Emerging adults: financial socialisation

This research will consider the important area of how young people are socialized into understanding and utilising financial services generally and specifically how they are socialized into pensions. Pensions are important individually and for society. The consequences of making a poor decision are wide-reaching. It is widely acknowledged that there is a need to encourage more saving towards retirement. Added to this, the pensions landscape is changing. The shift from Defined Benefits (DB) to Defined Contribution (DC) pensions and the recent introduction of auto-enrolment are placing greater onus and responsibility on individuals to manage their own pension savings (OFT 2013). Furthermore in 2014 the UK Government budget announced that on retirement individuals would take control of their own pension pots and would no longer be required by law to obtain an annuity. Such fundamental change to the way pensions are administered puts control and responsibility firmly with the individual, a situation which is not only occurring for pensions but also increasingly for all financial services products. Not all individuals are well socialized into financial services and are particularly unmotivated to engage with pensions planning – even when they are aware of the long term importance (MAS 2013). Furthermore, many individuals do not know where to go for help (MAS 2013). Previous research has tended to focus on addressing systemic weaknesses and barriers to, for example pension saving, rather than understanding agents of financial socialization and addressing how to build financial capability among consumers.

The importance of primary socialization of children, via the agent of family, is noted by all scholars (Piaget in Liben 1983, Vyjotsky 1974, Roedder John 1999), and has reasonably been the focus of empirical research into children’s understanding of money for decades (Berti and Bombi 1988, Strauss 1952, Roland-Levy 2010). However, some scholars still bemoan the lack of research focus on financial socialization within the family (Gudmunson and Danes 2011). More and more the role of secondary socialization (Brim and Wheeler 1966) through the agent of schools has become a focus for UK government intervention in financial socialization with increasing emphasis on compulsory financial education in primary and senior schools in England. Lusardi et al. (2010) talks of turbulent economic events having ‘forced’ finance and education to work together and there has been increasing interest in policy research - particularly in UK, USA and Australia – to address the seeming lack of capability amongst the young (Taft et al 2013, Taylor & Wagland 2013, Atkinson et al 2013, Serido et al 2013). The importance of the media, the workplace and peers as agents of financial socialization have had little research focus though (Roedder-John 1999, Ekstrom 2007) and despite calls for a greater understanding of adult socialization over and above the emphasis on children, there has been very little focus on researching other more adult groups. ‘Emerging adults’ (Arnett 2006) are the next generation growing up and taking responsibility for their finances. Arnett describes “emerging adulthood” as the lifestage between approximately late adolescence and the mid-twenties, highlighting the young person’s psychological journey to greater autonomy from the family. This is a time when “most young people in this age period feel like neither adolescents nor (fully) adults, but somewhere in between” (Arnett, 2006:113), indicating a protracted period of liminality (Cody, 2012). He sees this age span as characterised by movement towards adult roles which are “highly unstructured and unsettled”, leading to a degree of ambiguity for these young adults. An understanding of how these emerging adults have been, and continue to be, influenced by financial services socializing agents is of particularly interest at the moment as economic constraints may leave them reluctant or unable to leave home, despite increasing desires for choice and freedom. This inevitably shapes their financial maturity and family interactions (Arnett 2006, Kloep & Hendry, 2010) and is of further interest as they are not only expected to be taking on greater financial responsibility by their key primary socializer – the family - but simultaneously by that other powerful agent – the state.


Government-supported architecture is trying to facilitate a greater ‘financial socialization’of particularly younger and vulnerable consumers, with the goal of creating greater ‘financial capability’ MAS 2013). The desire to ensure (or be seen to ensure) a more canny financial consumer has also led to the increasing interest in the whole area of acquiring effective financial understanding, yet to date there are limited empirical studies on the financial socialization of emerging adults.