Young adults' financial advice‐seeking behavior: The roles of parental financial socialization

• Published date: 01 July 2022
• Author: Lu Fan,HanNa Lim,Jae Min Lee
• Date: 01 July 2022
• DOI: http://doi.org/10.1111/fare.12625

RESEARCH

Young adults’financial advice-seeking behavior:

The roles of parental financial socialization

Lu Fan

1

|HanNa Lim

2

|Jae Min Lee

3

1

Division of Applied Social Sciences,

University of Missouri, Columbia,

Missouri, USA

2

Department of Personal Financial Planning,

Kansas State University, Manhattan,

Kansas, USA

3

Department of Family Consumer Science,

Minnesota State University–Mankato,

Mankato, Minnesota, USA

Correspondence

Lu Fan, Division of Applied Social Science,

Program of Personal Financial Planning,

University of Missouri, 125B Mumford Hall,

Columbia, Missouri 65211 USA.

Email: fanlu@missouri.edu

Abstract

Objective: This study investigated the association between

family financial socialization during adolescence and seek-

ing financial advice in early adulthood. Personality, finan-

cial risk tolerance, and financial knowledge were examined

as mediators. Gender differences throughout the parental

financial socialization process and outcome were also

explored.

Background: Young adults are transitioning into adult-

hood. It has been found they lack fundamental financial

knowledge and are more vulnerable to financial stress and

financial shocks. Understanding young adults’financial

advice-seeking behavior is important because it is linked to

positive financial outcomes. Parents serve as significant

financial socialization agents for their children and can

influence their financial knowledge, attitude, behavior,

and long-term well-being. However, little attention has

been paid to the role of parents in the financial socializa-

tion process on children’s financial advice seeking in early

adulthood.

Method: Using the 1997 National Longitudinal Survey of

Youth and the family financial socialization model, we

constructed a structural framework in which we could

examine whether two aspects of family financial socializa-

tion, parenting style and receiving allowance, influenced

young adults’propensity to seek financial advice. Also, the

mediating roles of personality traits, financial risk toler-

ance, and financial knowledge were examined.

Results: Personality traits, financial risk tolerance, and

financial knowledge were directly associated with financial

advice-seeking behavior. Parenting style and receiving

allowance during adolescence were indirectly associated

with young adults’financial advice-seeking behavior.

Additional analyses by gender showed significant differ-

ences in the direct and indirect associations among

Received: 23 November 2020Revised: 29 April 2021Accepted: 12 August 2021

DOI: 10.1111/fare.12625

© 2021 National Council on Family Relations.

1226 Family Relations. 2022;71:1226–1246.wileyonlinelibrary.com/journal/fare

financial socialization factors, personality traits, and finan-

cial advice-seeking behavior between men and women.

Conclusion: This study illustrates the association between

early financial socialization and financial advice-seeking

behavior through psychological and knowledge factors

focusing on the importance of family influence. Using a

national dataset and the structural equation modeling

method, we found insightful direct, indirect, and total

effects of parental financial socialization on young adults’

financial advice-seeking behavior and significant gender

differences in these effects.

Implications: The findings provide implications for

policymakers and financial educators and practitioners.

This study underscores the significant role of parents as

financial socialization agents and their long-term influence

on adult children’s financial advice-seeking decisions. Cur-

rent financial literacy programs not only should focus on

educator–student relationships but also need to pay atten-

tion to parental involvement in children’s financial sociali-

zation process. Adult financial education would help

parents play a role in providing financial advice to their

children as more capable socialization agents. Accessible

financial counseling services at the community level can

potentially meet the needs of young adults who have a

lower financial knowledge to benefit from professional

advice.

KEYWORDS

emerging adulthood, financial advice seeking, financial knowledge,

financial socialization, personal and family finance, personality, risk

tolerance

INTRODUCTION

Financial advice seeking is a series of activities individuals take toward solving financial problems

through accessing different advice sources (Grable & Joo, 1999). Researchers have suggested that

various factors influence financial advice-seeking behavior, which could result in more positive

financial behaviors (Fan, 2020; Kramer, 2016; Lim et al., 2014). Young adults have been found, in

general, to lack fundamental financial knowledge and to have a higher likelihood of suffering from

financial vulnerability and financial stress (Kim et al., 2019; Lusardi et al., 2010). Thus, seeking

proper financial advice from external sources may help young adults demonstrate better financial

capacity. Certain barriers could prevent young individuals from seeking professional advice, how-

ever, such as their less-complicated financial needs or a poor awareness of the importance of profes-

sional financial services (Alyousif & Kalenkoski, 2017; Kramer, 2016). There is room to further

understand financial advice-seeking behavior among young adults.

Because improving youth’s and young adults’financial capability has become a policy

priority (Consumer Financial Protection Bureau, 2016), the influence of parents or caregivers

who provide the first experiences of financial socialization is of interest to many stakeholders.

Parents serve as significant financial socialization agents for their children (Kim &

Chatterjee, 2013) and can influence financial knowledge, attitude, behavior, and long-term

FINANCIAL ADVICE SEEKING1227