Journal of Family Psychology

Unidirectional and Bidirectional Relationships Between

Financial Parenting and Financial Self-Efficacy: Does
Student Loan Status Matter?
Jessie H. Rudi, Joyce Serido, and Soyeon Shim
Online First Publication, April 9, 2020. http://dx.doi.org/10.1037/fam0000658

CITATION
Rudi, J. H., Serido, J., & Shim, S. (2020, April 9). Unidirectional and Bidirectional Relationships
Between Financial Parenting and Financial Self-Efficacy: Does Student Loan Status Matter?. Journal
of Family Psychology. Advance online publication. http://dx.doi.org/10.1037/fam0000658
 Journal of Family Psychology
© 2020 American Psychological Association 2020, Vol. 2, No. 999, 000
ISSN: 0893-3200 http://dx.doi.org/10.1037/fam0000658

Unidirectional and Bidirectional Relationships Between Financial Parenting

and Financial Self-Efficacy: Does Student Loan Status Matter?

Jessie H. Rudi Joyce Serido

Shakopee, Minnesota University of Minnesota–Twin Cities

Soyeon Shim
University of Wisconsin–Madison
This article is intended solely for the personal use of the individual user and is not to be disseminated broadly.
This document is copyrighted by the American Psychological Association or one of its allied publishers.

Using longitudinal data and a cross-lagged, multigroup panel design, we examined unidirectional and
bidirectional relationships between financial parenting and young adults’ financial self-efficacy during
the transition to adulthood. Because increasing college costs and student loan debt have changed the
financial landscape of achieving higher education, we examined effects over time under 2 distinct
conditions: a debt-financed college education and a debt-free college education. Analyses included
the effects of 2 types of financial parenting: implicit role modeling and explicit communication. The
sample was drawn from the Arizona Pathways to Life Success (APLUS) project, a cohort study of college
students enrolled full time at a public university in the fall of 2007. Participants provided data at 3 time
points across 5 years. The sample included 850 student loan borrowers and 800 nonborrowers. We found
unidirectional patterns for both nonborrowers and borrowers depending on the type of financial parent-
ing: Parents’ explicit financial communication before college predicted higher levels of financial
self-efficacy during freshman year for nonborrowers, whereas parents’ implicit modeling before college
predicted higher levels of financial self-efficacy during freshman year for borrowers. Financial self-
efficacy led to less frequent explicit parental financial communication for nonborrowers after college but
was associated with more frequent explicit parental financial communication during college for borrow-
ers. Our findings suggest that explicit communication regarding basic finance principles is likely
sufficient to support financial self-efficacy in a debt-free context, whereas observing parents’ responsible
financial behaviors may be beneficial for young adults who incur student loan debt.

Keywords: parenting, financial self-efficacy, social learning theory, financial socialization,

young adulthood

Supplemental materials: http://dx.doi.org/10.1037/fam0000658.supp

Higher education has long been regarded as necessary to the
achievement of financial self-sufficiency because college gradu-
ates with a bachelor’s degree earn more on average than those with
only a high school diploma (Greenstone & Looney, 2011). With a
shift to more debt financing for a college education, it is likely that
a shift in the ways that parents and children interact during the
college years may need to occur as well. With that in mind, we
examined how parents socialized their children regarding financial
Jessie H. Rudi, Shakopee, Minnesota; Joyce Serido, Department of
Family Social Science, University of Minnesota–Twin Cities; Soyeon
Shim, School of Human Ecology, University of Wisconsin–Madison.
A prior version of this article was presented at the 2018 Annual Con-
ference of the American Council on Consumer Interests (ACCI) in Clear-
water, Florida. The presentation occurred as part of a paper symposium at
the event.
Correspondence concerning this article should be addressed to Jessie H.
Rudi, 200 4th Avenue West, Shakopee, MN 55379. E-mail: conne262@
umn.edu
matters over a 5-year period that covered their college years and
career launch to determine whether the parental influence on
young adult children’s financial self-efficacy might differ for
young adults who did not take out student loans and those who did.
The data we compiled provided an effective basis upon which to
examine the bidirectional effects of financial parenting and self-
efficacy under two distinct conditions: a debt-financed college
education and a debt-free college education.
More young adults today are attaining higher education than
previous generations, attributed partly to increases in student loan
accessibility and changes in government policies (Fry & Parker,
2012). However, the rising costs associated with attending college
(CollegeBoard, 2019), coupled with a decrease in the availability
of grants and scholarships (Burdman, 2005; Mezza & Sommer,
2015), have led to more young adults accruing greater levels of
student loan debt (Houle, 2014). Thus, although today’s young
adults are the best-educated cohort in U.S. history (Fry, Igielnik, &
Patten, 2018), many are starting their adult lives at a financial
disadvantage (Pew Research Center, 2015).
More specifically, it has been reported that the total amount of
debt related to student loans currently exceeds $1.5 trillion (Fed-

