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It’s nearly the end of April, which is financial literacy month. Are you more financially
literate now than you were at the beginning of the month? I hope so!

Of the thousands of decisions we make each and every day, many of them have at
least an indirect impact on our finances. That’s not to mention the times that you are
directly faced with a major financial decision such as how to invest your retirement
contributions (Roth or traditional?!), buying a home or whether it’s worth it to go back to
school and get an advanced degree.

In truth, it’s easier for some people than for others to make good financial decisions,
both big and small, depending on a number of different influential factors. By
understanding some of these factors, you can learn a little bit more about yourself so
that you are equipped to make better financial decisions.

Related Post: Financial Decisions Determine Your Destiny

1. YOUR PERSONALITY & EMOTIONS

Whether you are naturally a spender or a saver will have a big impact on your finances.
It seems to hold pretty true that there’s one of each in most relationships and that can
make it challenging for either partner to learn to deal with combining finances when you
don’t have complete control over the money.

A natural saver may have an easier time making good financial choices. However,
there’s still hope even if you tend to be a spender. Flexible budgeting and setting clear
financial goals can help you to keep the right perspective, while still enjoying life.

In addition, some personality traits including procrastination, stubbornness, pessimism

and a predisposition for addictions will all have a negative impact on your finances. And
everyone’s emotions causes them at times to make bad decisions such as when you’re
angry, frustrated or bored. When you’re happy it may be easier to be more content with
your life and not feel that you need to buy things to improve it.
Your level of discipline in all areas of your life can help you to conquer your finances
and create a life you love, even despite your weaknesses (we all have them!).
Sometimes it’s as simple as just getting started and making small changes.

2. PAST EXPERIENCES & EXAMPLE

All of our life experiences collectively shape our views of the world and directly affect
our thoughts and actions.

Each generation has faced their own unique challenges from baby boomers to
millennials. As for millennials, a lot of us graduated from college around the time of the
great recession in 2008-2009. Most millennials were faced with large student loans, but
minimal employment prospects. I personally graduated right before the recession, just in
time to buy a house at the height of the housing market.

All of your past experiences working, investing and even budgeting influence your
current decisions. Investing involves determining your risk profile, and this is almost
entirely shaped by your past experiences.

Losing half the value of my home almost suddenly definitely discouraged me from
investing in real estate! My husband, on the other hand, has been more influenced by
seeing many people have to delay their retirement for years because their 401k
accounts dropped so significantly.

The example our parents or caregivers set financially can explain the nurture side of the
nature vs. nurture argument. In addition to our individual personality traits, this is one of
the biggest factors that affects your finances.

The good news is that parents that provide good examples of frugality and saving
money for the future are more likely to have kids that are also good with money. The
bad news is that those who live paycheck-to-paycheck and fund their lifestyle with debt
are more likely to have kids that are financially unstable. T. Rowe Price conducts an
annual Parents, Kids & Money Survey and you can see a great summary of the results
in PRNewswire’s article here.
3. YOUR PHYSICAL & MENTAL HEALTH
Maslow’s hierarchy follows that your most basic needs need to be met before one will
be motivated to other needs and wants. The hierarchy follows this order, summarized
from Wikepedia:

 Basic Needs: These are the absolute basic human needs for air, water, food,
clothing and shelter. Except for air (and for most Americans water), all of these
things cost money and will be the first thing people prioritize in their finances.
 Safety: Safety needs stem from a person’s innate desire to live without physical
and emotional pain. We all seek safety from war, natural disaster and violence,
but on the financial side, this will also include job security, emergency funds, and
insurance policies.
 Love & Belonging: Everyone has the desire to find their place in the world and
build relationships of some sort. The lack of feeling love & belonging can lead to
depression and anxiety, which can have serious detrimental effects on your
finances.
 Esteem: Next is the need for respect and acceptance. The need to fit into society
and keep up with the Joneses can sometimes lead people to get into significant
debt to impress or please others or engage in overspending instead of saving for
the future. Alternately, others can find a great deal of esteem in getting
promotions and opportunities that help financially.
 Self-Actualization: Only after all other needs are conquered, can one realize
their opportunity to reach their full potential. Imagine that you have more money
than you need for your basic needs and wants. What would you do with your life
if money was no object?

In addition to the way that your needs impact your finances, it is obvious that significant
physical or mental problems can impair your ability to both earn income and manage it
on a regular basis.

4. THE CULTURE & SOCIETY WHERE YOU LIVE

I didn’t realize how much culture affects your finances until I live outside the U.S. as an
expat for four years. We often become oblivious to things that we just see as normal.
However, the “American dream” doesn’t translate to every other country. Not everyone
has a big home, fancy cars and toys as their ultimate goals in life.

For example, in Korea, it’s not common to ever meet someone at their home, so their
cars are their biggest status symbol. Plastic surgery is also super common, so many
parents start saving at their kid’s birth to pay for this in the future. Koreans tend to be
much more frugal in everyday life.

Social media has had a significant impact on people’s finances. Pinterest may convince
you that there’s a perfectly styled home or lifestyle out there for you. Facebook and
Instagram will show you the amazing homes, vacations and other experiences of those
in your network and make you feel like a failure unless you have your own successes to
show publicly.

It’s not only okay to be different and go outside social and cultural norms where you live,
it is the way to real success! It does require knowing what you really want and setting
clear financial goals.

5. YOUR FINANCIAL KNOWLEDGE

Ignore certainly isn’t bliss when it comes to your finances.

Not tracking your expenses and net worth will ensure that you never achieve financial
independence.

