The Role of Financial Identity Processes in Financial Behaviors and Financial Well-Being

Financial identity formed during emerging adulthood is important for the regulation of youth financial behaviors, decisions, and long-term financial goals. This three-wave short-term longitudinal study investigates how youth develop a distinct manner of approaching and managing personal finances and reveals the structure and dynamics of financial identity development during emerging adulthood. Using the cross-lagged panel model analysis, it also investigates longitudinal reciprocal associations between financial identity processes, financial behaviors, and financial well-being of emerging adults. The sample consists of 533 Lithuanian higher education students (56.8% women; M age = 18.93, SD age = 0.71) who took part in three assessment waves. The findings support the use of the three-factor model of financial identity formation and show that financial identity formation is shaped by emerging adults’ financial situation and contribute to the formation of financial behaviors and financial well-being. Practical implications of study results are also discussed.

The Financial Identity Scale (FIS): A multinational validation and measurement invariance study among emerging adults

The transition from financial dependence on one’s parents to financial self-sufficiency is one of the most relevant transitions during emerging adulthood. It is important to have an instrument able to assess emerging adults’ financial capabilities and to detect its change over time. The current article aims to collect international evidence of the Financial Identity Scale (FIS) validity and reliability. Cross-sectional data collected from 2,501 emerging adults aged 18–25 and belonging to three different countries—U.S. ( n = 1,535), Italy ( n = 485), and Lithuania ( n = 481)—were adopted to test score structure validity, generalizability, sensitivity to difference, criterion-related validity, and internal consistency. Instead, four-wave longitudinal data, available for the American sample only ( n = 1,900), were adopted to test FIS structural stability and sensitivity to change. As recommended by the contemporary view of validity, different structural equation models were performed. Findings suggest that FIS scores are valid and reliable. The implications for researchers and practitioners are discussed.

Linking Family Financial Socialization With Its Proximal and Distal Outcomes: Which Socialization Dimensions Matter Most for Emerging Adults’ Financial Identity, Financial Behaviors, and Financial Anxiety?

Financial behaviors are grounded in family financial socialization, and its effects continue well into people’s life course. However, only a handful of studies have addressed dimensionality of family financial socialization practices. Even fewer studies have investigated how different dimensions of financial socialization are linked to financial identity and distal outcomes such as financial behaviors and anxiety. To address this gap, a cross-sectional study was conducted with 481 emerging adults (57.8% women; M age = 20.27, SD age = 1.39). The results suggest that family financial socialization practices are multidimensional and that they have different effects on the outcomes. Specifically, direct parental teaching on money management and openness about family finances are related to favorable outcomes (i.e., higher spending self-control, less impulsive buying, and lower financial anxiety), while experiencing financial distress within a family is related to less favorable outcomes. The results also suggest that financial identity may play an essential role in this process.

Creditworthy: A History of Consumer Surveillance and Financial Identity in America by Josh Lauer

In September of 2017 Equifax, one of the three major consumer credit reporting agencies in the United States, announced its system security had been breached and confidential consumer information may have fallen into the hands of hackers. Although reports of system intrusions are released almost daily, this breach was of particular significance: sensitive data, including personal, identifying and financial data, was compromised for an estimated 143 million consumers in the United States. Just this week, Equifax further disclosed another 15 million client records were breached in the United Kingdom. Any consumer who has received credit of any kind is familiar with the big three credit reporting agencies—Equifax, TransUnion, and Experian—as these agencies house the financial identities American consumers. With such vast data stores, credit reporting agencies are prime and potentially profitable targets for hackers. All the information a hacker needs to steal a financial identify of a victim resides in the agencies’ files. Clearly, credit reporting agencies play a critical role in the financial marketplace. How these agencies became the powerful guardians and suppliers of consumer financial information is the topic of Josh Lauer’s book, Creditworthy: A History of Consumer Surveillance and Financial Identity in America. This is the first book authored by Lauer, who is an associate professor of media studies at the University of New Hampshire with specialties in media history and theory, communication technology, consumer and financial culture, and surveillance. Lauer relates in great detail how we moved from a society of relationships and human interaction to one of faceless data designed to symbolize character and reputation. Lauer’s history takes us from a time when Americans desired access to goods and services more than they valued confidentiality, to the financial privacy concerns of these surveillance systems today.