Financial socialization and financial well‐being in early adulthood: The mediating role of financial capability

Abstract Objective This study explores the relationship between financial socialization agents and financial well‐being in early adulthood and the mediating role of financial capability. Background The family financial socialization theory provides a foundation for delineating the financial socialization process and outcomes in a family context. However, few studies have examined financial socialization experiences within a social context and their differential impacts on financial well‐being mediated by young adults' financial capability. Method This study used a sample of Koreans aged 25–39 years gathered from an online survey conducted in 2021 ( N = 1,599). Linear regressions were used to estimate the associations between financial socialization agents and financial well‐being, and the mediating roles of financial capability factors. Results The findings indicate that financial socialization from observing parental financial behavior was positively related to young adults' financial well‐being. Other socialization agents—including peers, media, and school—were generally uncorrelated with financial well‐being. Further analyses showed that financial capability was a mediator between observing parental financial behavior and financial well‐being. Conclusion Young Korean adults who learned personal finance by observing their parents had higher financial well‐being. Part of this effect was due to the improved financial behavior learned through the socialization process. Implications The path to financial well‐being begins with experiential learning within a family context in early adulthood through improved financial behavior. Our findings call for greater attention to children who might be excluded from the benefits of family‐oriented financial socialization through observing parents' financial behaviors.