Not learning about investments will solidify your need for someone else to make those
decisions for you, which will result in hefty fees that take away from your returns or
decisions made that are not in your best interest.

Not knowing how the tax system works will definitely result in thousands of dollars more
in taxes in the future.
Knowledge is power and in this case, knowledge is money. The more you read and
learn about personal finances, the better off you’ll be financially. Start by learning the
basics of creating a budget and then move on to debt management and simple
investing. Keep learning and implementing and you’ll find yourself becoming more
wealthy.

FINAL THOUGHTS
Don’t let the external, or even internal factors decide what happens to you! Don’t accept
the default, which is to go through life following society’s preconceived notions that you
need bigger and better and you need it right now.

A life worth living is one that is on your own terms and takes you on the path that you
create for yourself to a well-thought-out destination of your own choosing. Take
everything you’ve been given and create a life you love from it, one dollar at a time.

J Intellect Disabil Res. 2005 Mar;49(Pt 3):210-7. https://www.ncbi.nlm.nih.gov/pubmed/15713196

The relationships among three factors affecting the

financial decision-making abilities of adults with mild
intellectual disabilities.
Suto WM1, Clare IC, Holland AJ, Watson PC.

Author information
Abstract
BACKGROUND:
Among adults with intellectual disabilities (IDs), there is a need not only to assess financial decision-
making capacity, but also to understand how it can be maximized. Although increased financial
independence is a goal for many people, it is essential that individuals' decision-making abilities are
sufficient, and many factors may affect the development of such abilities.

METHOD:
As part of a wider project on financial decision-making, we analysed previous data from a group of
30 adults with mild IDs, identifying correlations among four variables: (i) financial decision-making
abilities; (ii) intellectual ability; (iii) understanding of some basic concepts relevant to finance; and (iv)
decision-making opportunities in everyday life.
RESULTS:
The analysis indicated a direct relationship between ID and basic financial understanding. Strong
relationships of a potentially reciprocal nature were identified between basic financial understanding
and everyday decision-making opportunities, and between such opportunities and financial decision-
making abilities.

CONCLUSIONS:
The findings suggest that the role of intellectual ability in determining financial decision-making
abilities is only indirect, and that access to both basic skills education and everyday decision-making
opportunities is crucial for maximizing capacity. The implications of this are discussed

Family Socialization, Economic Self-Efficacy, and the Attainment of

Financial Independence in Early Adulthood
Jennifer C. Lee and Jeylan T. Mortimer

Author information ► Copyright and License information ►

The publisher's final edited version of this article is available at Longit Life Course Stud

See other articles in PMC that cite the published article

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3198812/.

Abstract
Go to:

Introduction
The attainment of financial independence is a critical component of the contemporary transition
to adulthood. Financial independence is closely linked to major demographic markers of this
transition. The start of a career, usually following the completion of formal schooling, fosters
economic independence, which, in turn, can provide the financial wherewithal for other markers
of adulthood, such as residing outside the parental home, marriage and parenthood. In addition,
difficulties in becoming financially independent can precipitate a return to the family of origin
after becoming residentially independent (Goldscheider and Goldscheider, 1994); such problems
may also lead to welfare dependency. Along with its linkage to these demographic markers of
adulthood, financial independence has considerable psychological salience to young people
themselves. When asked to consider what is necessary to become an adult (Arnett, 1994, 1998),
young adults point to financial independence as a central consideration. In addition, Furstenburg
et al (2004) report that among respondents to the 2002 U. S. General Social Survey, 97% said
that financial independence is at least somewhat important to being considered an adult.
Surprisingly, despite the importance of financial independence in the transition to adulthood,
little research has been conducted on the factors that foster the attainment of this desired state.

In this paper, we contend that economic self-efficacy is a key precursor of economic

independence in early adulthood. In addition, we suggest that socialization processes that occur
within the family during adolescence might influence economic self-efficacy. The present
research builds on a wide-ranging body of prior work in the status attainment tradition and in
social psychology by examining a rich longitudinal data set for plausible familial and
psychological precursors of financial independence in early adulthood. Specifically, we
investigate the role of family communication and socialization, operationalized by hearing
parents talk about work, parent-child discussions about work, work arrangements in the home
(chores and special work projects for which the child is paid), and the receipt of a regular
allowance. Drawing upon panel data that span adolescence and young adulthood, we first ask
whether these socialization practices surrounding work and finances influence the development
of ways of thinking about oneself that imply self-reliance and confidence in the economic
domain (economic self-efficacy). Second, we assess whether economic self-efficacy has a long-
term influence on the transition to adulthood and status attainment, thereby affecting financial
independence in young adulthood.

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Background

Prior Research

Many social science literatures have relevance to educational and occupational achievement, but
do not address financial independence directly. A well-developed body of research has examined
the antecedents of socioeconomic attainment, as indicated by years of schooling, educational
credentials, occupational prestige, and, of greatest interest here, earned income (Sewell and
Hauser, 1975; Featherman, 1980). This work highlights family socio-economic background, as
well as adolescents' educational and occupational aspirations and plans, as precursors of adult
attainments. There is also a long-standing tradition of research on intergenerational transfers of
wealth (Kohli, 2003; Keister, 2003). The absence of wealth among minority families seriously
reduces the educational prospects and earning potential of their children (Orr, 2003). However,
the attainment of socioeconomic status, even income, while clearly linked to financial
independence, is not the same; many young people (and adults) with seemingly good jobs and
adequate earnings are plagued by overwhelming debt and financial insecurity.

