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Catch Them Young: Impact of Financial Socialization, Financial Literacy and

Attitude Toward Money on Financial Well-being of Young Adults

Article in International IJC · November 2020

DOI: 10.1111/ijcs.12583

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Received: 29 May 2019 | Revised: 18 February 2020 | Accepted: 15 March 2020

DOI: 10.1111/ijcs.12583

ORIGINAL ARTICLE
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Catch them young: Impact of financial socialization, financial

literacy and attitude towards money on financial well-being of
young adults

Utkarsh1 | Asheesh Pandey2 | Arvind Ashta3 | Eli Spiegelman3 | Angela Sutan3

1
T A Pai Management Institute, Manipal,
India Abstract
2
Fortune Institute of International Business, A stream of research has examined the financial well-being of individuals. However,
New Delhi, India
less research has been conducted on the financial well-being of young adults in de-
3
CEREN, EA 7477, Burgundy School of
Business, Université Bourgogne Franche-
veloping economies. To further examine this domain, we developed a conceptual
Comté, Dijon, France framework based on the existing literature of consumer research and financial well-

Correspondence
being and assessed how financial literacy, socialization and attitude towards money
Utkarsh, T A Pai Management Institute, influence the financial well-being of young adults. Two cross-sectional surveys were
Manipal, India.
Email: [email protected], utkarsh@
conducted on 446 young adults (preliminary study n = 156; main study n = 290; mean
tapmi.edu.in age 22 years) in India. This study contributes to the literature by demonstrating that
financial discussion with parents during childhood positively influences financial
well-being of young adults. In addition, we found that relationship between financial
literacy and financial well-being is not significant. Furthermore, the study reveals the
role of attitude towards money as a strong predictor of financial well-being. The re-
sults provide implications for educational and financial institutions and policymakers
for improving the financial well-being of young adults.

KEYWORDS

attitude towards money, financial literacy, financial socialization, financial well-being, India,
young adults

1 | I NTRO D U C TI O N The personal, economic and societal effects of poor financial

well-being are not limited to working adults or the mature popula-
Financial well-being has recently gained prominence in the academic tion. An increasing number of young adults aged between 18 and
and public policy domains. A report by the Consumer Financial 29 years are experiencing financial difficulties (Brüggen, Hogreve,
Protection Bureau (CFPB, 2015) emphasized that financial well-be- Holmlund, Kabadayi, & Löfgren, 2017; Williams & Oumlil, 2015).
ing must be the objective of financial literacy (Netemeyer, Warmath, This may be attributed to their phase of transition from financial
Fernandes, & Lynch, 2017). The significance of financial well-being dependence to financial independence (Gutter & Copur, 2011;
is not limited to personal financial success; it also promotes the work Mimura, Koonce, Plunkett, & Pleskus, 2015; Sorgente & Lanz,
productivity and overall well-being of individuals; and the develop- 2017). Another factor can be the increasing student debt (Brüggen
ment of a healthy economy, overall (Diener, 2000; Netemeyer et al., et al., 2017; Elliott & Lewis 2015; Insler, 2018; Shim et al., 2009;
2017). Conversely, low levels of financial well-being create a vicious Williams & Oumlil, 2015). Moreover, young adults are vulnerable
cycle of stress, thus, further hampering personal and societal growth consumers, who lack sufficient knowledge to make critical finan-
(Elliott & Lewis, 2015; Shim, Xiao, Barber, & Lyons, 2009). cial decisions (Lusardi, Mitchell, & Curto, 2010; O'Connor et al.,

Int J Consum Stud. 2020;00:1–11. wileyonlinelibrary.com/journal/ijcs© 2020 John Wiley & Sons Ltd | 1
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UTKARSH et al.

