The moderating effect of parental income on parental financial discussions and financial literacy is increasingly becoming important. The objective of this study was to determine whether the relationship between parental financial discussions of young adults and their financial literacy is moderated by parental income.
This study adopted quantitative research approach and used self-administered questionnaire to collect data from young adults in South Africa. Financial literacy was measured through financial knowledge, financial behaviour, financial attitudes and financial decision-making. Moderated regression analysis was used to analyse data.
The results showed that parental income moderated the relationship of parental financial discussions with financial knowledge, financial behaviour and financial attitude. Furthermore, the results indicated that parental income did not moderate the relationship of parental financial discussions and financial decision-making. Therefore, the overall results indicated that the relationship between parental financial discussions and financial literacy is moderated by parental income.
Parental income is important in parental financial discussions and financial literacy and it must be understood better so that it does not hinder financial discussions between parents and children. The government of South Africa must come up with initiatives to address and improve parental income.
This study contributes to the existing body of knowledge by empirically testing whether the relationship between parental financial discussions of young adults and their financial literacy is moderated by parental income. There is no study that has been conducted before in South Africa.
The peer review history for this article is available at https://publons.com/publon/10.1108/IJSE-07-2024-0622
1. Introduction
Parenting income is gaining significance in conversations about parenting finances and financial literacy. Parental income is a significant socio-economic component that exists within the social milieu in which children grow up. It has a crucial role in shaping the child’s financial socialisation (Sherraden, 2013; Serido et al., 2020). Batten (2015) suggests that parents from various social classes and economic brackets tend to impart financial knowledge to their children in distinct ways. Research suggests that parental wealth influences the occurrence and outcome of financial discussions amongst parents, either impeding or facilitating such conversations (Ameliawati and Setiyani, 2018; Alshebami and Aldhyani, 2022). Furthermore, there is empirical data suggesting that discussions about finances between parents and children have a favourable impact on the development of financial literacy of their children (Kim and Torquati, 2019; Fulk and White, 2018; Ndou and Ngwenya, 2022a). Nevertheless, Ndou and Ngwenya (2022b) discovered that there was no noteworthy beneficial correlation between parental financial discussions and financial attitude. Therefore, there are conflicting outcomes regarding parental financial discussions and financial literacy that necessitate additional research. However, the present study does not consider these conflicting outcomes and instead focusses on the ongoing vacuum in data regarding whether parental income can influence the connection between parental financial discussions and financial literacy. There is a dearth of studies undertaken in this field. In a study conducted by Ndou (2023a), the researcher examined whether the association between parental financial communication and financial literacy is influenced by parental income. In their study, Ndou (2023b) examined how parental socio-economic position influences the connection between parental financial teaching and financial literacy of children. Several other studies have examined related topics, including gender, educational background, self-control, saving behaviour and the impact of social learning on self-reported financial literacy, financial services usage and financial literacy (Siegfried and Wuttke, 2021; Agabalinda and Isoh, 2020). However, these studies did not specifically examine the impact of parental income, family financial conversations and the moderating effects of financial literacy. Hence, this study is one of the initial attempts to examine how parental income influences the connection between parental financial discussions and financial literacy. Investigating this relationship is crucial because if it is proven that the moderating effect exists, greater emphasis must be placed on improving parental income and financial discussions to enhance the financial literacy of young adults. This study aims to investigate how parental income influences the connection between parental financial discussions and the financial literacy of young adults in South Africa.
The remainder of this article is structured as follows: Sections 2 provides literature review. Section 3 explores research and methodology of the study. Section 4 covers results and discussions of the study. Section 5 provides conclusions.