Several institutional features of contemporary American society foster prolonged financial

dependency, high levels of young adult indebtedness, and considerable difficulty and anxiety
surrounding self-support. Shifts in the economic structure have made the achievement of
financial independence particularly challenging for young people. Whereas youth entering the
labour market after high school in the mid-twentieth century had access to good blue collar jobs
that could support a family (Schneider and Stevenson, 1999), labour market opportunities for
young people who do not have specialized training or college degrees have declined
precipitously. Indeed, young people (age 18-32) in the U.S. are more likely to have poverty-level
incomes than their counterparts in five other industrialized countries (Smeeding and Phillips,
2002). In addition, rapid technological change, economic turbulence, and organizational
instability complicate career decision-making and diminish the likelihood of stable career
progressions that yield high earnings and the receipt of health insurance and other benefits.
These social and technological changes, and consequent employment restructuring, increase
uncertainty and make the transition from school to work more difficult for contemporary cohorts
of youth in Britain, Germany, and other post-industrial societies as well as in the United States
(Bynner, 1998; Bynner and Parsons, 2002; Heinz, 2003).

These macroeconomic trends give young people strong incentives to pursue postsecondary
education to enhance their credentials in an increasingly competitive labour market. The
extension of higher education has marked personal benefits for youth (Pallas, 2003), but by
prolonging the transition to adulthood (Shanahan, 2000) higher education also lengthens the
duration of time that young people are at least partially, and often substantially, financially
dependent on their parents. Fifty-three percent of U.S. students entering 4-year colleges in 1995-
96 earned a bachelor's degree within five years; 17 percent were still enrolled by 2000-2001
(National Center for Educational Statistics, 2004). The growing cost of higher education,
coupled with a reduction in grant programmes, have made it necessary for many young people to
accrue large amounts of debt by the time they leave school. With limited financial backing from
parents, many college students increasingly look beyond their families for tuition and living
expenses, to federal and other loans, supplemented by their own wages from part-time jobs as
they attend school (Christie, Munro and Rettig, 2002). Some move in and out of higher degree
programmes as their financial circumstances permit. Those who eventually obtain the BA have
typically amassed over $22,000 in loans by the time of graduation. Many recent graduates must
set aside more than 8% of their monthly incomes to pay off student loans (King and Bannon,
2002).

As a result of these and other trends, many young people find themselves in difficult financial
situations well after they have completed their formal schooling. They typically turn to their
parents for help. In fact, analysis of data from the Panel Study of Income Dynamics and the U.S.
Census, showed that the average financial contribution of parents to children aged 18-34 was
$2,200 annually (Schoeni and Ross, 2004), and many young adults receive support from their
parents even when they are employed (Furstenberg et al, 2003).

Under these often trying circumstances, why do some young people move rather smoothly
toward financial independence, and others remain dependent on their parents well into their
twenties? How do young people gain the capacity to support themselves and how do they acquire
confidence in being able to comfortably manage their finances? Given the high psychological
salience of financial independence for young adults, as well as its significance for multiple
aspects of adult role enactment, it is rather surprising that this phenomenon has received so little
systematic scrutiny. Contemporary “economic sociology” is squarely focused on the macro level
of analysis, to the neglect of micro-level experiential and social-psychological precursors of
financial independence.

Rarely are experiences in the family setting examined as sources of financial independence. One
exceptional study (Whittington and Peters, 1996), using longitudinal data from the Panel Study
of Income Dynamics, examined the sources of independence, defined jointly by leaving the
parental home and by achieving financial self-sufficiency. Parental income was found to be
associated with greater dependence up to the age of 18 or 19, after which it predicted greater
independence. The authors reason that “higher income parents have greater resources to induce
their children to avoid …behaviours [such as early childbearing and marriage] and to remain
dependent on them.” Another study by Aquilino (2005) found that family structure had an
influential role in parental attitudes towards economic support of their adult children. Parents in
intact families (those with both biological parents in the household) were more likely than single
parents or step-parents to believe that parents should provide financial support to their children
as they transition to adulthood. These studies, however, did not address family communication
processes relevant to work and earnings that could foster the achievement of financial
independence.

Although parents of higher socioeconomic status present role models to their children signifying
economic success, such attainment in itself may be insufficient to instill a sense of economic
efficacy and behaviours in children that promote their own financial independence. Parents may
be more or less salient role models to their children, depending largely on the closeness of the
relationship between parent and child. Consistent with Kohn's “occupational linkage hypothesis”
(Kohn, 1981; Kohn and Schooler, 1983), parental work values, linked to parental occupations,
are found to affect children's values only under conditions of parental support and
communication that facilitate parental identification (Mortimer, 1976; Mortimer and Kumka,
1982; Mortimer, Lorence and Kumka, 1986; Ryu and Mortimer, 1996). Therefore, the present
research focuses on the role of family socialization and communication in the development of
economic self-efficacy in adolescence, which could foster adult role transitions and attainments
that enable financial independence in young adulthood.

Economic Self-Efficacy

The pervasive consequences of control beliefs for persistence and success in the face of obstacles
are well known (Bandura, 1997). Caplan and Schooler (2007) report that self-confidence and
non-fatalistic beliefs are linked to a strategy of coping with financial difficulties that is problem-
focused (rather than emotion-focused). Self-efficacy in particular is an important determinant of
behaviours in many domains. Domain-specific beliefs of efficacy during adolescence may be
valuable for later attainments because they promote more effective goal-oriented behaviour.
Perceptions of economic self-efficacy, once formed, appear to be critical in fostering
achievement-relevant behaviours. For example, youth who think they will be successful in
achieving their goals, and specifically those in the economic realm, are likely to be more
persistent in their preparation and striving for post-secondary education. In fact, the belief that
one will be successful in the economic realm is found to enhance academic achievement (grade
point average) and educational goals during high school, to increase the likelihood of behaviours
conducive to college enrollment (such as seeing counsellors, requesting applications, etc.), and to
promote actual post-secondary educational attendance (Grabowski et al, 2001). The higher level
of educational attainment thereby promoted could foster financial independence by increasing
the likelihood of full-time employment and the stability of earnings in early adulthood. It is that
high levels of efficacy would also lead to a delay in family formation, to enable postsecondary
educational achievement. Thus, youth with higher levels of economic efficacy would likely
experience delayed transitions to adulthood, characterized by prolonged school attendance,
higher levels of educational and income attainment, and delayed marriage and parenthood.

