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Impact of financial behaviour on financial well-being: evidence among young adults in Malaysia

Mohamad fazli sabri.

1 Department of Resource Management and Consumer Studies, Faculty of Human Ecology, Universiti Putra Malaysia, 43400 Serdang, Selangor Malaysia

Mervin Anthony

Siong hook law.

2 School of Business and Economics, Universiti Putra Malaysia, 43400 Serdang, Selangor Malaysia

Husniyah Abdul Rahim

Nik ahmad sufian burhan, muslimah ithnin.

3 Southeast Asia One Health University Network (SEAOHUN) Secreteriat, Muang, Chiang Mai, 50200 Thailand

Associated Data

The high cost of living and prolonged lockdowns due to the COVID-19 pandemic made the financial well-being of individuals vulnerable, especially young adults. This paper examines the impact of financial behaviour on financial well-being (FWB) among young Malaysians during the COVID-19 pandemic. The study collected variable data on financial literacy, financial behaviour, financial socialisation, self-control, financial technology and FWB. To collect a representative sample of Malaysian young adults, a multi-stage random sampling method was used, and 360 young adults aged 18–29 years old completed the questionnaires. Structural equation modelling was adopted to investigate the factors influencing young adults' FWB. The empirical findings revealed a significant mediating effect of financial behaviour in the relationships between financial literacy, financial socialisation, self-control, financial technology, and FWB. The research concluded that the mediation analysis yields a clear and firm conclusion that financial behaviour is important in empowering young adults’ FWB. Thus, the present study adds value to the existing literature on the relationship between financial behaviour and FWB. Furthermore, the paper’s findings will assist government agencies and non-governmental organisations in developing outreach programmes for young adults per the strategies outlined in the Twelfth Malaysia Plan and the aspirations pledged in the Malaysian Youth Policy 2015–2035.

Supplementary Information

The online version contains supplementary material available at 10.1057/s41264-023-00234-8.


Recently, the financial well-being of Malaysian young adults has been affected due to the COVID-19 pandemic, where their savings and income opportunities have declined. As a result, underemployment has become common among young people not only in Malaysia, but also around the globe. Ideally, individuals in Malaysia are expected to have a job by the time they reach the age of 24. This study focuses on young adults aged between 18–29 years old because the benchmark of “young adults” is based on this classification. The Malaysian Department of Statistics ( 2019 ) revealed that young adults constitute a reasonable proportion of the country's 32.6 million population. From the official estimates, youths in Malaysia constitute 45.8% of the total population (Department of Statistics Malaysia 2020 ), a clear indication that the financial well-being of young adults is still ambiguous, and if correctly addressed, will have a significant impact on the country’s economic outlook in the years ahead.

Young adults' financial well-being has been significantly impacted and they have encountered a number of problems after the COVID-19 pandemic in Malaysia, including job loss, housing and rental issues, and credit card debt. First, young adults are one of the most rapidly declining groups in terms of income. Due to the pandemic, some young adults have lost their jobs or had their working hours curtailed. Thus, it has been challenging to pay for bills, rent, and other living expenditures. Second, young adults also face an even greater financial strain as they attempt to pay off their student loan debt, which is already a major financial burden for many. Third, many young individuals are finding it difficult to meet their monthly payments due to job loss and decreased income. Fourth, many young adults are finding it difficult to make ends meet or afford housing. Finding affordable accommodation has proven to be a challenge for young adults due to the high cost of housing. Fifth, many young individuals have turned to credit cards to pay their bills and make ends meet as a result of the economic downturn. Credit card debt has increased as a result, which can be challenging to pay off. In addition, the young adults' retirement funds have also been affected where the government allowed the contributors to withdraw their savings to pay for living expenses. The economic recession due to the pandemic has had a significant impact on young adults' finances, and it may take time for them to recover from these financial issues. Therefore, recent developments have led to a renewed interest in the financial well-being of young adults of Malaysia, whereby much of the research up to now has been descriptive in nature.