2019; Williams & Oumlil, 2015). Therefore, studying the financial financial well-being is defined as a subjective assessment of finan-
well-being of young adults, understanding the causes that hin- cial well-being, specifically “an expectation of future financial se-
der their well-being and proposing possible solutions is crucial curity” (Netemeyer et al., 2017). Researchers concur that financial
(Sorgente & Lanz, 2017). The literature focusing on the financial well-being has a subjective and objective side (Netemeyer et al.,
well-being of university and college students is gaining research 2017; Sorgente & Lanz, 2017; Sorgente & Lanz, 2019; Xiao & O'Neill,
attention (Lanz, Sorgente, & Danes, 2019; Marchant & Harrison, 2018). Objective financial well-being reflects material possessions
2019; Vosylis & Erentaitė, 2019; Watson, Barber, & Dziurawiec, such as income, savings and so forth, whereas the subjective side is
2015). individual's self-assessment of financial situation (Netemeyer et al.,
This issue seemed pertinent to us given the potential for young 2017; Sorgente & Lanz, 2017). The development of the financial
adults’ choices to affect their later lives. Young adults are more well-being cannot be measured based on only the objective assess-
susceptible to financial threats because of less experience in the fi- ment of income and socioeconomic data (Netemeyer et al., 2017). In
nancial domain and are unable to start saving at an early age, which this research which focusses on young adults who are transitioning
hampers their future savings accumulation. Moreover, young adults from financial dependence to independence, the assessment of fi-
may possess low financial literacy (Ergun, 2018), which negatively nancial well-being in future is a critical component. Therefore, we
influences their savings rate. Finally, financial adversity, because of concur with the subjective side of financial well-being which empha-
low family income and debt accumulation, can lead to unsatisfactory sizes future financial security (Netemeyer et al., 2017). This study
academic achievements and this can degrade the overall well-be- focused on three crucial determinants of financial well-being, that is,
ing of students (Gutter & Copur, 2011; Shim et al., 2009; Watson, financial socialization, financial literacy and attitude towards money.
Barber & Dzirawiec, 2015). This study is crucial in the domain of the financial well-being
In addition, we were also motivated to focus on financial well-be- of young adults (Brüggen et al., 2017; Drever et al., 2015; Gutter
ing in developing economies, where similar studies can make crucial & Copur, 2011; Marchant & Harrison, 2019; Norvilitis & MacLean,
contributions to enhance the overall well-being of individuals and 2010; Sansone, Rossi & Fornero, 2018; Shim et al., 2009). Because a
society. Stress may be high in young adults because of the increasing substantial number of students report low financial well-being, ed-
cost of education, debt accumulation, uncertain employment oppor- ucational institutions, financial institutions and policymakers must
tunities and lack of financial literacy (Elliott & Lewis, 2015). Hence, increasingly focus on young adults. Furthermore, this study con-
this study could be valuable for building the base for future studies tributes to the literature on consumer financial decision making by
on the financial well-being of young adults in developing economies. demonstrating that financial discussion with parents and attitude
Research indicates that parents can play a vital role in developing towards money positively affect financial well-being.
positive financial behaviour in their children's later life by discussing The paper is structured as follows. This introduction is followed
financial issues at home (Lanz et al., 2019). In particular, few studies by a literature review, where key research findings on the financial
explain how financial socialization by parents influences the financial well-being of young people are examined and consolidated to de-
well-being of young adults (Lanz et al., 2019). Furthermore, financial velop the conceptual framework of the study. The methodology and
literacy is expected to influence financial well-being and financial findings of each of the two studies are then provided, followed by
behaviour positively. However, contrary evidence casts doubt on a discussion. The study concludes by suggesting the implications of
the relationship between financial literacy and downstream finan- the results and avenues for future research.
cial behaviour (Fernandes, Lynch, & Netemeyer, 2014) and financial
well-being (Netemeyer et al., 2017). Netemeyer et al. (2017) found
that financial literacy was negatively related to expected financial 2 | TH EO R E TI C A L BAC KG RO U N D
well-being. It, therefore, appears that more research is needed. We
argue that the attitude towards money developed by young adults 2.1 | Financial well-being of young adults
could contribute substantially to their financial well-being, by im-
proving saving and budgeting capacity. It would be interesting to The literature on financial well-being is wider than it is deep and is
investigate if attitude towards money is an important variable in scattered over different disciplines (Brüggen et al., 2017). Therefore,
addtion to financial socialisation and financial literacy influencing fi- more research must be conducted in this area. This research falls
nancial well-being. To this end, the current study investigated the ef- within the domain of “Transformative Service Research”, defined as
fect of financial socialization, financial literacy and attitude towards the integration of consumer and service research, focused on im-
money in improving financial well-being of young adults. proving the well-being of individuals, employees and ecosystems
Our study has two parts. A preliminary study was conducted (Anderson et al., 2012). In the field of financial services, transforma-
to validate the scale of financial well-being within the Indian con- tive service researchers can, for instance, examine the effects of
text and asses the current level of the financial well-being of young consumption on the well-being of individuals (particularly vulner-
adults (Prawitz et al., 2006). In the main study, a model of financial able or disadvantaged individuals) beyond satisfaction and loyalty
well-being was developed based on socialization theory, attitude (Anderson et al., 2012). Brüggen et al. (2017) called specifically for
development and the literature on financial literacy. In this study, more research on the financial well-being of young adults.
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Financial well-being leads to life satisfaction, academic perfor- true for students. Ford and Kent (2010) showed that financial lit-
mance, psychological well-being (Shim et al., 2009). But what are the eracy among female students is lower than that of male students.
antecedents of financial well-being? Financial education at a college Similarly, Mahdavi and Horton (2014) studied the impact of financial
level can help in wealth accumulation (Binswagner & Carman, 2012). knowledge among educated women and reported numerous inade-
However, other psychological factors can influence financial well-be- quacies in their financial knowledge. Based on the discussion above,
ing because formal education is not the only practical approach to we present the conceptual framework of this study.
improve financial well-being (Shim et al., 2009). In addition, parents
play a vital role in enhancing knowledge on economic matters, which
can positively affect financial well-being (Mimura et al., 2015; Shim 3 | CO N C E P T UA L M O D E L
et al., 2009).
Financial anxieties can escalate the level of overall stress of 3.1 | Financial socialization
young adults when moving towards financial independence, adjust-
ing to a new environment, overcoming personal concerns and mak- Financial Socialization is defined as acquiring and developing values,
ing career choices (Elliott & Lewis, 2015; Lee & Jang, 2015), which attitudes, standards, norms, knowledge and behaviours (Danes, 1994)
may influence both financial and psychological well-being. Indeed, that influence financial planning and behaviour that promotes finan-
not having sufficient money to participate in activities among their cial well-being. Research indicates parents play a critical role in en-
peers is one of the most crucial factors causing financial stress hancing knowledge on economic matters, which can positively affect
among college students (Heckman, Lim, & Montalto, 2014). financial well-being (Agnew, Maras, & Moon, 2018; Shim et al., 2009)
Another key concern is the lack of financial literacy among young and are a crucial source of financial socialization for young adults.
adults, which impairs financial decisions and reduces satisfaction. Moreover, research has shown that parental financial socializa-
Less than one-third of the young adults possess basic knowledge tion affects their financial behaviour (Jorgensen & Savla, 2010; Kim
of financial terms like interest rate, inflation and risk diversifica- & Chatterjee, 2013; Otto, 2013; Shim et al., 2009; Sohn, Joo, Grable,
tion (Lusardi et al., 2010). Additionally, this lack of financial literacy Lee, & andMinjeung Kim., 2012). The effect of financial socializa-
combines with easy access to plastic money to generate compulsive tion in influencing well-being has received more attention recently
buying behaviour (Broughman, Jacobs-Lawson, Hershey, & Trujillo, (Sorgente & Lanz, 2017; Lanz et al., 2019; for review see Gudmunson
2011). Gutter and Copur (2011) found that financial behaviour and & Danes, 2011). Sansone et al. (2018) evaluated the relationship be-
compulsive buying are significantly related to financial well-being, tween receiving an allowance (pocket money) in childhood and fi-
after controlling for demographics and financial literacy. nancial confidence in adulthood. They concluded that pocket money
Financial well-being is a priority for developed and develop- given by parents to their children becomes a crucial informal vehicle
ing economies (Brüggen et al., 2017). However, most research in for developing their financial habits in later life. Motivating and in-
the financial well-being domain has been conducted in developed structing children to budget and save early improves their savings
economies and an apparent gap is observed in understanding the rate as young adults (Bucciol & Veronesi, 2013; Webley & Nyhus,
financial well-being of individuals in developing and poor econo- 2006, 2013) as well as their tendency to invest regularly (Hira, Sabri,
mies (Brüggen et al., 2017; Elliott & Lewis, 2015; Lusardi et al., 2010; & Loibl, 2013).
Netemeyer et al., 2017; Shim et al., 2009). Certainly, a few research- In this study, the focus was on parental socialization because
ers have acknowledged the importance of this research in the finan- parents are a key socialization agent (Drever et al., 2015; Lanz et al.,
cial service domain for the very poor who are at the bottom of the 2019). Financial socialization was considered to include discussion
pyramid (Brüggen et al., 2017; Gebauer & Reynoso, 2013). However, with parents during childhood on savings, investing, financial prod-
developing economies cannot be seen only from the bottom of the ucts, budgeting and spending behaviour. Given the strong relation-
pyramid lens (see Prahalad, 2005). A substantial section of devel- ship in the literature between parental financial socialization and
oping economies emulates developed economies, where residents financial practices, we hypothesize that financial socialization will be
enroll for higher education, live in cities with suitable infrastructure a determinant of financial well-being. Adults who discussed about
and have a high disposable income, with access to consumer loans. financial aspects with their parents in childhood are more likely to
Therefore, studying financial well-being in developing economies is have higher financial well-being. Therefore, we hypothesize that,
crucial for several service organizations, such as academic institu-
tions, financial institutions and counselling organizations. A nuanced Hypothesis 1 Financial socialization has a positive effect on financial
understanding of the financial well-being of young adults can have a well-being of young adults.
long-lasting effect on their economic and life satisfaction.
For financial well-being, socioeconomic factors are crucial. Socio-
demographic factors and financial knowledge of the family are the 3.2 | Financial literacy
two most crucial factors leading to financial literacy among young
people (Lusardi et al., 2010). Lusardi et al. (2010) reported lower fi- Financial literacy is defined as the ability of an individual to plan their
nancial knowledge among females than males. This observation is finances, plan for debt and retirement and maintain wealth (Lusardi
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F I G U R E 1 A conceptual model of
factors influencing financial well-being