Bandura (1977) contends that four factors contribute to perceptions of efficacy: personal
accomplishments, vicarious experience, verbal persuasion and physiological state. This
formulation suggests that beliefs about one's economic self-efficacy are dependent upon the
observation of, and persuasion from, others, in addition to one's own achievements and feelings.
Little research, however, has examined the influence of the family on the development of this
positive self-perception. Grabowski et al (2001) find that family background indirectly
influences perceptions of economic self-efficacy through youths' own school and work
experiences. In addition, among non-working youth, parents' income was found to be positively
related to youths' beliefs about their economic futures. These findings suggest that adolescents
may develop a sense of efficacy by observing their parents' achievement. Yet to be examined,
however, is whether communication between family members about economic matters
influences adolescents' developing sense of confidence in this sphere.
Socialization and Family Communication Processes

We suggest that family socialization, particularly communication about work and money, is an
important factor in the development of economic self-efficacy, which leads to a greater
likelihood of being financially independent during young adulthood. Baumrind (1980) views
socialization as an “adult-initiated process by which developing children, though insight,
training, and imitation, acquire the habits and values congruent with adaptation to their culture.”
Parents and other family members can help socialize youth towards many positive behaviours
and attitudes. For example, some researchers have found that teens who communicated often
with their parents exhibited less risky sexual behaviours and were less likely to become school
age mothers (Fox and Inazu, 1980)1. Communication in the family has also been shown to be an
important factor in informing young people about economic matters. For example, the family is
instrumental in teaching children about consumer behaviour and money management (Moschis
and Moore, 1979; Moschis, 1985). In addition, Moschis and Moore (1984) find a relationship
between family communication about consumption and adolescents' career decisions.

Family communication can occur in various ways, both overtly through social interaction, and
covertly though role modeling and reinforcement (positive or negative) of behaviours (Moschis,
1985). To promote the transmission of attitudes and behaviours that foster financial
independence, we submit that elements of the parents' work must be brought into the family
arena, coming to the child's awareness and influencing the child's proximal experience. For
example, some parents discuss their experiences on the job with one another in the presence of
their children, and talk to their children about their work as well. Alternatively, parents may
consider their employment as a more separate sphere, with little such discussion or activity
penetrating into the family realm (Piotrkowski, 1978). In this study, we examine discussions
about work that occur between family members and visits to parents' workplaces.

The division of family work is another experience that may affect economic socialization.
Specifically, we assess the time the adolescent spent on regular chores in the home, and consider
whether this work is done for pay. On the basis of their research in a rural setting, Elder and
Conger (2000) note the potentially positive effects of regular chores, as well as paid work, in
producing a sense of competence and importance, in mattering, and in fostering “integration into
adult roles and self-conceptions.” (91). The assignment of chores can establish a pattern of
behaviour premised on the assumption of responsibility for self and others, an everyday
experience of working as normal and expected, and a prelude to the similar assumption of
economic responsibilities in adulthood. On the other hand, if doing chores promotes orientations
and behaviours that enhance dependency and interfere with achievement outside the family, the
implications for future financial independence may not be so sanguine.

Finally, we examine whether receipt of a regular allowance fosters economic efficacy and
independence. Allowance is widely seen by parents as a form of economic education; through
receiving a regular allowance, they believe that children will learn the value of money.
Allowance may also be considered a prototypical exchange relation: often teenagers are expected
to do their regular chores, get good grades, or display other positive childhood role enactments in
order to receive their weekly or monthly stipends. It is therefore plausible that a regular
allowance would have a positive influence on economic self-efficacy. However, if allowance is
seen as a child's entitlement, it could establish a template of financial dependency that is unlikely
to encourage economic independence. (For discussion of the various meanings of allowance,
see Miller and Jung, 1990.)

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Data and Methods

Data Source

The Youth Development Study (Mortimer 2003) began in 1988 with a randomly-chosen
community sample of 1010 ninth graders enrolled in the St. Paul Public School District in
Minnesota. United States Census data for 1980 indicate that this site was quite comparable to the
nation as a whole with respect to economic and social indicators. The analyses reported here use
data from student and parent surveys collected in 1988, when the respondents were freshmen in
high school (mostly age 14 and 15), through the ninth wave of the study in 1997, six years after
their scheduled graduation from high school, when they were 23 and 24 years old. This dataset is
unique in its coverage of family socialization experiences, economic efficacy, transitions
marking the onset of adult status, and economic independence. The longitudinal design
represents a key asset in our study of the precursors and long-term consequences of economic
self-efficacy. Whereas demographic information and other factual data may be measured
accurately through retrospective recall, earlier experiences in the family of origin of interest to us
here may have little psychological salience to young adults, and thus would be unlikely to be
recalled. Any attempt to retrospectively measure adolescent self-efficacy would be quite suspect.

