Developing a Measure of Financial Privacy: A Pilot Study of U.S. College Students

Abstract

This study applied communication privacy management (CPM) theory to develop a new measure of financial privacy, encompassing three dimensions of ownership, permeability, and linkages. The exploratory factor analysis was based on a pilot survey of 371 U.S. college students. The development of this scale was motivated by previous research establishing links between financial literacy, financial socialization, and family communication patterns to suggest the importance of understanding and measuring the role of communication and privacy in the transmission of financial knowledge. Therefore, correlations are also presented between the new measure of financial privacy and measures of financial knowledge, confidence, and experience. The financial privacy scale attained adequate validity and reliability to encourage further refinement and utilization in future theoretical and practical research related to family financial socialization.

1. Introduction

Increasing individual responsibility for financial well-being, particularly related to matters of debt management and retirement savings, has been a significant societal trend in developed economies since at least the 1940s (Ryan et al. 2011). Consequently, financial knowledge and skills have become essential for participation in financial markets that only grow in complexity and ubiquity in their influence on people’s lives (Campbell et al. 2011; Sherraden 2013). Simultaneously, however, measured levels of financial literacy have only declined over time (e.g., Lusardi 2015). This discrepancy between the growing importance of financial knowledge and skills and the declining knowledge in the general populace has motivated considerable research to understand the sources and implications.

A natural response to a knowledge deficit is to encourage schools to develop curriculum and instruction related to finance (e.g., Alsemgeest 2015). However, research on the effects of formal financial education has revealed conflicting findings on behavioral outcomes. Some studies report essentially no effect of school-based financial instruction (e.g., Fernandes et al. 2014) or little evidence of behavioral change (e.g., Stolper and Walter 2017). By contrast, other studies report positive outcomes, including increases in knowledge and behavioral change, which would support financial education mandates (Danes and Brewton 2014). These discrepant findings are related to challenges of conceptualization and measurement in the research literature related to financial literacy.

A body of early research on financial literacy emphasized a cognitive perspective of the operationalization and measurement of financial literacy as nearly equivalent to financial knowledge (e.g., Lusardi and Mitchell 2011). However, the complexity of the construct of financial literacy was evident even then, as exemplified by various attempts at a formal definition. For example, Lusardi and Mitchell (2007) offer an encompassing definition that includes information gathering, skill development, risk awareness, assistance seeking, and general behaviors to improve personal financial situations. The multi-dimensional nature of financial literacy has encouraged a shift toward conceiving the construct as a complex, interactive process (Danes and Haberman 2007), while Huston (2010) conceptualizes financial literacy as both understanding financial concepts and enacting that knowledge in financial behaviors. The latter emphasis on the application of financial knowledge through actions and behaviors has been reinforced by research on financial capability (Sherraden 2013; Xiao et al. 2022).

Therefore, recent refinements to the definition of financial literacy emphasize both knowledge of financial concepts and the ability to employ that knowledge in decision-making (Lusardi and Mitchell 2023). The application of financial knowledge then has direct ramifications for financial well-being and satisfaction (Lusardi and Messy 2023). Furthermore, financial literacy requires continual updating due to innovation in the financial industry. Most recently, the plethora of new digital financial services has provided further challenges for individuals navigating their personal finances and for researchers measuring financial literacy (e.g., Koskelainen et al. 2023).

One aspect that unites financial literacy research, regardless of its exact measurement or conceptualization, is ongoing investigation into its sources and influences. Financial literacy research also explores ramifications and behaviors that result from an individual’s level of financial knowledge or experience. Therefore, financial literacy can be conceived of as a mediating variable between knowledge development and enacted financial behaviors. Given this middle role, it would be natural for financial literacy to be closely related to socialization within families, schools, and peers, as well as communication and privacy more broadly. However, a bibliometric study of interdisciplinary financial literacy research shows that researchers have so far not emphasized this connection as a major area of inquiry (Ansari et al. 2022). Consequently, this paper fills a research gap by exploring the knowledge development aspect of financial literacy and seeking to understand the extent to which family financial socialization and financial privacy shape the knowledge acquisition of adolescents.

