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

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.