& Mitchell, 2014). Several researchers have stated that financial lit- Hypothesis 2 Financial literacy has a positive effect on financial
eracy is vital for improved financial planning and behaviour and con- well-being of young adults.
sequently, several researchers have assessed the level of financial
literacy and its positive consequences (Ergun, 2018; Landerretche &
Martínez, 2013). Financial literacy promotes later wealth accumula- 3.3 | Attitude towards money
tion (Martin & Oliva, 2001; Van Rooij, Lusardi & Alessie, 2012) and
effective debt management (Campbell, 2006; Huston, 2012) both Yamauchi and Templer (1982) devised an attitude towards the
key financial outcomes for young adults. Furthermore, high financial money scale, in which the factor “Time Retention” denoted “behav-
literacy can enable young adults to make complex financial decisions iours aimed at the future, which require planful preparation”. In sync
and promote savings. Improvement in financial literacy leads to in- with the above definition in this study, attitude towards money is de-
creased savings, budgeting, improved financial planning and smart fined as the predisposition of an individual towards being financially
usage of credit cards (Wann, 2017). prepared for future, reflecting tendency to save money and manage
Literature has raised concerns over the level of financial literacy expenses. This definition reflects the priority of young adults, who
among young adults (Ergun, 2018; Lusardi, 2015; Lusardi et al., 2010). are moving towards financial independence and preparing to deal
Lusardi et al. (2010) found that among 7,138 young adults, only 27% with future financial uncertainties. Savings behaviour is positively
had knowledge of inflation, risk diversification and simple interest associated with financial satisfaction in college students (Xiao, Tang,
calculations. Additionally, research shows demographic differences in & Shim, 2009). Shim et al. (2009) concluded that subjective norms
the level of financial literacy. A consistent finding is that females have and financial attitudes are crucial in all aspects of financial well-be-
a lower level of financial literacy than males. Ergun (2018) examined ing. Attitude towards money was selected as determinant because
the relationship between the financial literacy and demographic char- the development of a saving and tracking attitude can influence the
acteristics of university students in seven European markets. They financial well-being of individuals.
reported the presence of a medium level of financial literacy on per- The model suggests that young adults with a positive attitude
sonal finance. Another interesting finding states that male students, towards money have higher expected financial well-being because
students who live in rental houses, students whose parents have high they have inculcated behaviour of saving and expense management
monthly income and those who took financial courses before are more (Figure 1). Therefore, we hypothesize that,
knowledgeable in personal finance (Ergun, 2018). On the contrary,
young adults from low socioeconomic status have a low financial liter- Hypothesis 3 Attitude towards money has a positive effect on finan-
acy score (Lusardi, 2015). Training on financial literacy is more crucial in cial well-being of young adults.
improving savings behaviour (Kaiser & Menkhoff, 2017) however, less
evidence is available to show that financial literacy has a positive effect
on the financial well-being of young adults. 4 | PR E LI M I N A RY S T U DY: M E TH O D O LO G Y
Financial literacy should positively affect the concerns of money
and future financial well-being. However, Netemeyer et al. (2017) 4.1 | Instrument
found that financial literacy has a negative effect on expected future
financial well-being. Therefore, a more nuanced understanding of This study aimed to validate the financial well-being scale and as-
the relationship between these constructs is required. In sync with sess the level of the financial well-being of young adults in India.
the above discussion, we hypothesize that, The scale of financial well-being proposed by Prawitz et al. (2006)
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was employed in a self-administered questionnaire. This scale has TA B L E 1 Demographic profile of respondents of preliminary
been used in previous studies on the financial well-being of young study

