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Family Financial Socialization: Theory and Critical Review

Article  in  Journal of Family and Economic Issues · December 2011

DOI: 10.1007/s10834-011-9275-y

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J Fam Econ Iss (2011) 32:644–667
DOI 10.1007/s10834-011-9275-y

ORIGINAL PAPER

Family Financial Socialization: Theory and Critical Review

Clinton G. Gudmunson • Sharon M. Danes

Published online: 18 September 2011

Ó Springer Science+Business Media, LLC 2011

Abstract Financial literacy research of the past 40 years contemporary concerns in the worldwide economy. At the
(1970–2010) has largely ignored the reasons for sociode- same time, there has been a steadily expanding growth in
mographic differences in financial outcomes. The primary financial literacy research from a variety of academic dis-
purpose of this paper is to initiate a theoretical discussion ciplines. This research has primarily been outcome-based.
regarding family financial socialization—what it is; why it The most attention has been directed toward sociodemo-
is important; and how its tenets could help advance graphic differences in financial knowledge, behavior, and
understanding of individual differences in financial liter- well-being, but relatively little attention has been given to
acy. To this end, we propose a conceptual model that processes explaining these differences. In particular,
integrates family socialization theory and recent trends in research has discounted the importance of financial
financial literacy research. The study concludes with an socialization processes occurring over time within the
interdisciplinary critical review of 100 articles which pro- family social context.
vide illustrations, highlight gaps, and present opportunities In seeking to remedy this shortcoming, we have sought
for further research with many practical guidelines for to investigate the role of family financial socialization in
advancing deeper understanding of financial literacy from a the existing literature, by theorizing and critically review-
socialization perspective. ing a cross-section of the personal financial literature.
Furthermore, we have proposed a theory-based conceptual
Keywords Family relationships
Financial literacy
model of family financial socialization processes and out-
Financial socialization
Financial attitudes
Socialization comes as a practical tool for promoting future research and
theory as a lens for assessing the role of family financial sociali-
zation in the personal finance literature of the last 40 years
(1970–2010).
Introduction We have attempted to meet these goals in a particular
sequence. First, we have followed this brief introductory
In recent years there has been a growing interest among section with a review of financial socialization definitions
educators, policymakers, and families in improving finan- and family socialization theory. Second, we have proposed a
cial behavior—partly as a result of necessity, due to conceptual model of family financial socialization. Third,
we have presented our methods for conducting a critical
review of personal finance literature in light of this theory.
C. G. Gudmunson (&)
(Because this was a critical review, we have ‘‘oversampled’’
Iowa State University, 4380 Palmer Building,
Suite 1323, Ames, IA 50011, USA articles as a way of assessing gaps in the literature.) Fourth,
e-mail: [email protected] we have reported findings regarding the quality of the lit-
erature. Finally, we have concluded with a general discus-
S. M. Danes
sion of the implications from the theory and critical review.
University of Minnesota, 275F McNeal Hall,
1985 Buford Ave, St. Paul, MN 55108, USA A process-oriented definition of financial literacy has
e-mail: [email protected] guided our critical literature review; that is, ‘‘the ability to

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J Fam Econ Iss (2011) 32:644–667 645

interpret, communicate, compute, develop independent integrated, theory-based and empirically-supported picture
judgments, and take actions resulting from those processes of family socialization. This has been our aim, and our
in order to thrive in our complex financial world’’ (Danes focus on family theoretical ideas has distinguished this
and Haberman 2007, p. 49). The concept of financial literacy review from past reviews. These other reviews have pro-
has been under revision among many scholars dedicated to vided perspectives on economic (Beutler and Dickson
this topic. Recognition of the importance of social processes 2008) and consumer socialization (Hayta 2008; John 1999;
and personal dispositions that interact with a person’s Ward 1974) as well as family financial socialization (Xiao
knowledge base has spurred scholars to introduce terms such et al. 2011).
as financial capability (Sherraden 2010; Sherraden et al.
2010) to explain that more than cognitive awareness has
been needed to improve financial behavior. In short, the Family Financial Socialization
notion that financial literacy is only about cognitive aware-
ness has become outdated. In this section we have placed family financial socialization
in the context of related concepts through a look at defini-
Financial Literacy Approaches tions. Afterwards, we have explored aspects of general
family socialization theory with the expectation of moving
For decades, efforts to increase financial literacy have toward a conceptual model of family financial socialization.
occurred through educational programs designed to
enhance individual financial knowledge. Those educational Review of Definitions
efforts have reflected the assumption that knowledge nat-
urally gives way to behavior that improves financial con- Generally, consistent definitions of economic and financial
ditions at every level. Yet, more recently, concerns have socialization have been offered over the past 40 years.
emerged that cognitive financial knowledge alone may be a Most definitions have appropriately considered economic
weak stimulus for producing financial behavior change socialization to be a broad concept which ‘‘goes beyond the
(NEFE 2006). There have been concerns that our market issue of competence, as narrowly defined in terms of social
culture may intentionally draw consumers into unsustain- skills, to include orientation to consumer society’’ (Lunt
able financial lifestyles (Cross 2002; Goldstein 2000; 1996, p.10). Furthermore, we have agreed with Alhabeeb’s
Kramer 2006), and that effective financial education may (2002) contention that ‘‘consumer socialization and finan-
require combating misperceptions and countering errone- cial socialization are integral subcomponents of economic
ous ideas about money. Further, the primary unit of anal- socialization’’ (p. 11).
ysis in financial literacy research has been the individual, Ward (1974) has spearheaded this topic with his defi-
without much recognition of the primary socialization unit nition of consumer socialization as ‘‘processes by which
in which the individual initially develops—family. young people acquire skills, knowledge, and attitudes rel-
These trends have continued even though 30 years ago evant to their functioning as consumers in the market-
Moschis (1987) called for a better understanding of family place’’ (p. 2; see also Churchill and Moschis 1979; Moschis
influence in the socialization process. Recently, there has and Churchill 1978). Early definitions have emphasized
been a growing recognition that financial decision-making that socialization was a process limited mainly to children,
and financial behavior stem from deeply rooted individual but later definitions have been more inclusive. For instance,
characteristics that are impacted by social and psycholog- Hayta (2008) has argued that ‘‘socialization of the con-
ical forces. Neoclassic economic rationality has helped to sumer is the process in which the individual constantly
explain some variability but has lacked sufficiency for a harmonizes himself or herself with the environment by
complete explanation (Lunt 1996). Thus, there has been learning or changing new attitudes, values, and current
greater interest in recent decades on culturally relevant norms’’ (p. 167). This definition has suggested a lifelong
factors such as attitudes, beliefs, norms, roles, skills, financial socialization process, especially in times of
standards, and values, and in the sources through which change.
these factors have developed and evolved over time (Danes Definitions of financial socialization have also been
1994). Especially for young children, family has endured broad in scope. Danes (1994) has suggested that
as the primary socialization agent for learning about ‘‘financial socialization is much more inclusive than
finances. Family has served as a filtering point for infor- learning to effectively function in the marketplace. It is
mation from the outside world (Danes and Haberman 2007) the process of acquiring and developing values, attitudes,
and has been a foundation for continued financial sociali- standards, norms, knowledge, and behaviors that con-
zation throughout one’s lifetime. Yet, the disparate work tribute to the financial viability and individual well-
done in this area has yet to be summarized in a compelling, being’’ (p. 128).

