Financial socializations impact on investment

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1Department of Human Development and Family Studies, Iowa State ... among household net worth, financial socialization, indicators of investment orientation ... edge, skills and values to participate as members of a group and ... than women reported co-workers as sources of financial planning ..... $0–$2 500 000.
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International Journal of Consumer Studies ISSN 1470-6423

Financial socialization’s impact on investment orientation and household net worth Tahira K. Hira1, Mohamad Fazli Sabri2 and Cäzilia Loibl3 1

Department of Human Development and Family Studies, Iowa State University, Ames, Iowa, USA Department of Resource Management & Consumer Studies, Faculty of Human Ecology, University Putra Malaysia, Selangor, Malaysia 3 Department of Consumer Sciences, Ohio State University, Columbus, Ohio, USA 2

Keywords Financial socialization, investment orientation, household net worth, wealth accumulation. Correspondence Mohamad Fazli Sabri, Department of Resource Management & Consumer Studies, Faculty of Human Ecology, University Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia. E-mail: [email protected] doi: 10.1111/ijcs.12003

Abstract This study investigates the role of financial socialization for investment orientation and household net worth. Combining consumer socialization literature with findings in the behavioural finance literature, survey data were analysed to (1) investigate the relationship among household net worth, financial socialization, indicators of investment orientation and socio-demographic investor characteristics; (2) examine the influence of sociodemographic investor characteristics and financial socialization on indicators of investment orientation; and (3) test whether financial socialization affects household wealth above and beyond socio-demographic and investment orientation factors. Parents emerged as a relevant socialization agent of investors, influencing investment regularity and household net worth above and beyond other factors. This result extends earlier findings about parents’ role for a person’s financial management and savings behaviour to the investment context. Based on our findings, educators may want to involve parents in their efforts. They may want to emphasize the importance of starting investing regularly at an early age and of continuing to increase involvement in investing over the years. Financial planners and financial counsellors may consider emphasizing these two practices for their clients and involve children of their clients when and where appropriate.

Introduction Why do individuals and households with similar sociodemographic characteristics accumulate different amounts of wealth? Wealth, a stock variable that refers to the total amount a person has accumulated in assets at a given time (Weiss et al., 2008), is an important measure of economic well-being. Accumulating wealth is an essential step on the path to household financial security (Gutter and Fontes, 2006). Yet for most persons, accumulating wealth requires learning to invest money. This study shows how financial socialization and two indicators of investment orientation are related to the accumulation of wealth. The findings provide directions for approaches to educate and advise investors. The various data sets that have been used to examine household financial behaviours lack information about the financial socialization of individuals (Gutter and Fontes, 2006). Studies addressing the influence of socialization factors, i.e. means and methods of obtaining information about investing, such as parents, peers, media and the workplace, on investment orientation are scarce. This manuscript has not been published in any form. The material in the manuscript will not infringe upon any statutory copyright. This manuscript will be not submitted elsewhere while under IJCS review.

International Journal of Consumer Studies 37 (2013) 29–35 © 2012 Blackwell Publishing Ltd

Additionally, there has been a paucity of research to connect financial socialization and investment orientation with household wealth. Combining consumer socialization literature with findings in the behavioural finance literature, survey data were analysed in the present study to (1) investigate the relationship among household net worth, financial socialization, indicators of investment orientation and socio-demographic investor characteristics; (2) examine the influence of socio-demographic investor characteristics and financial socialization on indicators of investment orientation; and (3) test whether financial socialization affects household wealth above and beyond socio-demographic and investment orientation factors.

Literature review Socialization is the process by which individuals acquire knowledge, skills and values to participate as members of a group and in society (McNeal, 1987; Moschis, 1987). It begins in childhood and continues, to some extent, throughout life. Applied to market behaviour, consumer socialization has been defined as the process ‘by which young people acquire skills, knowledge and attitudes relevant to their functioning in the marketplace’ (Ward, 1974, p. 2). Financial socialization, according to Danes (1993), is ‘much more inclusive than learning to effectively function in the marketplace. 29