2. Literature review
2.1 Social cognitive theory
Bandura (1986) developed social cognitive theory, which encompasses social interactions, cognitions and sociocultural viewpoints. Personal factors primarily encompass demographic variables such as gender, race, age and education. Social cognitive theory is substantiated in studies on socialisation. Wiese and Kruger (2016) investigated the impact of parents on the consumer and purchasing behaviour of Generation Y, using the framework of social cognitive theory. The researchers determined that there is a direct correlation between the influence of parental role models and the consumer behaviour of parents, resulting in favourable effects on the purchasing behaviour of their children. Social cognitive theory is used in this study to explain the moderating effects of parental income on the relationship between parental financial discussions and financial literacy. Moreover, this theory allows for children to learn finances which are discussed at their homes by parents to enhance their financial literacy. Parental income might affect the effectiveness of financial discussions by influencing the context in which financial behaviours are viewed and acquired. Affluent parents typically possess enhanced access to financial resources and opportunities, enabling them to exemplify effective financial practices such as budgeting, investing and saving. This modelling offers youngsters tangible models to imitate, so improving their financial literacy and self-efficacy. In contrast, parents with lower incomes may have financial pressures that hinder their capacity to implement healthy financial habits, thereby diminishing the quality of financial discussions and modelling accessible to their children. Consequently, based on social cognitive theory, parental income indirectly impacts children’s financial behaviours by shaping the quality and substance of financial socialisation inside the home (Agnew and Sotardi, 2024). Parental income moderates financial socialisation through several key mechanisms. Higher-income parents often provide direct financial support, such as funding education or housing, which can significantly influence their children’s financial independence and opportunities. Therefore, parental income plays a pivotal role in shaping the quality and effectiveness of financial socialisation within families.
2.2 Permanent income hypothesis
Modigliani and Brumberg (1954) proposed the life-cycle concept of saving as an expansion of the permanent income hypothesis. The life-cycle theory posits that individuals want to maintain a reasonably consistent level of consumption throughout their lifespan. This pattern is found when younger individuals borrow money to fulfil their consumption requirements, middle-aged individuals save a significant amount of their income and older individuals gradually deplete their assets as their retirement income decreases. According to a stringent interpretation of the life-cycle hypothesis, individuals will exhaust all of their assets prior to their death. The objective is to preserve assets in order to cover unforeseen rises in both life expectancy and medical costs (DeVaney, 2016). Lusardi and Mitchell (2014) established a life cycle saving model that specifically examines the significance of financial literacy. This approach suggests that financial literacy is determined from within and changes as individuals age. Therefore, consumers allocate their resources towards acquiring financial knowledge until the additional time and money they spend on it is balanced by the additional benefits they receive. The permanent income hypothesis theory is adopted for this study as it explains the relationship between income levels and financial discussions and financial literacy. Moreover, parental income variable is measured by this theory as it has the potential to influence and moderate the relationship between parental financial discussions and financial literacy. Within this theory, parental income can substantially impact financial discussions amongst families. Parents with elevated permanent earnings are more inclined to participate in thorough financial planning and conversations, as their steady financial perspective fosters long-term thinking and investment plans.
2.3 Financial literacy
Various studies have provided different definitions for financial. The OECD provides a more comprehensive conceptual definition of financial literacy. According to the OECD, financial literacy encompasses awareness, knowledge, skills, attitudes and behaviours that are essential for making sound financial decisions, ultimately leading to financial security and active participation in the economy (OECD, 2017). Acquiring financial literacy is a lengthy and intricate process that necessitates a blend of financial information, skills and attitude. Financial literacy is considered an essential attribute for individuals to make optimal decisions (Rehman and Mia, 2024). Improved financial literacy leads to better budgeting practices (Anusha et al., 2025). This study assessed financial literacy by evaluating individuals’ level of financial knowledge, their financial behaviour, their financial attitude and their ability to make sound financial decisions. Financial decision-making was included as the component and a measurement of financial literacy for this study because it is an essential aspect of financial literacy, since it enables individuals to make informed choices regarding saving, spending, investing and borrowing. Strong decision-making abilities enable individuals to assess risks, analyse financial alternatives and establish long-term financial objectives, resulting in enhanced financial stability. Integrating financial decision-making into financial literacy components equips individuals with the confidence and expertise to manage intricate financial circumstances and attain financial stability.
Financial knowledge is a crucial aspect of financial literacy. Proficient persons can easily analyse financial information related to mutual funds, since there is readily available initial classification to facilitate the processing of the information (Ramalho and Forte, 2019). In their study, Mitchell and Lusardi (2015) discovered that a significant portion of wealth inequality, specifically one-third, can be attributed to a disparity in financial understanding. Moreover, there is a correlation between a lack of financial understanding and an increased inclination to participate in precarious financial behaviours amongst college students. Robb and Woodyard (2011) demonstrate that differences in financial habits can be attributed to varying levels of financial understanding. These studies assessed financial knowledge from a subjective point of view rather than the objective point of view. There is a greater need for more studies which must be conducted on assessing objective financial knowledge.