1
 2 RUDI, SERIDO, AND SHIM
eral Reserve Bank of New York, Center for Microeconomic Data,
2019). Student loan debt is consistently reported as a top stressor
among young adults and is associated with psychological distress
and lower levels of overall well-being (Archuleta, Dale, & Spann,
2013; Lusardi, Scheresberg, & Oggero, 2016; Stein et al., 2013).
Student loan debt is also associated with lower levels of financial
well-being and lower net worth (Zhan, Anderson, & Scott, 2006),
so it should come as no surprise that those who incur education-
related debt have also been found to delay achievement regarding
other key markers of adulthood (Arnett, 2007), including marriage
(e.g., Bozick & Estacion, 2014) and homeownership (Cooper &
Wang, 2014).
Although more young adults than ever before are borrowing
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money to pay for higher education, particular socioeconomic sub-
This document is copyrighted by the American Psychological Association or one of its allied publishers.
groups of young adults are more likely to take out student loans
and be negatively affected by student loan debt. Women, for
instance, are not only more likely than men to take out student
loans (Dwyer, Hodson, & McCloud, 2013), but they are also more
likely than men to worry about not being able to repay student loan
debt (Lusardi et al., 2016; Shim, Serido, & Lee, 2019). Ethnic
minorities and those with lower incomes are also more likely to
fall behind on payments for student loan debt (Lusardi et al.,
2016). An extensive research literature has examined how parents
potentially alleviate children’s financial stress by promoting re-
sponsible financial behaviors (Chowa & Despard, 2014; Clarke,
Heaton, Israelsen, & Eggett, 2005), financial self-efficacy (Shim,
Serido, Tang, & Card, 2015), and overall financial well-being (Lee
& Mortimer, 2009; Shim, Barber, Card, Xiao, & Serido, 2010).
Importance of Financial Self-Efficacy
We adopted Lown, Kim, Gutter, and Hunt’s (2015) definition of
financial self-efficacy as the belief an individual has regarding his
or her level of ability in performing a financial behavior. Financial
self-efficacy has been conceptualized as a self-regulating mecha-
nism, one that typically predicts behavior (Serido, Shim, & Tang,
2013). Those who believe themselves to be efficient when dealing
with financial matters do in fact tend to engage in more responsible
financial behaviors, such as saving for retirement (Dietz, Carrozza,
& Ritchey, 2003), investing, and maintaining a savings account
(Farrell, Fry, & Risse, 2016). A number of studies have found
evidence supporting Xiao, Chatterjee, and Kim’s (2014) finding
that self-efficacy among young adults was associated with behav-
iors that promote financial independence later on, regardless of
their economic factors (e.g., income, assets, educational attain-
ment). In addition, Lim, Heckman, Letkiewicz, and Montalto
(2014) found that students with higher levels of financial self-
efficacy were more likely to seek help in managing their financial
stress compared to those with lower levels of financial self-
efficacy. Shim et al. (2015) found that financial self-efficacy
partially mediated the association between financial parenting and
students’ financial behavior; this study utilized data from only two
time points and tested only unidirectional effects from financial
parenting to financial self-efficacy. We build on these previous
findings to better understand the directionality between financial
parenting and young adults’ self-efficacy during the college-to-
career transition.
The Influence of Financial Parenting on Children’s
Financial Behavior and Well-Being
In this study, we have defined financial parenting to include
both the implicit (via role modeling) and explicit (via communi-
cation) ways that parents socialize their children to manage their
own finances. A number of studies have demonstrated that both
implicit and explicit financial parenting practices promote the
financial knowledge and skills children need to function indepen-
dently outside the family (Danes, 1994; Danes & Haberman, 2007;
Gudmunson & Danes, 2011). Implicit financial parenting, or pa-
rental financial role modeling, refers to the interactions that natu-
rally emerge during day-to-day family life and includes basic
financial behaviors such as paying bills, grocery shopping, and
making banking deposits. These implicit interactions provide les-
sons in the ways the family thinks about and manages finances,
with the assumption being that children will see their parents as
role models and mimic their financial behaviors.
Explicit financial parenting refers to the purposeful actions and
communications parents initiate that are intended to impart knowl-
edge and understanding about finances and financial behaviors to
children, such as explaining to children how to establish credit and
the importance of saving for retirement. Both types of financial
parenting can be used proactively to “pre-arm” children to be able
to deal with financial challenges and problems before they occur,
or reactively, to support children in solving financial problems
after they arise.
Implicit financial parenting has been found to correlate with stu-
dents’ practice of modeled behaviors (Angulo-Ruiz & Pergelova,
2015; Clarke et al., 2005; Jorgensen & Savla, 2010; Shim et al.,
2010). Parental financial communication and teaching, meanwhile,
is apparently associated with young adults’ feeling more positive
about and more prepared to handle personal financial demands on
their own (Clarke et al., 2005; Jorgensen & Savla, 2010; Kim &
Chatterjee, 2013; Serido, Shim, Mishra, & Tang, 2010). In a
sample of Dutch young adults, those who reported that their
parents routinely encouraged them to save money and to spend
according to a set budget also tended to report that they had saved
money during the previous year and avoided going into debt
(Webley & Nyhus, 2013). College students who reported learning
about financial issues from parents also tended to carry signifi-
cantly lower credit card balances and were more likely to make
regular payments (Smith & Barboza, 2014). Other research ex-
tends these findings beyond financial behavior by showing that
parents’ discussing and direct learning along with children was
positively associated with financial attitudes (Jorgensen & Savla,
2010). Although there is robust evidence of positive associations
between financial parenting and young adults’ subsequent finan-
cial behaviors, we know little regarding the associations between
financial parenting and young adults’ financial self-efficacy over
time.
Directional Effects of Financial Parenting
Parenting theories and extensive research confirm that not only
are parents key socialization agents for their children (e.g., Ho-
ghughi & Long, 2004), but children also influence their parents
and their parenting practices (Belsky, 1984; Kuczynski, 2003).
Although the extant literature within the financial domain assumes
 FINANCIAL PARENTING AND FINANCIAL SELF-EFFICACY
that parental financial socialization directly influences young
adults’ financial self-efficacy in a unidirectional fashion (Pinto,
Parente, & Mansfield, 2005; Shim et al., 2010), it would seem
reasonable that financial parenting practices change as children
mature. This may indeed be the case with emerging adult children
because the parent– child relationship becomes more egalitarian
and less hierarchical (Tanner, Arnett, & Leis, 2008). Parents may
respond to their young adults’ financial self-efficacy by “backing
off” and giving their young adult children the opportunity to try
financial management on their own prior to stepping in to help.
Alternatively, when parents see their children struggling or feeling
less confident in their ability to manage finances, parents may step
in and provide detailed information or financial coaching to their
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children. The current study was designed to examine whether the
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associations between financial parenting and financial self-
efficacy are unidirectional or bidirectional.
Research has yet to examine differences in explicit and implicit
financial parenting between families that use debt to finance chil-
dren’s education and those that do not. However, given the in-
creasing costs associated with achieving higher education and the
difficulty some young adults face in affording a college education,
it is possible that not only would parents in these two situations
financially parent their children differently, but also that the effects
of different kinds of financial parenting would have a varied
impact on young adults’ financial well-being. Some parents may
recognize that an 18-year-old high school senior lacks experience
in making financial decisions that have long-term repercussions
that are more commonly made in adulthood (e.g., paying back a
mortgage). Some young adults who take out student loans may
need continued parental guidance during the transition to adult-
hood to avoid significant financial problems that can interfere with
academic success during college (Dwyer et al., 2013).
Current Study
The current study used longitudinal data collected from a cohort
of college-attending young adults to answer the following research
question: How do financial parenting, both implicit and explicit,
and young adults’ financial self-efficacy influence each other over
time? More specifically, we examined whether financial parenting
(both implicit and explicit) has a unidirectional or bidirectional
association with young adults’ financial efficacy over time. Given
the proposed distinction between young adults who acquire student
loans and those who do not, in this study, we examined the
associations between financial self-efficacy and financial parent-
ing, first with regard to those young adults who acquired student
loans (N ⫽ 800) and then with regard to those who did not (N ⫽
850). Given the sociodemographic differences between student
loan borrowers and nonborrowers, our analyses controlled for
gender, ethnicity, first-generation status, and socioeconomic status
in an attempt to focus on debt status as it relates to the bidirectional
relationships between financial parenting and financial self-
efficacy.
Method
Sample Characteristics
The data for this study were taken from three waves of the