adults (Gutter & Copur, 2011). The scale has eight items and re- Characteristics N = 156 Percent (%)
sponses are coded on a scale of 1 to 10, where 1 indicates high
Gender (n = 154)
stress/low well-being and 10 indicates no stress/high well-being.
Male 99 64
Responses indicating 5–6 can be classified as the midpoint of the
Female 55 36
scale; the responses higher than 6 indicate low stress/high finan-
Age (n = 154)
cial well-being; and responses less than 5 indicate high stress/low
financial well-being. 20–22 Years 87 57
23–26 years 67 43
Mean age = 22.56
4.2 | Participants Income (n = 138)a
Below USD 7000 22 16
The Prawitz et al. (2006) scale was applied to a sample of 156 full- USD 7000 to USD 14000 81 59
time students enrolled in the first year of the postgraduate pro- Above USD 14000 35 25
gramme of two business schools using convenience sampling. These Mean Income = USD 13207
students are Indians from different states, though the sample is not
Family members (n = 150)
truly representative of the Indian population, considering the pre-
2–3 26 17
liminary nature of the study the sampling was considered adequate.
4–5 105 70
The Cronbach alpha for the scale was .89, which was sufficiently
Above 5 19 13
higher than the recommended criterion of .70.
Median = 4
Demographic information, such as gender, age, family income
and family size, was used, and per capita family income was com- Per capita incomea (n = 137)

puted (Table 1). A few students did not report all the answers and Below USD 1,390 18 13

the least answered question was related to income, where only 136 USD 1390 to USD 2780 70 51
students shared income details. Furthermore, 64% of respondents Above USD 2780 49 36
were male and total sample age distribution was 20–26 years with Mean per capita
average age was 22.56 years. The mean household income was USD Income = USD 3,221
13,084 and the household per capita income was USD 3,213. The a
1 USD = 71.50 INR.
household size varied from 2 to 15 members with a mean of 4.