According to Kumar et al. ( 2022 ) and Vargas and Sanchez ( 2020 ), the COVID-19 crisis has made many young adults psychologically and financially vulnerable, and their financial well-being is worse, particularly for low-income young adults. Malaysia is not an exceptional case, where the gross domestic product (GDP) growth for the year 2021 has been revised downward to 4.0% from an earlier anticipation of 6.5–7.0%, which is bound to affect young adults' contributions to the GDP on a macro basis. Based on the historical data, this GDP growth is the lowest growth rate since the 1997–1998 Asian Financial Crisis that shackled the global financial markets. Correspondingly, the Malaysian economy posted its second-worst GDP growth in 2020 at − 5.58% (World Bank 2021 ). Before this, Malaysia's real GDP growth was at an average rate of 6.1% per year from 1970 to 2018. In terms of debt, Malaysian households aggregated debt was 93.3% of the GDP as of December 2020 (Bank Negara Malaysia or the Central Bank of Malaysia 2021 ), which increased from the previous years.

Young adults start their careers and often depend on debt to fuel their consumption, particularly vehicle and home purchases. Therefore, they should learn to differentiate between needs and wants, prioritise their consumption within their budget, and save money not only for the transaction but also for precautionary purposes. Undeniably, young adults have been among the hardest hit by the economic consequences of the pandemic, such as youth employment dropping and the rising cost of living. Therefore, youths need to find new opportunities and keep pace with the current economic condition, which has a variety of sophisticated financial products. In addition, having good money management abilities, financial decisions and money management are crucial in order to deal with various financial difficulties and financial responsibilities.

This study examines the determinants of the financial well-being of young adults, considering financial behaviour as a mediator. The multi-disciplinary nature of well-being is often explored from many dimensions. According to Ryff and Keyes ( 1995 ), the absence of theory-based formulations of well-being is perplexing. In determining an individual's financial standing, subjective and objective indicators of financial well-being are used. A young adult's financial situation and subjective well-being are determined by three interconnected factors: life satisfaction, pleasant affect, and unpleasant affect (Diener 2009 ). Young adults with similar earning capabilities will differ in their assessment of their financial standings and other aspects of life, such as their health or relationship with a significant other, thus indicating their well-being differently. Van Praag et al. ( 2003 ) highlighted that financial well-being is one of the six major contributors to well-being. Brüggen et al. ( 2017 ) pointed out that in the analysis of well-being, researchers should go further than just relying on the financial standings of an individual, with most studies on the multidimensional concept of well-being focusing on financial well-being as this is the most important component of well-being.

The observed well-being values for Malaysia based on Malaysia’s level of GDP per capita or income per capita from a cross-country dataset of 150 countries indicated that Malaysia is ranked in the middle (OECD 2021 ). However, the poverty rate is slightly below average compared to other countries. Gross national income (GNI) per capita, household income, and the Gini coefficient are clear indications of Malaysia’s progress in terms of financial well-being (Ann 2020 ).

A young adult is considered to have good financial well-being when they can meet their current financial commitments and have sufficient buffers for the longer term. Individuals who can absorb a financial shock are also financially well-off. These people can deal with emergencies and unexpected life challenges. Those who are on track to meet their financial objectives benefit from a formal or informal financial plan. Consumer Financial Protection Bureau (CPFB) further demonstrated that the factors that influence financial well-being are social and economic environment, which interact with a person’s personality and attitude, decision context, knowledge and skills, financial behaviours, and available opportunities to achieve personal financial well-being.

It is documented that to achieve financial well-being, an individual’s personality and attitude (how they tend to think, feel, and act) play a key role (CFPB 2015a ). It was reckoned that knowledge alone does not automatically equate to behaviour. Hence, determinants of a young adult’s financial well-being include personality traits. As discussed in the following sub-sections below, financial literacy, financial socialisation, self-control, financial technology, and financial well-being were thought to be mediated by financial behaviour.

Theoretical framework

This study identifies the mediating role of financial behaviour on the financial well-being of young adults. The conceptual framework is built using the four most commonly used theories. The research framework was founded on the Systems Theory, the Unified Theory of Acceptance and Use of Technology (UTAUT), the Social Learning Theory, and Self-Control Theory in explaining young adults' financial well-being. Deacon and Firebaugh ( 1988 ), using the underpinnings of systems theory, highlighted the link between factors (financial literacy, financial socialisation, self-control, and financial technology) and young adults' financial well-being.

