Does parental socialization affect financial literacy in Indonesia?

Abstract

The technological advancement of Industry 4.0 embarked on a trend of digital payment in Indonesia to promote a cashless society. However, the rapid advancement of financial digitalization in the world should be prepared for the changes of a well-literate society. In Indonesia, a cashless society has been intensively promoted. But the low level of literacy index from its younger generation, this campaign has struggled. Among several factors, this study seeks to investigate the effect of parental socialization on improving financial literacy from this generation dominated by undergraduate students in Bandung, West Java, Indonesia. This study is designed using qualitative and quantitative approaches. The qualitative data was collected by interviewing as many as 10 parents. Also, the quantitative data were gathered by distributing the online survey questionnaire to 204 public, and private undergraduate students aged 20-24 in Bandung using Google form started January to May 2020. The data collection process was chosen to solve some constraints during the pandemic of COVID-19. This study has successfully produced a conceptual framework based on parents' perspectives. Through a data analysis process using multiple linear regression, this study found that money allowance and trust variables significantly positively affect financial literacy among undergraduate students in Bandung, West Java, Indonesia. In conclusion, this study has successfully investigated the effect of parental socialization on improving financial literacy. The parents' decisions will determine their children's proficiency in money management. Also, this study found a new model that differs from the previously developed model in the United States. For the Bandung context, these two factors are perceived as effective socialization factors from the perspective of undergraduate students.