During the first four years of the study, corresponding to the high school period, participants
completed questionnaires in their classrooms. If they were not present on either of the two survey
administration days scheduled in each school, or if they were not attending school, they
completed questionnaires by mail. Extensive tracking and follow-up procedures during each
wave of data collection ensured that students who dropped out of school after ninth grade, or
moved to another school district, continued to be followed. Data for the post-high school period,
from 1992 on, were collected annually (except in 1996) via mailed surveys. Of the original 1010,
788 respondents completed surveys in 1997. The retained sample in recent years is somewhat
more advantaged than the initial sample in terms of family socioeconomic background and
family composition (favouring the two-parent family), and retention has been more likely for
females than males. Still, demographic, attitudinal, and experiential characteristics of the
retained sample are quite similar to those of the initial panel (see Mortimer, 2003). Our analyses
utilize data from the first, third, fourth, and ninth waves of the study; we select those respondents
who participated in these waves and for whom full information on the variables used in the
analysis was available. This yields an analytic sample of 617 respondents. We next describe the
variables, which are reported in Table 1.

Table 1

Descriptive Statistics, Youth Development Study, 1988-1997 (N=617)

Key Independent Variables—Family Communication and Socialization towards

Work

We measure both overt and covert family communication about work. First, we considered how
often the child hears his/her parents talk about work (“How often do you hear your parents
[stepparents or guardians] talk about their jobs [with each other or with others]?”) (1=never,
4=often). Second, we examined how often the parent talks with the child about his or her
work (“How often does he [she] talk to you about his [her] work?”) (1=never, 4=often). The
highest value for the two parents was utilized; if the respondent had only one parent, that
measure was used. We also consider visits to parents' workplaces, which is comprised of two
indicators measuring how often the child visits the parent's workplace (0=never, 6=more than
once a week; again, we used the highest value) as a factor in socializing youth towards work.2 A
unique feature of the Youth Development Study is a battery of questions about parents who do
not live with the respondents. As a result, we were able to gain information about parents' work-
related communications even for parents who did not live with the youth at the time of the
survey. If respondents reported that they had two fathers or two mothers, e.g., a stepfather living
with them and a biological father living apart, precedence was given to the parent who was living
in the child's household.

As discussed earlier, we also consider other ways that youth can be socialized towards
work. Time spent on chores was measured by the number of hours spent per week on household
chores in the 11th grade, andpaid chores is a dichotomous variable indicating whether or not the
adolescent was paid for doing these chores. A third measure of family socialization towards
work is whether or not the youth had ever received an allowance.
Dependent Variables

We examine the development of economic self-efficacy during high school (measured in 1991

when the respondents were 17-18 years old and in the 12th grade). The young people responded
to a series of questions about the future (preceded by a lead-in question, “How do you see your
future?”). Specifically, respondents were asked, “What are the chances that: You will have a job
that pays well? You will have a job that that you enjoy doing? and You will be able to own your
own home?” (Response options ranged from 5=Very high to 1= Very Low). Our measure of
economic self-efficacy was created from these three items (alpha=.80). The mean of this
composite measure of economic self-efficacy is 12.29, suggesting that the respondents were
rather optimistic about their futures. There was little difference between boys and girls in
average levels of economic self-efficacy; however, girls tended to be more optimistic about their
chances of having a job they enjoy doing in the future.

Next, we examine status attainments and markers of the transition to adulthood as mediating
variables in the process of attaining financial independence. Specifically, we examine the impact
of current school enrolment, employment status, marital status, parenthood, educational
attainment, and income on financial independence, and how they are influenced by family
socialization towards work and economic self-efficacy during the adolescent period. In our
analysis sample, 56% were enrolled in school in 1997, 85% were employed, 20% were married,
and 30% had at least one child. Thirty-two percent of the sample had a high school degree or
less, 43% had completed some college, and 25% had obtained a college degree or higher. The
average yearly income of employed respondents was about $16,350 (if respondents were not
employed, income was coded as 0; this reduced the average for the entire sample to $13,860,
shown in Table 1).3

Finally, we assess the young adults' financial independence by examining the percentage of their
living expenses that came from either their own earnings or savings, or from their spouse or
partner's earnings and/or savings, at age 23-24. On average, a little less than three-quarters
(73.7%) of the respondents' expenses are covered by themselves or their spouses. Because this
variable is skewed, we use its logged form as the dependent variable in our analyses.

Control Variables

For measures of family background, we draw on the 1988 parent survey for indicators of family
socioeconomic status, including family income, parents' highest level of education, mother's
employment, and family composition. Family income is an ordinal variable indicating total
household income in 1987 (0=less than $5,000, 13=more than $100,000), parents' education is
measured by dichotomous variables indicating the highest educational attainment of either parent
(less than high school, high school, some college, or college or higher), mother's employment is
a dichotomous variable indicating whether or not the adolescent's mother was currently
employed (1=employed), and family composition indicates whether the child lives with two
parents. Dichotomous variables indicating race (1=white) and gender (1=male) of the respondent
were also included in the analyses. Last, we control for grade point average in the 9th grade (1=F,
12=A).

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Results

Economic Self-Efficacy

Table 2 presents results from an Ordinary Least Squares (OLS) regression of economic self-
efficacy during adolescence. Model 1 is the baseline model that examines the effects of family
background and grade point average on economic self-efficacy in the 12th grade. Model 2
examines the influences of communication within the family and socialization towards work
without taking into consideration background factors.4Last, Model 3 includes both background
characteristics and family socialization in order to assess the independent associations between
socialization towards work and economic self-efficacy above and beyond differences in gender,
race, family socioeconomic status, and prior academic achievement.5

Table 2

Regression of Economic Self-Efficacy on Family Socialization towards Work

Our analysis of economic self-efficacy during high school suggests that more advantaged youth,
in terms of family background and academic performance, exhibit more confidence about their
economic future. Model 1 shows that family background and grades significantly affect
economic self-efficacy during high school. Family income exerts a weak positive influence
(p<0.10) and parents' education also has a positive effect on economic self-efficacy in high
school. Children whose parents had some college have higher efficacy than those whose parents
had less than a high school education.6 Higher academic achievement is associated with higher
levels of economic self-efficacy.

