Financial literacy education: An opportunity for colleges and sociology

Financial literacy represents the knowledge necessary to manage one's financial affairs in a way that contributes to overall wellbeing, yet financial literacy and financial education are understudied in sociology. While emerging adults have low rates of financial literacy overall, this article focuses on college students due to increasing college access and student loan debt. Based on the limited literature that assesses college financial literacy education, it appears that these types of programs may serve to advance college students' financial knowledge. Additional mechanisms that serve to develop college students' financial literacy include parent socialization, banking experience, and high school financial education programs. However, not everyone has the same access to these resources. Thus, given the magnitude of the US student debt crisis and persistent economic inequalities, college financial literacy education may prove beneficial for all students, particularly those from economically vulnerable backgrounds. This article serves as an invitation to sociologists to consider financial literacy education as both a worthwhile pursuit in application and as a research topic.     

Childhood roots of financial literacy

Financial literacy predicts informed financial decisions, but what explains financial literacy? We use the concept of financial socialization and aim to represent three major agents of financial socialization: family, school and work. Thus we compile twelve relevant childhood characteristics in a new survey study and examine their relation to financial literacy, while controlling for established socio-demographic characteristics. We find in a mediation analysis that both family and school positively affect the financial literacy of adults. Moreover, financial literacy and school related variables also have a direct effect on financial behavior. This suggests that family factors and schooling work through complementary channels.     

THE EFFECTS OF PERCEIVED AND ACTUAL FINANCIAL LITERACY ON FINANCIAL BEHAVIORS

A combined measure of financial literacy that includes both a test score of actual financial literacy and a self‐rating of overall financial literacy is used in this study. We find that the combined measure appears to provide greater understanding about how financial literacy affects financial behaviors. A large national survey of U.S. adults and households (n = 28,146) was used to investigate how this overall financial literacy is likely to change financial behaviors across five financial topics: credit cards, investments, loans, insurance, and financial advice. For each topic, we include 4–5 financial behaviors (22 in total) to demonstrate the consistency of the findings within and across topics. Although we are unable to identify a causal relationship, the results from the probit analysis show that both actual and perceived financial literacy appear to influence financial behaviors and that perceived financial literacy may be as important as actual financial literacy. (JEL D14, G00)     

The Cost of Not Knowing the Score: Self-Estimated Credit Scores and Financial Outcomes

This study analyzes consumers’ knowledge of their own credit situation and tests whether a lack of knowledge affects financial outcomes. The unique dataset from survey and credit report data includes self-estimates of credit scores and actual scores from a low-to-moderate income sample. We argue and show empirically that many respondents don’t know their credit score and generally underestimate their creditworthiness. Furthermore, our evidence suggests that this biased self-assessment may explain differences in perceived credit constraints and credit contracts, specifically credit card interest rates. Our research suggests that an important aspect of financial literacy is self-assessment, and that it is important to encourage consumers to regularly check their credit reports and scores so as to better understand their actual creditworthiness.     

The Role of Parents in Introducing Children to Financial Services: Evidence from Ghana-YouthSave

Financial capability—financial knowledge, skills, and access to financial services—may help smooth transitions to adulthood for youth and is affected by socialization experiences with parents and other family members. Among a sample of youth and their parents enrolled in the YouthSave experiment in Ghana (n?=?4,065), this study examined whether physical access to financial services and/or visiting banks with parents or other family members was associated with youth’s perceptions and understanding of financial institutions. We found a statistically significant association between visiting the bank with a parent or other family member and youth’s attitudes (β?=?1.45, p?<?0.001) and understanding of financial services (β?=?2.96, p?<?0.001), controlling for other factors like household income and assets. Conversely, physical access (distance, travel time) was not associated with financial services attitudes or understanding. Parents may play an important role in introducing their children to financial services. Practitioners and policy makers should consider ways to include parents in efforts to promote financial capability among youth.     

Spending Today or Saving for Tomorrow: The Influence of Family Financial Socialization on Financial Preparation for Retirement

Many of the factors that motivate individuals occur within the context of the family, and can be influenced through family socialization processes. To better understand the influence family socialization processes may have on financial capabilities and financial behaviors, 334 married couples were sampled. Structural equation modeling was used to examine both direct and indirect associations. Findings indicated direct relationships between materialism and financial strain, between religiosity and determination of needs, and between financial strain and saving for retirement. Indirect relationships were found between materialism and saving for retirement through financial strain. Our study found evidence to support the Family Financial Socialization theoretical framework. Financial counselors may benefit by understanding how couples socialize each other as they prepare for retirement.     

Race Identity and Race Socialization in African American Families

Abstract

In recent decades, theoretical and empirical efforts have enhanced our understanding of race identity and race socialization in African American families. This review of that literature identifies ways in which this growing knowledge base might assist social workers who work with African Americans. Prominent theories of race identity are outlined with a brief summary of research that has found linkages between race identity and well-being. Race socialization is defined and research investigating age, gender, and social class differences in socialization are discussed. Finally, research that examines the consequences of race socialization for psychological adjustment, academic achievement, and identity development is summarized, along with recommendations for social workers.     