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Family Financial Socialization Theory Liable and Thompson (2007) have defined a family
relationship ‘‘as an integrated network of enduring emo-
A number of theoretically important ideas regarding family tional ties, mental representations, and behaviors that
financial socialization have been offered over the past connect one person to another over time and across
40 years. Moschis has described how communication plays space’’ (p. 181). Family relationships have continuously
a role in helping individuals learn the content, logic, and involved human agency because family members actively
functioning of financial systems (1985; Moschis et al. interpret message meanings, and respond in innovative
1984). Mugenda et al. (1990) have showed how family ways, indicating their willingness to resist influence or
characteristics influence these communication patterns to internalize values that underlie specific requests
about finances leading to improved financial behaviors. (Kuczynski and Parkin 2007). Furthermore, evidence
Bandura (1977, 1997), has pointed out that although a from family socialization research has supported the
person may have been aware that it is important to save, premise that relationships are bidirectional. Not only
without self-efficacy, or the belief that they are capable of have parents influenced children’s financial attitudes and
saving money, they have not been likely to do so. Thus, behavior (Beutler and Dickson 2008), but children have
self-efficacy, a concept from Bandura’s (2001) social influenced parent’s decision making and practice (John
cognitive theory, has become important in financial literacy 1999). Longevity in quality family relationships has
work. John (1999) has provided an excellent review of enabled successful family routines to become habitual
consumer socialization research illustrating how children’s and automatic, freeing up mental and physical energy to
cognitive capacity has proceeded through the perceptual, focus on increasingly higher levels of teaching and
analytical, and reflective stages that were identified by Jean training. Furthermore, Liable and Thompson have pointed
Piaget. Finally, Beutler and Dickson (2008) have provided out that, ‘‘sensitive responding to children’s behavior
a comprehensive view of how family members influence contributes to their perception that their actions make a
intermediate outcomes such as development of money difference’’ (p. 191) thereby enhancing the individual’s
attitudes (e.g. materialism, financial prudence) which have sense of agency.
been linked to financial behaviors and well-being. Yet, Quality family relationships have been characterized by
despite these inroads, we along with others have asserted warmth, trust, mutual reciprocity (Grusec et al. 2000), and
that more can be done to understand the unique socializing longevity. Warmth in family relationships has proven to
role of family in promoting financial literacy (Jorgensen enhance mutual attentiveness (Dix 1992) and, because it is
and Savla 2010). intrinsically rewarding, has increased ‘‘motivation to
We have begun with a look at how family relationships comply and cooperate with relational partners’’ (Liable and
are unique from other socialization contexts. Family Thompson 2007, p. 184). Many adults have rated trust as
socialization theories have focused foremost on the parent– an essential value in intimate relationships. Trust in young
child relationship because it is very influential. Grusec and children has often first developed as positive child-care-
Davidov (2007) have suggested five reasons parents are giver attachment leading to greater trust in relationships
primary in socialization, (1) parents are ‘‘biologically with individuals outside the family (Thompson 2006). As
prepared’’ not only to produce offspring, but to attend to children age, a trusting relationship has enabled trusting
multifaceted demands of their upbringing, (2) parents who individuals to engage in appropriate financial risk taking
are primed to protect and nurture children find opportuni- and to be accepting of financial opportunities. Mutual
ties play into a human need for interrelatedness, (3) there reciprocity has entailed the recognition of mutual obliga-
are strong cultural expectations in all societies for parents tions in relationships and has provided the foundations of
to be primary socializers of children, (4) because parents moral conduct as individuals have been affected by and
typically live in close proximity to their children, an influenced by reciprocated actions in relationships. In
incentive for parents exists to help establish prosocial reoccurring family routines and rituals, children have often
behavior in children, and (5) parents control economic and witnessed how the overt and implied norms of the family
material resources that children need to grow and develop. affect behavior, and how they may be appropriately mod-
These ubiquitous ties have been used to set the stage for a ified in the evolving context of the family. These family
social relational theory which ‘‘emphasizes that socializa- relationship features have continued to underlie a key
tion and dynamics of parent–child interactions should be premise of family financial socialization theory; the suc-
understood as occurring in the context of close personal cess of an explicit attempt to financially socialize another
relationships’’ (Kuczynski and Parkin 2007, p. 271). This family member is conditioned on the quality of the inter-
perspective has also extended beyond parent–child rela- personal family relationship. Thus, for example, parents
tionships to include other types of close family relation- who try to teach children about money have been more
ships (Reis et al. 2000). successful when they have had a quality relationship with

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the child and the same may have been true for all types of faced extreme financial difficulties. Thus, it has been
family relationships. important not to have lost sight of the fact that family
Behavior modeling has also existed as an important socialization theory should also have drawn on life course
mechanism of socialization. For example, parents who perspectives. Future expansions of family socialization
have offered children a regular allowance have provided theory should also draw on the idea that family members
their children the ability to model consumer behaviors have enacted their socializing roles in conjunction with
(Barnet-Verzat and Wolff 2002). As individuals model larger environments including media, schools, neighbor-
financial behavior, they will have gained experience with hoods, and workplaces (Shim et al. 2010).
internal and external motivations (Peng et al. 2007; Rettig
et al. 1999). Those motivators have included social sanc-
tioning, approval, tangible rewards, and offers for further A Conceptual Model of Family Financial Socialization
interaction. Positive and negative reinforcements have
helped to channel development of internalized beliefs, With this theoretical grounding, we introduce a conceptual
social norms, role schemas, and personal values. model which embeds family financial socialization pro-
A great deal of the financial socialization that occurs in cesses within the context of personal finance (Fig. 1). The
families has come via observation and through other indi- proposed conceptual model is multidisciplinary in nature
rect influences. Observation has proven an efficient way of because it draws together family studies and financial lit-
learning in social systems such as the family (Grusec and eracy perspectives. Rather than depicting what currently
Davidov 2007). In a family setting, where there has been a exists in the literature, the proposed conceptual model
great deal of day-to-day contextualized awareness, indi- depicts the main thesis of this critical literature review.
viduals have been able to pick up subtle clues even when That thesis stipulates that personal finance research has
financial matters may not have been discussed directly. discounted the importance of financial socialization pro-
This has emerged as a second key premise of family cesses occurring over time within the family social context.
financial socialization theory; most of the financial The proposed model highlights research emphases and
socialization that takes place in the family has resulted discrepancies from a family socialization lens and reviews
from day-to-day family interaction and relationships and the literature through this proposed lens. So, for example,
implicit financial training (Jorgensen and Savla 2010). rather than identifying direct relationships between demo-
Purposeful efforts that families have used to financially graphic differences and financial outcomes that are cur-
socialize each other have proven less common than implicit rently prevalent in the literature, the proposed conceptual
forms of financial socialization, and were often intermin- model depicts indirect relationships through family
gled with other family matters. This has been expected, not socialization processes as a possible explanation of the
only because there is so much that must be learned in one’s effects of demographic differences on financial outcomes.
family of origin, but also because parents have had mul- In this section, we define conceptual categories within our
tifaceted values that they wish to teach their children. For model, describe theoretical linkages, and illustrate with
example, while a parent may have wished to instruct a examples.
child about how to get the ‘‘most for the money’’, they may
also have desired their children to learn to share and to be Personal and Family Demographic Characteristics
generous to others. Much of this teaching has come by
participating in everyday economic events such as acquir- Demographic characteristics are of two types, personal and
ing and using resources. familial. Some, like gender and age, tend to be most
Family relationships have long held the potential to be important on the individual level. Household size, or
the most enduring relationships in life. Although family family developmental stage, and socioeconomic status tend
socialization theories have focused mostly on the parent– to be measured at the family level.1
child relationship, we have contended that changing family Our conceptual model poses demographic variables as
contexts, such as moving away from home, finishing an predictors rather than as control variables (Fig. 1). Our
educational degree, initiating an adult romantic relation- model implicitly and empirically poses the question about
ship, the birth of a child, leaving work upon retirement, and why variables such as gender, age, race/ethnicity, marital
so forth are examples of events throughout a life course status, socioeconomic status, household size, and other
that have continually demanded renewed attention to
1
financial matters and have been intimately tied to family Across generations, economic and financial variables have an
impact on certain demographic variables such as marital status, the
contexts. Thorne (2010), for example, has provided one
age at which major life events take place, and a person’s socioeco-
gripping illustration of how gender differences in per- nomic status, but these types of life course studies are beyond the
forming unpleasant financial tasks emerged when couples scope of this review.