Financial behaviour refers to the way in which individuals handle their money (Xiao, 2008). It is the primary factor in forecasting financial well-being (Rahman et al., 2021). It can be categorised as either good or undesirable, and it refers to the way individuals save and spend their money. Research has discovered that engaging in favourable financial behaviours is linked to achieving positive financial results. According to a study conducted by Fan and Park (2021), there is a direct correlation between the financial management behaviour of young adults and their financial well-being. Having a positive financial attitude is crucial for exhibiting good financial behaviour, which ultimately enables effective management of personal resources. The financial attitude of individuals has a direct impact on their money management conduct, as stated by Ameliawati and Setiyani (2018). Young individuals can exhibit either favourable or unfavourable views regarding their present financial circumstances, money and credit. Research has shown that maintaining a positive attitude towards one’s financial condition is associated with improved financial outcomes. This is because individuals are more motivated to take action and adopt a positive approach towards managing their money. The presence of a pessimistic mindset towards finances is linked to inadequate financial management conduct (Robb and Woodyard, 2011).
Financial decision-making is a crucial component of financial literacy and the attainment of financial well-being. Financial decision-making is influenced by an individual’s locus of control, which refers to their impression of how much control they have over events in their life. This perception is shaped by both external factors and internal beliefs (Grable et al., 2009). Financial decision-making includes the allocation of funds, investment choices, utilisation of financial products, risk appetite and ultimately decides the potential return on investment. These behaviours, thus, result in variations in individuals’ wealth (Xu and Yao, 2022).
The findings of the literature review on variables of financial literacy, indicate that there is an existing gap that must be filled by researchers, more studies must be conducted on financial literacy especially linking it with parental financial discussions and parental income. Moreover, studies on the moderating effect of parental income on the relationship between parental financial discussions and financial literacy in literature is lacking. The current study is amongst the first to investigate this issue.
2.4 Parental financial discussions
Parental financial discussion refers to the practice of parents engaging in open and transparent conversations with their children about financial concerns, while also considering and valuing their children’s input (Agnew and Sotardi, 2024; Kim and Torquati, 2019). The process is not unidirectional; children are not solely seen as recipients of financial knowledge, but they can also provide guidance to their parents, and the parents actively involve the children in significant financial choices. Webley and Nyhus (2006) argue that engaging in explicit financial discussions with children directly influences their future financial behaviour. Engaging in financial discussions with children can influence their spending habits and attitudes. These discussions allow parents to directly talk about themes such as purchase decisions, money, credit and related matters (Allen, 2008; Agnew, 2018). Agnew et al. (2018) found that increased frequency of parent–child discussions regarding financial problems is associated with more favourable financial views.
2.5 Parental income
Parental income is a significant determinant in the process of teaching children about financial matters. Gudmunson and Danes (2011) argue that parents’ income is crucial in enabling them to cultivate favourable financial behaviours in their children, ultimately resulting in improved financial outcomes during maturity. Serido et al. (2010) contend that parental income significantly influences parent–child financial interactions, which subsequently affect the development of their financial coping strategies. According to Ekstrom et al. (1987), parents with a high income are more likely to engage in reciprocal financial socialisation. This is because these parents are more open to their children’s perspectives, allowing the children to have a bigger impact on the family’s financial decision-making. In a study conducted by Furnham (1999), it was discovered that children from families with greater incomes tend to have higher saving rates. Arikan (1991) suggested that parents with a high income may be more likely to engage in luxury consumption as a means of displaying their wealth and attaining a higher social standing within their group. These parents choose to squander their extra income rather than save it. There are few notable studies that used parental income as a moderating variable between parental financial discussions and financial literacy.
3. Methodology
This study employed a quantitative research methodology. Data were collected using self-administered Likert-type scale questionnaires. The questionnaire was specifically created to achieve the study’s purpose and was chosen because of its ease of standardisation (Bhandarkar and Wilkinson, 2010). This questionnaire was designed in line with the objectives of the study and the measures were adopted from previous studies. These questionnaires were validated from those studies but further validation was done by conducting a pilot study. In addition, questionnaires were distributed to academics and professionals in financial socialisation and financial literacy to assess whether the measurements adequately encompass the various aspects that constitute the notion. Their contributions were evaluated, and if necessary, the questionnaire was modified to assure its readiness for data collection.
