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Childhood financial socialization and young adults' financial management

Evidence type: Insight i


The effect of factors, such as employment, financial education, and socioeconomic status on the financial practices of transitioning adults have been extensively studied. However, limited information is available about the process of financial socialisation (the development of financial values, attitudes and behaviours that foster financial independence and facilitate transition into adulthood), which is the focus of this study.

The study

The study, published by the Association for Financial Counselling and Planning Education, used the Panel Study of Income Dynamics (PSID) data to examine predictors of financial attitudes and practices among young adults. The PSID is a longitudinal study of a nationally representative sample of US men, women, children, and their families. This paper reports how individual and family variables (drawn from two PSID supplements - the Transition to Adult Supplement 2005 and the Child Development Supplement II 2002/03), influence the financial attitudes and practices of young adults (aged 18-21). Specifically, this paper reports the extent to which the family processes and individual and parent factors affect their financial behaviours and financial attitudes.

Key findings

  • Overall, childhood socialisation was found to be positively associated with financial asset ownership, lack of financial anxiety, and credit card debts.
  • Among the childhood socialisation variables, it was observed from the descriptive statistics that a significantly higher percentage of those who received an allowance from their parents carried a credit card balance, were less worried about their finances, and had full responsibility for managing their finances. However, without substantial parent-child interaction, giving an allowance by itself was not significant in establishing good financial practices.
  • A higher percentage of respondents with savings accounts, or who had learned about helping others with money from their parents, had financial assets and were less worried about their financial situation. Additionally, a higher percentage of respondents who had savings accounts as children reported currently carrying a credit card balance.
  • The study supports savings accounts as an educational tool for children on financial asset ownership that helps them into young adulthood. Children whose parents are unbanked need to target additional opportunities, such as a school credit union or bank.
  • A greater proportion of those respondents whose parents monitored their spending in childhood had financial assets, were less worried about their finances, and did not currently have full responsibility for managing their finances.
  • Teaching about credit earlier may be important – understanding credit and the principle of borrowing can be taught well before young adults are ready to apply for a credit card.
  • Formal financial education in elementary, middle and high schools could supplement the deficiency of appropriate financial socialisation in the family and may be particularly beneficial to children from disadvantaged backgrounds.

Points to consider

  • Methodological strengths: The methodology applied to conducting the study and producing the analysis is described in detail. The survey data (sample size of 628 and nationally representative) and analytical methods appear robust.
  • Methodological limitations: The study does not assume any causality in explaining financial attitudes and behaviours and does not cover other socialisation influences such as peers, media, or school.
  • Applicability / relevance: This paper will be of interest to those wanting to understand how the family environment and child-parent interactions may influence the development of financial attitudes and behaviours in young adults.

Full report

Childhood financial socialization and young adults’ financial management - full report

Key info

Client group
Year of publication
Contact information

Jinhee Kim, Ph.D, University of Maryland, jinkim@umd.eduSwarn Chatterjee, Ph.D, University of Georgia, swarn@uga.edu