What shapes the financial capabilities of young adults in the US and Asia-Pacific region? A systematic literature review

Abstract

AbstractYoung adults today face greater financial difficulties than previous generations as they transition from financial dependence to financial independence and require sufficient financial capabilities to overcome financial setbacks. Few studies, however, have conducted a detailed analysis of the literature on young adults’ financial capabilities in the Asia-Pacific region, home to over 1.1 billion young adults, and the US. Thus, this study systematically reviewed the literature addressing the factors affecting young adults’ financial capabilities in the US and the Asia-Pacific region, in accordance with the RepOrting standards for Systematic Evidence Syntheses (ROSES) publication standard and employing multiple research designs. The articles for this study were selected from two authoritative databases, Scopus and Web of Science, and a supplementary database, Google Scholar. Twenty-four articles were included for quality appraisal and qualitative synthesis based on predetermined criteria, including articles with empirical evidence published in English, with the US and Asia-Pacific countries as context and published after 2006. This review was divided into six major themes: (1) financial knowledge/literacy and education, (2) financial behaviour, (3) financial attitude, (4) financial inclusion, (5) financial socialisation, and (6) demographic characteristics. Eleven sub-themes were developed from the six major themes. The findings of this review identify three approaches to enhance the financial capability of young adults: (1) early financial education with practical simulations, which can promote positive financial attitudes and healthy financial behaviour; (2) assisting parents with adequate financial education given their role as the primary financial socialisation agents for young adults; and (3) coupling financial education with access to formal financial institutions. Additionally, this study provides insight into the directions that should be taken by future research endeavours.