The primary contribution of the present research is a new measure of financial privacy that is grounded in the theory of communication privacy management (CPM; Petronio 2002). This pilot study utilizes exploratory factor analysis of a Likert-type scale as a quantification of financial privacy. Additionally, the survey data allows for examination of the relationship between this measure and financial knowledge. The next section motivates the need for the scale by reviewing the literature related to financial socialization, family communication patterns, and financial privacy. Then the study’s methods and results are presented, emphasizing the development of the new scale, and the paper closes with consideration of limitations and future research.

2. Literature Review

2.1. Financial Socialization

Financial socialization is the process by which individuals attain financial knowledge and develop associated attitudes, norms, and behaviors related to finance (Danes 1994). However, socialization is not a monolithic process, and adolescents learn about finance through multiple channels. Shim et al. (2010) emphasize the influence of parents, workplaces, and formal education settings. Additional financial socialization occurs through peers, the media, and self-learning, although research consistently reports that families (and parents, in particular) play the largest role in guiding adolescent knowledge and behaviors related to finance (e.g., Gudmunson et al. 2016). Even among college students in committed romantic relationships, parental influence on financial attitudes and behaviors remains considerable, demonstrating the persistence of this early financial socialization channel (Serido et al. 2015).

A common theme of financial socialization models is that learning occurs in both indirect and direct modalities. Shim et al. (2010) describe these as observational and formal, while other scholars describe similar interactions as unintentional and direct (e.g., Deenanath et al. 2019). In a review of the published literature between 2010 and 2019, LeBaron and Kelley (2021) categorize the research into three family socialization processes: parent financial modeling, parent–child financial discussions, and experiential learning. In all cases, communication plays a vital role in transmitting knowledge, beliefs, and values.

The importance of family communication in shaping adolescent knowledge and behavior in consumer and financial matters has been referred to indirectly in financial literacy research for decades (Moschis 1985; Moschis et al. 1984). Some research has even examined communication explicitly. For example, Mugenda et al. (1990) provide interview-based evidence that communication is related to both financial knowledge and finance-related activities. Fan et al. (2022) argue that parental financial socialization is further related to advice-seeking behavior, while Zhao and Zhang (2020) employed data from the 2016 National Financial Well-Being Survey to describe how financial socialization is related to financial literacy, behavior, and well-being. Additionally, Bucciol et al. (2022) report on the importance of family conversations and influence during adolescence as a complement to formal financial education, while demonstrating that the effects of financial socialization are quite similar to the effects of financial literacy. This value of family communication and socialization on financial well-being has also been documented around the globe (e.g., Sharif and Naghavi 2020; Utkarsh et al. 2020). Therefore, financial literacy and socialization research should seek to incorporate communication theories and measures in its models.

2.2. Family Communication Patterns and Finance

Family financial socialization relies on an underlying assumption of family communication, which suggests communication theory should inform research on financial socialization. The theory of family communication patterns (FCP) describes how beliefs and behaviors related to interpersonal communication lead to predictable communication patterns and styles (Koerner and Fitzpatrick 2002). FCP has been conceptualized (Koerner and Fitzpatrick 2006) as comprising two dimensions—conformity and conversation—which intersect to yield four family types: consensual (high conversation and conformity), laissez-faire (low conversation and conformity), protective (low conversation and high conformity), and pluralistic (high conversation and low conformity). Family communication patterns have previously been investigated for their influence on financial literacy. For example, Hanson and Olson (2018) reported that a family background with a strong conversation orientation was associated with greater financial literacy among college students. Furthermore, Chatterjee et al. (2010) argue that families that regularly eat meals together have better financial outcomes in part due to positive socialization and communication, while Jorgensen and Savla (2010) provide survey-based evidence that explicit conversations within the family influence the financial attitudes and behaviors of college students. In a survey of U.S. college students, Hanson (2022) reported an association between financial literacy and growing up in a household with stronger conversation orientation. Even when relying on parental modeling or experiential learning as transmission mechanisms of financial information, communication plays a vital role in sharing knowledge and shaping behavior of adolescents.