Financial socialization’s role in investment behaviour

It is the process of acquiring and developing values, attitudes, standards, norms, knowledge and behaviours that contribute to the financial viability and well-being of the individual’ (p. 128). Previous research has shown that parents, peers, media and schools are the important agents of consumer socialization (Moschis and Churchill, 1978; Moschis, 1987). Parents are considered instrumental in teaching children the basic aspects of consumption (Moschis, 1987). According to Kuhlmann (1983) and Moschis (1987), prior to entering school, children already have acquired knowledge, attitudes and motives on most subjects that might have been included in school-based education on consumer roles. Moschis et al. (1984) suggested that positive reinforcement might encourage the development of effective consumer behaviours, whereas negative reinforcement might constrain the development of consumer knowledge. Secondly, peer groups are considered another significant source of financial socialization. Moschis and Churchill (1978) found that peers contributed to the learning of materialistic values and social motivations. Lin and Lee (2004) reported that younger respondents who considered themselves less knowledgeable were more likely than their counterparts to consult their friends in making investment decisions. Loibl and Hira (2006) found that more men than women reported co-workers as sources of financial planning information. Thirdly, the media play an important role in financial socialization, affecting many purchase decision, including the choice of investment products. By searching for information, consumers may find products with greater benefits per dollar spent and increase their satisfaction with the products and/or decisions (Punj and Staelin, 1983). Lin and Lee (2004) found that subjective knowledge, risk tolerance, age and income levels were significantly associated with the consumers using the media as an information source. Lee and Cho (2005) examined consumers’ use of information intermediaries and the impact of their information search behaviour in the financial market. They found that a high percentage of consumers used marketing literature to obtain financial market information. Among consumers who paid for information or advice, about half used the media as a source of information. Rhine and Toussaint-Comeau (2002) studied adult preferences for personal finance information and found that newspapers and magazines were particularly popular among lowerincome, less educated investors. Finally, the workplace acts as a relevant socialization environment. Adult learning of personal finance is not restricted to the traditional classroom setting nor does it require the continuous involvement of an accredited teacher. Rather, Loibl and Hira (2005) found that co-workers played a role in initiating financial learning. Their findings showed that the educational offerings at the workplace were useful for improving financial knowledge. Loibl and Hira (2005) analysed the effects of self-directed financial learning using employer-provided financial newsletters, financial publications, financial planning software and the Internet on financial management practices. Results showed that the most widely used educational offerings were the company newsletters. Alexander et al.’s (1998) study on characteristics, investor knowledge and information sources among mutual fund shareholders arrived at similar findings that most respondents cited employerprovided printed materials as the best source of information about their mutual funds. 30

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Along with socialization influences, prior research has shown that investment orientation varies with socio-economic characteristics; in particular, investor gender, race, age, education and income. For example, men tend to have more aggressive portfolios than women (Bajtelsmit and VanDerhei, 1997; Jianakoplos and Bernasek, 1998) and allocate higher proportions to risky assets. Badu et al. (1999) found that white investors held higher asset values than African–American investors in every asset category, and that white households relied more heavily on higher-risk, higher-return types of investment vehicles, such as stocks. A positive relationship has also been reported for age and the likelihood of owning stocks (Zhong and Xiao, 1995; Bertaut, 1998; Gutter et al., 1999) and for highly educated individuals to be more aware of the full range of investment alternatives and their possible returns (Bertaut and Starr-McCluer, 2000; Coleman, 2003). Higher household income was found to relate to a higher level of portfolio allocation to riskier assets (Zhong and Xiao, 1995). In summary, consumers learn the knowledge, skills and values related to consumption behaviours by interacting with socialization agents, which include parents, peers, media and the workplace, adjusted to their social class. The present study extends the current body of knowledge on financial socialization by examining how the four important socialization agents affect household net worth, with particular focus on higher-income investors.

Methods Sample characteristics A telephone survey was conducted using a list-assisted sample of 7500 households in the US. Eligible households consisted of primary residences with a household income of $75 000 or more, as determined in the screening process. To increase the likelihood that there would be a greater proportion of households with higher annual incomes and to ensure appropriate representation of minority households, five targeted, randomly selected, national white page samples of 1500 phone numbers were purchased, including households with (1) an average household income of $100 000/ year; (2) an average household income of $150 000/year; (3) an average household income of $100 000/year and at least 30% African–American population; (4) an average household income of $100 000/year and at least 30% Asian population; and (5) an average household income of $100 000/year and at least 30% Hispanic population. Because the natural disasters in Louisiana, Mississippi and Florida (Hurricanes Katrina and Rita) coincided with the onset of data collection, the households selected in those areas were either deleted from the sample (Louisiana, Mississippi and surrounding coastal areas) or were contacted later during the survey (Florida). Data collection began on 17 October 2005 and ended on 24 February 2006. Advance letters were sent to each sampled household prior to telephone contact in order to explain the purpose and nature of the project and to encourage participation. When conducting screening calls and interviews, staff followed standard random-digit-dialling protocols. The first screening condition was that an adult person was living in the household. If there were only one adult living in the household, that individual was automatically eligible to be interviewed. If there were more than one adult in the household, interviewers asked to speak with the one

