Share This Page

Wisconsin School of Business Professor Identifies Keys to Financial Well-Being for Children and Young Adults

by Peter Kerwin Monday, February 16, 2015

Financial well-being doesn’t mean living the lifestyle of the rich and famous. It means having control over your finances, providing a financial safety net for yourself and your family, and meeting financial goals.

Elizabeth Odders-White, an Associate Professor with the University of Wisconsin-Madison’s Wisconsin School of Business, has conducted a broad review of existing literature from consumer science, developmental psychology and related fields to identify how children can best develop the skills and approaches they will need to become adults who can manage their own finances and enjoy a sense of financial well-being.

The review establishes the critical importance of parents and other adults in fostering financial well-being for youth of all ages and suggests specific steps that could improve children and youth’s chances of achieving financial well-being in adulthood.

elizabeth Odders-white wsb cvs study US treasury

Elizabeth Odders-White, U.S. Bank Associate Professor of Finance at the Wisconsin School of Business.

“The focus of this project was to identify the key elements that will lay the groundwork for financial well-being at different stages in life,” said Odders-White. “Our review found that parental modeling and monitoring are influential for youth of all ages and that there are promising avenues for intervention within each major age category.”

For pre-elementary students, it is critical to focus on executive function development, even though it might have limited apparent “financial content.” This involves helping young children stay focused despite distractions and helping them practice delaying gratification.

For elementary and middle school students, it is important to receive parental and other adult guidance in learning basic financial skills and healthy financial attitudes. This includes learning about savings, frugality, and financial planning by observing behaviors modeled by parents and other adults.

And for adolescents and young adults, financial learning can be built through increases in financial independence, supervised engagement with the financial system, and experience-based, practical education programs that teach financial research skills.

“In all cases, research suggests that the key is providing opportunities for practice that are developmentally appropriate and include time for reflection,” said Odders-White. “Through repeated practice that is supported by parents or other adults, children can develop positive financial habits related to skillful money management, goal-setting and financial research.”

Odders-White conducted the review along with Anita Drever, Emily Hoagland, and Emory Nelms from the Corporation for Enterprise Development, a Washington, DC-based organization working to create economic opportunity to alleviate poverty; Charles W. Kalish of the Department of Educational Psychology at UW-Madison; and Nicole Else-Quest of the Department of Psychology at the University of Maryland, Baltimore County. This research is part of larger project they are conducting under contract to the United States Consumer Financial Protection Bureau to understand what sets the stage for financial well-being in adulthood.

“Foundations of Financial Well-Being: Insights into the Role of Executive Function, Financial Socialization, and Experience-Based Learning in Childhood and Youth” has been accepted for publication by the Journal of Consumer Affairs.