Are family relationships at the root of financial risk-taking?

What makes some young adults behave in ways that have the potential to harm themselves or those around them? Many studies have examined the complex psychology of financial risk-taking, but new research from Cogent Economics & Finance suggests that financial risk-taking in young adults, including going into debt or breaking the law, could be rooted in their childhood relationships with parents.

This study, led by researchers at Oklahoma State University, used the domain-specific risk-taking scale (DOSPERT) to assess five areas of risk-taking, namely ethical, social, financial, recreational and health. The authors also measured a personality trait known as “sensation-seeking”, which has previously been shown to predict risk-taking and family dynamics, quantifying positive and negative child-parent relationships.

The study found that negative childhood interactions with their mother predicted financial risk-taking among men. Ethical risk-taking among men was predicted by negative childhood interactions with their father, and with disinhibition (enjoying the feeling of not being in control). For women, ethical risk-taking was linked to negative childhood interactions with their father, low positive interactions with their mother and their overall susceptibility to boredom.

Interestingly, results suggested that parent-child relationships did not predict the other three types of risk-taking (health, social and recreational). The researchers suggest that these kinds of risk-taking may be linked more with the influence of peers, and they argue that further studies are needed establish the extent to which parent and peer relationships affect risk-taking. It had previously been shown that risk-taking among young children is linked to their interactions with their parents, but this new article shows that family relationships in childhood continue to have an impact in adulthood. With potentially life-changing consequences arising from such risk-taking, understanding what causes it could ultimately result in better outcomes for those most likely to be susceptible to it.

The article, Financial and ethical risk-taking by young adults: A role for family dynamics, published in the open access journal Cogent Economics & Finance, is free to read and download via this permanent link.