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household member ‘who is the most knowledgeable about saving and investing.’ The interviews were then conducted with this household member. Phone numbers requiring multiple contacts were rotated through a minimum of eight call attempts at various times. If an answering machine was reached, additional attempts were made to that number and messages were left to try to screen the household. The interviews averaged 22 min in length [standard deviation (SD) = 5.8]. Unless the incentive was declined, a $20 check was mailed to each respondent who completed the interview. The attempts to contact the 7500 sampled phone numbers resulted in 33.7% of the numbers being unusable for a variety of reasons. Some of the numbers were not in service, businesses, or belonged to other non-households; other numbers belonged to households that could not be screened due to language barriers, health or hearing problems or disaster impact. Of the remaining 4972 households, those refusing to screen comprised 66.8%, the largest segment of the sample. A total of 911 individuals were interviewed, resulting in a response rate of 18.3%; 880 responses were used for this research excluding a subsample of 31 who used no investment vehicles other than savings account and certificates of deposit. The survey respondents approximate the sociodemographic characteristics of households in the 2004 Survey of Consumer Finances (Bucks, Kennickell, Mach and Moore, 2009) with an average household income of at least $75 000/year. The data differ from the Survey of Consumer Finances because they explored a variety of behavioural factors that may impact investment behaviour and household net worth.

Dependent variables The dependent variables are household net worth and two indicators of investment orientation. Following a common procedure (Creedy and Tan, 2007; Kapoor et al., 2008; Weiss et al., 2008), household net worth was measured by calculating the difference between a household’s total gross assets and its financial liabilities. Total gross assets were inquired with the question, ‘Thinking of your total gross assets, including the financial assets we just mentioned as well as your home and any other real estate you own, what would you estimate is the total overall value?’ It was an open-ended question. The question referred to the previous question that listed 10 common investment vehicles: savings account, certificates of deposit, employer-provided retirement account, personal individual retirement account or Keogh account, annuities, life insurance with cash value, government savings bonds or bond mutual funds, corporate bonds or bond mutual funds, stocks or stock mutual funds and money market mutual funds. Financial liabilities were inquired with the question, ‘Now think about your financial obligations, including any mortgages, loans or credit card debt. Approximately what is the total amount that your household owes?’ It was an open-ended question. The average respondent had total financial assets of $1 149 801 (including real estate) and total financial obligations of $229 817. Investment orientation was measured by two variables. The first variable, investment regularity, inquired, ‘I started to invest regularly early in my life.’ Response options ranged on a 5-point Likert scale from strongly disagree = 1 to strongly agree = 5. The average response was slightly above the scale midpoint, at 3.19 (SD = 1.181). The second variable, investor involvement,

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inquired, ‘Over the years, would you say that your involvement in saving and investing has decreased (= -1), remained fairly stable (= 0), or increased (= 1).’ The average response was 0.52 (SD = 0.639), indicating somewhat increasing involvement.

Independent variables Independent variables included financial socialization measures and the sample socio-demographic characteristics. Financial socialization was inquired with four measures, including parental, peer, media and workplace influences. Parental influences were measured with three questions: (1) ‘When you were growing up, how often did your parents talk with you about how to handle money? Would you say never, sometimes or often?’; (2) ‘When you were growing up, how often did your parents talk with you about the importance of saving money for the future? Would you say never, sometimes or often?’; and (3) ‘My parents advised me when I was young on how to invest. Please tell me if you strongly disagree, disagree, agree or strongly agree with each one.’ Respondents’ scores were normalized and added up to create a single score. Reliability analysis indicated a Cronbach’s a of 0.777 for the three measures. Peer influences were inquired with the question, ‘How often have you obtained information about investing from friends or colleagues? Would you say never, seldom, sometimes, often or very often?’ Media influences were inquired with the question, ‘How often have you obtained information about investing from the Internet; TV programs; radio programs; newspapers, magazines, newsletters or books? Would you say never, seldom, sometimes, often or very often?’ Reliability analysis for these four media-related questionnaire items indicated a Cronbach’s a of 0.683. Workplace influences were inquired with the question, ‘How often have you obtained information about investing from your workplace? Would you say never, seldom, sometimes, often or very often?’ Reponses for these three questions were provided on a 1 = never to 5 = very often Likert scale. The average response indicated that parental influences were right at the scale midpoint at 3.01 (SD = 1.131). The other three socialization agents were rated below the scale midpoint at 2.06 for media influences (SD = .745), 2.11 (SD = 1.068) for workplace influence and 2.32 (SD = .945) for peer influences, indicating irregular information gathering at those places. With regard to the sample socio-demographic characteristics, age, family size, assets and obligations were measured as continuous variables. Household income was measured using 14 unequal categories ($75 000–$80 000 = $1–$200 000 and more = 14). For data analysis purposes, we recoded the responses into dollar amounts using the interval midpoints in addition to the upper-scale anchor value. Binary variables included gender (female = 0, male = 1), race (non-white = 0, white = 1), marital status (single, divorced, widowed = 0, living with a partner, married = 1), education (no college degree = 0, college degree = 1), employment status (part-time, retired, not employed = 0, employed fulltime = 1) and occupation (other management, technical, sales, administrative support, construction and maintenance, operative, service, homemaker = 0, professional, business and finance management = 1). As presented in Table 1, out of 880 respondents, 65% were men, with the majority being white, married and living in households of 31