Among the implications of family financial socialization are calls for family involvement in designing and implementing financial education (Hanson and Olson 2018; Jin and Chen 2020). These conclusions assume that family communication will offer a useful supplement to formal education and experiential learning. However, discussions of financial matters are often deeply uncomfortable for people, even within families and romantic relationships (Atwood 2012). This societal taboo around discussions of financial matters can be particularly pervasive in households facing financial setbacks or challenges (Alsemgeest 2014). Unfortunately, lack of communication about financial matters within the family has been shown to have negative ramifications for later financial behavior (Alsemgeest 2014; Furnham et al. 2014). Therefore, family communication patterns may be insufficient to capture the role of families in transmitting financial knowledge, and it may prove useful to explore notions of financial privacy.

2.3. Financial Privacy

CPM (Petronio 2002) provides a useful framework for conceptualizing financial privacy by proposing that individuals view privacy and private information through the lens of ownership and attempt to construct boundaries and rules around disclosure. Therefore, financial privacy relates to the belief that personal financial information is owned and controlled by individuals. The theory identifies three types of privacy rules that are regularly used as dimensions in psychometric scale construction related to CPM (e.g., Child et al. 2009). First, because individuals feel a sense of metaphorical ownership of their private information, they anticipate a right to affect the flow of information through privacy management rules. Furthermore, sharing information with others makes them co-owners of the information, which results in the need for co-determination of privacy rules and creates the possibility of boundary turbulence when those rules are violated, either intentionally or unintentionally. Therefore, ownership rules constitute the first dimension, relating to the ability to choose whether or not to disclose information (Petronio 2002). The second dimension of permeability rules deals with typical sharing practices in terms of the breadth and depth of shared information. Greater permeability implies a willingness to share more information and/or greater detail, while lower permeability implies a thicker privacy boundary (Petronio 2002). The third and final dimension of CPM is linkage rules, which describe openness to sharing private information with other people (Petronio 2002). Collectively, these three types of rules take into account the risks and benefits of disclosure, as well as context and cultural criteria (Petronio 2002).

Matters of privacy are typically described in terms of disclosure, and surveys reveal that most parents believe it is important to discuss financial matters with their children (Furnham 2001). However, these results must be tempered by parental comments that some financial information would never be disclosed to their children (Danes 1994). LeBaron et al. (2018) describe three principal methods by which family socialization transmits financial knowledge, namely, parent financial modeling, experiential learning, and parent–child financial discussion. Of these three transmission channels, LeBaron et al. (2021) note that financial discussion is the method of family financial socialization with the greatest number of extant measures in the literature, citing eight papers describing how family discussions influence financial knowledge. Therefore, an understanding of financial privacy can help improve our understanding of financial socialization processes.

Disclosures related to financial matters have previously been examined with qualitative research methods in a CPM framework. In a survey of parents about their disclosure behavior, Romo (2011) reports two motivations to conceal information (private financial issues are not a child’s concern, and cultural taboos exist around financial conversations) and three motivations to reveal information (a child’s current need to know certain information, preparation for the real world, and financial openness as a means to foster trust). These findings are reinforced by a survey of children about parental disclosure (Romo and Vangelisti 2014), in which children perceived financial discussions were driven more by parental instruction than child curiosity. Additionally, children believed that parents concealed information to prevent the children from worrying or sharing the information with others outside the family. In a study of parent–child dyads, these perspectives were confirmed by the fact that generally, parents were willing to discuss general financial and consumer matters while being less likely to disclose specific personal financial data (Romo 2014). Family discussions about finance imply disclosure and co-ownership of information, and families will have their own particular level of openness about financial matters that will promote or discourage family financial socialization.