The Influence of Parental Financial Socialization on Youth’s Financial Behavior: Evidence from Ghana

How youth manage their money may influence their transitions to adulthood. This may be particularly true for youth in sub-Saharan Africa (SSA), where many youth and young adults lack access to economic opportunities. Parental financial socialization is associated with youth financial knowledge, attitudes, and behavior in research studies conducted mostly in the US, yet little is known about the financial lives of youth living in SSA. Propensity score analysis and robust standard errors with multiple regression were used to examine the relationship between parental financial socialization and youth financial behaviors among a sample of 3,623 youth ages 12–19 and a parent or other adult guardian living in eight out of 10 regions of Ghana. Findings indicated that both parent- and youth-perceived parental financial socialization was a strong and consistent predictor of youth financial behaviors, as was receipt of earned income. Practitioners interested in empowering youth through financial education and inclusion programs might consider how to involve parents and other family members in programs and capitalize on opportunities for youth to have some earned income while they learn how to manage money.     

The Financial Behavior of Emerging Adults: A Family Financial Socialization Approach

The current study examined the role of attachment insecurity, locus of control, and parental financial communication on the financial behavior of emerging adults from a family financial socialization theory perspective. Data were used from the Emerging Adult Financial Capability Study, the sample consisted of emerging adult college students (N = 321) from a large southeastern university in the United States. Structural equation modeling was used to examine the direct and indirect effects as well as the overall fit of the model that was constructed according to family financial socialization theory. Results suggested that increased attachment insecurity predicted decreased financial communication from parents and a decreased perception of an internal locus of control. Emerging adults who received greater financial instruction (both direct and indirect) and who felt they had a greater ability to influence outcomes in their life engaged in more sound financial behavior. Results also suggested that financial communication and locus of control mediated the relationship between attachment insecurity and financial behavior. The findings supported the inclusion of attachment as an important family relationship variable in the financial socialization process, as well as the structure of a conceptual model of family financial socialization theory.     

Financial Education With College Students: Comparing Peer-Led and Traditional Classroom Instruction

This project compared the learning gains from teaching financial literacy skills to undergraduate students through two methods: traditional classroom instruction and peer financial counseling. Students at a southeastern university received instruction through either a semester-long course on family economics (N = 78) or a one-hour peer-led session (N = 149). Students in the peer sessions received instruction on either budgeting (n = 94) or credit (n = 55). Students in the course received extended instruction on budgeting, credit, and other topics. Comparisons of posttest learning revealed similar gains between the two methods on shared content and on planned financial behaviors. Results suggest additional investigation to explore peer financial counseling for teaching financial literacy skills may be warranted.     

Family Size and College Aspirations: A Note on Catholic-Protestant Differences

Data from a study of college aspirations among 40,000 Minnesota adolescents indicate that the relationship of family size to aspirations is somewhat higher among Protestants than Catholics. Overall aspirational differences between religious groups are minor. Further analysis suggests that these differences are probably not a function of financial capacities but rather of more basic socialization practices. The data are used to illustrate an alternative approach in analyzing the relevance of religion to contemporary society: examining processual differences between religious groups rather than concentrating only on outcomes–such as net differences in aspirations. The paper concludes by speculating that social process may be critical in distinguishing Protestants from Catholics but has generally been neglected in contemporary research on religion.     

The Financial Literacy of Social Work Students

The financial literacy of social work students has become the focus of curriculum development and research, but no study to date has attempted to assess the financial knowledge possessed by social work students. This study addressed that gap by assessing the level of objective financial knowledge reported by social work student respondents (N?=?1,506) to an Internet-based survey. Results indicated that the majority of social work student respondents scored more than 70% correct on a 48-item measure of financial literacy. Multiple regression analysis explained 33.7% of the variance and suggested that the dominant pathway to acquiring objective financial knowledge is through personal experience. Accordingly, financial education programs for social work students may be most appropriate for traditional undergraduates.     

Giving Unto Others: Private Financial Transfers and Hardship Among Families With Children

Prior research shows that financial assistance from family and friends is an important source of support for families with children. Research on financial transfers has largely focused on the recipients of transfers, however. In this study, using longitudinal data from the Fragile Families and Child Wellbeing Study (n ～ 16,000 person‐waves), the authors examine the association between the provision of financial assistance to family and friends and material hardship. The results from pooled regression and fixed effects models indicate that providing financial transfers is associated with an increased risk of hardship. The most economically disadvantaged groups, single mothers, those in the bottom income tertile, and Black mothers are the most likely to experience hardship after giving a transfer. These findings have important implications for understanding why families may have difficulty meeting basic and essential needs and how social networks may exacerbate the challenges of escaping poverty and establishing economic self‐sufficiency.     