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Fig. 1 Conceptual model of family financial socialization processes and outcomes

sociodemographics are linked to financial outcomes (also Moschis (1985) and Alhabeeb (1996) suggest that par-
see Xiao et al. 2011). Studies that use demographic char- ents not only impact children’s socialization via purposive,
acteristics as predictors seek to explain why effects do or overt teaching, modeling, and practice, but implicitly play
do not exist, and the best examples show this empirically. a role in financial attitude, knowledge, and capability
On the other hand, when demographic variables are used as development through everyday family interaction and
controls, they are assumed to be markers for ‘‘unknown relationships. Specifically, Moschis identifies three ways
factors’’ that help to reduce potential spuriousness in sci- learning occurs in families: (a) conscious or unconscious
entific models. Personal financial literacy can be advanced communication of norms and expectations resulting from
by turning greater attention towards understanding why observations or imitation of behaviors, (b) family mem-
these variables predict financial outcomes. bers’ positive and negative reinforcement, and (c) overt
In the personal finance literature, socialization processes communication. In response, we draw a distinction
are often theoretically invoked to explain the effects of between levels of intention (implicit and purposive). Fur-
demographic differences but seldom tested empirically. In thermore, we contend that most family financial sociali-
our conceptual model, we propose that demographic vari- zation occurs implicitly via family interaction and
ables are tied to financial socialization via family sociali- relationships.
zation processes. This proposition in no way concludes that We draw a line between these levels of intention for two
family socialization is a total explanation, or always even reasons. First, we wish to encourage inclusion of a wider
the most prominent, because the relative effect of family range of family interaction and relationship variables in
socialization varies over the life course with respect to personal financial research. Measures of family interaction
other agents of socialization. such as time use, relationship quality, and communication
In our literature review, we discover that many studies, patterns are often viewed as beyond the personal finance
even those classifying demographic variables as predictors, domain. However, we feel it is important to branch further
do not include socializing variables, or other types of into the behavioral sciences to get a richer understanding of
intermediate variables that could be used to explain pro- socialization forces. The second reason is to emphasize the
cesses leading to financial outcomes. Thus, there is a broad importance of the linkage between implicit and explicit
gap in our understanding of reasons why variables such as family socialization (Fig. 1, Pathway C; see Jorgensen and
gender, age, and socioeconomic status are found to be Savla 2010).
significant financial outcome predictors. Variables that For example, many allowance-granting families give
measure socialization processes could help explain some of money to children with the purpose of promoting fiscal
these linkages. responsibility and for teaching children to save, share, and

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budget money prudently. Yet, the success parents have in in mind and make limited attempts to teach consumer
promoting these values via allowance experience could be skills’’ (p. 206).
dependent on parent–child relationship quality. Children
who feel that parents are loving and warm, who routinely Purposive Financial Socialization
spend time with parents, or have positive communication
with parents are more likely to share parents’ prosocial By purposive family financial socialization, we mean
values about money (Kim et al. 2011). Likewise, good intentional efforts family members use to financially
relationship quality enables parents to engage in instru- socialize each other. Most interest in the literature is
mental teaching and training of children rather than directed at parental efforts in socializing children (Beutler
spending time dealing with conflict. This distinction helps and Dickson 2008; Clarke et al. 2005). However, purposive
strengthen the bridge between family studies and personal financial socialization occurs bi-directionally and among
finance literature. many family relationships, not solely from parents to
children. Our model indicates these efforts vary by race/
Family Interactions and Relationships ethnicity and nationality reflecting cultural differences that
impact purposive financial practices family members use to
A holistic view of financial socialization recognizes that influence each other (Danes et al. 2008). Characteristics
interaction patterns among family members influence such as gender, age, family structure, and family relation-
financial attitude development, knowledge transfer, and ship type highlight family roles tied to cultural values and
financial capability development even when financial norms that underlie financial practices. Income, education
socialization is implicit. For instance, Flouri (2004) found levels, and occupation underlie a family’s ability to enact
that mother’s parenting involvement, measured by items desirable financial practices. For instance, parents with
such as spending time together and setting rules was neg- higher status occupations and higher income levels are
atively related to development of children’ materialistic more likely to offer a regular and larger allowance (Barnet-
attitudes. Kirchler (1988) found that marital quality influ- Verzat and Wolff 2002). Furnham (1999) found savings
enced ways spouses made purchase decisions, with spouses rates are higher among adolescents from higher income
in good relationships having more persuasive power. families.
The place of the family in the financial socialization
realm is multifaceted and complex due to the nature of Financial Attitudes, Knowledge, and Capabilities
families themselves. Families thrive by ensuring that the
comprehensive needs of individuals are met by success- These concepts in our model are intermediary financial
fully orchestrating the care coming from inside and outside socialization outcomes. Most of the literature on these
the family. The demand set may be larger and more mul- variables does not consider how they emerge. We assume
tidimensional for family roles, such as spouse, parent, they are socially imbued individual characteristics adapted
sibling, or child, than the more singular pursuits of schools, over time. Accordingly, individuals carry certain attitudes,
community organizations, and workplaces. Families are knowledge, and capabilities with them from context to
also highly systemic, meaning that individual behavior context although they are variously expressed in each cir-
carries a great deal of feedback affecting subsequent cumstance. Although Ward’s (1974) view of socialization
interactions. By merely interacting with others in family focuses on attitudes, knowledge, and skills, we focus on
roles, family members are financially socialized. For attitudes, knowledge, and capabilities. In our view, capa-
instance, children learn the value that parents accord to bility is a more expansive concept than skills. Capabilities
particular material objects, learn family financial norms, better capture what developing individuals, especially
and begin to anticipate future financial roles as they children, are able to do, rather than skills which emphasize
mature. what is done proficiently. The notion of capabilities also
With all this complexity, there are practical bounds for better captures a sense of a person within societal structures
what can be reliably measured as family interaction. We that variously provide opportunities and constraints to
suggest beginning broadly by incorporating constructs such individuals (Johnson and Sherraden 2007; Sherraden
as family interpersonal communication, relationship qual- 2010). However, even when external conditions are simi-
ity, and parenting style. It is important to remember that lar, there will be variations in what individuals are capable
family members behave in ways to accomplish a variety of of achieving—thus the term also refers to internal moti-
goals at any given time. As John (1999) observed, ‘‘family vational sources such as self-efficacy, values, perceived
influences on socialization seem to proceed more through needs, and living standards. Financial attitudes, knowledge,
subtle social interaction than purposive educational efforts and capabilities interact in important ways. For instance,
by parents[;] parents appear to have few educational goals self-efficacy may be a necessary condition before

