Financial Behavior Change and Progress Toward Self-Sufficiency: A Goal-Framing Theory Application

Abstract

We applied goal-framing theory to determine whether there were discernible patterns in emerging adults’ financial behavior from college to career and whether those patterns were associated with progress toward self-sufficiency. Using longitudinal data collected over 5 years from a college cohort of emerging adults ( N = 968) in the United States, we estimated latent growth curve models and identified three financial-behavior patterns suggestive of the overarching motivations in the theory: planful (gain), present focused (hedonic), and socially compliant (normative). Using multinomial logistic regression analysis, we found that higher perceived financial control, more positive financial attitudes, higher perceived parental expectations, and more exposure to financial education were predictive of a gain pattern. Analyses of variance showed that the gain financial-behavior pattern was associated with the most progress toward self-sufficiency (adult stability, career status, and well-being). We discuss the findings as they pertain to the connection between emerging adults’ financial behavior and progress toward self-sufficiency.

How Does Financial Life Shape Emerging Adulthood? Short-Term Longitudinal Associations Between Perceived Features of Emerging Adulthood, Financial Behaviors, and Financial Well-Being

“…Research on the determinants of youths' financial capabilities emphasizes the role of parental financial socialization and family characteristics. The integrative family financial socialization (FFS) model (Gudmunson & Danes, 2011), built upon an extensive review of existing research, suggests that FFS processes (e.g., financial role-modeling, financial communication, or financial expectations; Serido et al, 2019) play a crucial role in the formation of young people's financial capabilities. The model further suggests that family characteristics, such as SES, shape these socialization processes.…”

“…Longitudinal studies also support these links and indicate that positive financial behaviors are linked to financial well-being, subjective well-being, and lower overall psychological distress over time (Ranta & Salmela-Aro, 2018;Serido et al, 2010Serido et al, , 2013Shim et al, 2012). Increases in financial capabilities also contribute to a faster transition to adulthood (Serido et al, 2019).…”

Feeling poor or feeling poorer: comparing subjective measures of income in predicting health and well-being ( Sentirse pobre o más pobre: comparación de medidas subjetivas del nivel de ingresos en la predicción de la salud y el bienestar )

“…Improving an individual’s perception about their own financial adequacy is critical for reducing the negative psychological impacts of being dependent on welfare (Dixon & Frolova, 2011; Hong et al, 2009). Individuals’ perception of self-sufficiency can depend on their financial goals and perceptions of their financial skills (Hong et al, 2009; Serido et al, 2020). The clear association between subjective economic need and health and well-being, over and above relative comparisons documented in the present work, speaks to the importance of this policy goal and suggests a possible target for future intervention.…”

“…Mejorar la percepción de un individuo sobre su propia suficiencia financiera es fundamental para reducir los impactos psicológicos negativos de depender de la asistencia social (Dixon & Frolova, 2011; Hong et al, 2009). La percepción personal de autosuficiencia puede depender de las metas económicas de las personas y sus percepciones en torno a sus habilidades financieras (Hong et al, 2009; Serido et al, 2020). La relación obvia entre necesidades económicas subjetivas y salud y bienestar, más allá de las comparaciones relativas documentadas en este trabajo, ponen de relieve la importancia de este objetivo político y sugiere un posible objetivo para futuras intervenciones.…”

Analysing the behavioural, psychological, and demographic determinants of financial decision making of household investors

“…The normative goal frame on the other hand refer to those heuristic behaviour that emerge from external factors. However, goal frames are not mutually exclusive, and the theory postulates the strength of a goal frame being confronted by the individual's current goals arising from unexpected situations [ 41 ]. For example, a financially literate individual who has a saving mentality (gain goal frame) might indulge in a money splurge or unwise investments due to impulsivity (hedonic goal frame).…”