The target population for this study comprises young individuals in South Africa aged between 18 and 35, as this demographic group is characterised by financial vulnerability. The study’s sample size consists of 500 young adults, determined using Yamane’s (1967) formula. This sample size is representative of the population and allows for the results of this study to be generalised. This is also supported by the sampling methods adopted for this study. The study employed simple random sampling to ensure that all young adults in every province of South Africa had an equal opportunity to be selected for the sample (Babbie, 2013). South Africa is divided into nine provinces. To determine the order in which they were picked, the names of the provinces were written on separate pieces of paper, folded, placed in a box, and then drawn one by one. The province that was selected initially was visited first, followed by the subsequent provinces until the desired sample size was achieved. A cohort of young adults was surveyed at their residences over a three-month period, primarily on weekends, to ensure the availability and accessibility of those who were attending university and reside at home or working, this was done to ensure that the response rate is high. This approach has some limitations, one major concern is selective availability, as people who are home on weekends may not reflect the general population; working young adults, for instance, are often absent during this time, leading to an overrepresentation of stay-at-home young adults. Additionally, socioeconomic status can play a role, as those who can afford to be home may come from higher-income backgrounds, while lower-income individuals are more likely to work on weekends or have less flexible schedules. This approach can lead to undercoverage bias, where certain groups are underrepresented, potentially skewing the study’s findings. 500 questionnaires were distributed to young adults. There were 472 young black African adults who participated in the questionnaire, resulting in a response rate of 94%.
This study addressed the concerns regarding the validity and dependability. Construct validity was assessed by doing a Kaiser-Meyer-Olkin (KMO) test and Bartlett’s test of sphericity to determine the validity. A KMO rating of 0.50 or higher is considered acceptable. Bartlett’s test of sphericity is considered significant when the p-value is less than 0.05. According to Hair et al. (2014), factor loadings between ±0.30 and ±0 .40 are deemed minimally acceptable, but values greater than ±0.50 are often considered necessary for practical significance. This study only considered factor loadings with a minimum value of 0.30 for interpretation. To enhance construct validity further, study constructs were clearly defined ensuring that they are distinct and based on established theories. Additionally, representative measurement instruments that accurately reflect these constructs were developed. The reliability of the data was assessed using Cronbach’s alpha. A reliability score of 0.60 or higher was deemed acceptable and indicative of data reliability (Cohen et al., 2018).
Data analysis for this study involved the use of descriptive statistics and moderated regression analysis.
3.1 Conceptual model and hypotheses
This study adopted the social cognitive theory by Bandura (1986) and permanent income hypothesis by Friedman (1957) to develop the conceptual model and hypotheses. Figure 1 indicates the conceptual model and hypotheses of the study.
The conceptual model shows three variables on top from left to right as follows: “Independent variable,” “Moderating Variable,” and “Dependent variables.” Below, a text “Parental Financial discussions” is present representing “Independent variable.” A right-pointing horizontal arrow from the text “Parental Financial discussions” branches into four labeled arrows and leads to four text boxes on the far right, arranged in a vertical series labeled from top to bottom as follows: “Financial knowledge,” “Financial behaviour,” “Financial attitude,” and “Financial decision-making.” The arrow labeled “H 1” points to “Financial knowledge.” The arrow labeled “H 2” points to “Financial behaviour.” The arrow labeled “H 3” points to “Financial attitude.” The arrow labeled “H 4” points to “Financial decision-making.” Above these four boxes is another text box labeled “Financial Literacy.” These five text boxes represent “Dependent variables.” The central horizontal arrow is influenced by a downward arrow from a text box labeled “Parental Income,” representing the “Moderating Variable.”Conceptual model of the study. Source: Authors’ own work
The conceptual model shows three variables on top from left to right as follows: “Independent variable,” “Moderating Variable,” and “Dependent variables.” Below, a text “Parental Financial discussions” is present representing “Independent variable.” A right-pointing horizontal arrow from the text “Parental Financial discussions” branches into four labeled arrows and leads to four text boxes on the far right, arranged in a vertical series labeled from top to bottom as follows: “Financial knowledge,” “Financial behaviour,” “Financial attitude,” and “Financial decision-making.” The arrow labeled “H 1” points to “Financial knowledge.” The arrow labeled “H 2” points to “Financial behaviour.” The arrow labeled “H 3” points to “Financial attitude.” The arrow labeled “H 4” points to “Financial decision-making.” Above these four boxes is another text box labeled “Financial Literacy.” These five text boxes represent “Dependent variables.” The central horizontal arrow is influenced by a downward arrow from a text box labeled “Parental Income,” representing the “Moderating Variable.”Conceptual model of the study. Source: Authors’ own work
As depicted in Figure 1 the following hypotheses were developed:
The relationship between parental financial discussions and financial knowledge of young adults is moderated by parental income.
