Talk is cheap: Parent financial socialization and emerging adult financial well‐being

Abstract

We test how three main methods of family financial socialization (retrospectively reported) are uniquely associated with three indicators of financial wellbeing, and whether financial self-efficacy and financial management behaviors mediate these associations. Background: Although the link between family financial socialization and financial well-being in emerging adulthood is well established, no previous study has differentiated between the three main socialization methods nor tested their unique pathways. We expand on family financial socialization theory to begin addressing this gap. Method: We utilize reliable and valid measures of parent financial socialization and data from 4,182 U.S. emerging adults.Results: Structural equation modeling revealed that (a) parent financial modeling was directly associated with financial behaviors and financial satisfaction and indirectly associated with all three financial outcomes through financial behaviors, (b) experiential learning was directly associated with financial self-efficacy and indirectly associated with all three financial outcomes through financial self-efficacy, and (c) parent-child financial discussion had zero direct or indirect associations. Conclusion: To prepare children and adolescents for future financial well-being, parents should focus on modeling financial behaviors and providing experiential learning opportunities rather than lecturing. Implications: To improve the financial well-being of emerging adults, educators should promote parent financial modeling and experiential learning.

Parental financial socialization, financial behaviors, and well‐being among Hong Kong young adults amid COVID‐19

“…Second, for the associations between financial behaviors and well-being, the original conceptualization of family financial socialization theory (Gudmunson & Danes, 2011) focused on individuals' financial outcomes, including financial well-being (i.e., the overall wellness of one's financial situation; Sorgente & Lanz, 2017). However, a growing number of studies have documented the importance of financial behaviors in the associations with young adults' nonfinancial outcomes (e.g., mental health and overall life satisfaction; LeBaron-Black, Curran, et al, 2022;LeBaron-Black et al, 2023;Li et al, 2020;Li et al, 2022;Li et al, 2019). In this study, we further extend the scope of nonfinancial outcomes by focusing on young adults' hopelessness (i.e., pessimistic versus optimistic feelings about the future; Perczel Forintos et al, 2013).…”

Money to Marriage, or Marriage to Money? Examining the Directionality Between Financial Processes and Marital Processes Among Newlywed Couples

“…For example, instead of merely telling clients how to budget, activities and assignments that require couples to create or adjust their own budget may promote change by directly applying knowledge and prompting practice of what could become a new habit. Indeed, experiential learning of finances has been linked with financial behaviors indirectly through financial self-efficacy (LeBaron‐Black et al, 2022b).…”

Finances and Fate: Parent Financial Socialization, Locus of Control, and Mental Health in Emerging Adulthood

“…For example, it is common that when parents discuss finances with their children, they will use their own financial behaviors (i.e., modeling) or their children’s financial behaviors (i.e., experiential learning) as an example (LeBaron et al, 2020b; Rea et al, 2019). Thus, while these three methods of socialization are conceptually distinct (Gudmunson & Danes, 2011; LeBaron et al, 2018; LeBaron & Kelley, 2021; LeBaron-Black et al, 2021) and seem to predict financial wellbeing in distinct ways (LeBaron-Black et al, 2022), they are highly interrelated. To this end, we followed Marsh et al’s (2014) guidelines and used exploratory structural equation modeling (ESEM) with target rotation to create the latent constructs for the three domains of financial socialization, which helped to reduce correlations among different dimensions (see Supplementary Document 1 for details).…”

“…We note that locus of control is related to but distinct from financial self-efficacy—how confident one feels in their ability to successfully manage money. Financial self-efficacy has been linked to financial socialization, financial behaviors, and financial well-being (Ahn & College, 2018; LeBaron-Black et al, 2022). Locus of control goes beyond confidence in money management and more broadly captures whether one believes their outcomes to be due to internal or external factors.…”