To get an even better understanding of the underlying relationships of financial technology and its relationship to financial behaviour, the UTAUT theory is adopted, which is considered one of the unique contributions to literature. The researchers attempt to identify financial technology as the key driver of financial well-being among young adults. The theory of Social Learning is part of the model as the financial socialisation variable can best be explained through it. Owing to that explanation, this theory will explain the use of parental influence on a young adult's financial well-being based on what was learned as a child in their own families. As for the theory of self-control, the implications for young adults' financial well-being with the ability to control themselves are clear. The literature highlights that young adults with better self-control are more likely to have better financial well-being and that ability among young adults is investigated based on the young adults' financial behaviours.

This study contributes to the body of knowledge in terms of the role of technology adoption among young adults to attain financial well-being. From the framework presented, the new relationship of financial behaviour through the use of financial technology (fintech) to attain financial well-being is explored by the UTAUT theory. Financial technology has impacted financial well-being (Frame et al. 2019 ) and as such, this would be a relevant theoretical contribution. Past studies in Malaysia which studied the financial well-being of young employees/youths/young adults/emerging adults have not dealt with the use of financial technology and how it could aid financial well-being. In all fairness, the availability of financial technology methods that could contribute to youths’ financial well-being is relatively new in Malaysia, which is why it has not been explored by other researchers previously. This study would add to the literature which suggests that fintech plays a crucial role in young adults’ financial well-being.

Furthermore, to measure the personality trait variable of self-control in the theoretical underpinnings, the theory of self-control is incorporated in this study. The self-control theory has not been used in any preceding studies on financial well-being of young adults in Malaysia. The inclined relationship with self-control and financial well-being delves away from the current state of literature of financial well-being of young adults in Malaysia. Additionally, as only a few studies on young adults have explored the mediating role of financial behaviour, this study potentially contributes by examining the mediating effect of financial behaviour in the relationship between financial literacy, financial socialisation, self-control and financial technology (Fig.  1 ).

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Research model

Hypotheses formulation

Financial literacy.

Financial literacy is the ability to manage everyday financial affairs and the ability to allocate money for the future (Muñoz-Murillo et al. 2020 ). A previous study by Sabri et al. ( 2020 ) acknowledges that financial capability is related to financial well-being. Those with good financial management skills (i.e. having financial goals, savings, investments and insurance) tend to have higher levels of financial well-being. According to O’Neill et al. ( 2005 ), when people receive basic personal financial education, they manage their finances well and thus improve their financial well-being. As a result, this study proposes the following hypothesis:

The relationship between financial literacy and financial well-being is mediated by financial behaviour.

Financial socialisation

According to Albeerdy and Gharleghi ( 2015 ), financial socialisation is based on both internal and externally observed behaviours. Financial socialisation agents provide useful financial information about personal financial management to achieve personal financial well-being. Parents, it was found, are key socialisation agents (Drever et al. 2015a , b ; Lanz et al. 2019 ). Parents tend to be as thrifty as possible, but as studies have shown (Grohmann et al. 2015 ; Pinto et al. 2005 ), children would have better financial well-being if their parents discussed everyday financial matters with them. The researchers consequently hypothesise that:

Financial behaviour acts as a mediator between financial socialisation and financial well-being.


Self-control is the ability to control oneself and overcome immediate needs for better outcomes in the future (Baumeister 2002 ; Fujita et al. 2006 ). This idea is supported by previous research, which shows that people with higher self-control save more (Pirouz 2009 ) and have better financial behaviour in general (Strömbäck et al. 2017 ). Because self-control is defined as the ability or capacity to reshape one's response (Baumeister 2002 ), young adults who can change their behaviour in response to control stimuli will be more financially well-off. This study consequently hypothesise that:

The relationship between self-control and financial well-being is mediated by financial behaviour.

Financial technology

Financial technology, better known as “FinTech,” refers to an innovative financial service that emerged in tandem with the new technologies' advancements to allow consumers to conduct financial activities through digital means (Micu and Micu 2016 ). Agarwal et al. ( 2019 ) found that when fintech is used, as reminders are sent, an individual is more alert to make payments on time. Medina ( 2016 ) found that these reminders are stimuli for reducing credit card late payment fees. This finding further collaborated with Karlan et al. ( 2016 ), who showed that text message reminders helped consumers avoid penalties. One common finding in all of these studies is that financial technology provided some form of stimulus for individuals to change their behaviours. This study consequently hypothesises that:

Financial behaviour serves as a mediator between financial technology and financial well-being.