The relationship between parental financial discussions and financial behaviour of young adults is moderated by parental income.
The relationship between parental financial discussions and financial attitude young adults is moderated by parental income.
The relationship between parental financial discussions and financial decision-making of young adults is moderated by parental income.
4. Results and discussions
4.1 Reliability and validity
In this study, the adequacy of the data for conducting exploratory factor analysis (EFA) was assessed using the Kaiser-Meyer-Olkin (KMO) measure and Bartlett’s test of sphericity. Table 1 displays the outcomes of the KMO and Bartlett’s test of sphericity.
KMO and Bartlett’s test
| Factors | Kaiser-Meyer-Olkin measure of sampling adequacy (KMO) | Bartlett’s test of sphericity | ||
|---|---|---|---|---|
| Chi-square | df | Sig. | ||
| Financial knowledge | 0.823 | 756.656 | 9 | 0.000 |
| Financial behaviour | 0.764 | 4412.543 | 33 | 0.000 |
| Financial attitude | 0.674 | 429.867 | 16 | 0.000 |
| Financial decision-making | 0.978 | 2646.656 | 17 | 0.000 |
| Parental financial discussions | 0.688 | 352.687 | 12 | 0.000 |
The KMO values for all parameters in Table 1 ranged from 0.674 to 0.978, all of which were above the threshold of 0.60. The p-value of the Bartlett’s test for all factors (p = 0.000) is less than 0.05, indicating statistical significance. This outcome suggests that the correlation structure of the construct is sufficient for doing a component analysis on the items, and that all factors are considered to be valid and trustworthy. Consequently, EFA can be carried out.
Table 2 presents the outcomes of the EFA, including the reliability measured by Cronbach’s alphas, as well as descriptive statistics for the constructs and components examined in the study.
Validity, reliability and descriptive statistics results
| Factors | EFA factor loadings | CA | Descriptive statistics | |||
|---|---|---|---|---|---|---|
| Variables | Items | Highest | Lowest | α | μ | SD |
| Financial knowledge | 7 | 0.965o | 0.546 | 0.946 | 3.46 | 1.24 |
| Financial behaviour | 5 | 0.846 | 0.334 | 0.860 | 3.14 | 1.17 |
| Financial attitude | 6 | 0.836 | 0.655 | 0.923 | 3.13 | 1.26 |
| Financial decision-making | 8 | 0.934 | 0.678 | 0.945 | 3.90 | 1.39 |
| Parental financial discussions | 6 | 0.756 | 0.466 | 0.846 | 3.36 | 1.31 |
Table 2 shows that the EFA identified five factors and all items were successfully assigned to the expected factors with loadings over 0.30. The factor loadings range from 0.334 to 0.965 overall. The Cronbach’s alpha coefficients was above 0.6, indicating their acceptability and reliability. The descriptive statistics included the measures of central tendency (means) and variability (standard deviation). In terms of the averages, most participants concurred with the assessments of their financial knowledge (3.46), financial attitude (3.13), financial behaviour (3.14), parental financial discussions (3.36) and financial decision-making (3.90). The standard deviations of all components are elevated, indicating significant variability in the respondents’ responses. Financial decision-making exhibited the highest standard deviation of 1.39, indicating that the responses differed significantly with regards to the statements related to this aspect. Consequently, the data were prepared and poised for subsequent study. Therefore, the moderated regression analysis can be conducted.
4.2 Moderated regression analysis
Table 3 presents the findings from the moderated regression analysis investigating the impact of parental financial discussions and parental income on the various aspects of financial literacy, including financial knowledge, financial behaviour, financial attitude and financial decision-making.