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Table 1 Sample characteristics

Variable

Range

Respondents

Household net worth Parental influences Media influences Peer influences Workplace influences Investment regularity Investor involvement Gender (male = 1) Age (cont.) Race (white = 1) Marital status (married/living with partners = 1) Family size (cont.) Education (college degree = 1) Employment (full-time = 1) Occupation (professional = 1) Household income (cont.) Assets (cont.) Obligations (cont.)

-$350 000–$19 600 000 1–5 1–5 1–5 1–5 1–5 -1, 0, 1 0–1 23–87 0–1 0–1

$919 983 ($1 388 116) 3.01 (1.131) 2.06 (0.745) 2.32 (0.945) 2.11 (1.068) 3.19 (1.181) 0.52 (0.639) 0.65 (0.477) 48.37 (10.551) 0.82 (0.381) 0.91 (0.288)

1–8 0–1 0–1 0–1 $77 500–$200 000 $5 000–$20 000 000 $0–$2 500 000

3.42 (1.310) 0.76 (0.424) 0.75 (0.433) 0.58 (0.493) $128 218 ($41 710) $1 149 801 ($1 414 062) $229 817 ($215 455)

n = 880. Table 2 Correlation among study variables

1. Household net worth 2. Parental influences 3. Media influences 4. Peer influences 5. Workplace influences 6. Investment regularity 7. Investor involvement Gender Age Race Marital status Family size Education Employment Occupation Household income

1

2

3

4

5

6

7

1.000 0.086* 0.092** -0.027 -0.071* 0.207*** 0.008 0.056 0.282*** 0.074* -0.039 -0.129*** 0.011 -0.286*** 0.047 0.317***

1.000 0.093** 0.222*** 0.135*** 0.241*** -0.040 -0.076* -0.112** -0.036 -0.065† 0.020 0.081* 0.015 0.040 0.034

1.000 0.132*** 0.013 0.144*** 0.178*** 0.193*** -0.058† -0.072* 0.034 0.046 0.149*** 0.083* 0.074* 0.162***

1.000 0.361*** 0.011 0.050 -0.051 -0.197*** -0.053 -0.042 0.087** 0.026 0.140*** 0.002 0.050

1.000 0.024 0.027 -0.057† -0.134*** -0.074* -0.021 0.065† 0.007 0.119*** 0.062† 0.015

1.000 0.056† 0.017 -0.003 0.054 0.007 0.010 0.087** -0.065† 0.074* 0.122***

1.000 0.073* -0.035 0.156*** 0.012 -0.058† 0.007 0.060† 0.060† 0.113**

†P < 0.100; *P < 0.050; **P < 0.010; ***P < 0.001. n = 880.

three to four members. About three-quarters of respondents had a college education and were employed full-time. About half were employed in professional or business and finance management positions. The average household had an income of $128 218.