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knowledge leads to financial behavior change. Without through multiple sources. Subjective indicators are based
confidence in one’s own ability to accomplish a financial on individual perspectives and opinions and include
action, knowledge is not likely to give way to behavior examples such as financial satisfaction, low economic
(Bandura 1977, 1997). Ultimately, we propose that the pressure, income adequacy, and so forth. Family members
important financial end products of these intermediate may have varying levels of agreement.
variables are financial behavior and financial well-being. Although objective and subjective measures are often
correlated, they should be treated as distinct constructs. For
Financial Behavior example, per-capita income is conceptually related to
perceived income adequacy but they may not have the
This construct refers to individual financial outcomes that same predictors. Furthermore, there may be mediated
are observable, even if most studies rely on self-reports. To processes that need to be discovered. For example,
further highlight processes leading to financial behavior, Sumarwan and Hira (1993) find that income has its largest
we recognize two interrelated financial behavior types. effect on financial satisfaction by indirectly boosting per-
First and most common, financial behavior is a pattern of ceptions of income adequacy. We advocate for examining
action over time such as earning, saving, spending, and objective and subjective indicators as separate constructs
gifting. and for examining how they are interrelated. Gutter and
A second type of behavior, one which is no less critical Copur (2011) call for a similar approach.
for financial success, is related to financial turning points Our conceptual model contains paths from financial
and decision making. This type of behavior is more ‘‘event- behavior to financial well-being and from attitudes,
like’’ and certainly includes initiation and termination of knowledge, and capabilities to financial well-being. Future
passive financial processes; like setting up a 401 k account research might investigate which of these are the best
or developing an automatic ‘‘pay-yourself-first’’ savings proximal predictors of objective and subjective financial
plan. Behavioral economics research is revealing powerful well-being. From our review of the literature, we generally
lessons about how practitioners may grapple with human observe that behaviors are likely to be stronger predictors
misperceptions, preference for the status quo, and behavior of objective well-being while attitudes, knowledge, and
that can seem irrational, to set up structures for better capabilities tend to best predict subjective financial well-
choice-making and maintenance of successful behavior being. Valid questions remain, however, about method
patterns (Thaler and Sunstein 2008). Although review of variance biases that can contribute to these differences.
behavioral economics literature goes beyond what could be Unfortunately, too often, subjective well-being measures
accomplished in the present investigation, the theoretical are not conceptually or empirically distinct from attitudes,
ideas that underlie this rapidly growing discipline are often knowledge, or capabilities. The ways in which they are
consistent with socialization ideas. measured is also important. Often measures are positioned
Financial behavior is often viewed as the cornerstone of adjacent to each other in surveys, have the same response
financial well-being. Recent financial literacy discussions formats (i.e. Likert scales), or are answered by the same
call for measuring behavioral outcomes as a result of respondents. These methodological issues can artificially
socialization—especially in relation to financial education inflate associations. Thus, there is need for greater under-
and knowledge application (Fox et al. 2005; McCormick standing of existing scales and survey construction. Too
2009). In an illustration of how family socialization often investigators consider only reliability and not validity.
impacts financial behavior, Pinto et al. (2005) show that More conceptual rigor is needed in future research. In the
college students received more information about credit following sections we describe our methods for sampling
from parents than from peers, media or school and that the for the critical review and present basic information about
more information they receive from parents, the lower are research quality and content.
their credit card balances. Likewise, a parent’s savings
habits and children’ experiences owning investments at a
young age are associated with higher savings rates several Research Overview
years after college (Peng et al. 2007).
Ward’s (1974) influential review seemed to have sparked
Financial Well-Being consumer socialization research with comparatively little
occurring prior to the 1970s. Thus, we considered research
This construct includes objective and subjective indicators. published from 1970 to 2010. To keep our project man-
Examples of objective indicators include income and sav- ageable, we used review articles in the areas of consumer
ings levels, ownership of goods, financial ratios, and credit and economic socialization (Beutler and Dickson 2008;
reports which are measures that can be reliably assessed Hayta 2008; John 1999; Ward 1974) to identify journals

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that were well positioned to publish personal financial and Nature and Quality of the Research
family-related content. The six journals we selected were:
Family and Consumer Sciences Research Journal, The Table 1 presents an overview of 100 selected empirical
Journal of Financial Counseling and Planning, Journal of studies from six journals on the topic of personal finance
Economic Psychology, Journal of Family and Economic from the past 40 years. The research originated from at
Issues, The Journal of Consumer Affairs, and The Journal least 11 different disciplines, with major contributions from
of Consumer Research. These journals regularly include family and consumer sciences (23%), family studies (20%),
content that bridges family issues, personal finance, and marketing (18%), and psychology (17%). While most
financial literacy and were prominently represented in the studies made at least some mention of theory, usually in the
reviews that guided our selection. context of findings from previous research, only 36%
We began with keyword searches within journals seemed to seriously be dedicated to a particular theoretical
related to personal finance, families, and economic/con- perspective. The behavioral life cycle, family life cycle,
sumer socialization. Since this method of searching left resource management, role theory, supply and demand, and
out articles that seemed promising for subject matter systems theories were the most often used. College student
coverage, we systematically browsed all article titles in samples and large public-use data sets were commonly
these journals within the 40-year time span. Due to our used, and the median sample size of 342 was encouraging
initial hypothesis that socialization perspectives in the (mean = 999). However, 86% of studies were cross-sec-
literature were limited, we focused on locating studies tional and most longitudinal studies were based on just two
related to personal finance that by face-value looked waves of information. About half (49%) of the samples
promising for potential information related to family were drawn through randomized procedures, 43% were
financial socialization, whether or not that was the convenience samples, with a remaining 8% that examined
intention of the authors. This critical review approach entire populations (usually all the participants in an edu-
allowed us to focus on gaps as well as strengths in the cational program). There was heavy use of multivariate
literature via an over-selection of articles and not merely statistics (74%), and a few that relied on bivariate statistics
select those studies that seemed to promise support for (18%). Eight percent were qualitative studies. It was
our theoretical perspective. Our first pass through the encouraging to see that multiple disciplines were interested
literature netted nearly 90 articles matching these criteria. in personal finance and that sample sizes were large
Our final pass updated the review with the most recent overall. It is, however, unfortunate that there were few
publications, and we intentionally sought to bring the longitudinal studies.
number in our sample up to 100, thereby making sum-
mary counts equivalent to percentages. Research Content
Our systematic sampling approach had strengths and
weaknesses. Limiting our search to these journals made the The ‘‘links’’ column in Table 1 identifies emphasized
task manageable but undoubtedly excluded relevant arti- relationships in the literature that corresponded with rela-
cles on family financial socialization from other sources. tionships proposed in our conceptual model (Fig. 1). It was
Our approach was, however, in keeping with our overall clear from results that the traditional province of personal
goal to assess the degree to which a socialization per- financial literature was on outcomes. The connections
spective existed in the personal finance literature. Some between financial attitudes, knowledge, and capabilities
articles in our selection have this perspective and others do and financial behavior (Pathway F) were investigated in
not. In our study overview, we excluded articles that were 56% of studies. Connections between financial attitudes,
non-empirical or that were primarily designed to introduce knowledge, and capabilities and financial well-being
new measures without examining relationships between (Pathway G) were investigated in 27% of the studies and
constructs. When there was more than one study within an connections between financial behavior and financial well-
article, we focused on the main study or the one with the being (Pathway H) were investigated in 23% of the studies.
largest sample size. Perhaps most importantly, virtually every study in our
We had two aims for the review of these 100 studies. sample used demographics variables in association with
First, we wanted to assess the nature and quality of these one or more outcomes. However, there was much less
studies. This was done by summarizing authorship and attention paid to relationships associated with implicit and
content, noting dedicated use of theory, and key aspects of purposive socialization processes. For further examination,
the methodology. Second, we wanted to estimate the we turned attention to pathways A–E.
amount of attention that was paid to linkages between the The fact that only 6% of studies examined relationships
broad concepts in the literature that have been incorporated between personal and family demographic characteristics
into our conceptual model (Pathways A–H). and family interaction and relationships (Pathway A)

123
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Table 1 Overview of selected personal financial literature; authorship, topics, linkages, samples, and methods
Study Disc. Topics Links Theory Sample Methods

123
Alhabeeb (1996) CS Demographics linked to adolescent – Neoclassic 423 from Massachusetts Randomized
spending and saving behavior economic demand public schools Cross-sectional
Multivariate
Baek and Hong FCS Demographics, life stage, and attitudes F, G, H Family life-cycle 3,974 from the Survey of Randomized
(2004) linked to consumer debt theory Consumer Finances Cross-sectional
Multivariate
Barnet-Verzat and Ec Demographics linked to parents allowance B, C Altruism, exchange, 5,300 French households Randomized
Wolff (2002) motives and amounts given preference shaping with a child Cross-sectional
Multivariate
Belk (1985) M Age linked to levels of materialism F Life span 338 students or workers Convenience
based on subscales of possessiveness, perspective from several different Cross-sectional
non-generosity, and envy organizations
Bivariate
Beutler et al. (2008) FS Adolescent money aspirations linked – – 187 middle school students Convenience
to intrinsic and extrinsic values Cross-sectional
Qualitative
Borden et al. (2008) FCS Financial knowledge and attitudes toward F – 93 from a financial Population
credit linked to financial behavior education seminar Longitudinal
Multivariate
Bowen (2002) FCS Parent financial knowledge linked to D, E – 64 students from a science Population
children’s financial knowledge program and their parents Cross-sectional
Bivariate
Braun and Wicklund P Commitment to an identity linked to D Conspicuous 85 university students, Convenience
(1989) conspicuous consumption attitudes for individuals consumption and professionals, and athletes Cross-sectional
of lower expertise Self-completion
Bivariate
theories
Brown et al. (2005) Ec Consumer, but not mortgage debt, H – 2,193 from British Randomized
linked to psychological well-being Household Panel Study Longitudinal
Multivariate
Burgoyne et al. P Perceived ownership and ideology linked to B, F – 42 heterosexual couples Convenience
(2007) development of money management from the United Kingdom Longitudinal
systems in early marriage
Qualitative
Carlson and M Parenting style linked to financial C Parenting style 451 mothers of elementary Convenience
Grossbart (1988) communication with child theories school children Cross-sectional
Multivariate
J Fam Econ Iss (2011) 32:644–667
 Table 1 continued
Study Disc. Topics Links Theory Sample Methods