Arizona Pathways to Life Success (APLUS) project, a four-wave
3
longitudinal study that examined associations between financial
behaviors of college students and adult well-being. The study
tracked a cohort of first-year college students enrolled full-time at
a public university in the fall of 2007. This study was approved by
the University of Minnesota Institutional Review Board.
The participants in the present study included a subsample of
1,650 young adults who provided data about their student loan
status at Wave 1 and Wave 2 of the longitudinal study. Participants
who reported owing no undergraduate student loans at Wave 1 or
Wave 2 but did report owing on undergraduate student loans at
Wave 3 were included in the “yes” student loan group. Just over
half of the participants reported taking out undergraduate student
loans (51.5%).
Over half of participants were female (63.0%), and approxi-
mately two thirds were White (68.1%), 14.7% were Hispanic/
Latino, 8.9% were Asian/Asian American/Pacific Islander, 4.7%
were Native American/other, and 3.5% were African American/
Black. Just over 16% of participants were first-generation college
students. The majority of participants reported living away from
their parents (86.7%), either in a residence hall, in a fraternity or
sorority, in a rental apartment/house, or in a home they owned,
when Wave 1 data were collected; 11.5% reported living at home
with their parents at Wave 1. The vast majority of participants were
18 –20 years old at the time of Wave 1 data collection (98.1% were
18 –20 years old; n ⫽ 7 participants were aged 26 – 41 years old,
comprising .42% of the sample). Over half (57.9%) of participants
reported that their father had graduated from college, 19.3% re-
ported that their father had completed some college courses, and
17.0% reported that their father had completed high school. Sim-
ilarly, approximately half (55.7%) reported that their mother had
graduated from college, 22.4% reported that their mother had
completed some college courses, and 18.1% reported that their
mother had completed high school. Regarding parents’ combined
income, 17.4% of participants reported that their parents earned
less than $50,000 per year, 33.3% reported that their parents
earned between $50,000 and $99,999 per year, 31.9% reported
between $100,000 and $200,000 per year, and 15.8% reported that
their parents earned over $200,000 per year.
Procedure
After receiving Institutional Review Board approval, a multistep
participant recruitment plan was used to invite all full-time first-
year students enrolled at a southwestern public university in the
United States during the spring 2008 semester to participate in the
research project. Announcements about the study were made
across campus through flyers, posters, student newspapers, campus
cable TV, and other campus media. First-year students were also
sent a series of e-mails concerning information about the study,
updates about recruitment progress, and a direct link to the study
survey posted online. Finally, student volunteers made presenta-
tions in classes and dorms that housed high percentages of first-
year students.
All participants gave informed consent prior to completing the
15-minute survey about financial behaviors, financial education,
financial socialization, and sociodemographic information; 85.7%
of participants completed the survey online, and the remaining
14.3% completed a paper version of the survey. All participants
who completed the survey were offered a nominal incentive for
 4 RUDI, SERIDO, AND SHIM
their participation: a $10 bookstore gift card for the first 1,000
participants and $5 gift cards for the remaining participants (see
Serido et al. [2010] for further information about the study design).
A total of 2,098 students completed the survey in spring 2008
(Wave 1). At Wave 1, participants answered items pertaining to
their family’s financial well-being, their parents’ financial behav-
iors, and financial parenting “during childhood, while growing up
at home.” We refer to this time period as “Wave 0” for our
measures of financial parenting prior to attending college. Partic-
ipants were invited to complete online surveys at three additional
time points: fall 2010 (Wave 2), summer 2013 (Wave 3), and
summer 2016 (Wave 4). Only data collected at Waves 1, 2, and 3
were included in study analyses, when the variables of interests in
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this study were collected.
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Measures
Implicit financial role modeling. Six items measured at
Waves 1, 2, and 3 asked about the extent to which participants
viewed their parents as positive financial role models (e.g., “When
it comes to managing money, I look to my parent[s] as my role
models”). Six similar items retrospectively measured the extent to
which participants perceived that their parents engaged in respon-
sible financial money management before coming to college while
growing up at home (referred to as Wave 0; e.g., “My parents
tracked monthly expenses”). Items were slightly different to cap-
ture the normal developmental changes in parent and child roles
when children are away at college. Although other cross-sectional
studies have used very similar items to measure implicit financial
role modeling (Shim et al., 2010), this study was the first to use
this combination of items in the context of longitudinal data
analysis, and therefore we parceled the six items to create three
indicators of financial role modeling at each time point (see the
online supplemental materials). Response options ranged from 1 ⫽
Strongly disagree to 5 ⫽ Strongly agree (␣ ⫽ .82–.98 across all
waves).
Explicit financial communication. At Waves 1, 2, and 3,
three items assessed the frequency with which parents had explicit
conversations with the participants about responsible money man-
agement (e.g., “My parent[s] have carefully explained to me how
to establish my credit rating”). Six similar items retrospectively
measured the extent to which the participants’ parents talked with
them about responsible money management before coming to
college while growing up at home (referred to as Wave 0; e.g.,
“My parents discussed family financial matters with me”). As
previously noted, the retrospective items were slightly different to
capture the normal developmental changes in parent and child
roles when children are away at college. Indicators were parceled
to create three indicators of financial communication at Wave 0,
the retrospective reporting of financial communication (see the
online supplemental materials). Response options ranged from 1 ⫽
Strongly disagree to 5 ⫽ Strongly agree (␣ ⫽ .87–.99 across all
waves). Although previous studies have used similar items to
measure explicit financial communication (Friedline, West, Rosell,
Serido, & Shim, 2017; Serido et al., 2010), this study was the first
to use this combination of items as well as the parceling strategy
indicated in the online supplemental materials.
Financial self-efficacy. At Waves 1, 2, and 3, three items
assessed participants’ efficacy when managing their own finances
(e.g., “I feel good about my money management abilities”; Serido
& Joseph, 2014). Response options ranged from 1 ⫽ Strongly
disagree to 5 ⫽ Strongly agree (␣ ⫽ .93–.98 across all waves).
Control variables. Given previous evidence of significant
associations among the constructs, we controlled for gender (male/
female), ethnicity (White, Hispanic/Latino, Asian/Asian American/
Pacific Islander, Native American/other, Black/African American),
first generation (yes/no), and socioeconomic status. Socioeconomic
status was calculated using the Computerized Status Index (CSI)
method (Coleman, 1983). The CSI is a sum of the education levels
of both parents and the parents’ combined income.
Data Analysis Plan
Prior to computing cross-lagged structural equation analyses to
answer our primary research question regarding how financial
parenting and young adults’ financial self-efficacy influence each
other over time, we examined bivariate correlations as well as the
means, standard errors, and skewness of key study constructs (see
Tables 1 and 2) to better understand our data. We also examined
differences in demographic characteristics and in our key study
variables by student loan status (see Table 3), as well as missing
data. Next, we fit a measurement model (also known as confirma-
tory factor analysis) to the data to ensure the reliability and
validity of our measures. Finally, we fit a multigroup (took out
student loans vs. did not take out student loans) structural equation
model examining bidirectional relationships between key study
constructs over time to answer our primary research question.
Because our research interest and our data were intended to ac-
count for developmental stability and change during the transition
to adulthood, our structural equation model included both within
and between associations over time as well as bidirectional effects
between study constructs (see Figure 1).
Results
Preliminary Data Analyses
Although there were no significant differences between the
student loan groups with respect to gender, participants who took
out student loans were more likely to have come from a racial or
ethnic minority background, to be a first-generation college at-
tendee, or to have come from a low- or middle-income background
compared to students who did not take out student loans (see Table
3). We also examined mean differences in financial parenting and
financial self-efficacy by student loan status (see Table 3). Pre-
liminary analyses revealed that participants who did not take out
student loans reported higher levels of financial role modeling
(Cohen’s d ⫽ 0.48, 0.59, 0.69, and 0.74 for Waves 0 –3, respec-
tively), financial communication (Cohen’s d ⫽ 0.19, 0.34, and
0.30 for Waves 0, 2, and 3, respectively), and financial self-
efficacy (Cohen’s d ⫽ 0.44, 0.32, and 0.39 for Waves 1–3,
respectively; p ⬍ .001). Financial communication did not differ at
Wave 1, although the t-statistic was approaching statistical signif-
icance (p ⫽ .08).
Missing data. All 1,650 participants provided full data on key
study constructs at Wave 1. All participants who did not take out
student loans (n ⫽ 800) also provided full data at Wave 2; this is
 FINANCIAL PARENTING AND FINANCIAL SELF-EFFICACY 5

