Comparing Financial Socialization and Formal Financial Education: Building Financial Capability

Many individuals learn financial knowledge and skills in school (namely formal financial education) and through friends and family (e.g., family financial socialization). While the two channels have distinctive merits and limitations, little is known about how formal financial education and family financial socialization differ and interact when it comes to helping people gain financial knowledge and skills. Using data from the 2015 National Financial Capability Study, we examined the association between formal financial education, family financial socialization, and financial knowledge. Results from regression estimates with interaction terms included indicated that both channels had positive associations with increased financial knowledge levels with different impact magnitudes, while together they seemed to have negative associations with increased financial knowledge. Our study suggests that each channel likely provides financial knowledge in different domains and has implications for future research and financial education policy.