Chaulk et al. (2003) FS Demographics linked to financial risk tolerance – Family development 4,305 from the U.S. Survey Randomized
and Prospect of Consumer Finances Cross-sectional
theory
Multivariate
Childers and Rao M Family type linked to product and brand – – 345 U.S. or Thai MBA Randomized
(1992) purchase decisions alumni Cross-sectional
Multivariate
Churchill and M Demographics linked to family communication B, E Social learning 806 adolescents Randomized
J Fam Econ Iss (2011) 32:644–667

Moschis (1979) and financial attitudes theory Cross-sectional

Multivariate
Clarke et al. (2005) FCS Financial role transfer linked most strongly to D, E, F Role theory 256 college students Convenience
parents, with differences for fathers and mothers Cross-sectional
Multivariate
Danes (1994) FS Parents perceptions of best ages to share B Family systems 182 parents from outreach Convenience
financial information with children programs Cross-sectional
Bivariate
Danes and FS Gender and program participation linked F – 5,329 students who studied Population
Haberman (2007) to differences in financial knowledge, a personal finance Longitudinal
self-efficacy, and behavior curriculum
Bivariate
Danes et al. (1999) FS Impact of high school financial planning curriculum F Jacobs’ five-tiered 188 teachers and 4,107 Population
on knowledge, behavior, and self-efficacy evaluation theory students using the NEFE Longitudinal
curriculum
Bivariate
Danes and Morris FS Demographics linked to financial satisfaction and F, G, H – 485 household heads from Randomized
(1989) plans to change the family financial situation the U.S. Midwest Cross-sectional
Multivariate
Davies and Lea P Religion, age, number of credit cards, and attitudes F, G – 140 English undergraduate Convenience
(1995) linked to student debt students Cross-sectional
Multivariate
Dean et al. (2007) FS Materialism linked to perceived financial G – 600 married couples Randomized
problems and marital satisfaction Cross-sectional
Multivariate
Devaney et al. CS Demographics linked to changes in savings motives G – 4,442 from the U.S. Survey Randomized
(2007) of Consumer Finances Cross-sectional
Multivariate
Dilworth et al. FCS Family life cycle linked to individual money goals – – 75 college student–parent Convenience
(2000) pairs Cross-sectional
Qualitative
653

123
 Table 1 continued
654

Study Disc. Topics Links Theory Sample Methods

123
Doss et al. (1995) CS Demographics linked to children’s spending, B, E, F – 409 middle school students Convenience
saving, and giving Cross-sectional
Multivariate
Dowling et al. P Financial behaviors and attitudes linked F, G, H – 400 male construction Convenience
(2009) to financial problems and satisfaction apprentices Cross-sectional
Multivariate
Eldar-Avidan et al. SW Parental divorce linked to economic hardships A, D, G – 22 Israeli young adults of Convenience
(2008) childhood parental Cross-sectional
divorce
Qualitative
Fan (2000) FCS Consumer debt linked to spending for social display H Neoclassical 5,174 from the Consumer Randomized
and more that is considered non-luxury consumer demand Expenditure Survey Cross-sectional
Multivariate
Fan and Burton FCS Demographics linked to beliefs about – Status consumption 371 college students Randomized
(2002) status-conveying goods theories Cross-sectional
Multivariate
Fisher and Montalto FCS Savings motives, goals, horizons, and health F Prospect theory 3,823 workers from the Randomized
(2010) status linked to savings behavior Survey of Consumer Cross-sectional
Finances
Multivariate
Flouri (2004) CS Mother’s involvement and inter-parental D – 2,218 British school-aged Convenience
conflict linked to children’s materialism children Cross-sectional
Multivariate
Foxman et al. (1989) M Demographics linked perceptions of adolescent B, E – 161 fathers, mothers, and Convenience
children’s influence on purchase decisions adolescent children Cross-sectional
Multivariate
Fry et al. (1998) Ec Matched savings plan linked to savings behavior F – Families in an Australian Population
change mediating the role of prior attitudes savings program Longitudinal
and behavior
Multivariate
Furnham (1999) P Demographics linked to allowance B, E – 280 English adolescents Convenience
and savings practices Cross-sectional
Multivariate
Furnham (2001) P Demographics linked to parent’s beliefs B, E – 305 British parents Randomized
about children’s economic socialization Cross-sectional
Multivariate
Gouskova et al. Ec Parent–child patterns in pension participation A, D – 2,001 participants in the Randomized
(2010) suggest intergenerational transmission of time Panel Study of Income Cross-sectional
preference Dynamics
Multivariate
J Fam Econ Iss (2011) 32:644–667
 Table 1 continued
Study Disc. Topics Links Theory Sample Methods

Grable et al. (2009) FS Locus of control, financial knowledge, and income F Cultural ‘‘cushion 62 native-born Americans Convenience
linked to financial management behavior hypothesis’’ and 91 Koreans living in Cross-sectional
U.S.
Multivariate
Han and Sherraden SW Demographics and attitudes linked to savings F Institutional saving 306 IDA participants and Population
(2009) amounts in Individual Development Accounts theory 231 non-participants Longitudinal
Multivariate
Hanley and Wilhelm FCS Compulsive buying linked to self-esteem and money F, G, H – 143 adults referred as Convenience
J Fam Econ Iss (2011) 32:644–667

(1992) attitudes compulsive spenders Cross-sectional

Bivariate
Hawks and FCS Family life cycle linked to shopping styles, A Family life cycle 378 adults who had Convenience
Ackerman (1990) information use, and decision making purchased a mattress Cross-sectional
Bivariate
Hayhoe et al. (1999) FS Money attitudes linked to number of credit cards F – 426 college students Randomized
Cross-sectional
Multivariate
Hayhoe et al. (2000) FS Gender, money attitudes, and financial behavior F, G, H – 480 college students Randomized
linked to number of credit cards and financial Cross-sectional
stress
Multivariate
Hibbert et al. (2004) FS Parent’s financial prudence linked to children’s debt D, F, G, H – 537 college students Convenience
avoidance, credit card use, and financial strain Cross-sectional
Multivariate
Hira et al. (1989) FCS Financial satisfaction linked to perceived changes in F, G, H – 123 managers of family Randomized
financial situation finances Longitudinal
Bivariate
Hira et al. (1993) FCS Demographics linked to perceived changes and – – 2,510 household financial Randomized
expectations of future financial conditions managers Cross-sectional
Multivariate
Hong et al. (2002) FCS Financial resources and plans for the future linked to F Family life cycle 2,345 from the Korean Randomized
savings Household Panel Study Cross-sectional
Multivariate
Howlett et al. (2008) M Self-regulation, future orientation, and knowledge F, G – 89 graduating college Convenience
linked to long-term financial decisions seniors Cross-sectional
Multivariate
Jones (2005) FS Demographics linked to knowledge and use of credit – – 216 college freshman Convenience
Cross-sectional
Multivariate
655