Table 1
Standardized Correlations for Latent Variables for Participants Who Did Not Take Out Student Loans (N ⫽ 800)

Variable 1 2 3 4 5 6 7 8 9 10 11

1. W0 PFM —
2. W1 PFM .56ⴱⴱⴱ —
3. W2 PFM .33ⴱⴱⴱ .59ⴱⴱⴱ —
4. W3 PFM .23ⴱⴱⴱ .41ⴱⴱⴱ .69ⴱⴱⴱ —
5. W0 PFC .56ⴱⴱⴱ .60ⴱⴱⴱ .38ⴱⴱⴱ .28ⴱⴱⴱ —
6. W1 PFC .40ⴱⴱⴱ .61ⴱⴱⴱ .42ⴱⴱⴱ .34ⴱⴱⴱ .73ⴱⴱⴱ —
7. W2 PFC .29ⴱⴱⴱ .45ⴱⴱⴱ .69ⴱⴱⴱ .54ⴱⴱⴱ .52ⴱⴱⴱ .71ⴱⴱⴱ —
8. W3 PFC .21ⴱⴱⴱ .35ⴱⴱⴱ .55ⴱⴱⴱ .70ⴱⴱⴱ .35ⴱⴱⴱ .50ⴱⴱⴱ .70ⴱⴱⴱ —
9. W1 FSE .20ⴱⴱⴱ .23ⴱⴱⴱ .08ⴱ .03 .31ⴱⴱⴱ ⫺.01 .01 ⫺.05 —
10. W2 FSE .10ⴱⴱⴱ .11ⴱⴱ .16ⴱⴱⴱ .09 .17ⴱⴱⴱ ⫺.01 .13ⴱⴱ ⫺.03 .49ⴱⴱⴱ —
11. W3 FSE .05ⴱ .05 .07 .11ⴱ .08ⴱ ⫺.04 .04 ⫺.01 .30ⴱⴱⴱ .60ⴱⴱⴱ —
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M 3.83 3.86 3.92 3.73 3.59 3.12 3.17 2.84 3.73 3.65 3.80
This document is copyrighted by the American Psychological Association or one of its allied publishers.

SE 0.84 0.81 0.92 0.98 0.87 0.96 1.05 0.97 0.80 0.86 0.77
Skewness ⫺0.55 ⫺0.52 ⫺0.92 ⫺0.81 ⫺0.30 ⫺0.08 ⫺0.07 0.14 ⫺0.26 ⫺0.39 ⫺0.47
Note. W0 ⫽ Wave 0; PFM ⫽ parental financial modeling; W1 ⫽ Wave 1; W2 ⫽ Wave 2; W3 ⫽ Wave 3; PFC ⫽ parental financial communication;
FSE ⫽ financial self-efficacy.
ⴱ
p ⬍ .05. ⴱⴱ p ⬍ .01. ⴱⴱⴱ p ⬍ .001.