Results Correlation among study variables Correlations among household net worth, financial socialization, two indicators of investment orientation and the sample’s socio-demographic characteristics are presented in Table 2. This preliminary, bivariate analysis already set the stage for the main relationships, to be confirmed in regression analysis. 32

Household net worth was correlated with investment regularity, parental, media and workplace influences, with workplace influences showing a negative sign. In addition, older age, minority racial status, smaller family size, less than full-time employment and higher household income were associated with a higher household net worth. Financial socialization was measured with four variables: parental, media, peer and work influences. Parental influences were correlated with the three other areas of influence as well as with investment regularity and household net worth. It was also correlated with female respondents, younger age and higher education of the respondents. Media influences were a particularly strong variable, correlated with 12 of the 16 study variables, such as household net worth, investment regularity and investor

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involvement as well as with parental and peer influences. Media influences were also correlated with male respondents, minority respondents, higher education, full-time employment, professional occupation and higher household income. Peer influences were correlated with parental, media and workplace influences as well as with younger age, larger family size and full-time employment. Finally, workplace influences were correlated with lower household net worth, parental and peer influences as well as with younger age, minority respondents and, of course, full-time employment. The correlations of investment orientation differed for the two measures of this concept. Investment regularity was correlated with household net worth, parental and media influences. In addition, higher educational status, occupation and household income were associated with investment regularity. Investment involvement related strongly particularly with media influences, white race and household income.

Influence of financial socialization on indicators of investment orientation To determine the effects of financial socialization on indicators of investment orientation, we performed the two ordinary least squares regression analyses presented in Table 3. The first regression model examined the effects of financial socialization on investment regularity. Investment regularity, measured with the statement ‘I started to invest regularly early in my life,’ was significantly associated with two of the four socialization variables: parental and media influences. Parental influence was significant; media influences were also positive and significant as a predictor of respondents’ investment regularity. The second regression model addressed the effects of financial socialization on investor involvement. Investor involvement, measured with the statement, ‘Over the years, would you say that your involvement in saving and investing has decreased, remained fairly stable or increased,’ was associated with the same two financial socialization variables. Media influences were positive and related strongly particularly with investor involvement. Surpris-

Table 3 Impact of financial socialization on indicators of investment orientation

ingly, parental influences were marginally significant, yet negatively associated with investor involvement.

Influence of financial socialization on household net worth The contribution of financial socialization to household net worth was tested by means of a multiple-step regression model. Following the pattern of analysis in social psychological research (e.g. Verplanken, 2006; Verplanken et al., 2007), the model examined whether the four socialization measures independently accounted for household net worth, above and beyond the influence of indicators of investment orientation and socio-demographic characteristics. The multiple-step procedure is a common alternative to comparing b’s for purposes of assessing the importance of the independent variables (Garson, 2009). Multiple-step regression was conducted with household net worth as the dependent variable. As presented in Table 4, household net worth was regressed on investor socio-demographic characteristics on step 1, investment orientation variables on step 2 and financial socialization variables on step 3. The variance inflation factors varied from 1.071 to 1.394, indicating there were no multicollinearity problems. Financial socialization, particularly parental influences, contributed to the prediction of household net worth over and above the previously entered variables. Gender, age, education, employment, household income and investment regularity variables remained statistically significant, suggesting that the effects of financial socialization and of those variables were independent. These results thus supported the notion that financial socialization, particularly parental influences, accounted for variance in household net worth over and above other sociodemographic and belief-related variables.

Discussion and conclusion The results from this study extend findings from previous studies that have shown that people learn financial management behaviour through observations, participation and intentional instruction by

Variables

Investment regularity Standardized coefficient b

Investor involvement Standardized coefficient b

Parental influences Media influences Peer influences Workplace influences Gender Age Race Marital status Family size Education Employment Occupation Household income R2; Adjusted R2; F value

0.238*** 0.112** -0.057 0.021 0.032 -0.022 0.066* 0.011 0.007 0.026 -0.087* 0.031 0.091** 0.099; 0.086; 7.330***

-0.065† 0.170*** 0.029 0.027 0.030 -0.075* 0.168*** 0.024 -0.101** -0.042 0.032 0.042 0.101** 0.088; 0.074; 6.410***

†P < 0.100; *P < 0.050; **P < 0.010; ***P < 0.001. n = 880.

