Written By: Stephanie R. Yates, PhD, AFC®, CFP®, RFC®
This collection of research articles shows the impact of financial socialization on various consumer groups. All three articles find that financial socialization impacts financial behavior. In the Netherlands, researchers considered the impact of saving education in early life on financial behaviors in adulthood. As adults, individuals who received this education tend to focus more on the future impact of their financial behaviors but not enough to change behavior. In New Zealand, authors considered the differences in financial socialization impacts on men versus women. They found that financial socialization is only associated with higher financial literacy and higher financial confidence for male adults as compared to female adults but not for the sample population. In the U.S., authors applied Family Financial Socialization Theory to high school students. They found that both purposive means (student-earned income) and unintentional means (communicating with parents about money) of family socialization are highly correlated with financial knowledge and financial confidence.
“Saving Education Received in Early Life and Future Orientation in Adulthood” by Alessandro Bucciol and Luca Zarri (Journal of Financial Counseling and Planning, 2019)
In this article, the authors study whether individuals who receive saving education as children or adolescents have different future concerns than those who do not. The authors use data from the DNB Household Survey collected annually via the Internet from a representative sample of Dutch households. After removing families with limited observations and those who do not meet specific age requirements, the authors obtain a final sample of 7,140 observations from 1,340 households or 5.33 observations per household on average.
The authors find that informal saving education does not have an impact on the time horizon considered when considering expenditures and savings. However, they do find a strong correlation between informal saving education and future orientation or future impact of certain behaviors. In other words, the authors find that informal saving education is effective in moving individuals to think about the future even in areas other than finance, but not to the extent that individuals shift to a long-term versus short-term view of their personal finances. They find that this effect is stable but declines with age.
“Financial Socialization, Financial Literacy, and Financial Behavior of Adults in New Zealand” by Rashid Ameer and Robert Kahn (Journal of Financial Counseling and Planning, 2019)
In this article, the authors examine whether financial socialization and financial literacy impact financial behavior. The authors hypothesize that financial education and financial socialization lead to higher levels of financial literacy and financial confidence. Further, they hypothesize that these effects are moderated by gender. That is, they anticipate differing socialization experiences for men versus women which directly impact literacy and confidence levels. Lastly, the authors hypothesize that overconfidence – when one has high confidence but low literacy – is associated with undesirable money management behaviors. To test these hypotheses, the authors administered a survey to professionals, retirees, students, workers, and lead parents in Auckland and Palmerston North New Zealand from July – August 2016.
The authors find support for their hypothesis that financial education is positively correlated with financial literacy and financial confidence. Further, they find that overconfident individuals are more likely to have financed a balance on credit cards and used more than three credit cards. Regarding socialization, they do find evidence of different experiences of males compared to females resulting in higher levels of financial literacy and financial confidence in males.
“Purposive and Unintentional Family Financial Socialization, Subjective Financial Knowledge, and Financial Behavior of High School Students” by Veronica Deenanath, Sharon M. Danes, and Juyoung Jang (Journal of Financial Counseling and Planning, 2019)
This article applies Family Financial Socialization Theory (FFST) to high school students. FFST integrates family socialization theory with financial literacy research. Thereby, family socialization processes such as family interaction and relationships lead to financial attitudes, knowledge and capabilities which ultimately manifest in financial behavior and well-being. Based on this theoretical framework, the authors hypothesize that financial socialization is positively associated with financial knowledge and financial behavior.
The authors tested these hypotheses using data collected by evaluating the National Endowment for Financial Education (NEFE) High School Financial Planning Program (HSFPP). After sending surveys to all 2,300 teachers who requested the NEFE HSFPP curriculum in 2010, the authors received completed surveys from 4,473 students from 299 teachers. Most of the students responding were White (54.3%), female (51.2%) in 12th grade (44.8%) and lived in a town with less than 24,000 people (30.8%).
The authors found that communication with parents about money, confidence in making money decisions, and student-earned income are all positively and significantly correlated with financial knowledge and financial behavior. However, access to money through parents is negatively and significantly correlated with financial knowledge and uncorrelated with financial behavior. Further, they find evidence that financial knowledge is positively and significantly correlated with financial behavior.
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