Moderated regression analysis: effects of parental financial discussions and parental income on financial knowledge, financial behaviour, financial attitude and financial decision-making
| Factors | Financial knowledge | Financial behaviour | Financial attitude | Financial decision- making |
|---|---|---|---|---|
| β | β | β | β | |
| Parental financial discussions | 0.422* | 0.500* | 0.431* | 0.061 |
| Parental income level | 0.934* | 0.946* | 0.906* | 0.811* |
| Parental financial discussions × Parental income level | −0.371* | −0.362* | −0.318* | 0.036 |
| R | 0.727* | 0.757* | 0.601* | 0.425* |
| 0.528* | 0.573* | 0.362* | 0.181* | |
| F | 87.34* | 89.80* | 38.17* | 16.80* |
Note(s): * significant at p ≤ 0.05; X indicates interaction
Regarding the primary outcomes, parental financial discussions were found to be a strong predictor of financial knowledge (β = 0.422; p ≤ 0.05), financial behaviour (β = 0.500; p ≤ 0.05) and financial attitude (β = 0.431; p ≤ 0.05). This meant that parental financial discussions have a strong, direct and significant effect on financial knowledge, financial behaviour and financial attitude. Moreover, this showed that there is a medium effect size of parental financial discussions on financial knowledge and financial attitude. Additionally, the results showed that there is a large effect size of parental financial discussions on financial behaviour. Nevertheless, discussions about finances between parents did not have a significant impact on financial decision-making (β = 0.061; p > 0.05). However, parental income did predict financial knowledge, financial behaviour, financial attitude and financial decision-making. Regarding the interaction effects, the relationship between parental financial discussions and financial knowledge, financial behaviour and financial attitude was significantly influenced by parental income. The beta coefficients for financial knowledge, financial behaviour and financial attitude were −0.371, −0.362, and −0.318 respectively, all with p-values less than or equal to 0.05. The R-squared values were 0.528, 0.573 and 0.362, respectively, and the F-values were 87.34, 89.80 and 38.17, respectively. Nevertheless, the income of the parents did not have a significant impact on the association between discussions about finances and making financial decisions. The beta coefficient was 0.036, the p-value was more than 0.05, the R-squared value was 0.181 and the F-value was 16.80. In addition, the impact on financial knowledge, financial behaviour and financial attitude was minimal.
The interactions were assessed using a straightforward slope test and by visually representing the moderator’s value at the average, as well as one standard deviation above and below the average. Figures 2–4 illustrate the correlation between parental income, parental financial conversations and financial knowledge, financial behaviour and financial attitude.
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial knowledge” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is a solid line, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.43) and increases slightly to end at (High Parental financial discussion, 3.26). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.13) and increases to end at (High Parental financial discussion, 4.65). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial knowledge. Source: Authors’ own work
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial knowledge” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is a solid line, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.43) and increases slightly to end at (High Parental financial discussion, 3.26). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.13) and increases to end at (High Parental financial discussion, 4.65). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial knowledge. Source: Authors’ own work
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial behaviour” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is solid, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.19) and increases to end at (High Parental financial discussion, 3.26). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.52) and rises slightly to end at (High Parental financial discussion, 3.77). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial behaviour. Source: Authors’ own work
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial behaviour” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is solid, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.19) and increases to end at (High Parental financial discussion, 3.26). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.52) and rises slightly to end at (High Parental financial discussion, 3.77). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial behaviour. Source: Authors’ own work
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial attitudes” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is solid, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.68) and increases to end at (High Parental financial discussion, 3.58). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.84) and rises slightly to end at (High Parental financial discussion, 4.23). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial attitude. Source: Authors’ own work
The horizontal axis is marked with two categories: “Low Parental financial discussion” on the left and “High Parental financial discussion” on the right. The vertical axis is labeled “Financial attitudes” and ranges from 1 to 5 in increments of 1 unit. The graph shows two lines extending from left to right. A legend on the right indicates that the lines represent two income categories. The first line is solid, marked with diamonds, represents “Less than R 5000,” and begins at (Low Parental financial discussion, 2.68) and increases to end at (High Parental financial discussion, 3.58). The second line is a dashed line, marked with squares, represents “R 20000 plus,” and begins at (Low Parental financial discussion, 3.84) and rises slightly to end at (High Parental financial discussion, 4.23). Note: All numerical data values are approximated.Interaction effects between parental income, parental financial discussions and financial attitude. Source: Authors’ own work
The data presented in Figures 2–4 demonstrate that the correlations between parental financial conversations and financial knowledge, financial behaviour and financial attitude were more pronounced amongst individuals whose parents earned R20,000 or more, compared to those whose parents earned less than R5,000. Participants whose parents had a monthly income of R20,000 or more and who obtained better scores in discussions about financial matters with their parents demonstrated significantly higher levels of financial knowledge, financial conduct and financial attitude.