two parts indicating a low and high level of financial well-being. The
4.3 | Data analysis responses of each scale item and classified respondents indicating
1–5 and 6–10 were considered as having low and high financial well-
A confirmatory factor analysis was conducted through AMOS 16 to being, respectively. Additionally, the overall score was presented
assess the applicability of the scale in the Indian context. Maximum and the classification is as per the full scale.
likelihood estimation method was used because it is considered the The description based on the scale item provides some ex-
best estimator with Likert scales of more than five items (Checa, ploratory insights. Approximately 37% of students worry about
Perales & Espejo, 2019; Finney & DiStefano, 2006). Furthermore, meeting their monthly living expenses and consider expenses
a descriptive analysis of the responses was performed to assess the management difficult (Table 2). Approximately 23% of the re-
level of financial well-being of young adults. spondents indicate that they are dissatisfied with their present
financial situation, feel stressed today (the day of providing the
response) and avoid going to a movie or eating because of the lack
5 | FI N D I N G S of finances. In addition, approximately 32% of the respondents
felt overwhelmed or worried about their current financial situa-
The confirmatory factor analysis approach suggested a good fit of tion. This analysis indicated that numerous students are stressed
the model. The Chi-Square was 21.1 with DF 14. Goodness of fit about their financial situations, thereby reducing their financial
indices were CFI = .989, TFI = .978 and RMSEA = .057. Descriptive well-being. Overall, on a summed scale approximately 23% of the
statistics were primarily employed to understand the financial well- respondents scored less than or equal to 5, thus, indicating aver-
being of students because of the exploratory nature of the study. age or low financial well-being. Overall, a mean of 6.92, with an
The findings are relevant to researchers and policymakers. To as- SD of 1.61 was observed. Gutter and Copur (2011) also reported a
sess the level of financial well-being, the sample was classified into median of 6.18 in a study on college students.
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UTKARSH et al.

TA B L E 2 Item-wise interpretation of financial wellbeing score

Mean on a scale
Item (N = 156) Scale range 1–5 Scale range 6–10 of 1–10 SD

How often do you worry about being able to meet Worry all the time or Never worry or rarely 6.58 2.18
regular monthly living expenses? sometimes worry worry
37% 63%
How frequently do you find yourself just getting by All the time or sometimes Rarely or never 6.34 2.13
financially and managing expenses with difficulty? 36% 64%
What do you feel the level of your financial stress Overwhelming or high stress Low or no stress at all 6.89 2.04
today is? 24% 76%
How often do you want to go out to eat, go to a All the time or sometimes Rarely or never 7.30 2.26
movie or do something else, but don't go because 23% 77%
you can't afford it?
How confident are you that you could find the No confidence or little Some confidence or high 7.05 2.14
money to pay for a financial emergency that costs confidence confidence
about Rs. 100,000? 28% 72%
How satisfied you are with your present financial Dissatisfied Satisfied 7.09 2.04
situation? 22% 78%
How do you feel about your current financial Feel overwhelmed or Not worried or feel 6.79 2.03
situation? sometimes feel worried comfortable
32% 68%
How stressed do you feel about your personal Overwhelming stress or high Low stress or no stress 6.74 1.88
finances in general? stress at all
28% 72%

6 | M A I N S T U DY: M E TH O D O LO G Y included at all) to 5 (Included in all financial issues) was created to

