A recent study on Chinese emerging adults (aged 18-30 years) in Hong Kong identified how family financial socialization – how children learn about money from their parents – influences financial wellbeing and behaviors in relation to the emerging adults’ gender, culture, socio-economic status, and financial changes during the COVID-19 pandemic.[1] They found that Eastern societies, such as China, differ from Western societies, like the United States, in two key ways: healthy money management and financial enabling. These insights from Hong Kong can not only enrich our understanding, but also allow us to introspect on what we can learn and apply from them.
Healthy Money Management
Dr. Muhammad Khan, Dr. Xiaomin Li, and colleagues1 found that emerging adult women displayed the healthiest money management behaviors (e.g., creating budgets and limiting spending). This may be largely due to money management being considered a necessary skill for household management and taught more specifically to girls during their upbringing. Interestingly, the study also found that emerging adult men often have less healthy money management behaviors. Similarly, the reason behind this is also financial socialization, as men are generally taught and expected to keep up with their peers and are seen in a higher standing when they spend more money. An example of this may include buying food for friends instead of just themselves when dining out.
Western culture differs from Eastern when you consider gender roles and finances. For example, men are often considered to be financially savvy, and women are stereotyped as the big spenders. How do you think your cultural and familial upbring has impacted your money management behaviors? And what skills could you learn that would improve your money management skills?
Financial Enabling
Financial enabling is a phrase academics use to refer to “less healthy financial behaviors of giving too much money to others that cost the financial well-being of [the] individuals themselves.”1 Basically, it means spending money you don’t have, to benefit another person. An example of financial enabling could be buying food for a group of friends when in reality you can’t afford to pay for your own meal. Though generous, this practice can lead to emerging adults having increased financial stress and decreased well-being despite their giving.
However, Khan, Li, and colleagues also found that financial enabling was less harmful for emerging adults who experienced a decrease in income during the pandemic.1 Interesting, isn’t it? Those who had a reduced income were affected less by giving more than they could afford. This led the research team to investigate further, and they found that emerging adults’ financial enabling behaviors remained the same regardless of whether their income decreased. So, people’s behaviors didn’t change even when their income levels decreased, but financial enabling was less harmful for those whose income decreased. It is possible it was less harmful to those with reduced income because they saw the situation as temporary and were more optimistic about their financial situation improving once the pandemic ended. This outlook may have counteracted some of the negative effects you would typically see from financial enabling.
We may want to help those around us, but it is important to make sure we are able to help first. However, your perspective on giving may reduce the negative impact giving outside of your means can have on you. How do you determine what you can afford to give to others?
A Double-Edged Sword
According to the research, parent financial socialization was the leading cause of both healthy money management and damaging financial enabling behaviors. What these young adults learned from their parents has the potential to both help and harm them. It’s important to recognize that the things we learn from our parents are never entirely good or bad—and that’s true for finances too. In what ways have you benefitted from what you’ve learned from your parents, and how can you minimize passing on the bad?
Takeaways
1. Family financial socialization can be good and bad. The things we learn from our families can have a tremendous impact. Parents who teach healthy money management behaviors, for example, set their children up for financial success. However, parents teaching other behaviors due to gender roles, societal expectations, and other pressures may set their children up for financial stress.
2. Intentionally develop healthy money management skills. We’ve learned that in Eastern cultures, such as Hong Kong, money management is something women generally excel at. In the United States, culturally, men are seen as better at money management. The societies we live in often play a huge role in how we view ourselves, but all people, regardless of gender, can learn good money management skills and achieve financial success.
3. Avoid financial enabling. It is natural to want to help loved ones or others in need. However, helping someone at your own detriment makes it impossible for you to continue being able to help others. One potential solution could be creating a budget line for generous giving. This can allow you to quantify how much you can afford to give without causing you to go without.
3. We learn from others. The things we learn from our families can have a tremendous impact on our lives in general and financially. Parents who teach their children healthy money management behaviors, for example, can help prepare them for future financial success. But even without our family’s influence, we can learn from the experiences of others and benefit from the insight they give us despite differences in culture, social standing, etc.
References:
[1] Khan, M. A., Li, X., LeBaron-Black, A. B., & Serido, J. (2023). Parental financial socialization, financial behaviors, and well-being among Hong Kong young adults amid COVID-19. Family Relations, 72, 2279–2296. https://doi.org/10.1111/fare.12947