Due to the lack of substantial interaction effects, one e hypothesis was not accepted. That was hypothesis (H4). Table 4 displays the conclusions drawn from the hypotheses.
Hypothesis decision
| Hypothesis | Results |
|---|---|
| H1: The relationship between parental financial discussions and financial knowledge is moderated by parental income | Accepted |
| H2: The relationship between parental financial discussions and financial behaviour is moderated by parental income | Accepted |
| H3: The relationship between parental financial discussions and financial attitude is moderated by parental income | Accepted |
| H4: The relationship between parental financial discussions and financial decision-making is moderated by parental income | Rejected |
Table 4 displays the outcomes of the hypothesis testing. Hypothesis H4 was rejected because there was no evidence that parental income influenced the association between parental financial discussions and financial decision-making. Three hypotheses (H1, H2, and H3) were confirmed, as the impact of parental financial discussions on financial knowledge, financial behaviour and financial attitude was influenced by parental income. Acceptance of three hypotheses and rejection of one suggests that the association between parental financial discussions and financial literacy is influenced by parental income.
The results that parental income could not moderate the relationship between parental financial discussions and financial decision-making is surprising. This might be because the key factor in developing financial decision-making skills lies in the communication and education about money rather than the amount of financial resources available. Therefore, this study’s findings are the initial ones to suggest that the connection between parental financial discussions and financial literacy is influenced by the income level of the parents. However, there are previous studies that came close to address this issue, for example, Gudmunson and Danes (2011), Serido et al. (2010, 2020) who investigated the relationship between parental income and financial literacy of young adults. However, these studies did not focus or deal with the moderation effects of parental income on the relationship between financial discussions and financial literacy. The results that parental income does not influence the correlation between financial discussions and financial decision-making contradicts previous studies (Agnew and Sotardi, 2024; Agnew, 2018) indicating that increased parental income typically improves children’s financial outcomes via mechanisms like financial assistance and the demonstration of effective financial behaviours. Research indicates that affluent parents can offer significant support for their children’s education and housing, thereby impacting their financial choices. The findings of the present study indicate that participating in financial discussions may independently promote prudent financial decision-making amongst young adults, irrespective of parental wealth. This suggests that financial socialisation, via open dialogues, may be a crucial element in cultivating financial literacy and decision-making abilities, perhaps alleviating the benefits associated with elevated parental income. The findings of this study will serve as a foundation for future research to be undertaken in this field.
5. Conclusion
The aim of this study was to ascertain whether the association between parental financial discussions amongst young adults and their financial literacy is influenced by parental income. Financial literacy of young adults was assessed by evaluating individuals’ understanding of financial concepts, their financial habits and actions, their beliefs and opinions about money, and their ability to make sound financial choices. Four hypotheses were tested. The findings indicated that the influence of parental financial discussions on financial knowledge, financial behaviour, and financial attitude of young adults was influenced by parental income. Moreover, the findings suggested that parental income did not influence or affect the connection between parental financial discussions and financial decision-making of young adults. Thus, the overall findings suggest that the connection between parental financial discussions and financial literacy is influenced by parental income. Hence, parental income plays a crucial role in parental financial discussions and financial literacy, and it needs a deeper understanding to prevent it from impeding financial conversations between parents and children. This study is one of the first to examine if the connection between parental chats about finances and financial literacy is influenced by the income of the parents. Hence, further research is required to address this matter. This study also contributed to body of knowledge, the theoretical implications for this study are that the social learning theory was used to explain the moderated relationship between parental income, financial discussions and financial literacy. The findings of this study can serve as a foundation for other research to be undertaken in this field. This study suggests that researchers should investigate the impact of parental wealth on the correlation between parental financial conversations and other aspects of financial socialisation, such as financial communication, financial monitoring and financial training, on financial literacy. The practical implication for this study is that to leverage the influence of parental financial discussions, specific programmes and policies could include community-based workshops that teach parents how to engage in effective financial conversations with their children, regardless of income level. Schools could partner with local organisations to host parent-child financial education events that promote interactive learning. Implementing these interventions to promote parental financial discussions in South Africa faces several challenges due to cultural, economic and systemic factors. More practical implications for policymakers would be to introduce financial education programmes that ought to adopt a tiered framework that customises information according to varying income levels, so assuring both relevance and accessibility. Programmes for low-income individuals should prioritise fundamental budgeting, debt management and access to inexpensive financial services utilising realistic and cost-effective ways.