Financial behaviour and financial well-being

Financial behaviour is how an individual decides what to do with money, including everyday financial decisions that will make them feel satisfied with their actions (Kamakia et al. 2017 ; Bilal and Zulfiqar 2016 ). This study uses financial behaviour as the mediating variable, as it defines how young adults behave financially, which is the cornerstone of financial well-being (Gudmunson and Danes 2011 ; Xiao et al. 2009 ). Positive financial behaviours have been found to be extremely beneficial to financial well-being (Sabri et al. 2021a , b ; Shim et al. 2009a , b ; Xiao et al. 2007 ).

According to the literature, subjective financial well-being is influenced by financial behaviour, which is a significant predictor of financial well-being. However, only a few studies have looked into financial behaviour as a mediator among Malaysian young adults. As a result, the current study intends to investigate the relationship between financial behaviour as a mediator to generate useful findings for future researchers. In short, financial behaviours have a positive relationship with financial well-being. This means that positive financial behaviour will improve young adults’ financial well-being and vice versa.

Financial behaviour as a mediating variable

The literature available confirms the positive direct impact of financial behaviour on financial well-being. It illustrates that financial behaviour mediates the relationship between financial literacy, financial socialisation, self-control, financial technology, and financial well-being. As found in numerous studies, individuals’ financial behaviour is the primary determinant of their financial satisfaction (Bashir et al. 2013 ; Falahati et al. 2012 ; Xiao et al. 2009 ). Furthermore, when desired financial behaviour is found in young adults, researchers (Gutter and Copur 2011 ; Shim et al. 2009a , b ) concluded that it has a positive relationship with their financial well-being, including non-personal consequences, such as improved physical health, better mental health and life satisfaction (Xiao et al. 2011 ).

Coskuner ( 2016 ) demonstrated that financial literacy is a life skill that is needed among individuals of all age groups. Financial literacy is about applying financial knowledge to make effective financial decisions in optimising resources. Ultimately, financial literacy influences financial well-being in determining decisions (Sabri et al. 2021a , b ; Zulfiqar and Bilal 2016 ). Further, Joo and Grable ( 2004 ) stated that financial knowledge mediates the effects on financial well-being. Better savings behaviour is observed in individuals with better financial knowledge (Henager and Mauldin 2015 ; Jappelli and Padula 2013 ). Having better retirement savings preparation (Lusardi and Mitchelli 2007 ) and lower total amount of debts (Lusardi and Tufano 2015 ) are among positive financial behaviours that is a factor that contributes to a young adults’ financial well-being. Financial well-being correlates with positive financial behaviour (Gutter and Copur 2011 ; Henager and Mauldin 2015 ; Shim et al. 2009a , b ).

Financial behaviour is directly related to financial socialisation (Rea et al. 2019 ; Deenanath et al. 2019 ) and financial well-being. Parental financial socialisation was found to have lasting and profound financial outcomes throughout individuals' lifetimes. In addition, positive financial behaviour is achievable through parental financial socialisation among young adults (Drever et al. 2015a , b ; Otto 2013 ). Parental financial socialisation impacts even financial behaviours (Kim and Chatterjee 2013 ; Sohn et al. 2012 ). Poor self-control causes excessive debt (Achtziger et al. 2015 ), unplanned spending (Gathergood 2012 ), and a lack of funds for retirement years (Kim et al. 2016 ). Because of this, self-control is an essential component and has a significant positive effect on financial behaviour. Self-control has been proven to impact financial well-being through better savings behaviour (Biljanovska and Palligkinis 2015 ) and credit management (Achtziger et al. 2015 ).

Limited literature exists on the influence of fintech and the observed influences among young adults. Nevertheless, Brown and Venkatesh ( 2005 ) found that positive attitude among users is attainable through the usage of technology. Fintech takes many forms in its ability to influence young adults or nudge them with behavioural traits. According to Anderson ( 2015 ), fintech is helpful as it provides a form of reminder mechanism for the end-users, allowing them to alter their behaviour and take action to avoid late financial payment fees. Thus, more significant financial technology usage among young adults is generally associated with healthy financial behaviours, hence increasing the likelihood of better financial well-being.