analyse the data.
6.1 | Instrument Attitude towards money was measured using a six-item scale de-
veloped by Yamuchi and Templer (1982) and was used by Fernandes
The questionnaire comprised questions on financial literacy, finan- et al. (2014). The Cronbach's alpha for the scale was .80. The scale
cial socialization, attitude towards money, expected financial well- included questions such as “I do financial planning for the future”,
being, and other demographic questions. “I put money aside on regular basis for the future”. Finally, finan-
Financial literacy was measured by asking five questions on in- cial well-being was measured using a recent scale developed by
flation, risk, return, investment and diversification adapted from Netemeyer et al. (2017), which included five questions (e.g., “I am
previous literature. Furthermore, two of these questions have becoming financially secure”, “I am securing my financial future”).
been commonly used in previous studies (Lusardi et al., 2010). The Cronbach's alpha for this scale was .75, above the recommended
Three questions used by Fernandes et al. (2014) were added con- criterion of .70.
sidering the respondents pursuing higher education can have bet-
ter financial literacy. Respondents were presented five multiple
choice objective questions on financial literacy and accurate and 6.2 | Participants
inaccurate responses were recorded, thus, resulting in a composite
measure ranging from 0 (all answers incorrect) to 5 (All answers Data were obtained from a survey of postgraduate students at five
correct). This method of developing a financial literacy measure is business schools in India. The survey was approved by a research
consistent with previous studies (O’Connor, 2018; Xiao & O'Neill, ethics committee at the institution of the first author. The online
2018). survey was then e-mailed to full-time students seeking their vol-
Financial socialization was measured by asking the participants untary participation. After a preliminary response check, 290 us-
whether their parents discussed five financial concerns when able responses were retained. The median age of the respondents
growing up. For instance, one of the items was “Did your par- was 22.4 years and 48% were male. The age of respondents was
ents include you in discussion or speak with you while you were between 18 and 29 years, which was consistent with the previous
growing up, about the importance of savings”. This measure was studies on the financial well-being of young adults. The students be-
adapted from Shim et al. (2009). The respondents indicated “yes” longed to various states in India representing an appropriate amal-
or “no” to the five questions. Finally, an index ranging from 0 (Not gam of different cultural and economic backgrounds. Approximately
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34% of respondents had previous work experience and 21% consid- in the domain of financial behaviour and financial well-being have
ered themselves financially independent from their parents. Table 3 used regression method for data analysis (Fernandes et al., 2014;
shows the demographics of the respondents. Netemeyer et al., 2017; Xiao & O'Neill, 2018). Demographic vari-
ables, such as age, gender, income, financial independence and stu-
dent loan were included as control variables. Effect of demographic
6.2.1 | Data analysis variables on financial well-being was insignificant, and thus, these
variables are not further discussed.
Descriptive analysis was conducted to assess the financial literacy
level of respondents. The difference between financial literacy level
of male and female respondents was tested using one-way analysis 7 | FI N D I N G S
of variance. To test the conceptual model, the data were analysed
using Ordinary Least Square regression in SPSS 20. Several studies We first present the descriptive findings, and then, present the find-
ings from the regression analysis of the conceptual model. Financial
TA B L E 3 Demographic profile of respondents of the main study
literacy is a crucial factor in the literature. Table 4 depicts the finan-
Demographic Variables N = 290 Percent (%) cial literacy levels of our sample. Approximately 50% of the sample
could accurately answer questions on inflation, risk and investment,
Gender
whereas 26% of respondents accurately answered the question on
Male 140 48
returns and 70% on diversification. The average financial literacy
Female 150 52
score was 2.43 with a standard deviation of 1.39.
Age
The literature indicates that generally, females have lower fi-
18–23 years 125 43
nancial literacy than males. A one-way analysis of variance was
Above 23–29 years 165 57 conducted to evaluate the difference between the financial literacy
Mean Age = 22.4 level of males and females. Results validate that male respondents
Family Income have a significantly higher level of financial literacy than females
Below USD 8000 101 35 [Male (Mean) = 2.70 and female (Mean) = 2.18, F (1, 289) = 10.337,
USD 8000 to USD 14000 93 32 p = .001].
Above USD 14000 96 33 With respect to total number of questions answered correctly
Work experience by each respondent, approximately 8% of the respondents could not

Yes 97 34 accurately answer any question on financial literacy, whereas 19%,

20%, 23% and 24% of respondents accurately answered 1, 2, 3 and
No 192 66
4 questions, respectively. Additionally, only 7% of respondents could
Financially independent
correctly answer all five questions.
Yes 60 21
Table 5 presents the correlation between the variables of the
No 230 79
study. Attitude towards money is significantly positively related to

TA B L E 4 Descriptive of financial literacy of young adults (N = 290)

Inflation (M1) Risk (M2) Return (M3) Diversification (M4) Investment (M5)

Correct 140 144 76 202 141

Incorrect 150 146 214 88 149
Percentage of correct 48% 50% 26% 70% 49%
answers

TA B L E 5 Correlation of key variables of the study (N = 290)

Financial well-being Financial literacy Attitude towards money Mean SD

Financial well-being – – – 3.45 .74

Financial literacy .110 – – 2.43 1.39
Attitude toward money .341** .099 – 3.30 .845
Financial socialization .095 .062 .223** 3.53 1.38

**Correlation significant at .01 level.

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TA B L E 6 Regression results on
Model 1 Model 2
financial well-being
B β p B β p

Constant 3.233 <.001 2.492 <.001

Financial .076 .149 <.05 .037 .075 .217
socialization
Financially literacy .050 .099 .110 .029 .059 .320
Attitude towards .260 .318 <.001
money

Notes: Model 1: R = .205, R 2 =.042, Adjusted r2 .011, p = .213, f = 1.347, df = (9, 286).
Model 2: R = .357 R 2 =.127, Adjusted r2 .096, p < .001, f = 4.011, df = (10, 285)
Control variables: Age, gender, family income, work experience, financial independence, financial
strain.