123
 Table 1 continued
656

Study Disc. Topics Links Theory Sample Methods

123
Joo and Grable FCS Financial knowledge, attitudes, behavior, and F, G, H – 220 clerical workers from Randomized
(2004) demographics linked to financial satisfaction Texas, mostly women Cross-sectional
Multivariate
Karlsson et al. P Economic situation, social comparison, aspirations, F, G, H – 411 Swedish from a Randomized
(2004) and consumption linked to satisfaction with metropolitan area Cross-sectional
consumption
Multivariate
Kidwell and Turrisi M Prior behavior, attitudes, affect, and perceived D, F Theory of planned 189 college students from a Convenience
(2004) control linked to money management tendencies behavior and large eastern university Cross-sectional
Theory of social
Multivariate
behavior
Kirchler (1988) P Marital quality linked to types of spousal influences D Gender role theory 21 Austrian couples Convenience
that affected purchase decisions Cross-sectional
Multivariate
Kivett and Schwenk FS Demographics linked to economic well-being – – 3,205 women of the Randomized
(1994) Consumer Expenditure Cross-sectional
Survey
Multivariate
Koonce et al. (2008) FCS Spending plans, financial goals, and saving practices E, F – 253 teenagers who attended Population
linked to sources used for financial information a 4-H event Cross-sectional
Multivariate
Kourilsky and Ed Classroom instruction linked to economic reasoning E, G – 27 parents of a fifth/sixth- Convenience
Murray (1981) and decision-making satisfaction grade child Longitudinal
Bivariate
Lea et al. (1993) P Economic resources, needs, social support for debt, D, G – 420 English individuals Randomized
demographics, and attitudes linked to debt level grouped by level of debt Cross-sectional
Multivariate
Lea et al. (1995) P Demographics, money management skills, time F, G, H – 583 English individuals Randomized
horizons, and consumer behavior linked to debt grouped by level of debt Cross-sectional
Multivariate
Lee et al. (2000) FCS Television shopping related to binge eating and D, F Social comparison 334 women Randomized
compulsive consumption theory Cross-sectional
Multivariate
Leiser et al. (1990) P Age linked to economic understanding, reasoning, – – Children from ten countries Randomized
and attitudes Cross-sectional
Bivariate
J Fam Econ Iss (2011) 32:644–667
 Table 1 continued
Study Disc. Topics Links Theory Sample Methods

Livingstone and Ec Social, economic, and psychological factors linked F – 279 middle-to-upper class Convenience
Lunt (1992) to indebtedness, debt amounts and debt repaid adults from the U.K. Cross-sectional
Multivariate
Loibl et al. (2009) CS Demographics, anticipated personal/social D, E, F Theories of self- 787 Ohio residents Randomized
outcomes, and persuasion linked to consumer esteem Cross-sectional
search strategies
Multivariate
Loibl and Hira FCS Self-directed financial learning and financial E, F, G, H – 1,089 lower-level, white- Convenience
J Fam Econ Iss (2011) 32:644–667

(2005) management practices linked to financial and collar workers for an Cross-sectional
career satisfaction insurance agency
Multivariate
Lowrey et al. (2004) M Relationships within a social network linked to gift D, F – Five female informants Convenience
giving at Christmas time Longitudinal
Qualitative
Lunt (1996) P Individual perceptions of the economy and views of F Social perception of 47 participants of focus Convenience
risk linked to attitudes about saving the economy group discussions Cross-sectional
Qualitative
Lyons (2004) CS Demographics, financial independence from parents, H Life-cycle theory 835 college students Randomized
and debt holdings linked to financial risks in Cross-sectional
college
Multivariate
Malone et al. (2010) S Family structure linked to differences in financial F, G, H – 368 women from diverse Randomized
concerns and priorities family structures Cross-sectional
Multivariate
Mandell and Klein B Financial literacy classes linked to financial F – 79 high school students Population
(2009) behavior Longitudinal
Multivariate
Mangleburg et al. M Gender linked to parent–child communication and B, E Consumer 353 high school students Convenience
(1997) product label use socialization Cross-sectional
theories
Multivariate
Medina et al. (1996) M Ethnicity linked to savings intentions, standards for – – 1,132 Mexican- and Anglo- Convenience
quality of goods, and money attitudes American graduates Cross-sectional
Multivariate
Meeks (1998) FCS Demographics linked to sources and amounts of B,E,F – 1,165 from the National Randomized
adolescent income and spending Survey of Families and Cross-sectional
Households
Multivariate
Moore and Stephens C Demographics linked to information seeking, B, E, F Piaget’s 132 middle school and 180 Convenience
(1975) spending behavior, and consumer skills developmental high school students Cross-sectional
theory
Multivariate
657

123
 Table 1 continued
658

Study Disc. Topics Links Theory Sample Methods

123
Moschis and Moore M Gender linked to decision-making patterns B, E Social learning 734 school children from a Convenience
(1979) theory Southern state Cross-sectional
Multivariate
Mugenda et al. FCS Demographics linked to evaluation, communication, A, B, C, Family systems and 123 family financial Randomized
(1990) money management practices and satisfaction D, E, F, resource managers Cross-sectional
G, H management
Multivariate
theories
Norvilitis and P Parental influences, knowledge, behavior, and delay D, E, F, H – 173 college students Convenience
MacLean (2010) of gratification linked to credit card debt Cross-sectional
Multivariate
Palan and Wilkes M Adolescent influence strategy style linked to D, E, F – 100 families with a mother, Convenience
(1997) parental response in consumer purchasing father, and child age Cross-sectional
12–15
Qualitative
Parrotta and Johnson SW Financial attitudes and knowledge linked to financial F, G, H – 194 recently married Convenience
(1998) management and satisfaction household managers Cross-sectional
Multivariate
Pasley et al. (1994) FS Demographics linked to type of resource pooling H – 91 remarried couples Convenience
and quality of life Cross-sectional
Multivariate
Peng et al. (2007) FCS Financial education, experience, income, and D, F – 1,039 college alumni of a Randomized
demographics linked to investment knowledge and Midwestern university Cross-sectional
savings
Multivariate
Perry and Morris M Financial resources, locus of control, and knowledge F – 10,997 from the Freddie Randomized
(2005) linked to financial behavior Mac Consumer Credit Cross-sectional
Survey
Multivariate
Pinto et al. (2005) FCS Parent teaching linked to credit knowledge and E, F – 589 traditional college Convenience
credit use students holding at least Cross-sectional
one credit card
Bivariate
Polegato and B Gender linked to food shopping strategies A Role theory and 50 husbands and wives Convenience
Zaichkowsky family systems Cross-sectional
(1994) theory
Bivariate
Prince (1993) P Self-concept linked to money attitudes D Self-concept 103 young metropolitan Convenience
theories adults Cross-sectional
Bivariate
J Fam Econ Iss (2011) 32:644–667
 Table 1 continued
Study Disc. Topics Links Theory Sample Methods

