Context

Financial socialisation is the capability to obtain all relevant technical, commercial, behavioural and emotional information that contribute to one’s financial knowledge and skills. The source of financial socialisation in most cases is the surrounding social environment, including family members, parents, relatives, close friends, community organisations and professional financial bodies.

Consumer-socialisation studies have found that young adults typically perceive a variety of financial-socialising factors that affect their health and well-being, their financial knowledge, and the quality of their romantic relationships. Young adults today rely on parents more than previous generations, taking longer to establish independent households, marrying later, and increasingly trading income for quality of life. To understand the life outcomes and well-being of young adults in this changing context of emerging adulthood, researchers sought to come to a better understanding of the socialisation factors that determine young adult outcomes across multiple domains.

The Study

By applying consumer socialisation theory to both the financial domain and family financial socialisation model, this study aims to interpret the power of socialising factors such as: the young adults’ own behaviours; influence of their parents; and influence of their significant other on impacting various life outcomes related to physical health, overall well-being, life satisfaction, subjective financial knowledge, objective financial knowledge, relationship satisfaction, and relationship commitment. 2,098 participants were drawn from a large, longitudinal sample of university students age 18-21 and tracked from spring 2008 to summer 2013, with 977 23-26 year olds remaining in the final wave. Only individuals who reported being in a committed relationship were selected. Of those sampled, 71% were women and 29% were men. Almost three-quarters (72%) were White; 14% were Hispanic/Latino; and 8% were Asian, with the rest identifying as African American, Native American or ‘other’.

Key findings

Seven Wave 3 hierarchical regressions revealed the following (note that all reported findings are statistically significant):

• the financial socialisation of parents is less patterned, while the financial socialisation of the romantic partner, and the young adults’ own financial behaviour, play a more important role in helping us understand young adults’ various life outcomes and well-being in this changing context of emerging adulthood.
• • Overall well-being;
  • Life satisfaction;
  • Relationship satisfaction;
  • Relationship commitment.
• • Physical health;
  • Overall well-being;
  • Life satisfaction;
  • Subjective financial knowledge;
  • Objective financial knowledge.
• As young adults assume more responsibility for their actions and take on adult roles (e.g., engagement in their career) they encounter more opportunities to practice making financial choices independently and opportunities to develop, test, and refine financial capabilities.

Implications

• Due to the magnitude of the impact that financial socialisation factors have on life outcomes, interventions should begin at a young age and target financial knowledge, literacy, and behavioural improvements.
• Targeted interventions that emphasize healthy behaviours around budgeting, paying bills, borrowing, saving, and investing aimed at young adults who engage in negative financial behaviours may encourage these young adults’ lives more holistically.
• Relationship educators and financial practitioners alike may help young adults’ relationship satisfaction and commitment by encouraging couples to talk about finances with one another and to engage in positive healthy financial behaviours.
• As young adults’ develop and financial socialisation from parents wanes, child-parent interactions should transition to conversations between ‘more-or-less’ equals, and question-and-answer guidance instead of the directorial role taken by parents in earlier years.

Points to consider

• It is possible that the perceived financial socialisation of the romantic partner may increase as the relationship progresses. However, the relationships reported by the young adults in this study were still in their early stages. Consequently, there were fewer opportunities to develop, test, and refine the lessons associated with relationships.
• Data came from a set of participants who attended the same university and from which most of the participants were white women. Therefore the findings may not generalise to young adult college students in general, young adults without college degrees, or those who are not white women.