Research methodology

Population and sample size.

Based on the data retrieved from the Department of Statistics Malaysia, the total population of Malaysia in 2020 was 32.6 million with an annual population growth rate of 0.6% (DOSM 2020 ). The number of Malaysians aged between 15–29 years is 9,187,200 (DOSM 2020 ). As this study focuses on young adults between the ages of 18–29, this constitutes an estimated number of 6,427,000 individuals.

The sampling techniques differ according to the research problem as one technique may not be appropriate for other research problems (Singh and Masuku 2014 ). According to Krejcie and Morgan ( 1970 ), a required sample size of 384 respondents is required for a population equal or more than 1,000,000, with confidence interval of 95% and margin of error of 2.5%. According to Hair et al. ( 2010 ), sample size must be sufficiently large to ensure precise statistically significant results. However, a sample size that is too large would lead to waste of resources which should ideally be avoided. In general, sample size is determined based on several criteria such as the model complexity, expected rate of missing data, and analytical procedures employed (Hair et al. 2010 ). According to Hair et al. ( 2021 ), a minimum of 200 respondents is needed for small to medium size models, with a least ten respondents per estimated path. This study also employed Westland’s ( 2010 ) approach to determine the sample size that meets the minimum requirements for quantitative analysis such as Structural Equation Modelling (SEM). Accordingly, Westland's method ( 2010 ) suggests that the minimum sample size for model structure is N  = 123 based on the anticipated effect size of 0.1 and statistical power of 0.80. This is calculated based on six (6) latent variables (constructs) and 22 observed variables (items) used in this study. The present study considered the sample size rule of thumb suggested by Krejcie and Morgan ( 1970 ), Hair et al. ( 2021 ) and Westland ( 2010 ). Thus, a total number of 400 respondents were decided.

Sampling technique

Multi-stage random sampling was used to sample a total of 400 respondents from five (5) regions in Malaysia (i.e. Northern, Southern, Eastern, Central and East Malaysia) that were randomly selected in the first stage. Firstly, Malaysia was divided into five (5) regions, namely Northern (Perlis, Kedah, Penang and Perak), Southern (Johor, Melaka and Negeri Sembilan), Eastern (Terengganu, Pahang and Kelantan), Central (Selangor and The Federal Territories of Kuala Lumpur and Putrajaya) and East Malaysia (Sabah and Sarawak). Secondly, one state was randomly selected from each region through a ballot. As a result, Penang (Northern), Johor (Southern), Terengganu (Eastern), Selangor (Central) and Sabah (East Malaysia) were determined to be the states for the study location.

The selected state in each region was targeted to obtain 80 respondents each. At the second stage, upon confirming the locations, a list of all youth organisations located in urban areas in the selected states was attained from the Malaysian Youth Council (MYC), the official youth organisation recognised by the Ministry of Youth and Sports, Malaysia. Four youth organisations were randomly selected from the list, requiring 20 respondents from each youth organisation. The leaders of these youth organisations were briefed via an online meeting, and they were to distribute the questionnaires randomly to 20 youths within their youth association. The sample was among youth (i.e. student, self-employed, public and private sector) with the age range between 18–29 years old.

Table ​ Table1 1 presents the definitions of the five variables in this study. The variables were investigated based on the adaptation from De Sena Abrahão et al. ( 2016 ) for financial technology, instruments adopted from Sabri et al. ( 2010 ) for financial literacy, and young adult’s financial socialisation measurement was assessed using Manfrè ( 2017 ). To assess financial socialisation, financial behaviour was measured using Kim ( 2004 ), Ismail et al. ( 2017 ), and Sumarwan and Hira’s ( 1993 ) self-control instruments with internal and external items that determine belief in one's ability to control the situation that occurs, and well-being was measured with the Financial Well-Being Scale developed by CFPB ( 2015b ), which was based on the adaptation of the scale development from the technical report.