As shown in Model 2, some early socialization experiences in the family can impact an
adolescent's beliefs about his or her economic capacity. Specifically, the more the child talks
with his or her parents about their work, the greater his/her economic self-efficacy during high
school. Surprisingly, however, other forms of family communication about work, such as visiting
a parent's workplace and hearing the parents talk about work amongst themselves or with others
do not influence economic self-efficacy. These findings suggest that direct communication about
work between the parent and child might be the most effective form of socialization when it
comes to shaping adolescents' perceptions of their own capacities to be successful in the
economic realm. Other economic activities within the home can also shape one's economic self-
efficacy. Consistent with Elder and Conger's (2000) findings, doing chores for pay is associated
with somewhat greater economic self-efficacy (p<.10). Contrary to our initial hypothesis,
however, we find that youths who received an allowance have lower levels of economic self-
efficacy. The zero-order correlation between regular allowance receipt and economic self-
efficacy is negative, which suggests that allowance may come to be perceived as a kind of
entitlement, with connotations of economic dependency rather than efficacy.

Model 3 shows that the influence of family socialization towards work on economic self-efficacy
cannot be fully explained by initial differences in background and prior academic performance.
Net of family background and grades, parent-child discussions related to work still exert a
positive influence on an adolescent's sense of future economic success, and those who ever
received an allowance had lower levels of self-efficacy than those who did not.

The Transition to Adulthood

The transition to adulthood is often marked by events such as the completion of schooling,
starting a career, marrying, and having children. We suggest that not only are these potentially
intervening factors in the attainment of financial independence, but that they might also be
influenced by economic self-efficacy. Using logistic regression, we next assess the influences of
economic self-efficacy on current school enrollment, employment status, marital status, and
parenthood.7 Results from these analyses are presented in Table 3.

Table 3

Logistic Regressions of the Transition to Adulthood on Background and Economic Self-Efficacy

The results, shown in Model 1 for each analysis, are consistent with prior research in that we find
that young adults with more socioeconomically advantaged family backgrounds are more likely
to still be enrolled in school and tend to delay marriage and parenthood. As of age 23-24,
individuals with more highly educated parents are more likely to be enrolled in higher education
and less likely to have had children than those whose parents have less than a high school degree.
Those with higher family incomes during high school are less likely to be married or parents by
23-24. Males are more likely to be employed than females, and are less likely to have had a
child. In addition, young adults with higher grade point averages in high school have higher odds
of school enrollment and of being employed, whereas they have lower odds of having a child.

We also find that economic self-efficacy during adolescence has long-term influences on some
facets of the transition to adulthood, independent of family background advantages and
educational performance during high school. In particular, the greater one's self-efficacy during
high school, the higher the odds that he or she will be employed, and the lower the odds he or she
will have had at least one child by age 23-24 (see Model 2 across these variables). Thus, while
economic self-efficacy increases the likelihood of working during young adulthood, it also tends
to “delay” other facets of the transition to adulthood by postponing the onset of parenthood. Even
though economic self-efficacy does not appear to influence school enrollment at age 23-24, the
results presented in Table 4 indicate that it is positively related to educational attainment. This
pattern suggests that perhaps those with the greatest economic self-efficacy have already
completed higher education by early adulthood.

Table 4

Multinomial Logistic Regression of Educational Attainment on Background and Economic Self-Efficacy

Status Attainment

Another mechanism through which economic efficacy could impact financial independence is
through one's own status attainments, specifically educational attainment and income. In Table 4,
we present the results of a multinomial logistic regression of educational attainment (with high
school or less as the reference category), and in Table 5, we report the results of an OLS
regression of income. Our findings for both of these outcomes are consistent with classic
research on status attainment. Higher family income and parents' education are associated with
increased odds of completing at least some college or more as opposed to a high school degree.
Additionally, men earn more then women, and whites earn more than non-whites. Somewhat
unexpectedly, parents' education has a negative effect on young adult income. The negative
relationship between parents' education and income in 1997 is probably due to the fact that those
with more educated parents are also more likely to still be enrolled in school themselves, as
shown in Table 3. Not surprisingly, grade point average in high school is also positively
associated with educational attainment in young adulthood.

Table 5

Regression of Income on Background and Economic Self-Efficacy

Even after accounting for these effects of family background and grades on status attainment, we
still see a positive relationship between economic self-efficacy during high school and
educational attainment and income. Similar to the findings of Grabowski et al, (2001), Model 2
in Table 4 shows that including economic self-efficacy significantly contributes to the overall
model fit. A greater sense of efficacy in the economic realm increases both the odds of
completing some college and the odds of completing college or more, as opposed to completing
a high school degree or less. In addition to its positive influence on educational attainment, we
also find that economic self-efficacy in adolescence is quite beneficial for income attainment in
young adulthood, as shown in Table 5. These results suggest that early development of self-
confidence in one's own economic capacity has long term benefits for status attainment, net of
family background and academic performance.

