-authored by UofM economist David Weir and Angela Lee Duckworth at the University of Pennsylvania, compared how people did on personality tests with their financial well-being after age 50.

The study controlled for a variety of other factors that could also have contributed to higher earnings, including intelligence quotient and education level. Examples of conscientiousness include being punctual, dependable and systematic, as well as being the type of person who tends to meet deadlines and pay bills and taxes on time.

“Typically, conscientious individuals are very orderly, they like to plan ahead, they tend to have neat desks and be organized,” Duckworth explains. “Crucially, conscientious people are very hard-working and self-disciplined. These are the people who go running, who tend to stick to healthy diets, who tend not to procrastinate.”

Previous research has found that an individual’s conscientiousness can also be a predictor of better health outcomes and life expectancy, as well as being negatively correlated with divorce — generally, a wealth-destroying exercise.

And this tendency starts early. Researchers at Duke University, led by psychologist Terrie Moffitt, found that the self-control children develop as early as age three can be a predictor of whether they will save more as adults or struggle with credit cards.

The Duke study followed New Zealand children born in the early 1970s throughout their lives, measuring self-control in the children based on assessments by their teachers, parents and other trained observers.

Levels of self-control were then tested as predictors of three sets of outcomes as the subjects became adults: health, criminal behaviour and wealth.

The impulsivity and relative inability to think about the future of the individuals with lower self-control resulted in more difficulty with finances, home ownership and debt. These people also were more likely to be single parents.

The Duke study underscores something experienced financial advisors have known for some time: how clients control their behaviour can be far more important than how much money they may have.

The UofM researchers say that conscientious people are better able to resist postponing the start of a savings plan or overreacting to short-term stock market swings — both keys to long-term financial success.

What’s more, they feel that some people may be able to increase their conscientiousness and, consequently, their earnings and retirement savings with the right sort of reinforcement.

There is also some evidence that conscientiousness may actually improve as we grow older, Duckworth says.

“There has been some success,” she says, “with trying to get people to be more conscientious about particular things, such as their exercise regimes, taking their medication, eating right.”  IE