likely due to subsample selection of only those who provided at
Wave 2 the information on student loan status that was needed to
create the groups for student loan status (yes/no). Over 80%
(80.9%) of participants who took out student loans provided full
data at Wave 2. For Wave 3, 59.3% of those who did not take out
student loans and 54.0% of those who did take out loans provided
full data on all study constructs at Wave 3. Analyses showed that
those who took out loans, first-generation students, and those with
a lower-socioeconomic-status background were more likely to be
missing any data (p ⬍ .05).
Auxiliary variables. Based on recommendations made by
Little (2013), we examined additional auxiliary variables that
might further explain missingness. Auxiliary variables in the data
set associated with missingness were amount of credit card debt
and academic satisfaction at Wave 1. These variables were in-
cluded in the analyses to ensure less biased estimates of missing
data using full information maximum likelihood (FIML) compared
with not imputing missing data (Little, 2013).
Control variables. Given differences in who takes out student
loans, how much, and who is more likely to be more burdened, our
analyses controlled for gender, ethnicity, first-generation status,
and socioeconomic status. This gives us more confidence that
differences in the associations among financial parenting and
financial self-efficacy over time were more likely to be attributed
to debt status and less likely to be attributed to the socioeconomic
factors associated with debt status.
Measurement-Model Results
A measurement model (confirmatory factor analysis [CFA])
was computed using MPlus Version 8 (Muthén & Muthén, 2017)
to assess the unidimensionality, validity, and reliability of the
proposed latent variables (Awang, 2014). Latent variables were
created for financial role modeling, financial self-efficacy, and
financial communication. Each latent variable had three indicators;
some indicators were parceled to ensure that each latent variable

Table 2
Standardized Correlations for Latent Variables for Participants Who Did Take Out Student Loans (N ⫽ 850)

Variable 1 2 3 4 5 6 7 8 9 10 11

1. W0 PFM —
2. W1 PFM .36ⴱⴱⴱ —
3. W2 PFM .26ⴱⴱⴱ .50ⴱⴱⴱ —
4. W3 PFM .18ⴱⴱⴱ .34ⴱⴱⴱ .58ⴱⴱⴱ —
5. W0 PFC .30ⴱⴱⴱ .37ⴱⴱⴱ .29ⴱⴱⴱ .20ⴱⴱⴱ —
6. W1 PFC .25ⴱⴱⴱ .42ⴱⴱⴱ .34ⴱⴱⴱ .25ⴱⴱⴱ .39ⴱⴱⴱ —
7. W2 PFC .23ⴱⴱⴱ .40ⴱⴱⴱ .62ⴱⴱⴱ .44ⴱⴱⴱ .33ⴱⴱⴱ .42ⴱⴱⴱ —
8. W3 PFC .13ⴱⴱⴱ .22ⴱⴱⴱ .32ⴱⴱⴱ .47ⴱⴱⴱ .18ⴱⴱⴱ .25ⴱⴱⴱ .39ⴱⴱⴱ —
9. W1 FSE .11ⴱⴱⴱ .12ⴱⴱⴱ .09ⴱⴱ .06ⴱ .09ⴱⴱⴱ .01 .08ⴱⴱ .04 —
10. W2 FSE .04ⴱ .04 .09ⴱⴱ .04 .04ⴱ .01 .04 .00 .29ⴱⴱⴱ —
11. W3 FSE .00 ⫺.02 ⫺.01 .03 ⫺.01 ⫺.04 ⫺.04 ⫺.01 .17ⴱⴱⴱ .33ⴱⴱⴱ —
M 3.40 3.32 3.21 2.98 3.42 3.03 2.81 2.54 3.35 3.37 3.47
SE 0.96 1.00 1.12 1.04 0.95 1.03 1.05 1.00 0.90 0.88 0.90
Skewness ⫺0.15 ⫺0.32 ⫺0.23 ⫺0.16 ⫺0.34 ⫺0.12 0.12 0.21 ⫺0.28 ⫺0.25 ⫺0.25
Note. W0 ⫽ Wave 0; PFM ⫽ parental financial modeling; W1 ⫽ Wave 1; W2 ⫽ Wave 2; W3 ⫽ Wave 3; PFC ⫽ parental financial communication;
FSE ⫽ financial self-efficacy.
ⴱ
p ⬍ .05. ⴱⴱ p ⬍ .01. ⴱⴱⴱ p ⬍ .001.
 6 RUDI, SERIDO, AND SHIM

Table 3
Sociodemographic Differences by Student Loan Status (N ⫽ 1,650)

No student loans Yes student loans

Sociodemographic characteristic (n ⫽ 800) (%) (n ⫽ 850) (%) ␹2

Gender 1.20
Male 38.4% 35.8%
Female 61.6% 64.2%
Ethnicity 51.17ⴱⴱⴱ
White 73.8% 62.8%
Asian/Asian American 10.8% 7.2%
Hispanic/Latino 10.1% 19.1%
Native American/other 3.3% 6.1%
African American/Black 2.1% 4.8%
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Generation status 62.36ⴱⴱⴱ

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First generation 9.0% 23.4%

Continuing generation 91.0% 76.6%
Socioeconomic status 195.68ⴱⴱⴱ
Low 12.6% 36.7%
Middle 37.4% 44.3%
High 47.1% 19.0%
M (SD) M (SD) t

Implicit parental financial modeling

Wave 0 3.83 (0.84) 3.40 (0.96) 9.69ⴱⴱⴱ
Wave 1 3.86 (0.81) 3.32 (1.00) 12.03ⴱⴱⴱ
Wave 2 3.92 (0.92) 3.21 (1.12) 13.18ⴱⴱⴱ
Wave 3 3.73 (0.98) 2.98 (1.04) 11.30ⴱⴱⴱ
Explicit parental financial
communication
Wave 0 3.59 (0.87) 3.42 (0.95) 3.66ⴱⴱⴱ
Wave 1 3.12 (0.96) 3.03 (1.03) 1.74
Wave 2 3.17 (1.05) 2.81 (1.05) 6.54ⴱⴱⴱ
Wave 3 2.84 (0.97) 2.55 (1.00) 4.52ⴱⴱⴱ
Financial self-efficacy
Wave 1 3.73 (0.79) 3.39 (1.37) 6.32ⴱⴱⴱ
Wave 2 3.65 (0.86) 3.37 (0.88) 6.22ⴱⴱⴱ
Wave 3 3.80 (0.77) 3.47 (0.90) 6.08ⴱⴱⴱ
Note. M ⫽ mean; SD ⫽ standard deviation.
ⴱⴱⴱ
p ⬍ .001.