Rabinovich and P Savings intentions, time horizon and self-control F Behavioral life cycle 1,869 Dutch or Belarusian Randomized
Webley (2007) linked to savings behavior individuals Longitudinal
Bivariate
Rettig et al. (1999) FS Financial and emotional resources linked to decision D, F, G, H Management 323 farm men and women Randomized
making, implementation, and family well-being theories and who attended mandatory Longitudinal
human ecology farm credit mediation
Multivariate
Richins (1994) M Possessions linked to public and private meanings D Semiotic theories 192 mail-survey Randomized
J Fam Econ Iss (2011) 32:644–667

respondents Cross-sectional
Qualitative
Richins and Dawson M Materialism linked to valued life goals and planned F – 250 from a large city Randomized
(1992) spending within categories Cross-sectional
Bivariate
Rindfleisch et al. M Family structure linked to materialism and A, D, F – 135 young adults from a Randomized
(1997) conspicuous consumption Midwestern city Cross-sectional
Multivariate
Roberts (1998) M Demographics, psychological resources, parent D, F – 300 college students from Randomized
behaviors, and credit card use linked to the Baby Bust generation Cross-sectional
compulsive buying
Multivariate
Roberts and Jones M Financial attitudes and credit card use linked to F – 406 college students Convenience
(2001) compulsive buying Cross-sectional
Multivariate
Sanders and SW Family structure linked to assets and economic well- – – 6,131 of Survey of Income Randomized
Porterfield (2010) being for women and Program Participation Longitudinal
Multivariate
Sumarwan and Hira FS Financial management practices and income linked H Family resource 297 money managers from Randomized
(1992) to satisfaction with preparation for emergencies management the U.S. Midwest Cross-sectional
Multivariate
Sumarwan and Hira FS Demographics linked to locus of control, income G – 2,510 rural household Randomized
(1993) adequacy, and financial satisfaction financial managers Cross-sectional
Multivariate
Titus et al. (1989) FCS Knowledge linked to planning behavior, and F, G, H Systems theory 123 Iowan household Randomized
financial satisfaction money mangers Cross-sectional
Multivariate
Walker (1996) P Debt linked to coping and financial management; F, G, H – 100 mothers with infants Convenience
materialism linked to strategies and budgeting recruited from postnatal Cross-sectional
clinics
Multivariate
659

123
 Table 1 continued
660

Study Disc. Topics Links Theory Sample Methods

123
Watson (2003) B Materialism linked to borrowing, spending, credit F, G – 322 adults from Randomized
use, and saving Pennsylvania Cross-sectional
Bivariate
Webley and Nyhus P Relationship quality, future orientation, and C, D, E, F – 308 Dutch families with a Randomized
(2006) economic socialization linked future orientation child age 16–21 living at Cross-sectional
and savings home
Bivariate
Wilhelm et al. FS Financial assets and money beliefs linked to G – 559 rural household Randomized
(1993) financial satisfaction and financial progress financial managers Cross-sectional
Multivariate
Wood (1998) S Demographics linked to impulsive buying – – 594 adults from the U.S. Randomized
Cross-sectional
Multivariate
Worthy et al. (2010) FS Parental receipt of public assistance, adulthood D, F – 450 college students from Convenience
status, and risky behavior linked to financial Mississippi universities Cross-sectional
problem behaviors
Multivariate
Xiao and Fan (2002) FCS Demographics and culture linked to savings motives D Maslow’s human 500 Chinese and 2,671 Randomized
needs theory American workers Cross-sectional
Multivariate
Yurchisin and FS Perceived social status associated with buying, D, F Theory of symbolic 305 undergraduate students Convenience
Johnson (2004) materialism, and self-esteem linked to compulsive self-completion Cross-sectional
buying
Multivariate
Notes Discipline codes are B Business, C Communication, CS Consumer Science, Ec Economics, Ed Education, FS Family Studies, FCS Family and Consumer Science, M Marketing,
P Psychology, S Sociology, SW Social Work. Links refer to emphases in studies that correspond with pathways in Fig. 1. Methods refer respectively to (1) how samples were drawn, (2) study
design, and (3) empirical methodology
J Fam Econ Iss (2011) 32:644–667
J Fam Econ Iss (2011) 32:644–667 661

should not be alarming since this relationship in our model findings related to demographic variables, or offering no
technically did not relate to personal finance; a type of explanation at all. For instance, Bajtelsmit and Bernasek
relationship which was more the province of family stud- (1996) review literature on gender differences in investing
ies. Twenty-six percent of studies in our sample examined and suggest that a reason that women are disadvantaged is
associations between family interaction and relationships because of differences in gender socialization. They pro-
and financial attitudes, knowledge, or capabilities (Pathway pose that women are socialized to make more conservative
D). Only 4% of studies examined ways in which family investment choices. We agree that this is likely, but it is not
interaction and relationships impacted purposive financial clear how this socialization takes place. In the personal
socialization (Pathway C). Purposive financial socialization finance literature there are many such mysteries.
was linked to demographic characteristics (Pathway B) in Yet some studies provide more acute examples of
13% of studies and to financial attitudes, knowledge, or financial socialization. Baek and Hong (2004) investigated
capabilities in 20% of studies (Pathway E). family debt outcomes using family life cycle (family
So, what was the point being made with these somewhat demographic characteristics) as well as several other fac-
banal statistics? After all, it was not incumbent on any tors which we could identify as financial capability (ability,
personal finance study to address financial socialization. willingness, and need to borrow). Family life cycle stages
We did not criticize research because it did not fit with our were more predictive of installment debt than credit card
notions of financial socialization. Rather, we drew two debt. This type of study could easily be adapted into an
general conclusions. The first was that, although virtually investigation of financial socialization through hierarchical
every study included demographic variables, only a few analysis of the variables to see if the effects of the family
studies offered empirical evidence for why these variables life cycle change when introducing ‘‘intermediate’’
predicted financial outcomes. Xiao et al. (2011) have socialization variables such as prudence and willingness to
likewise held this as a central issue in family financial borrow, thereby revealing socialization processes rather
socialization research. Like others before (John 1999; than simply the most proximal outcomes. Mangleburg et al.
Moschis 1987; Ward 1974), we have reiterated a remaining (1997) use a socialization perspective explaining gender
gap in understanding of the role that socialization plays as a differences in teen consumer habits. They find differences
mediating process. As we reviewed literature, we searched in reading rates of product labels entirely attributable to
for other ways the effects of demographics were explained, differences in communication levels that girls have with
but these were even rarer than socialization explanations. parents and peers about products in the marketplace. This
The second conclusion was simply that focus continued to study provides strong evidence of socialization processes
be on outcomes. In contrast, we have been encouraging a as mediators of the relationship between demographic
research focus on family financial socialization, recogniz- variables (gender) and consumer behavior.
ing that these undiscovered processes should not be viewed Karlsson et al. (2004) show that a household’s socio-
as ends in themselves. economic status has an effect on financial satisfaction
mediated by aspirations, social comparison (both proximal
socialization outcomes) and consumption behaviors (a
Lessons Learned from the Critical Review more distal socialization outcome). A particularly inter-
esting study aspect is that increased aspirations, although
In this section, we attempt to enlarge the discussion leading they boosted satisfaction via increased consumption, also
to family financial socialization theory and its practical depress satisfaction directly. This study highlights multiple
implications. We argue that effects of demographic char- ways socialization can impact outcomes including simul-
acteristics on financial outcomes may be transmitted taneous positive and negative effects. Families regularly
through socialization processes. If family financial social- face these kinds of dilemmas. Taking a child along on a
ization explains effects of demographic variables on shopping visit could teach important lessons about eco-
financial outcomes, examples of this should exist in the nomic functions, but could also boost materialistic desires.
literature. Ideally, this issue is best demonstrated with Another key finding is that poor family relationships
statistical analyses that can test for mediation including lead to financial behaviors that do not improve financial
hierarchical regressions, path analysis, and structural well-being. Studies that measure financial socialization
equation modeling. Another way to accomplish this goal is processes reveal more than just financial processes; they
by locating sets of studies that identify these processes by provide clues about influences of family functioning and
linking together series of outcomes. These methods can family relationship quality (Skogrand et al. 2011). These
provide empirical support for socialization as a mediating studies often reveal that financial difficulties are tied to
process in place of the more common practice of merely poor family functioning. Communication plays a key role
invoking a socialization explanation in discussion of in relationships and in financial socialization and is an