General family privacy orientation has been previously operationalized with a two-dimensional, 12-item scale (Morr Serewicz and Canary 2008). Higher scores on the scale imply greater openness and information sharing within families (interior) or with individuals outside the family (exterior). Hanson (2022) utilized this scale to demonstrate a correlation between greater openness (i.e., lower levels of financial privacy) and higher levels of financial knowledge among college students.

2.4. Research Purpose

The research literature on financial socialization suggests that the family plays an influential role in a person’s financial literacy (e.g., Shim et al. 2010). One important mechanism for transmitting financial knowledge, attitudes, and behaviors is family communication. Therefore, family communication has been linked in previous studies to levels of financial literacy (Alsemgeest 2014; Hanson and Olson 2018). Given the evidence related to the importance of communication, Hanson (2022) employed the notion of family privacy orientation and CPM theory to examine the relationships between family privacy orientation (Morr Serewicz and Canary 2008) and financial literacy, reporting that families with more open communication in general are associated with higher levels of financial knowledge. However, there is no established psychometric scale to measure financial privacy directly. Therefore, the primary purpose of this paper is to develop a measure of financial privacy, based on the three dimensions of CPM theory.

To support validity of the new measure, the study also collected data using the Morr Serewicz and Canary (2008) measure of family privacy orientation. As preliminary evidence of the utility of the new scale, participants responded to scales measuring financial knowledge, financial confidence, and financial experience. Based on previous work, it is anticipated that more openness about financial matters and more financial experience will be associated with stronger financial knowledge and greater financial confidence.

3. Methods

3.1. Participants

Valid responses were obtained from a total sample of 371 college students between the ages of 18 and 26 (M = 20.8 years, SD = 2.5), 255 males and 116 females. Respondents had an average of 2.6 siblings (SD = 1.3). A substantial majority (321 or 86.5%) reported growing up in a traditional two-parent household, while 22 and 28 grew up in families headed by males and females, respectively. The sample was predominantly Caucasian (222 or 59.8%), with the remainder of the sample being African-American (62), Hispanic (49), Asian (29), and Native American (4) and with five participants not responding to the question.

3.2. Procedures

Data collection was conducted by means of a Qualtrics survey between 1 October and 10 December 2023, and all procedures were approved by a university Institutional Review Board prior to participant recruitment. The survey administration began with a brief statement describing the purpose of the study: “We hope to learn more about the relationship between a person’s family background and financial knowledge and experience”. The introduction continued with information related to the participant’s rights, and respondents provided informed consent by clicking on a consent statement before proceeding to the survey items. Data were collected anonymously.

The underlying target population for this measure of financial privacy was young adults in the United States, and the participants in this pilot study were college students to avoid additional procedures related to surveys involving minors. Respondents were solicited with non-random sampling techniques through multiple communication channels. First, students were contacted directly through email messages by professors at three U.S. educational institutions: a small, private university in the Midwest; a large community college in the Midwest; and a large, public university in the northeast. Announcements were also made through campus electronic newsletters, and an invitation to participate was posted on the social media sites of a finance-related student organization. All messages included a web link that provided anonymous access to the online survey. By using multiple communication channels and geographically dispersed educational institutions with different profiles, we aimed to obtain a diverse (though non-random) sample of participants.

The survey began with a brief summary explanation of the study and its purpose. Participants were provided with contact information for any questions before they confirmed their eligibility and provided consent to complete the survey. The survey took an average of just more than 20 min to complete. Participants did not receive any compensation for their participation in the study.

