Financial Behaviors – Parents, Environment, Advertisers, Peers

Financial habits are molded in children from birth; unfortunately, many of the habits children pick up from their parents, peers, and advertisers are negative. Because children absorb information and learn quickly, the behaviors they form young can shape their financial futures powerfully.

Unless parents and other influencers take proactive measures to shape and instill positive financial behaviors and counteract the impact of advertising, many kids will fall into the common financial traps people experience as adults.

Research, Statistics & Quotes

A Brown University survey of 50,000 families demonstrates that children’s habits take root at age 9 and stick.

Brown University as reported by the Huffington Post

A research study analyzing the effects of parents’ values on children found a statistically significant positive association between parents’ savings rates and children’s savings rates.

Journal of Economic Psychology

Only 22% of kids surveyed indicated that they talk to their parents frequently about money.

Money Confident Kids

Adolescents in particular experience difficulty in receiving proper financial guidance. Many parents do not feel that they can influence their teenage child’s spending habits due to peer influence. Furthermore, many teenagers have a high spending rate when using cash, checks, or credit cards. Pinto, Parente, & Mansfield (2005) established that the age at which young adults receive credit cards is dropping. As children have access to more money and credit at a younger age, the need to ensure a quality financial education increases.

South Dakota State University

A substantial majority, 86 percent, of parents surveyed report that they talk to their kids aged 7 to 17 about money and personal finance. Of those parents who talk to their kids about money, 85 percent discuss the topic at least once a month, and half report that they talk about money “often,” twice per month or more.”

Financial Capability Network

56% of parents say their 18- to 24-year-old has little to no involvement in family finances.

US Bank

“We need to protect our kids by empowering parents to be positive financial role models and empowering them with the training and resources that can help them encourage positive financial behaviors in their children.”

Vince Shorb, CEO, National Financial Educators Council

“Your example is everything when it comes to teaching your children about money. Slowing down and saving up to buy things teaches your kids to make wiser, less spontaneous purchasing decisions.”

Rachael Cruze, Ramsey Solutions

Family and cultural influences, peer pressure, and social intervention all affect financial decisions. And although there is a lot of literature on social influences on decisions, there is limited research on social influences in financial decision-making.

World Bank Study as reported by Duke University

Consumer purchasing decisions are affected by online influences of people that the individuals know and trust, including friends (Kim & Srivastava 2007). This implies that at some level, people either are considering social norms, trust others to evaluate goods, or will purchase goods for the social benefit. Research also shows that people trade off general social influence at a steady rate with influence from specific friends (Abbassi et al. 2012). This is particularly interesting because this indicates that the influence of a specific friend will be greater than the general crowd when applied to the current experiment.

World Bank Study as reported by Duke University

“With the proliferation of expanded social networks and changes to the way we manage relationships, the impact of peers on our finances has increased. This can be a good or bad thing – we are encouraging people to support their friends and loved ones to work toward their personal financial goals.”

Vince Shorb, CEO, National Financial Educators Council

Negative effects of advertisements include several developmental trends, both psychological and physiological. Media and commercials generally lack moral ground, creating a wide expanse of grey which helps teenagers justify wrong actions. It creates gender stereotypes and incites aggression. Effects of media also include the lack of patience and social apathy. All these factors are directly responsible for the depression and low social image which is a grave issue and is being faced by most teenagers.

OMICS International

“Everywhere we turn we’re saturated with advertising messages trying to get our attention. We’ve gone from being exposed to about 500 ads a day back in the 1970s to as many as 5,000 a day today.”

Jay Walker-Smith, President of the Marketing Firm Yankelovich

It is estimated that advertisers spend more than $12 billion per year to reach the youth market and that children view more than 40,000 commercials each year.

American Psychological Association

Food industry advertising that targets children and youth has been linked to the increase of childhood obesity.

American Psychological Association

Multiple techniques and channels are used to reach youth, beginning when they are toddlers, to foster brand-building and influence food product purchase behavior.

International Journal of Behavioral Nutrition and Physical Activity

“The self-regulation of ads to kids has not worked. Kids today are targeted with sophisticated marketing campaigns that typically have a call to action that encourages them to spend their money. This early breeding of consumerist behaviors can spell disaster to their finances as they mature.”

Vince Shorb, CEO, National Financial Educators Council

NFEC Position Statement

The NFEC agrees with the familiar African proverb, “It takes a village to raise a child.” Parents, peers, and marketers wield strong influence on a child’s financial habits. Care must be taken to protect our children and raise self-sufficient adults who are on a path toward greater financial security.

Parents have the greatest responsibility. It is up to you to ensure that your children develop positive financial behaviors and protect them from negative influences – such as those often presented in marketing messages. Peers should also support each other in encouraging their friends and loved ones to work toward financial wellness.

Our training and materials emphasize helping the next generation avoid or overcome negative financial behaviors and encourage a positive relationship with money. Resources are provided not only to kids, but also to adults and other peer influencers. For example, we honor our financial literacy advocates and champions for their partnership with us to spread these resources widely. When kids receive positive financial lessons from multiple sources, they are more likely to adopt behaviors that help them to be better stewards of their money.