Financial Attitudes and Responsible Spending Behavior of Emerging Adults: Does Geographic Location Matter?

The current study examined the role of geographic location on financial achievement attitudes, financial power attitudes, and responsible spending behaviors of emerging adults from a family financial socialization model perspective. Using data from the Emerging Adult Financial Capability Study (EAFCS), the sample consisted of emerging adult college students (N?=?2847) from three unique regions in the United States as well as students from Portugal. Hierarchical linear regression and ANOVA models were used to examine the patterns of similarities and differences among regions according to the family financial socialization model. Results suggest that financial achievement attitudes, financial power attitudes, and responsible spending behaviors differ across locations. Results also revealed that greater financial achievement attitudes and power attitudes were associated with fewer responsible spending behaviors. Results did not indicate that geographic location moderated the link between financial achievement attitudes or power attitudes and spending behaviors. The results suggest that financial education be adapted and conducted in a way that targets particular financial attitudes specific to each distinct region.     

Financial Literacy: Building Economic Empowerment with Survivors of Violence

The purpose of this paper is to outline key constructs including financial literacy, economic self-efficacy, economic self-sufficiency, and economic empowerment, and then present findings from an exploratory study that sought to understand the relationship among these variables in a sample of abused women. The results revealed positive and significant relationships between financial literacy with economic empowerment, economic self-efficacy and economic-self sufficiency. Results also indicated that financial literacy, race, and economic self-sufficiency were significant predictors of economic empowerment. By focusing this research on abused women, it is our intention to raise awareness about the importance of financial literacy curricula with advocates, policy-makers and researchers, so more focus can be given to economically empowering IPV survivors.     

A community initiative to support family financial well-being

Many community initiatives focus on workforce participation. Research indicates that affordable childcare is key to maintaining employment for low-income parents in the USA. These parents may also benefit from instruction to build financial literacy skills. The United Way of Tampa Bay, Florida, USA implemented a program to support family economic status that linked summer childcare for school-age children with financial literacy classes. Results from the evaluation of the initiative indicate that it enabled parents to participate more fully in work or school than would have been possible otherwise. Parents welcomed choices of free, innovative childcare programs that promoted social, academic, and cultural skills and provided safe care for their children. Parents reported that their money management knowledge and skills improved due to the course they took to qualify for childcare. Initiatives such as this show promise for promoting family financial well-being and an engaged workforce.     

Economic socialization: Basis for international comparisons

The aim of this article is to discuss some theoretical backgrounds concerning children's development and socialization, particularly centered on economic socialization; this paper also describes how an international comparative research project reached maturity. The joint object is to investigate, through cross-cultural comparisons, a general picture of children's economic socialization throughout the world. Common points and differences according to specific social, economical and political situations in the countries are brought to the fore by an international comparative research project. A common method based on interviews centered on economic understanding, economic reasoning and economic attitudes was applied in 15 different countries.     

Same-Sex Parent Socialization: Understanding Gay and Lesbian Parenting Practices as Cultural Socialization

ABSTRACT

Cultural socialization refers to the processes by which parents communicate cultural values, beliefs, customs, and behaviors to their children. To date, research on cultural socialization has focused primarily on racial- and ethnic-minority families, and more contemporary studies have examined these practices among international and transracial adoptive families. In general, four main themes have emerged in the literature: Cultural Socialization, Preparation for Bias, Promotion of Mistrust, and Egalitarianism. Since families with same-sex parents continue to experience stigma in society, there is reason to believe these parents engage in cultural socialization strategies specifically around issues of sexual orientation. Yet, current research on cultural socialization has not explicitly investigated same-sex parenting. Thus, the present study examined same-sex parent socialization among families headed by sexual-minority parents (52 fathers, 43 mothers) using a preexisting socialization framework. Findings revealed that the majority of parents endorsed behaviors designed to promote children's awareness of diverse family structures and prepare them for potential stigma-related barriers socialization along three dimensions: Cultural Socialization, Preparation for Bias, and Proactive Parenting. These results contribute to our empirical understanding of same-sex parenting and justify the need to broaden our conceptualization of cultural socialization to be more inclusive of these diverse family structures.     

Financial Capability in Children: Effects of Participation in a School-Based Financial Education and Savings Program

A groundswell of interest in young people’s ability to understand and handle financial decisions has generated keen interest in financial knowledge and effectiveness of financial education. This study examines an innovative four-year school-based financial education and savings program, called “I Can Save” (ICS). Using a quasi-experimental design, the study examines quantitative and qualitative data to analyze program effects on financial knowledge. Elementary school children who participated in ICS scored significantly higher on a financial literacy test taken in fourth grade than comparison group students in the same school, regardless of parent education and income. Results suggest that young children increase financial capability when they have access to financial education and it is accompanied by participation in meaningful financial services.