3.3. Measures

Financial knowledge is measured to understand the relationship with more open communication. Research has not coalesced around a consistent definition of financial literacy, nor is there a single reliable and valid instrument for measurement (Huston 2010). Financial literacy has been conceptualized as encompassing both financial knowledge and such additional topics as application (Huston 2010), information gathering (Lusardi and Mitchell 2007), and perceived financial capability (Xiao et al. 2014). The greatest challenge in measuring financial literacy is the potential gap between knowledge and behavior (e.g., Nicolini and Haupt 2019). In lieu of measuring the larger construct of financial literacy, the present study measured solely financial knowledge, which was operationalized with 14 questions from previous studies of financial literacy. The first 11 questions came from Lusardi (2015), comprising three questions of basic financial knowledge (regarding interest rates, inflation, and diversification) along with eight questions of more advanced financial knowledge related to the functioning of markets, risk, and return. The remaining three questions covered debt literacy (Lusardi and Tufano 2015).

Second, financial experience was measured using a ten-item checklist from basic personal finance to more sophisticated investments. Scales of this type are widely used in financial literacy studies, ranging from a dichotomous measure of having a bank account (Sohn et al. 2012) to experience with various investment products (Frijns et al. 2013; Tang and Peter 2015) and the use of various consumer accounts and investments (Lusardi and Tufano 2015). The present study employed a modified and truncated version of Lusardi and Tufano’s (2015) list to avoid survey fatigue and to match typical experiences for college students. The following questions were answered with a yes/no response format:

• Do you have a personal checking account?
• Do you have a personal savings account?
• Have you ever taken out a loan for student education?
• Have you ever taken out an auto loan?
• Have you ever taken out a mortgage?
• Have you ever taken out a short-term or payday loan?
• Have you ever sold an item to a pawn shop?
• Have you ever been late on a debt payment of any kind?
• Have you ever invested in stocks or mutual funds?
• Have you ever invested in savings bonds or other bonds?

Financial confidence was measured with three questions, following Hanson (2022). Students were asked to rank their financial knowledge (from very low to very high), their confidence in how well they currently handle their personal finances (from very confident to not confident at all), and their financial knowledge compared with other U.S. college students (from well above average to well below average; cf. Lee et al. 2019; Robb and Woodyard 2011).

Data were collected using the Morr Serewicz and Canary (2008) scale of interior and exterior family privacy orientation in order to compare the newly developed financial privacy scale with this related measure of family privacy orientation. This comparison helped establish concurrent validity of the new measure.

Finally, students answered an item pool of 32 candidate items for inclusion in a financial privacy scale. These items were generated by the authors after consulting the related literature on financial socialization and CPM to reflect the three-dimensional structure of permeability, ownership, and linkages. Candidate items were also based on previous qualitative work (e.g., Romo 2011, 2014). Prior to the administration of the survey, the items were also reviewed by two experts on CPM theory, who provided feedback and revisions to the items before data collection occurred. Analysis of these items with exploratory factor analysis was the principal goal of the present research.

3.4. Analysis

All statistical analysis was conducted in the R statistical computing environment (R Core Team 2021). The psych package (Revelle 2022) was utilized for factor analysis. The initial pool of candidate items was examined with principal component factor analysis to determine which items were most useful in measuring the latent factor of financial privacy. The exploratory techniques examined alignment with an a priori three-factor structure. Given the likely correlation among the three factors, promax rotation was used in model estimation (cf., Child et al. 2009). Cronbach’s alpha was computed as a measure of internal reliability for each factor, and correlational analysis was used to investigate various aspects of the scale’s validity.

4. Results

The primary analytical results were related to the exploratory factor analysis of the financial privacy scale. The data were first assessed for suitability for exploratory factor analysis. The Kaiser–Meyer–Olkin (KMO) test estimated an overall MSA of 0.82 with no scores below 0.7. Therefore, all KMO statistics were rated as good (Kaiser 1974; Hutcheson and Sofroniou 1999). Bartlett’s test of sphericity was statistically significant (p < 0.0001), again suggesting that factor analysis may be a useful approach. Parallel analysis and visual inspection of a scree plot implied that the sample data contained three factors.