Financial Independence

The question of what factors foster financial independence in young adulthood still remains. We
now turn to the influences of economic self-efficacy during adolescence on financial
independence. The results of this analysis are presented in Table 6. Model 1 assesses the role of
family background and grades on the logged percent of expenses that are covered by the
respondent and his/her spouse. Model 2 adds economic self-efficacy in order to assess its
independent contribution to financial independence net of the effects of family background and
educational performance. Finally, Model 3 examines whether any of these relationships are
mediated through status attainment and/or other markers of the transition to adulthood. Because
it is plausible to assume that the process of achieving financial independence would differ for
males and females, we estimated interactions of gender with economic efficacy, the family
socialization and communication indicators, and the Wave 9 attainments. Therefore, Model 3
also includes interactions between gender and employment status, marital status, and
parenthood.8

Table 6

Regression of Financial Independence on Background, Economic Self-Efficacy, and Attainments

The results from Model 1 indicate that background factors have little effect on financial
independence in young adulthood. It is interesting to note that more advantaged youth are no
more or less financially independent at the age of 23-24 than those who grew up in more
socioeconomically disadvantaged households, and that being financially self-reliant is not
associated with early academic performance. Instead, the strongest background predictors of
financial independence are gender and race. Males report greater financial independence than
females, and whites are more economically self-sufficient than non-whites.

Model 2 shows that early adult financial independence is positively associated with economic
self-efficacy during adolescence. Those who felt more efficacious when it came to their
economic futures were indeed more likely to be financially self-reliant by age 23 or 24. It is
notable that this construct, measured in the senior year of high school, is still associated with
financial independence so many years later, even when controlling for relevant background
factors.

Model 3, however, indicates that the markers of the transition to adulthood and status attainments
mediate the relationship between economic self-efficacy and financial independence in young
adulthood. First, as shown earlier, economic self-efficacy formed during high school increases
the odds of employment (Table 3); this in turn increases financial independence, especially
among women. Second, economic self-efficacy decreases the odds of having at least one child by
age 23-24 (Table 3), which is negatively related to financial independence for women. Third,
higher adolescent economic self-efficacy increases educational attainment and income (Tables
4 and and5),5), which are associated with greater independence in supporting oneself. These
findings suggest that although economic self-efficacy contributes to the accomplishment of
financial independence, its influence is primarily indirect, through the youth's own status
attainments. The significant interactions indicate that the process of attaining financial
independence differs for men and women. Young adult women are more dependent on marriage
and employment for financial self-sufficiency than are men (i.e., the effect of marriage is .84 for
women, but only .26 [.84-.58] for men; the effect of employment is 1.34 for women, but only .24
[1.34-1.10] for men). Parenthood, in contrast, lessens females' independence (-.41), while
increasing it somewhat for men (-.41+.66= .25).

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Discussion
This paper has examined the role of family socialization towards work in adolescence in
fostering economic self-efficacy, and the subsequent influence of self-efficacy on the transition
to adulthood, status attainment, and financial independence in young adulthood. From this
research, it appears that for young adults, experiences in the family that increase the salience of
market work—that is, communicating with one's parents about their work--foster a sense of
confidence in the economic realm. A household climate that emphasizes verbal communication
about work between family members, including discussions with fathers and mothers, is likely to
increase the psychological salience of work to adolescents. Their own anticipation of being
effective in the economic sphere is thereby heightened. In addition, we find that self-efficacy has
a direct impact on financial independence in young adulthood though educational and
occupational attainments as well as the delay of family formation in the early 20s.

This paper sets forth preliminary evidence that the development of economic competency is a
long-term process that commences through experiences in the family setting, well before the
onset of adulthood. Socialization towards work in the family context appears to directly enhance
young adults' capacities to support themselves. The overall pattern of findings suggests that
micro-level interpersonal relations and interactions may be key to understanding the processes
through which families foster the economic self-efficacy and independence of their children.
These findings point to the potential for positive work-family linkages. Parents can indeed
promote the development of economic self-efficacy in their teenage children by enabling their
work to influence what goes on at home, by talking about their jobs to their children. In some
circumstances, for example, in entrepreneurial settings or on the farm (Elder and Conger, 2000)
the blurring of the boundaries between work and home may occur very naturally, encouraging
interactions about work. In large bureaucratic settings, there may be days set aside for children to
be brought to work. Other settings (particularly those that may be highly regulated, highly
technical, or dangerous) may be less “family-” or “child-friendly.” No matter what the setting,
informal socialization towards work, like just talking about work, can have positive
consequences for adolescents' confidence about their financial futures and their actual capacities
to become economically independent in early adulthood. The findings raise caution, however,
about potentially adverse effects of monetary exchanges in the family. Contrary to many parents'
beliefs, and prescriptive advice to give children a regular allowance in the family guidance
literature, we find that those who ever received an allowance were less economically efficacious
in adolescence than those who did not receive this regular stipend; moreover, allowance receipt
was associated with restricted educational attainment.

This study has some noteworthy limitations. First, all data (except the socio-economic
background variables) were obtained from the young people themselves. Much better
understanding of the family dynamics that foster economic independence would be obtained if
parents' own orientations could be taken into account. While there is some understanding of
parent's views with respect to the purposes of allowance (Miller and Jung, 1990), we know little
about parents' intentions with respect to communications about work, or about the reasons for
assigning chores. For example, do parents who have higher occupational aspirations for their
children deliberately make a point of talking to them about their work? Do parents who give their
children allowance or offer money in exchange for chores encourage financial dependency in
other ways? Even though we know the frequency of parent-child discussion about work, we
know nothing of the content of these communications. They may involve direct encouragement
of economic self-efficacy in children, or they may provide other messages from which
adolescents derive this positive self-concept. More direct study of parental intentions and the
content of family interactions, surrounding both market work and housework, would enable
assessment of whether the communications among family members observed here mediate
important differences in parental goals.