had only three indicators (see the online supplemental materials).
Parceling should only be incorporated into data analyses if a
clearly defined unidimensional factor structure has been identified
for a measure; for the current study, our definitions of financial
parenting and self-efficacy were focused on specific behaviors and
perceptions and are well suited to parceling (Bandalos & Finney,
2001). Parceling provides many advantages in structural equation
modeling, including maximization of data available, increased
reliability of aggregate scores, and improved model fit (Little,
Cunningham, Shahar, & Widaman, 2002). Parcels were deter-
mined by examining correlated residuals and factor loadings. This
approach maximizes the information provided by participants
while also ensuring that the models are justified (Little, 2013). All
factor loadings were above .48. Acceptable model fit (Little, 2013)
was achieved with a comparative fit index (CFI) of greater than .90
and a root mean square error of approximation (RMSEA) of less
than .08: ␹2(1, 004) ⫽ 2,888.41, p ⬍ .001, RMSEA ⫽ .049, CFI ⫽
.908, Tucker–Lewis index (TLI) ⫽ .889, standardized root mean
residual (SRMR) ⫽ .054.
To determine measurement invariance across the two student
loan groups (i.e., whether the three latent variables operate simi-
larly across the two groups), we computed a series of nested
multigroup models with accompanying chi-square difference tests
as recommended by both Dimitrov (2010) and Little (2013). Given
the positive results of these tests demonstrating no significant
chi-square differences between the nested models (see the online
supplemental materials), we could assume that our key measures
for financial parenting and financial self-efficacy have the same
meaning for young adults who took out student loans and those
who did not. Testing measurement invariance between the two
groups is a prerequisite to then test for structural invariance, which
examines whether the relationships between the constructs over
time are the same for the two groups (Dimitrov, 2010).
Primary Data Analysis
We answered our research question by fitting a multigroup
cross-lagged panel model (CLPM; Kenny, 2005) using MPlus
Version 8. Because factorial invariance was determined both be-
tween groups and over time, differences between the student-loan-
status groups were tested with paths between the latent variables.
We examined the causal pathways linking parental role modeling
 FINANCIAL PARENTING AND FINANCIAL SELF-EFFICACY 7
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This document is copyrighted by the American Psychological Association or one of its allied publishers.

Figure 1. Cross-lagged model for effects of financial modeling and financial communication on financial
self-efficacy over time (N ⫽ 850) with full information maximum likelihood (FIML), ␹2(1, 004) ⫽ 2,396.48,
p ⬍ .001; root mean square error of approximation (RMSEA) ⫽ .041, comparative fit index (CFI) ⫽ .935,
Tucker–Lewis index (TLI) ⫽ .919, standardized root mean residual (SRMR) ⫽ .064. Solid arrows and normal
text depict the model results for young adults who did not take out student loans. Dashed arrows and italicized
text depict the model results for young adults who did take out student loans. ⴱ p ⬍ .05. ⴱⴱⴱ p ⬍ .001.