Three factors were extracted using principal component factor analysis with promax rotation. The initial model was not satisfactory, given several items reflected cross loadings and/or maximum loadings less than 0.4. Therefore, the item pool was trimmed to the 13 items with the best factor loadings, and the model was re-estimated. This model resulted in a simple structure with adequate factor loadings and a statistically significant model for the adequacy of three factors (p = 0.007). Factor loadings and items for this revised model appear in

Table 1. Factor loadings for rotated solution of the financial privacy scale.

	Factor
Items	1	2	3
Factor 1: Permeability (α = 0.77)
My parents are comfortable discussing our family’s financial situation with me.	0.700	0.104	0.016
I know substantial details of my parents’ financial situation.	0.594	0.046	0.024
My parents share financial information and decisions with me so that I avoid making similar mistakes.	0.594	0.043	−0.148
My parents openly discuss their debt and income with me	0.614	−0.024	0.008
My parents share financial struggles or challenges with me	0.621	0.020	−0.046
Factor 2: Ownership (α = 0.74)
My parents generally discuss finance in only vague terms to maintain control of their financial information. *	0.238	0.626	0.168
My parents and I co-develop a budget to improve my money management.	0.001	0.594	−0.057
There are only certain times that I would need to know about my parents’ financial situation. *	−0.328	0.460	−0.152
My parents encourage me to learn and practice good habits related to my own finances.	0.021	0.566	0.055
Factor 3: Linkages (α = 0.81)
Budgeting conversations with my parents are not meant to be shared with others. *	−0.169	0.138	0.405
My parents told me that I should not share my financial information with others. *	0.037	0.001	0.601
My parents allow discussions of financial matters to be shared outside our family.	−0.038	0.077	0.637
I know specific people outside my immediate family who I can talk to about our financial situation.	−0.075	−0.049	0.506

* Indicates items that should be reverse-coded.

. Factors were retained using a cutoff of 0.4 (Stevens 1992). While loadings between 0.45 and 0.55 were considered only moderate (Comrey and Lee 1992), the items loaded with the expected factor in this exploratory scale development research, suggesting that they may be useful for future research. The factors also demonstrated adequate reliability with Cronbach’s alpha estimates of 0.77, 0.74, and 0.81 for the three factors, all exceeding the traditional cutoff of 0.7 (Nunnaly 1978; Peterson 1994).

The first factor of permeability accounted for 17.3% of variance. This dimension relates to the thickness of privacy boundaries with larger scores indicating more open communication within the family related to financial matters. The second factor of ownership accounted for 8.5% of variance. Whereas permeability emphasizes communicative aspects of privacy, ownership relates to norms and expectations regarding co-ownership of knowledge. The third factor of linkages explained 7.1% of variance. This dimension measures whether young adults are able to create new linkages by sharing financial information outside the family. These three dimensions all relate to the underlying construct of financial privacy but represent the three sub-dimensions of CPM theory.

Descriptive statistics for all other measures appear in

Table 2. Descriptive statistics.

Measure	Mean	SD
Financial knowledge	8.1	3.6
Financial experience	4.6	2.2
Financial confidence	7.7	1.5
Interior family privacy orientation	18.0	2.9
Exterior family privacy orientation	16.3	3.8

. Financial knowledge was scored by awarding one point for each question answered correctly, so 14 was the maximum possible score. Financial experience was scored by counting each yes answer to the 10 items as one point. The respondents ranged over the entire set of outcomes, with 18 students scoring 0 and 12 students scoring 10 on this measure. Financial confidence was the sum of three Likert-type items on a 5-point scale with larger scores reflecting greater confidence. No students reported total scores of either 14 or 15, which suggested relatively low financial confidence among the respondents. Finally, interior and exterior privacy orientation each consisted of the sum of 6 Likert-type items on a 5-point scale.

Correlation coefficients for all measures appear in

Table 3. Correlation analysis.

