Who is the founder of Financial Socialization Theory:? | 3 Answers from Research papers (2024)

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Who is the founder of Financial Socialization Theory:? | 3 Answers from Research papers? ›

The founder of Financial Socialization Theory is Clinton G. Gudmunson and Sharon M. Danes. They propose a conceptual model that integrates family socialization theory and recent trends in financial literacy research, aiming to understand individual differences in financial literacy from a socialization perspective.

Financial socialization is defined as “the process of acquiring and developing values, attitudes, standards, norms, knowledge, and behaviors that contribute to the financial viability and individual well-being” (Danes, 1994, p. 128).

Financial socialization theory suggests that relationships among individuals influence the financial information the individuals receive which in turn results in financial literacy among them. This explains why financial information literacy is regarded as a prerequisite for financial literacy among individuals.

Based on Sen's capability theory (1993), financial capability refers to the ability to act (e.g. people's knowledge, skills, attitudes, habits, motivations, confidence and self- efficacy), and opportunity to act (e.g. people's awareness of basic financial products they need to manage their money lives) (Collard, 2019).

Heuristic theory explains how investors make financial decisions under conditions of uncertainty. According to this theory, there are a lot of bias beliefs that affect how investors think and making decisions, while the prospect theory explains how investors make decisions under a certain risk.

The founder of Financial Socialization Theory is Clinton G. Gudmunson and Sharon M. Danes.

It is a concept proposed by (Gudmunson & Danes, 2011) . The theory states that the way children learn about money from their parents during their formative years will impact their financial situation in adulthood (H. ...

Robert Kiyosaki, the founder of the “Rich Dad, Poor Dad” empire, says that there are six basic words that are key to financial literacy and education: income, expense, asset, liability and cash flow. The last “key” is a combination of two words, making six total terms that Kiyosaki finds essential.

Three theoretical perspectives are presented that represent different understandings of information literacy; phenomenography, sociocultural theory and Foucauldian discourse analysis.

Financial Literacy is the combination of financial knowledge, skills, attitude, and behavior necessary to make the right financial decision (Hung, Parker & Yoong, 2009 ).

What is the basic theory of financial management? ›

Financial management prioritizes creating value through profitability, growth, and sustainability. To achieve profit objectives by balancing revenues and strategic investments against costs, organizations need to identify their core competencies, competitive advantages, and areas of opportunity.

Having financial problems means being unable to pay debts over the short or long term. Debt complicates financial management and limits purchasing power. Financial difficulties become a source of stress until all debts are paid.

Financial statement analysis is used by internal and external stakeholders to evaluate business performance and value. Financial accounting calls for all companies to create a balance sheet, income statement, and cash flow statement, which form the basis for financial statement analysis.

So, what is behavioral finance? It's an economic theory that explains often irrational financial behavior, such as overspending on credit cards or panic selling during a market downturn. People often make financial decisions based on emotions rather than rationality. ¹.

Biases of Behavioral Finance

Experiential bias: It occurs when an investor's memories or experiences from past events make them choose sides even when such a decision is not rational. For instance, previous or current bad experience leads them to avoid similar positions.

In their seminal work, Tversky and Kahneman introduced three heuristics based on which people make decisions: representativeness, availability, and anchoring.

One important assumption of financial socialization in a family context is that it helps children develop the literacy and capability they need to manage financial matters and achieve financial well-being (Gudmunson et al., 2016).

Examples include retail investors, high-net-worth individuals, pension funds, charitable foundations, and private foundations. Social enterprises: Social enterprises represent the demand for investment in social finance.

Financial Socialization (FS) can have an impact on the FWB. FS, as explained by Danes (1994), is the process of learning and advancing values, knowledge, norms, standards, attitudes, and behaviors which promote well-being, financial viability among the individuals.

Financial socialization theory argues that learning about money during childhood is connected with adults' FWB (LeBaron & Kelley, 2021). ... ... According to Sohn et al. (2012), there are four key financial socialization agents: parents, peers, education, and the media.