financial well-being (r = .341, p < .001) and financial socialization (r = among a sizable minority of young adults. A substantial number of
.223, p <. 001). All other correlations were insignificant. All correla- the respondents indicated that they worried about managing ex-
tion estimates are less than .6, thus, suggesting that multi-collinear- penses, were dissatisfied with their financial situations and exhibited
ity is not a problem. a lack of finances.
To evaluate the model 1, financial socialization and financial lit- The main study aimed to explore the effect of financial social-
eracy were first regressed on financial well-being. Further in model ization, financial literacy and attitude towards money on financial
2 financial socialization, financial literacy, attitude towards money well-being. The results of the main study indicate that financial
were regressed on financial well-being. Table 6 presents the regres- socialization is a crucial variable, which has a positive effect on the
sion results. Tolerance in both the regression models was higher financial well-being of young adults. Students who had a discus-
than .10 and variance inflation factor in both models was less than sion with their parents, on spending behaviour, financial invest-
10, thus, suggesting the absence of multi-collinearity (Belsley, Kuh, ments and the importance of savings, when growing up were more
& Welsch, 1980). likely to display a positive attitude towards saving and tracking ex-
The results of the regression indicate that financial socialization penses, which resulted in improved expected financial well-being.
positively affects financial well-being (β = .149, p = .015). The ef- Although researchers argue that individuals are more positive for
fect of financial literacy on financial well-being was insignificant (β temporally distant events, this is a positive trait for young adults.
= .099, p = .110). The model explained only 1.1% variance [F (9, 286) A positive outlook on financial well-being may reduce stress and
= 1.347, p = .213]. enhance academic performance as research indicates financial
Attitude towards money was included in model 2, which signifi- well-being can influence the academic, personal and social growth
cantly predicted financial well-being controlled for demographic of individuals (Elliott & Lewis, 2015; Netemeyer et al., 2017; Shim
variables (β = .318, p < .001). The inclusion of attitude towards et al., 2009).
money improved the R 2 and the model achieved significance. The This study suggests that parents must engage with their children
model exhibited 9.6% variance and was significant [F (10, 285) = in financial discussions. This socialization at young age will improve
4.011, p < .001]. their positive outlook on future financial situations. Furthermore,
These results on financial literacy indicate that literacy is not a existing literature states that financial socialization is crucial for de-
very crucial factor in improving financial well-being of young adults. veloping positive financial behaviour among young adults (Drever
This result is consistent with the study of Netemeyer et al. (2017), et al., 2015; Otto, 2013; Norvilitis & McLean, 2010). This study adds
who stated that financial literacy was insignificantly related to fi- to this stream of literature by validating that financial socialization by
nancial well-being. This observation is possibly favourable for future parents at young age positively affects financial well-being of young
research on how and when financial literacy contributes to financial adults. Moreover, developing positive attitude towards money,
well-being if it does at all. which includes inculcating habit of savings, tracking expenses and
being prudent with money, is a strong predictor of financial well-be-
ing. This study contributes to the existing literature by highlighting
8 | D I S CU S S I O N the importance of attitude towards money for improving financial
well-being.
The findings from two studies warrant a discussion. The prelimi- The other aspect of our study was to investigate the relationship
nary study was conducted to assess the level of financial well-be- between financial literacy and financial well-being. The descriptive
ing among young adults. A survey of 156 young adults in business results indicate that young adults have a medium level of financial
schools was conducted using the Prawitz et al. (2006) scale of fi- literacy. Approximately 50% of the respondents could not answer
nancial well-being. The findings indicated lack of financial well-being questions on inflation, risk, return and basic financial product,
UTKARSH et al.
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such as mutual funds, stocks and bonds. Financial knowledge lev- of savings, family income, spending behaviour and financial prod-
els are consistently low among young adults (Lusardi et al., 2010). ucts. These discussions can promote financial well-being. In addition
Therefore, improving the financial literacy of young adults is imper- to the increasing emphasis on promoting financial literacy, early in-
ative for developing positive financial behaviour. The literature on tervention by parents can be instrumental in shaping the financial
financial behaviour has emphasized the importance of financial lit- well-being of adults.
eracy in promoting positive financial behaviour and current financial This study also highlights the important role of attitude towards
satisfaction however its effect on financial well-being is ambiguous. money in developing financial well-being. Therefore, it is suggested
The regression results of this study indicate that financial literacy that policy makers should also focus on developing attitude towards
does not positively influence financial well-being. money through effective communication highlighting the benefits
Netemeyer et al. (2017) reported a negative relationship be- of saving money, tracking expenses and being prudent with money.
tween objective financial literacy and financial well-being and no ex- In addition, academic institutions must focus on developing
planation was presented for this counterintuitive finding. One of the a support mechanism for students with low financial well-being.
possible explanations could be the young adult's inability to assess The provision of counselling and mentorship to such students can
the low level of financial literacy and thereby creating a positive per- assist them to improve their overall well-being. Students can also
ception of expected financial well-being (O’Connor, 2018). Research be supported through the provision of scholarships and work facil-
indicates that subjective financial knowledge can positively affect itation. Furthermore, a course on managing personal finances may
financial well-being (Shim et al., 2009). Researchers must address help in improving the financial literacy of young adults and induce
this concern of the effect of subjective and objective financial liter- confidence in them to manage their personal finances in a better
acy on the expected financial well-being. O’Connor (2018) cautioned way (Gutter & Copur, 2011). Academic institutions have significant
that the subjective perception of financial knowledge “may create a role in developing and enhancing the financial well-being of young
false sense of security”. Therefore, investigating the role of objective adults. Financial organizations must focus on assessing the financial
versus subjective financial literacy in developing financial well-being well-being of young adults before disbursing loans and promoting
is crucial. financial literacy. The provision of personal loans at a high-interest
Overall, this study contributes to the domain of the financial rate can have unintended consequences on young adults, therefore,
well-being of young adults by highlighting the importance of finan- communication which promotes a positive attitude towards money
cial socialization by parents in developing financial well-being and can be developed for their benefit.
explaining the role of attitude towards money. This denotes that
early intervention by parents in form of financial socialization at
young age can lead to financial well-being. The study also highlights 10 | LI M ITATI O N S A N D FU T U R E
the low level of financial literacy among young adults. R E S E A RC H

