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How parenting can impact your child’s financial future

Parental love may impact a child’s future financial well-being, according to new research from a professor at UNC Greensboro’s Bryan School of Business and Economics.

Dr. Zhiyong Yang, Professor of Marketing and Department Head, the Department of Marketing, Entrepreneurship, Hospitality & Tourism, recently expanded on the topic in the Journal of the Association for Consumer Research. With the help of a grant from Statistics Canada, Yang and his team pulled data from a large-scale Canadian study that observed thousands of families over 14 years. That project followed the same children from ages 10-11 to ages 24-25.

“Our findings suggest that an important answer to the question ‘What can parents do to enhance the financial well-being of their children?’ is to provide children with adequate levels of parental love and nurturance,” he said. “Indeed, our findings suggest that the higher the level of love and nurturance that parents provide to their children, the better their children’s future financial health will be.”

According to his research, not only does parental love matter for the healthy psychological development of children and for the quality of their social life — but it also matters for their future financial discipline, and this is true cross-culturally. 

In his project, parental love was assessed three times. The children were asked to rate how often their parents smiled at them, praised them, made sure that they knew they were appreciated, spoke of the good things they did, and seemed proud of the things they did. Yang’s work then measured financial success at the ages of 24 or 25, using three indicators, namely personal income level, whether they were behind two months or more on a bill, loan, rent, or mortgage payment, and whether they had any savings or investments.

“The basic idea is when parents truly love their kids, parental love promotes children’s capacity to regulate emotion, which leads to higher levels of future financial discipline and income,” Yang said.

This research is part of a large project Yang has been working on, with respect to how parent-child interactions at childhood and early adolescence may affect children’s future. Common sense will suggest that parents can exert influence on their children when they are young, but appear to gradually lose impact as children grow up. In contrast to this conventional wisdom, Yang believes that parental influence is underestimated.

“From an early age, parents provide their children with information about parental expectations. Positive parent-child relationships facilitate the identification of children with parental attitudes, values and role expectations and help them incorporate these attitudes into their own value system,” he said.

A critical factor, Yang found, was the concept of parental psychological control, which reflects such parental behaviors as threats, physical discipline, withdrawal of love, and guilt induction.

“Parents need to be aware of so-called psychological control, such as scolding kids for no reason. Kids get lost and have no idea what’s going on,” he said. “Definitely avoid that. At least, after the fact, you should have an explanation.” 

Parents may have a legitimate reason for issuing a punishment, but it can be harmful if not in line with past instances of discipline and appears to come out of nowhere from a child’s perspective. While Yang discourages parents from using psychological control, he encourages parental monitoring, which is the degree to which parents monitor, set, and enforce limits on their child’s activities and behaviors.

“Set up rules in the very beginning and talk with your kids, say ‘Here’s the right way, these are the rules. This is a household and we have to follow rules and come to an agreement,’” Yang said. “If you all of a sudden spank kids and scold kids and behaviors go beyond, it can have a long-lasting impact, pushing kids away from the chance to have a good influence on them.”

For this study, Yang also looked at parents’ income, number of siblings, birth order, marital status, student status, and single-parenthood. All in all, he says parental love leads to more mature and well-disciplined children, which can translate to success down the line. Parental monitoring is not a bad thing, often leading to children’s compliance without necessarily internalizing parental values.

“Building trust early on, in many ways, tends to make a lot of good things happen,” Yang said.