Despite the limitations of this study and the further questions remaining, the long duration of this
project, with surveys spanning a highly formative period of economic socialization and
attainment, has enabled us to observe the impacts of family and work experiences as they occur,
rather than relying on retrospective recall. The findings highlight the significant influence of
economic socialization in the family setting on the development of an adolescent's confidence in
his/her economic capacities, which paves the way for adult financial independence. It is
especially noteworthy that in this study six years separated the measurement of economic
efficacy and the outcomes of interest; economic efficacy was measured at age 17-18, the status
transitions and attainments, at age 23-24. The findings demonstrate the enduring significance of
economic self-efficacy in assuring a successful transition to adult roles and the achievement of
economic independence. The more efficacious adolescents were more likely to be employed in
early adulthood; they also had higher educational attainment and income. Furthermore,
adolescent economic efficacy was associated with a delay in parenthood, enabling the more
efficacious youth to invest more in their human capital through higher education. Whereas
economic efficacy had a positive relationship to economic independence, this relationship was
entirely mediated by the transitions and attainments that led to financial self-sufficiency.
It might be countered that self-efficacy in adolescence should not be considered to have causal
force. Instead, those adolescents, on the basis of their socioeconomic backgrounds and associated
advantages, simply understand that they are likely to have more positive economic futures than
those facing greater obstacles. According to this view, the relationship between efficacy and the
outcomes we have studied is spurious. This argument parallels a long-standing criticism of
studies that prioritize psychological orientations more generally, including aspirations, as
determinants of educational and occupational attainments (Roberts, 1968). Achievement-related
orientations are seen as having no causal role in the process of attainment; they are instead mere
products of actual achievements and more or less advantaged social location. While this position
is plausible, the fact that numerous indicators of advantage and achievement are controlled in our
analysis appears to undermine such criticism. Even with gender, race, family income, family
composition, and parental education controlled, we still find that adolescent self-efficacy is
positively related to educational attainment, employment, and income in early adulthood. The
adolescent's grade point average is, as might be expected, also a significant influence on these
positive outcomes, but this indicator of ability and academic performance is also controlled. The
findings indicate that efficacy is, in fact, an important resource for the transition to adulthood and
for the processes of socioeconomic attainment that promote early adult economic sufficiency.
They call for more active interventions on the part of the family, as well as other institutions, to
stimulate positive self-conceptions of efficacy in the workplace so as to enhance socioeconomic
attainments and foster financial independence.

We recognize that institutional structures and changes, including trends in educational

enrollment and financing, labour market opportunities, welfare policies, and taxation
mechanisms (Smeeding and Phillips, 2002), are of critical importance, influencing the likelihood
that individuals will experience economic difficulties during the transition to adulthood as well
as at other junctures in their lives. Such macro-level phenomena give rise to the societal
distribution of income, the prevalence of poverty in any given historical period, and the
effectiveness of various asset accumulation strategies for particular social groups (Shapiro and
Wolff, 2001). Moreover, the effectiveness of individual agentic processes importantly varies
across time and place depending on the configuration of structural opportunities (Shanahan,
Elder, and Miech, 1997). Nonetheless, we contend that a full understanding of financial
independence, along with other forms of adaptation to the challenges of adulthood, requires
consideration of both structure and agency. The capacity of individuals to take advantage of the
particular, historically-specific opportunities available to them as they make the transition to
adulthood, and to surmount the obstacles that they encounter in seeking their economic goals,
will depend on a multitude of resources, including psychological assets and behavioural patterns
acquired during the course of their prior development.

Go to:
Acknowledgments
The Youth Development Study is supported by a grant, “Work Experience and Mental Health: A
Panel Study of Youth,” from the National Institute of Child Health and Human Development
(HD44138). It was previously supported by the National Institute of Mental Health (MH42843).
The content is solely the responsibility of the authors and does not represent the official views of
the National Institute of Child Health and Human Development or the National Institutes of
Health.

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Footnotes
This paper was presented at the 2005 Annual Meeting of the American Sociological Association, Philadelphia.
1
Moore, Peterson and Furstenberg (1986) find that that this is only the case for daughters of parents with
traditional values.
2
We examined whether a family socialization index comprised of these single indicators (hearing parents talk
about work, discussing work with parents, and visiting parents' workplaces) would be more appropriate;
however, their low alpha reliability (0.50) suggested that they should be analyzed separately in our model.
3
It would be interesting to consider household income as well as personal income, given that our measure of
financial independence also includes spouses' earnings. However, information on household income is not
available in the data for 1997.
4
We also examined whether family communication about work over time (measured by an average over 9 th,
10th, and 11th grades) impacted economic self-efficacy. This analysis yielded similar results.
5
We also tested for interactions between gender and family socialization. The effects were not statistically
significant, suggesting that the relationship between family socialization and communication and economic self-
efficacy in adolescence is similar for boys and girls.
6
When grade point average is not included in the equation, children of parents with a four-year college degree
or more also have higher efficacy than those whose parents had the lowest level of education. The pattern
suggests that the most highly educated parents increase their children's self-efficacy by fostering high grade
point averages.
7
In preliminary analyses, we found that family socialization towards work is not correlated with the transition to
adulthood and financial independence beyond its relationship with economic self-efficacy. Thus, for parsimony,
these variables are omitted from subsequent models.
8
We initially included interactions between gender and all indicators of the transition to adulthood; we present
only those that are statistically significant.

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Contributor Information
Jennifer C. Lee, 

Jeylan T. Mortimer, 

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