One of the limitations of the study is reliance on convenience sam-

9 | CO N C LU S I O N A N D I M PLI C ATI O N S ple for conducting the study. Future studies can employ more ro-
bust sampling methods and conduct studies in different regions of
This study is possibly the first attempt in investigating the financial India. Another limitation of the study is that the focus is on young
well-being of young adults in India. Considering that numerous stu- adults who are students. Inclusion of working adults in the sample
dents reported low financial well-being, focusing on the attitude to- will be valuable to understand the financial well-being. This research
wards money of young adults who perceive low financial well-being has also considered parents as the only source of financial sociali-
is necessary. The inculcation of positive financial habits, such as sav- zation. Future research can explore other socialization agents such
ing and tracking expenses, can positively affect expected financial as peers. Similarly exploring the relative effect of objective literacy
well-being. In addition, this study emphasized the role of financial and subjective literacy on financial well-being can be another fruit-
socialization by parents during childhood, which effects financial ful research area. In addition, more research is required to examine
well-being. Additionally, this study exhibited the positive influence the financial well-being on young adults in developing economies
of attitude towards money on financial well-being. Therefore, this specifically by exploring the personality-related factors and financial
study contributes to the existing predictors of financial well-being education impacting objective and subjective financial well-being.
and establishes financial socialization and attitude towards money as Researcher can also attempt to investigate the role of financial lit-
a crucial antecedent to financial well-being. This research is consist- eracy in promoting financial well-being. Our study shows an insig-
ent with the previous findings that socialization by parents positively nificant relationship. This can be a crucial are of future research
influences financial well-being of young adults (Shim et al., 2009). considering the focus on financial literacy.
Our study has important implications for academic and finan- We also suggest young adults are vulnerable groups facing
cial institutions as well as for policymakers. Policymakers can create myriad financial challenges and more research should be con-
programmes and interventions that encourage parents to initiate a ducted for promoting positive financial behaviour and financial
dialogue with children on financial matters, such as the importance well-being. In the United States (US), college graduates under
10 | bs_bs_banner
UTKARSH et al.

the age of 35 years are spending 18% of their income on student socialization, and experience-based learning in childhood and youth.
Journal of Consumer Affairs, 49(1), 13–38.
loan payments (Brüggen et al., 2017; Citizens Financial Group,
Elliott, W., & Lewis, M. (2015). Student debt effects on financial well-be-
2016) and many graduates who do not have high paying jobs ing: Research and policy implications. Journal of Economic Surveys,
have to spend a significant part of their income in paying the debt 29(4), 614–636.
(Hoffower, 2018). This behaviour negatively affects savings and Ergun, K. (2018). Financial literacy among university students: A study in
eight European countries. International Journal of Consumer Studies,
retirement planning (Touryali, 2014). Therefore, investigating the
42(1), 2–15.
effect of education debt on financial well-being can be a very Fernandes, D., Lynch, J. G. Jr, & Netemeyer, R. G. (2014). Financial lit-
fruitful research area with meaningful implication for policymak- eracy, financial education, and downstream financial behaviors.
ers. Succinctly research on financial well-being of young adults is Management Science, 60(8), 1861–1883.
a crucial research area. Finney, S. J., & DiStefano, C. (2006). Non-normal and categorical data in
structural equation modeling. Structural Equation Modeling: A Second
Course, 10(6), 269–314.
ORCID Ford, M., & Kent, D. (2010). Gender differences in student financial
Utkarsh https://orcid.org/0000-0003-2183-8593 market attitudes and awareness: An exploratory study. Journal of
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