Father with his daughter
Financial Literacy

This Is How Parents Influence Their Children's Financial Decisions

Friends, the media, and school all influence children's financial behavior. But the strongest influence on their financial decisions is still their parents. The economics education specialist Prof. Carmela Aprea says the same. In this interview, she explains how parents influence their children's financial behavior, and what needs to be taken into account in this regard.

Prof. Carmela Aprea

Economics education specialist Prof. Carmela Aprea

Ms. Aprea, people say that parents are an important role model for their children, and that they have a decisive influence over them. Can you recall something wise that your parents told you about finance?

Yes, I was taught to pay attention to quality. So, it's better to have less of something, but of good quality.

Have you always stuck to this principle?

Not always, unfortunately. When there's a bargain in the sales or on vacation, I sometimes let myself be tempted to make a purchase, which I then regret. There has been the occasional pair of shoes or item of clothing that I've only worn once. Nevertheless, I would say overall that I've more or less stuck to this principle.

Also, in the Credit Suisse pocket money study, parents were asked what they pass on to their children. The principles "Money doesn't grow on trees" and "Don't live beyond your means" were mentioned most often. What is your opinion of this?

This makes it clear that Switzerland is a country with a Calvinistic outlook – in other words, virtues such as hard work and moderation are important. It is actually difficult to have anything against these principles. For me, the most important thing is that parents also behave in accordance with this principle. In addition, we should also prepare our children for the fact that they might meet people later who do not live in accordance with these principles. That's why it's important to give them strength and self-confidence so that they stick to the principles they have learned. Because sometimes a good deal of self-confidence is needed to make financial decisions.

Parents agreed with these financial principles most often.

What principles do Swiss parents follow when bringing up their children?

These statements were selected most frequently
Source: Credit Suisse Pocket Money Study

But How Exactly Do Parents Influence Their Children's Financial Behavior?

From financial socialization we know that there are four different channels that influence financial behavior – in some cases explicitly, in others implicitly. One important explicit aspect is financial education. This means when you explain to a child how to draw up a budget, for example, or allocate money, or how a bank account operates. Explicit financial socialization also includes enabling children to experience money, for example by giving them pocket money. On the other hand, parents influence their children implicitly, when they discuss their financial decisions at home: What purchases have to be made? What can we afford? Children hear this and learn from it. Also because they notice their parents' behavior. A further important point is that parents are role models and their children are guided by them.

At what age do parents have the strongest influence on their children's financial behavior?

To answer this question, you first need to understand that financial behavior is not only influenced through the channels already mentioned. The general values and standards that parents pass on to their children also have a major impact. These include achievement motivation, self-control, and using resources carefully, among other things. These general attitudes are already shaped in children at primary school age. Presumably explicit financial socialization and children's own experiences with money only take place later because "money matters" are relatively complex and presuppose a certain degree of development.

Once parents have passed on certain beliefs to their child, should they stick to these, or is it easy to revise them?

In general, people can certainly revise their beliefs. The key is dependability, trust, and how genuine the parents are. At an early age, children should already have a sense of what is being done as a matter of principle, or for good reasons. Children should learn how to manage money flexibly. In my view, we live in a consumer society and the challenges are not diminishing thanks to online shopping and so on. Developments of this kind should not be demonized. But they require people to revise their ideas a bit – not every day of course.

At an early age, children should already have a sense of what is being done as a matter of principle, or for good reasons. 

Prof. Carmela Aprea

To conclude, how strongly do such factors as parents, friends, school, and the media influence financial behavior? What is your opinion on a scale of 1 to 10: 1 means no influence, 10 means a very strong influence.

Parents: 10. Parents definitely have the greatest influence on their children.

Friends: 8, because friends have a strong influence on each other.

School: 6. That could be better. At the moment, a lot of plans are being developed that are trying to integrate financial topics better. In this regard, I think people should try harder to bring financial education by parents together with financial education by the school. It wouldn't be good if children learned different things.

Media: 5/6. I think the media are so fast-moving at the moment that it's difficult to assess to what extent they really make a lasting impression.