Canadian Securities Course (CSC) Level 2 Practice Exam

What do consumers focus on during the "family commitment years" stage according to the life-cycle hypothesis?

1. Retirement savings and minimizing taxes

2. Children leaving home

3. Marriage

4. Save for post-secondary education

The correct answer is: Save for post-secondary education

During the "family commitment years" stage, consumers are primarily focused on saving for significant future expenses related to their children, which includes post-secondary education costs. This stage typically coincides with crucial financial planning for family needs, where parents prioritize educational savings to ensure their children can pursue further education without excessive financial strain. The life-cycle hypothesis suggests that individuals make consumption and saving decisions based on anticipated lifetime income and needs at different stages of life. During these years, parents often allocate financial resources to prepare for the costs associated with their children’s education, minimizing the burden of debt or the need for financial aid later on. While considerations such as retirement savings and tax minimization are indeed important in other life stages, they are not the primary focus during the family commitment years. Similarly, events like children leaving home or marriage are vital life events but do not directly address the immediate financial priorities associated with raising children and preparing for their future education expenses.