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Table 4 Multiple-step regression analysis predicting household net worth

Predictor

B

SE B

b

DR2

Final b

Step 1: Gender Age Race Marital status Family size Education Employment Occupation Household income Step 2: Investment regularity Investor involvement Step 3: Parental influences Media influences Peer influences Workplace influences

328 954 18 321 120 028 -218 359 -44 349 -227 361 -849 344 38 762 11 185 767 -68 606 87 676 88 002 38 649 -47 066

92 629 4 532 109 389 151 920 35 663 105 197 107 005 89 655 1 34 881 65 290 38 235 58 490 47 792 41 014

0.113*** 0.139*** 0.033 -0.045 -0.042 -0.070* -0.265*** 0.014 0.331*** 0.158*** -0.032 0.071* 0.047 0.026 -0.036

0.236***

0.103** 0.156*** 0.035 -0.040 -0.046 -0.088** -0.249*** 0.010 0.310*** 0.136*** -0.036 0.071* 0.047 0.026 -0.036

0.025*** 0.009*

*P < 0.050; **P < 0.010; ***P < 0.001. n = 880. Dependent measure is: household net worth. Final model: R2 = 0.269; adjusted R2 = 0.257; F = 21.225***; variance inflation factor range: 1.071–1.394.

socialization agents, to the investment context (McNeal, 1987; Moschis, 1987; Danes and Dunrud, 1993). We find significant but only modest effects of parental influence on indicators of investment orientation, investment regularity and household net worth. The first research objective investigated the correlations among household net worth, financial socialization, indicators of investment orientation and socio-demographic investor characteristics. This exploratory analysis already indicated the main relationships. Household net worth was strongly associated with investment regularity, when comparing the significant associations, in addition to older age, smaller family size, less than full-time employment status and, as expected, higher household income. The results suggested a possible linkage between early involvement in life in investment decisions and subsequent household wealth. The finding points not only to the effects of compounding interest for longer-term investments, but also links to involvement research in the consumer behaviour literature. This literature has long documented the benefits of ongoing, compared with temporal, involvement for the quality of consumer decision making (Bloch et al., 1986; Richins and Bloch, 1986). Correlation analysis also indicated a cumulative effect of socialization agents. Higher levels at one agent tended to relate to higher levels at other agents. Finally, investment regularity emerged as the stronger, more highly correlated variable among the two investment orientation measures in this exploratory analysis. The second research objective was to examine the influence of socio-demographic investor characteristics and financial socialization on two indicators of investment orientation. Regression results confirmed modest yet significant effects of the role of parents for investors’ involvement in making investment decisions. This finding points in the direction of other research on the importance of parents as socialization agents for financial behaviours (Sonuga-Barke and Webley, 1993; Webley et al., 2000; Webley and Nyhus, 2006). In addition, the finding that an investor’s motivation to keep abreast about the markets in the current media tended to further regular and early involvement in investing is a finding that connects both the consumer involvement literature 34

as well as the behavioural economics literature (Lin and Lee, 2004; Loibl and Hira, 2009). These results indicate that when investors read, watch television and review information about finances from various types of media, the activities positively influence investment patterns early in their lives. In their study, Blinder and Krueger (2004) found that television was the dominant source of information on general economic knowledge, followed by newspapers and the Internet. The media’s influence was also a significant predictor of differences between those who did report increased involvement in saving and investing over the years. Our study suggests that the diversification of information gained from various sources of information (the Internet, television, radio and printed media) could provide investors with the information needed to make investment decisions and to become more regularly involved. From a socio-demographic point of view, white respondents and those with higher household incomes reported higher investment regularity and investor involvement, a pattern common for this line of inquiry as discussed in the literature review. The third research objective was to test whether financial socialization affects household wealth above and beyond sociodemographic and investment orientation factors. Multiple-step regression analysis confirmed that, in fact, socialization influences independently accounted for variation in household wealth, with parental influence emerging as the strongest socialization agent, even though the effects were modest in size. This result likely extends earlier findings about parents’ role for a person’s financial management and savings behaviour (i.e. Webley and Nyhus, 2006) to the investment context. Alhabeeb (1996) reported that, for spending and saving, ‘children usually acquire their knowledge early at home with a heavy influence by their families’ behavior and their economic, social and psychological atmospheres’ (p. 12). A number of other studies have also confirmed that children learn about finances through observation, practice and participation, as well as through deliberate instruction by parents (Rettig, 1985; McNeal, 1987; Danes and Dunrud, 1993). As expected from the exploratory bivariate analysis, investment regularity also contributed to higher household wealth.

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While the present study is limited to a sample of higher-income respondents and limited in that the information is self-reported, which should caution readers when generalizing the results, it contributes to the behavioural economics literature a better understanding of the ties between investor behaviour and their parents’ socialization efforts. With this knowledge, educators may want to consider involving parents in their efforts. They may want to emphasize the importance of starting investing regularly at an early age and of continuing to increase involvement in investing over the years. Financial planners and financial counsellors may consider emphasizing these two practices for their clients and involving children of their clients when and where appropriate.

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