	Experience	Interior	Exterior	Confidence	Permeability	Ownership	Linkages
Knowledge	−0.042	−0.018	0.121 *	−0.061	0.225 *	0.133 *	0.227 *
Experience		0.110	0.078	−0.135 *	−0.079	0.097	0.090
Interior			0.094	−0.036	0.208 *	0.162 *	0.031
Exterior				0.032	−0.029	−0.035	0.375 *
Confidence					0.111	−0.051	0.101
Permeability						0.212 *	0.405 *
Ownership							0.349 *

* Indicates statistical significance at the 5% level.

. First, as expected, the three sub-scales of financial privacy were correlated to a significant extent. CPM posits an underlying construct of privacy that is expressed in three different types of rules, which are naturally correlated. This finding suggests that future research could employ a financial privacy measure in multiple ways, using only a sub-scale of interest, measuring all three sub-scales, or computing a unitary score of financial privacy.

Second, examining the relationships between the new financial privacy and the Morr Serewicz and Canary (2008) family privacy measure supported concurrent validity. Permeability and ownership were both correlated with interior privacy orientation, while linkages correlated with exterior privacy orientation. These relationships suggest that the new measure aligns with this previously developed measure.

The theoretical contention motivating research on financial privacy was that greater openness would lead to increased financial socialization within the family. The increase in family conversations about finance would, in turn, lead to increased financial literacy, potentially through experiential learning, confidence, or financial knowledge. The results showed that financial privacy was not correlated to a statistically significant degree with measures of financial experience or financial confidence. Therefore, the primary channel of influence appeared to be the effect on financial knowledge.

5. Discussion

This pilot study developed a new scale to measure financial privacy, motivated by a conceptualization of privacy and communication as central to our understanding of financial literacy. Financial literacy arises from financial socialization (Gudmunson and Danes 2011), which in its broadest definition encompasses formal education in addition to a range of other influences (Shim et al. 2010). The most prominent source of financial socialization, however, is the family (LeBaron and Kelley 2021). The ramifications of financial literacy are downstream behaviors and traits, including risk tolerance, retirement savings, and debt management, to name just a few.

The processes from financial socialization through financial literacy to financial behavior all exist in an environment of communication that has been undertheorized and undermeasured. The proposed financial privacy scale relied on CPM (Petronio 2002) as a framework for understanding disclosure and communication about financial matters. Exploratory factor analysis was employed to develop a preliminary measure with the expected factor structure and acceptable psychometric properties. While these findings were a pilot study, the results suggested that the scale had concurrent validity with previous privacy measures (Morr Serewicz and Canary 2008). Furthermore, the measure aligned with theoretical expectations of correlation with financial knowledge. Therefore, the scale developed in this piece should have utility for future research on financial literacy.

The new scale can be used to measure privacy attitudes around finance, as a means to underscore the value of open communication as a way to transmit financial knowledge. Families both influence habits about information sharing (Petronio 2002) and exhibit typical patterns of communication and interaction (Koerner and Fitzpatrick 2002). Deepening our understanding of financial privacy and communication within the family can help understand joint negotiation of values and behaviors related to finance. This analysis can be extended to situations in which adolescents form contrasting rules or behaviors from their parents or reverse socialization in which parents learn indirectly from other financial socialization channels of schools or peers of their children.

The correlations reported here between financial privacy and knowledge suggest the value of open communication in the development of financial literacy for adolescents. This result aligns with previous work emphasizing communication (Hanson and Olson 2018; Hanson 2022). If conversations about finance do not occur within the family, there is a strong case that financial education should be discussion-oriented with a practical focus to encourage knowledge and skill development for adolescents.