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important link to financial behaviors. Mugenda et al. financially socialize their children are associated with
(1990) find that spousal communication about money children’s economic behavior. Likewise, children also
mediates the relationship between family variables such as influence their parents. For instance, adolescents who
age and household size in predicting money management emulate adult strategies for influencing financial decision-
practices. Financial knowledge is also tied to communi- making are more successful at influencing their parents
cation and behavior. Thus, the nature of family social (Palan and Wilkes 1997).
context appears not only to present the opportunity to As adult children move away from home, their financial
express financial knowledge, but also the frequency with attitudes interact with new financial opportunities that
which communication takes place leads to better money produce behavior changes. Credit card use among college
management practices. students is a good example. Roberts (1998) finds that credit
Other examples show that family relationship quality card use is dramatically associated with compulsive buying
influences financial attitudes. Maternal parental involve- and that factors such as self-esteem and social status
ment is associated with less materialistic attitudes in chil- associated with buying are also important. Financial
dren, and children from families experiencing inter-parental socialization continues in adulthood evolving with chang-
conflict have more materialistic attitudes (Flouri 2004). ing adult roles and resource levels (Dew and Price 2011).
Marriages ending in divorce are linked to more materialistic Throughout life, individuals take on new family roles
attitudes in children (Rindfleisch et al. 1997). Kirchler and identities (i.e. spouse, grandparent), and work to meet
(1988) found that marital quality had an impact on couple new financial needs and develop the characteristics that
financial decision making. When there is a happy marriage, they perceive pertain to those roles and identities. These
spouses influence each other in making a purchase when the changes are often accompanied by changing financial
commodity need is greater; furthermore, marital partners attitudes. For instance, Braun and Wicklund (1989) note
use a more ‘objective’ style of reasoning to explain a pur- that conspicuous consumption is higher for individuals who
chase. Times of family change represent windows of are committed to a particular identity (lawyer, business
opportunity for educators and practitioners who work with person) and are inexperienced in these roles. Those with
families to influence financial practices. Times of family more experience rely less on outward indicators of success.
change are also a fruitful research focus for financial Thus, financial practices are one way that individuals
trajectory changes. fashion new identities. New identities can shift personal
A parent’s example is an important socializing influ- resource access and introduce change in ways money is
ence. Parents who were more prudent money managers used in families. For instance, egalitarian dual-income
better socialize their adult children to avoid unnecessary couples entering marriage often turn to pooling resources
debt (Hibbert et al. 2004). Like many of the prosaic family when it becomes evident that having a child will reduce
life functions, financial practices become interwoven with one partner’s ability to earn a similar income (Burgoyne
social and psychological meaning. In a retrospective et al. 2007). Although financial management is an impor-
qualitative study of divorce, Eldar-Avidan et al. (2008) tant predictor of debt status, Walker (1996) observes that
note that adult children recall feeling that ‘‘economic improvements in financial management are a result of
consequences mean not only less money, but also a sense being in debt and the birth of a child. Thus, major family
of abandonment, a perception of parental, especially events may be natural times when families reconsider
paternal, responsibility, yet, for some, an empowering financial practices and break through barriers leading to
opportunity’’ (p. 82). changed financial behavior. Yet, the presence of life course
Finally, although research on financial socialization is investigations of personal finance are rare in personal
concentrated on children’s development, financial sociali- finance literature.
zation occurs throughout life. Children learn their first A family financial socialization approach can enrich our
lessons observationally, even before they can speak, understanding of financial literacy. An uncomfortable
watching their parents shop and manage tangible family conundrum in this field is simply how often financial
resources. In families, this learning takes place as part of knowledge proves ineffective as a predictor of financial
family social interactions, whether or not parents intend to behavior or change in behavior. Many questions rise about
teach (Danes 1994). Yet, formal learning is needed for the effectiveness of knowledge change as a precursor to
abstract concepts (i.e. interest) that are difficult to com- financial behavior change (Fox et al. 2005; McCormick
prehend through everyday observation (Bowen 2002). 2009; Robb 2011). Among college students, financial
Webley and Nyhus (2006) find that parents who are con- knowledge is sometimes associated with financial attitudes
scientious about money and are oriented toward the future which, in turn, are associated with financial behavior
influence the economic behavior of their adult children for (Borden et al. 2008; Jorgensen and Savla 2010). However,
the better. They also show that parent’s purposive efforts to it is also not uncommon to find that financial knowledge

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alone is not directly associated with financial behavior behavior over time and what affects initiation and termi-
(Borden et al. 2008; Mandell and Klein 2009; Peng et al. nation of ‘‘healthy’’ financial behavior patterns would
2007). This point is illustrated in recent work by Norvilitis inform the most effective entry points for educators to
and MacLean (2010) who find that the capability to delay motivate behavior change. That research would also assist
gratification while using a credit card is associated with policy makers in developing policies that reinforce these
fewer problematic credit card practices, but financial ‘‘healthy’’ financial behavior pattern changes at the critical
knowledge is not associated with credit card use. Whether entry points. The research would further inform the content
or not delayed gratification and other capabilities can be and pedagogy of financial curricula. The curricula would
taught in formal educational settings is a separate question, need to be capability-based so that students are assessed on
but issues such as these naturally work themselves into the behaviors performed along with knowledge learned. Based
fabric of family lives. Yet, most of the research is dis- on the Family Financial Socialization conceptual model
counting the importance of financial socialization pro- introduced in this study along with the critical review of the
cesses that occur over time within the family social current financial literacy literature, family values and
context. Furthermore, many seem to have ignored the idea norms, attitudes, and beliefs would need to be an essential
that these forces are present both in a person’s family of component of this capacity-based learning.
origin and in their families of formation as their life course One point to note is that we do not suggest that family
progresses. financial socialization is the only factor or even the most
Family socialization theory can guide future research by intense socializing context affecting financial behavior
highlighting concepts that need further investigation and by throughout a person’s life. Rather, what we state is that it is
explaining possible mechanisms underlying their effec- a largely ignored process empirically in personal finance
tiveness as predictors of financial behavior and financial literature. Continuing to ignore family socialization pro-
well-being. There is ample opportunity. Relatively little is cesses is like attempting to tie one’s shoe lace with only
known about how family socialization as exemplified in one hand—an essential element is missing. Inclusion of
personal family history, experience, skills, beliefs and family financial socialization processes in future personal
values affect patterns of action over time and the initiation finance research will address the ‘‘whole person’’, not just a
and termination of financial behavior patterns. We know person’s work and consumer life with an emphasis on
little about children and financial issues as they transition financial outcomes devoid of the socialization processes
to adulthood, create new families, their perceptions about that are essential in obtaining those outcomes.
finances, and how their normative conceptions of attitudes
and activities are reinforced or are redirected to facilitate or Acknowledgments We would like to thank three anonymous
reviewers whose constructive advice helped us improve the quality of
create behavior change. Research streams are needed in all manuscript.
these arenas; they need to be longitudinal and both quali-
tative and quantitative in nature. All of these research
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satisfaction and assessment of financial progress: Importance of relationships in family-related contexts. He was recently awarded a
money attitudes. Financial Counseling and Planning, 4, grant to develop observational measures of client anxiety during
181–199. financial counseling. He earned his PhD in Family Social Science
*Wood, M. (1998). Socio-economic status, delay of gratification, and from the University of Minnesota in 2010.
impulse buying. Journal of Economic Psychology, 19, 295–320.
*Worthy, S. L., Jonkman, J., & Blinn-Pike, L. (2010). Sensation- Sharon M. Danes is a Professor in the Family Social Science
seeking, risk-taking, and problematic financial behaviors of Department at the University of Minnesota. She has authored over
college students. Journal of Family and Economic Issues, 31, 160 refereed research articles, book chapters, and outreach publica-
161–170. tions emphasizing the intersection of economic and social decision-
*Xiao, J. J., & Fan, J. X. (2002). A comparison of saving motives of making. Her PhD is in family economics from Iowa State University.
urban Chinese and American workers. Family and Consumer She has received over $1,050,000 of research and educational grants
Sciences Research Journal, 30, 463–495. in recent years; the most recent grant from NSF. She is Past-President
Xiao, J. J., Ford, M., & Kim, J. (2011). Consumer financial behavior: of the Association for Financial Counseling and Planning Education.
An interdisciplinary review of selected theories and research. She serves on several editorial boards of research journals.
Family and Consumer Sciences Research Journal, 39, 399–414.
*Yurchisin, J., & Johnson, K. K. P. (2004). Compulsive buying
behavior and its relationship to perceived social status associated

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