Financial independence is associated with the transition to adulthood of young people, which has consequences for their psychological health and prospects in general. The capability of financial self-sufficiency confers to youth a greater degree of autonomy, self-efficacy, and the ability to build sustainable security for their future (Xiao et al., 2014). Nevertheless, data suggest that young people nowadays are more likely to reach financial independence than before (Furstenberg, 2010)). Though variously ascribed to diffuse socioeconomic factors, this delay is also shown in research about the complexity of psychological, educational, and family dynamics. The route to financial independence in early adulthood is intricate and uneven. Therefore, this process demands a detailed analysis of various factors that affect young people differently. Therefore, the research question pursued in this study is: Which factors help young adults to achieve their autonomy?
Financial independence is conceptualized in this study as no longer relying on familial support for necessities and being responsible for earning, budgeting, and managing one’s finances (Lee & Mortimer, 2009). Underpinning this research is Bandura’s (1997) self-efficacy theory, which posits that an individual’s belief in their capabilities is crucial in motivating their financial behaviors. Relatedly, financial socialization theory highlights how childhood experiences, especially family dynamics, shape financial attitudes and capabilities that young people bring into adulthood (Shim et al., 2010). Therefore, a holistic examination of the psychosocial, educational, and familial factors that enhance or inhibit self-efficacy development is warranted.
Previous studies show that parental financial socialization is the main reason for children’s financial habits and attitudes. Lee and Mortimer (2009) argued that adolescents with open parent-child communication at work can develop economic self-efficacy at the time. This, in turn, will enable him to achieve a higher educational level and obtain a good job. This consequently uplifts economic stability in early adulthood. For this reason, Mu’at et al. (2024) demonstrated that family socialization contributes to developing self-efficacy and financial skills in youth.
Nonetheless, both studies solely depended on the self-reporting data, thus missing the opportunity for objective evaluation of the financial knowledge and behavior. Though socialization agrees with minds, in reality, financial literacy is an essential tool for addressing financial matters. Besides socioeconomic factors, Xiao et al. (2014) illustrate that financial knowledge and skills are significant to young adults’ financial autonomy. Nonetheless, their study was meaningful, but it was conducted among college students only, demanding examination across other populations. In another study, Shim et al. (2010) showed that financial education programs benefit independence-related competencies like savings habits, budgeting skills, etc. However, the acquisition of knowledge does not mean that a behavior change will automatically happen, and it shows that there are underlying psychological factors.
Park (2021) explained these psychological factors and concluded that self-determination and motivation cannot change financial behavior without understanding and dealing with dysfunctional thinking patterns. The psychological factors of mental health, self-control, and overcoming debt aversion are the key psychological factors supporting financial liberation. Nevertheless, the limited focus on the nature of debt psychology needs to include a complete grasp that many social, educational, and psychological factors combine to determine the state of financial self-sufficiency. Therefore, the present correlational study will examine the relationship between family financial socialization, self-efficacy beliefs, financial knowledge, and achievement of financial independence among young adults aged 18-25. Drawing from Bandura’s theory, it is hypothesized that higher levels of perceived self-efficacy will be associated with greater financial independence. It is also hypothesized that more extensive parental financial socialization and higher financial literacy will be correlated with enhanced self-efficacy and financial independence. Data will be collected using online surveys measuring participants’ self-reported financial status, family socialization experiences, financial knowledge, and self-efficacy beliefs. The findings will provide insight into how psychosocial, familial, and educational factors work in concert to promote financial capability and independence in young adulthood.
References
Bandura, A. (1997). Self-efficacy: The exercise of control. New York, NY: Freeman.
Lee, J. C., & Mortimer, J. T. (2009). Family socialization, economic self-efficacy, and the attainment of financial independence in early adulthood. Longitudinal and Life Course Studies, 1(1), 45-62.
Mu’at, S., Mahdzan, N. S., & Mohd, E. (2024). What shapes the financial capabilities of young adults in the US and Asia-Pacific region? A systematic literature review. Humanities and Social Sciences Communications.
Park, H. (2021). Financial behavior among young adult consumers: The influence of self-determination and financial psychology. Young Consumers, ahead-of-print (ahead-of-print). https://doi.org/10.1108/YC-12-2020-1263
Shim, S., Barber, B. L., Card, N. A., Xiao, J. J., & Serido, J. (2010). Financial socialization of first-year college students: The roles of parents, work, and education. Journal of Youth and Adolescence, 39(12), 1457-1470.
Xiao, J. J., Chatterjee, S., & Kim, J. (2014). Factors associated with financial independence of young adults. International Journal of Consumer Studies, 38(4), 394–403. https://doi.org/10.1111/ijcs.12106
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