(implicit financial parenting), parental communication concerning
finances (explicit financial parenting), and financial self-efficacy
over time (see Figure 1) while controlling for gender, race/ethnic-
ity, and socioeconomic status. Implicit financial parenting at Wave
3 was regressed on the same measure of parenting, financial
self-efficacy, and explicit financial parenting at Wave 2, whereas
Wave 3 financial self-efficacy was simultaneously regressed on
implicit financial parenting and explicit financial parenting at
Wave 2, and so forth (see Figure 1). Each modeled causal pathway
was regressed on the three control variables.
The significant chi-square statistic of the model was probably
due to the large sample size (Little, 2013). However, both the
absolute fit indices (SRMR ⬍ .08) and the relative fit indices
(RMSEA ⬍ .06) indicated a very good fit for the multigroup
model (Hu & Bentler, 1999): ␹2(1,004) ⫽ 2396.48, p ⬍ .001;
RMSEA ⫽ .041, CFI ⫽ .935, TLI ⫽ .919, SRMR ⫽ .064 (see
Figure 1). Among participants who had not acquired student loans,
financial communication during childhood while they were grow-
ing up at home (Wave 0) led to higher levels of financial self-
efficacy during the first year of college (Wave 1; ␤ ⫽ .29, p ⬍
.001; see Figure 1). We found a reciprocal relationship between
financial self-efficacy and financial communication during the
period beginning after the senior year of college (Wave 2) and
extending to 2 years after college graduation (Wave 3; ␤ ⫽ ⫺.12,
p ⬍ .05), such that higher levels of financial self-efficacy during
the senior year of college led to less frequent financial communi-
cation 2 years after college. Among those who had not acquired
student loans to pay for an undergraduate education, more frequent
financial communication during childhood (Wave 0) led to greater
perceptions of parents as financial role models during the first year
of college (Wave 1; ␤ ⫽ .41, p ⬍ .001).
Our model revealed a different pattern of interaction between
financial parenting and financial self-efficacy over time among
participants who had acquired loans to pay for an undergraduate
education (see Figure 1). For those who acquired student loans,
parental financial modeling during childhood while they were
growing up at home (Wave 0) led to higher levels of financial
self-efficacy during the first year of college (Wave 1; ␤ ⫽ .14, p ⬍
.001). In turn, participants who reported higher levels of financial
self-efficacy during their first year of college (Wave 1) reported
more frequent parental financial communication during their se-
nior year of college (Wave 2; ␤ ⫽ .09, p ⬍ .05). We found a
bidirectional pattern between financial communication and finan-
cial role modeling from Wave 0 to Wave 1 and from Wave 1 to
Wave 2. Specifically, more frequent financial communication dur-
ing childhood while growing up at home (Wave 0) led to more
frequent financial role modeling during the first year of college
(Wave 1; ␤ ⫽ .41, p ⬍ .001), which then led to more frequent
financial communication during the senior year of college (Wave
2; ␤ ⫽ .16, p ⬍ .05; see Figure 1). It is worth noting that there were
no direct predictors of financial self-efficacy at Wave 2 and Wave
3 other than self-efficacy itself at prior time points; this finding
was true for both borrowers and nonborrowers.
Structural invariance testing was used to examine whether the
pathways, or the relationships between the constructs, were the
same for the two student loan groups. The unconstrained model, as
reported previously, where structural paths were allowed to be
freely estimated for each group, fit the data well, ␹2(1,004) ⫽
2,396.48, p ⬍ .001; RMSEA ⫽ .041, CFI ⫽ .935, TLI ⫽ .919,
SRMR ⫽ .064. The fully constrained model, ␹2(1,064) ⫽ 2477.59,
p ⬍ .001; RMSEA ⫽ .040, CFI ⫽ .934, TLI ⫽ .922, SRMR ⫽
.067, however, was significantly different from the unconstrained
 8 RUDI, SERIDO, AND SHIM
model, ⌬␹2(60) ⫽ 81.11, p ⫽ .04. Using an iterative process and
allowing the path coefficients with the largest differences between
the two student loan groups to be free one by one, we determined
that the pathways between Wave 2 parental financial modeling and
Wave 3 explicit financial communication were significantly dif-
ferent between the two student loan groups (␤ ⫽ .15, p ⫽ .10 for
young adults who did not take out student loans, whereas
␤ ⫽ ⫺.13, p ⫽ .30 for young adults who did take out student
loans). However, these associations were not significant in and of
themselves. We also determined that the pathways between Wave
0 explicit financial communication and Wave 1 financial self-
efficacy were significantly different between the two student loan
groups (␤ ⫽ .29, p ⬍ .001 for young adults who did not take out
This article is intended solely for the personal use of the individual user and is not to be disseminated broadly.
student loans, and ␤ ⫽ .08, p ⫽ .15, for young adults who did take
This document is copyrighted by the American Psychological Association or one of its allied publishers.
out student loans). After allowing these two pathways to be freely
estimated, there was no statistically significant chi-square differ-
ence between the model fit for the two student loan groups.
Discussion and Implications
The normative shift from parent-regulated to self-regulated re-
sponsibility for adult roles and financial obligations has histori-
cally been easier for emerging adults with college degrees (Zarrett
& Eccles, 2006). Today, with so many college graduates relying on
their parents for continued financial support (Fingerman et al.,
2015, 2016), we considered how parent– child financial interac-
tions prepared young adult children for the financial responsibili-
ties of college. Because the number of graduates burdened by
student loan debt has increased dramatically (Federal Reserve
Bank of New York, Center for Microeconomic Data, 2019), we
further considered if the associations differed by student loan
status.
Relying on longitudinal data over a 5-year period, we examined
the bidirectional pathways between financial parenting (i.e.,
implicit financial role modeling and explicit financial commu-
nication) and financial self-efficacy for each group (student loan
borrowers and nonborrowers) and found unique differences de-
pending on student loan status. For participants who did not take
out student loans, more frequent explicit financial parenting prior
to attending college was associated with higher financial self-
efficacy during the first year of college, and more financial self-
efficacy during the fourth year of college led to less frequent
explicit parental communication about finances after college. In
contrast, for participants who did take out student loans, implicit
financial parenting prior to college led to higher levels of financial
self-efficacy during the first year of college, and more financial
self-efficacy during the first year of college led to more frequent
explicit parental communication about finances during the fourth
year of college. Because we controlled for sociodemographic
factors known to be associated with borrowing for education (i.e.,
gender, ethnicity, and socioeconomic status), we propose that a
debt-financed education may play a unique role over time in
influencing the causal pathways between financial parenting and
young adults’ financial self-efficacy.
Unidirectional Pathways: When Financial Parenting
Promotes Financial Self-Efficacy
For nonborrowing young adults, we found a unidirectional path-
way from explicit financial parenting to young adult children’s
financial self-efficacy, suggesting a proactive effect. In other
words, when parents initiated explicit conversations about finances
during childhood, such as discussing the importance of establish-
ing credit and the benefits of budgeting and saving for the long-
term, this led to greater levels of young adults’ confidence during
the first year of college in dealing with their own financial matters.
We would expect to observe this pattern linking parents’ emphasis
on self-regulation and financial skills while their children are
living at home so that when they become young adults, they are
prepared to make their own financial decisions independently,
such as paying bills and saving (Jorgensen & Savla, 2010). Per-
haps in the context of a non-debt-financed college education,
parents’ explicit communication about financial topics has a
greater positive impact on financial self-efficacy early in college
because they emphasize self-regulation in managing finances.
We found an alternate unidirectional pathway for young adults
who were burdened by student loans; for these participants, per-
ceptions of parents as positive financial role models during child-
hood led to more confidence in the students’ ability to manage
finances early on in college. The explicit behaviors measured in
our study covered routine daily financial transactions, such as
managing current resources, rather than debt-management behav-
iors (e.g., ensuring that a large sum of borrowed money lasts for an
entire semester or school year). The greater impact of implicit
behaviors may reflect young adults’ remembered observations of
parents’ planning ahead for future expenses (e.g., annual auto
insurance) or repaying a mortgage. Perhaps observing parents’
responsible financial management behaviors instills a sense of
empowerment and confidence in young adults that they, too, can
manage their finances well despite taking on student loans.
For both borrowers and nonborrowers, participants who re-
ported that their parents explicitly talked with them about the
importance of saving and budgeting during childhood tended to
view their parents as financial role models during their first year of
college. Perhaps young adults, regardless of loan status, view their
parents as more credible sources of financial information because
parents had initiated conversations about money prior to college. If
so, then it would seem wise to inform parents that discussing
finances earlier in life can establish credibility that will persist as
children transition to adulthood.
Our findings suggest that for both borrowers and nonborrowers,
early parenting during childhood prior to attending college sets
young adults on a trajectory of increasing financial self-efficacy
over time. Direct effects of parenting on financial self-efficacy