Financial literacy programs that aim to alter privacy orientation or communication style can only assess their effectiveness if the construct can be assessed. The financial privacy scale can be one tool in measuring such change. Additionally, privacy rules and behavior change over time (Petronio 2002). Longitudinal measurement may enrich our understanding of financial socialization and the multiple influences on knowledge and behavior. CPM also emphasizes the value of understanding boundary turbulence, which occurs when privacy rules are violated and need renegotiation. This boundary turbulence can be assessed both qualitatively and quantitatively to illuminate such changes and issues around unexpected or unwanted disclosure of financial information.

Studies of financial socialization often emphasize the relationship with financial literacy (e.g., Shim et al. 2010; Zhao and Zhang 2020). Financial privacy represents an inquiry into one of the mechanisms by which socialization leads to literacy. This theoretical model positions communication- and privacy-related issues as mediating or moderating variables. Thus, the measurement of financial privacy potentially has both theoretical and practical impacts on modeling and teaching financial literacy.

6. Conclusions and Limitations

This pilot study proposed and developed a psychometric scale of financial privacy, building on CPM theory to measure the three dimensions of ownership, permeability, and linkages. The motivating theoretical argument is that financial socialization and transmission of financial knowledge can only occur through communication. Therefore, understanding privacy practices and associated family communication are vital for modeling financial literacy. On a practical level, the importance of communication suggests that financial literacy programs should emphasize conversations and practical case study examples to enhance learning (Hanson 2022; Hanson and Olson 2018).

6.1. Limitations and Future Research

This preliminary scale development work did not establish measurement invariance across demographic factors. For example, the research literature is generally consistent in reporting that females underperform in measures of financial literacy around the world (e.g., Bucher-Koenen et al. 2017; Chen and Volpe 1998; Lusardi and Mitchell 2008). Studies of financial literacy and financial socialization generally report that females score higher on both measures. Financial socialization may play a larger role for females than males (Bucciol et al. 2022), which Garrison and Gutter (2010) attribute partially to increased exposure to discussions with parents and peers, as well as observations of parental and peer financial behaviors for females. Similarly, the current sample is neither large nor diverse enough to establish measurement invariance regarding socioeconomic status. Future work will be needed, first, to establish consistency of the measure of financial privacy and, second, to examine whether differences in financial privacy mirror the patterns observed in measures of financial literacy and socialization.

This pilot study employed a non-random convenience sample. Furthermore, the current sample included only college students, so the scale cannot claim generalization across generational cohorts, which differ in their financial knowledge and behavior (Antwi and Naanwaab 2022). The sample was slightly skewed toward males and Caucasians from the overall college student population, so more diverse samples in future studies would provide evidence of robustness of the results. Ideally, measurements of family financial socialization would be collected from members of the same family, preferably in parent–child dyads. Data from families would be valuable in further validating the scale. In addition, further qualitative data collection about the role of the family in financial literacy and behavior could provide useful triangulation (similar to Romo 2011, 2014).

Looking beyond scale development and validation, financial privacy research should seek to reinforce the important, and somewhat overlooked, role of communication in financial literacy and capability. Replication of some previous work with the inclusion of financial privacy as a variable could provide additional insights to knowledge transmission and development of beliefs, habits, and behaviors. Such research could influence pedagogical development in financial literacy. The goal of greater financial well-being will be met partially through increased conversation about finance.

6.2. Conclusions

The value of financial literacy at both an individual and a societal level will only continue to increase due to the growing complexity and importance of financial decisions as individuals are asked to take greater control over their personal finances (Goyal and Kumar 2020; Lusardi and Mitchell 2023). This trend is only exacerbated by the increasing digitalization (and associated depersonalization) of financial services (Koskelainen et al. 2023). Therefore, the pathways and mechanisms for transmitting financial knowledge, literacy, and behavior are important areas of study. Financial socialization research suggests that family conversations and behavior modeling are key determinants of financial literacy for young adults. However, the transmission of knowledge through this channel relies on open communication. Consequently, financial privacy will play a role in the determination of financial literacy. This article developed a measure of financial privacy, using communication privacy management as a framework to conceptualize privacy, to provide a measure for related future work.