were only found from Wave 0 to Wave 1, suggesting that if parents
wish to influence their young adults’ financial self-efficacy, the
time to do so is before college starts, regardless of whether it is
through implicit or explicit parenting. This is not surprising, given
that parents’ waning influence over time is developmentally ap-
propriate (Erickson, 1968; Tanner, 2006). By young adulthood,
children have been incorporating their parents’ values or teachings
into their personal experiences. Our findings add to research dem-
onstrating that parental financial socialization serves as the foun-
dation for the development of financial well-being (Curran, Par-
rott, Ahn, Serido, & Shim, 2018). Our results revealed financial
self-efficacy to be particularly stable over time—perhaps estab-
lishing financial self-efficacy early on provides a strong self-
regulatory foundation for maintaining responsible financial behav-
ior throughout the college years and during the transition to work.
 FINANCIAL PARENTING AND FINANCIAL SELF-EFFICACY
Bidirectional Pathways: When Financial Self-Efficacy
Elicits Financial Parenting
We found evidence of reactive parenting, or bidirectional path-
ways, for both borrowers and nonborrowers but at different times
and in different directions: For nonborrowers, higher financial
self-efficacy toward the end of their college career led to less
frequent explicit financial parenting after college. In other words,
young adult children who were more confident in managing the
routine financial decisions of college tended not to discuss these
and other financial matters with their parents after graduation. A
bidirectional effect, however, in the opposite direction, was re-
ported earlier for borrowers: Borrowers who had more financial
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self-efficacy in the year of college reported more frequent com-
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munication with their parents about finances during the senior year
of college, prior to graduation. Perhaps young adults who take out
student loans and feel more confident, or more like an adult, in
their ability to manage their finances are more likely to discuss
financial matters with their parents prior to graduation. It could be
that some young adults who have incurred student loan debt have
figured out that additional financial considerations and planning
are needed prior to graduation and are reaching out to parents in
preparation for postgraduate jobs and financial transitions.
Compared with nonborrowing young adults, discussions of ba-
sic financial concepts, such as budgeting and saving, may not be
enough to support the development of financial self-efficacy for
young adults who borrowed money to pay for college. More
explicit communication and education about higher finance, in-
cluding lending practices and borrowing, may be needed to en-
hance the novice borrowers’ ability and confidence regarding
managing their finances. Ultimately, the bidirectional effects
found in our study extend previous research findings demonstrat-
ing children’s impact on parenting processes (Kuczynski, 2003) to
the financial domain.
Type of Parenting Matters in Different Contexts
According to family financial socialization theory (Gudmunson
& Danes, 2011), role modeling contributes significantly to the
development of financial behaviors, knowledge, and attitudes.
Indeed, the extant literature demonstrates a positive association
between parental financial role modeling and young adults’
healthy financial behaviors (e.g., Serido et al., 2010). Yet, we only
found an association between financial role modeling (implicit)
and financial self-efficacy over time for the borrowers in our
sample. As previously mentioned, perhaps viewing parents as
positive financial role models empowers young adults with student
loan debt to believe that they can succeed financially despite their
loan debt, whereas for nonborrowers, explicit financial communi-
cation is more salient.
Explicit financial parenting played a significant, albeit different,
role for nonborrowers and borrowers. Nonborrowers seemed to
benefit from early financial communication with parents. Our
measure of explicit parenting focused on the routine financial
responsibilities of living apart from the family, rather than on the
more complex responsibilities associated with debt financing of
education or managing large sums of money all at once (e.g.,
financial aid lasting the full semester). Parents may be preparing
young adult children for the assumed, or “typical,” home-to-
9
college-to-adulthood transitions: Parents teach basic financial con-
cepts; children obtain training or education, get a job, and success-
fully launch into a financially independent adulthood.
Our findings suggest that young adults without loans may ben-
efit from parents talking early about the importance of healthy
financial behaviors. At appropriate times, parents could include
more complex financial topics in their discussions, such as college
costs and financial aid options. For borrowers, parents’ own re-
sponsible financial behavior served as an important model. Family
financial counseling during the college-search process could pro-
vide key opportunities for discussing more complex financial
topics, such as actual college costs and the implications of finan-
cial aid options. Given the association demonstrating financial
self-efficacy leading to explicit financial communication with par-
ents for those who did not take out student loans, it is important for
parents to remain open and prepared to discuss financial matters
with their young adult children. Ultimately, our findings suggest
that although the nature of the parent– child relationship changes
during this important life transition, parents should continue to be
involved in the development of their children’s financial well-
being after high school.
Limitations and Future Research Directions
Although our study overcomes many limitations qualifying the
conclusions reached by previous researchers who sought to under-
stand links between financial socialization and young adults’ fi-
nancial well-being, it does not overcome several that should be
noted. APLUS utilized a single-report design that did not include
the perspectives of other family members; therefore, we could not
develop a more accurate picture of the financial socialization
occurring within families. Future research seeking to verify our
results should strive to obtain information from multiple infor-
mants (i.e., parents and siblings). Wave 0 (during childhood while
growing up at home) and Wave 1 data were collected at the same
time; although we controlled for the correlations between latent
constructs within waves to account for shared variance, it is
possible that the associations between Wave 0 and Wave 1 are
conflated. Because data were collected from college students at a
single university located in one geographic region of the United
States, our findings should not be considered representative of all
college students’ experiences. Because participants in our study
started college prior to the 2008 financial crisis, many of the
participants in our sample (74%) took more than 4 years to
graduate from college. Consequently, we included participants
who took out student loans later in their college career (reported
owing undergraduate student loans at Wave 3 but not at Wave 1 or
Wave 2), in the “yes” student loans group. Although the percent-
age is rather small (4% of the entire sample, 7% of those in the
student loan group), it is possible that these young adults had a
different experience regarding student loan debt than those who
incurred debt at the beginning of their college career. We reran our
model excluding those participants, and the pattern of results did
not change. Nevertheless, future research could distinguish be-
tween the various times at which young adults take on student
loans (begin college with loans vs. incur loan debt later in college
career).
Future research should seek to capture the experiences of a more
diverse sample of young adults by including participants drawn
 10 RUDI, SERIDO, AND SHIM
from multiple geographic regions, as well as examine differences
by type of higher education institution (public vs. private, secular
vs. religiously affiliated, commuter vs. residential, 2 years vs. 4
years). Future research could also examine interactions between
different types of financial parenting and its associations with
financial self-efficacy. For example, implicit financial modeling
may positively affect self-efficacy in situations where parents do
not frequently discuss finances with their young adult children.
Despite these limitations, we contend that the findings are still
meaningful given the strength of the study design: Information was
collected from participants at regular intervals across a long period
of time, and the same measures were used at each wave. A
measure of financial socialization that occurred prior to college
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was also included, thereby overcoming a key limitation restricting
This document is copyrighted by the American Psychological Association or one of its allied publishers.
the scope of previous research. Our sample was relatively diverse
with regard to socioeconomic background, first-generation status
and ethnic makeup.
Conclusion
Our findings provide insights that will help future researchers
studying continued parental involvement during the transition to
adulthood. The findings could be used to inform parent education
programs designed to help parents prepare late-adolescent children
to better manage finances in a climate of increasingly complex
financial uncertainty. By helping young adult children develop
their financial self-efficacy, parents can support young adult chil-
dren’s financial well-being and overall self-sufficiency during the
college-to-career transition. The college years may be important
for continuing financial dialogue between parents and emerging
adult children about the changing financial obligations and respon-
sibilities of new social roles during the transition to adulthood.
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Received April 3, 2019
Revision received February 18, 2020
Accepted February 23, 2020 䡲