Variables definition

Financial literacyThe level of knowledge in finance among young adults and the significant relationship with day-to-day personal financial management to attain financial well-being
Financial behaviourYoung adults’ actions such as having a budget, cash flow management, make plans for spending, managing credit and planning finances for the longer term
Financial socialisationWhen young adults look at their parents and family members as well as role models in the community to emulate
Self-controlYoung adults’ ability to control their current self for something that is to come in the future as well as to gauge their control over their finances
Financial technologyYoung adults’ adoption of financial technology platforms/services as part of the ecosystem of attaining financial well-being
Financial well-beingYoung adults’ assessment of their quality of life according to their own chosen criteria and individual perception. This is by understanding their sufficiency of money for everyday living as well as emergency savings for the future

Data analysis

Prior to estimation, the exploratory factor analysis (EFA) was performed on all variables (financial literacy, financial socialisation, self-control, financial technology, financial behaviour) measuring the individual constructs, indicating that the Bartletts’ Test of Sphericity is significant ( p value 0.05). Furthermore, the Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy for the individual variables is adequate because it exceeds the required value of 0.6 (Rahlin et al. 2019 ; Bahkia et al. 2019 ). These two results (significant Bartlett's Test and KMO > 0.6) indicate that the data is sufficient to proceed with the data reduction procedure in EFA (Rahlin et al. 2019 ; Bahkia et al. 2019 ). The KMO test has a range of 0–1, with 0.6 being the recommended minimum value. Before conducting a factor analysis, the KMO measure of sampling adequacy and Bartlett’s Test of Sphericity must be met.

Following the recommendations of Awang et al. ( 2018 ), the AMOS in SPSS was used to perform confirmatory factor analysis (CFA) on the items of each scale (financial literacy, financial socialisation, self-control, financial technology, and financial well-being). Absolute Fit, Incremental Fit, and Parsimonious Fit are the three model fit categories (Mahfouz et al. 2019 , 2020 ; Sarwar et al. 2022 ). The index fit categories and fitness index thresholds indicate that the fit statistics were satisfactory.


To ensure the precision and accuracy of the items in the questionnaire, a pilot test was run among 30 selected young adults. The reliability coefficients for the six (6) constructs in the pilot test are within the ranges of 0.823 (financial technology) to 0.955 (financial literacy) as shown in Table ​ Table2. 2 . The instrument was improved on the terms and instruction parts as the respondents had problems in understanding them. The result of the actual study is within the ranges of 0.77 (financial behaviour) to 0.906 (financial well-being).

Reliability analysis of scales

ScaleCronbach’s alpha
Pilot test (  = 30)Actual (  = 360)
Financial technology0.8230.812
Financial literacy0.9550.892
Financial socialisation0.9000.785
Financial behaviour0.9060.771
Financial well being0.9300.906

Confirmatory factor analysis (CFA)

Like Awang et al. ( 2018 ), this paper used a two-step technique to model and analyse the structural model, namely confirmatory factor analysis (CFA) and structural equation modelling (SEM). As a result, before modelling the structural model and performing structural equation modelling (SEM), the study must test all measurement models of latent constructs for Unidimensionality, Validity, and Reliability (Sarwar et al. 2022 ). Confirmatory Factor Analysis (CFA) is the name given to this procedure.

According to Afthanorhan et al. ( 2020 ), the measuring model of latent constructs must satisfy three types of validity: construct validity, convergent validity, and discriminant validity. The Fitness Indexes of the Measurement Model are used to assess construct validity, the average variance extracted (AVE) to assess convergent validity, and the Discriminant Validity Index Summary to assess discriminant validity. In terms of dependability, the composite reliability (CR) technique, which replaced the previous method of calculating Cronbach Alpha for analysis using structural equation modelling (SEM), is adequate for the study (Asnawi et al. 2019 ). A latent construct's fitness indices are considered valid if they fall into one of three Model Fit categories: Absolute Fit, Incremental Fit, or Parsimonious Fit (Afthanorhan et al. 2020 ).

Measurement model

Figure  2 depicts the pooled constructs. The five constructs, namely financial literacy, financial behaviour, financial socialisation, self-control and financial technology in the model are second-order constructs with a certain number of sub-constructs and every sub-construct is measured using a certain number of measuring items in the questionnaire. The details of the items’ statements are in Supplementary 1. An interval scale which ranges from 1 (strongly disagree) to 5 (strongly agree) is used to measure every item in the given statements (Awang et al. 2018 ). Thus, the measurement model for all constructs is complicated in terms of the number of components and their respective measuring items. For the complicated model, the researcher could elect to assess the CFA for each measurement model of the construct separately and combine them together at the final stage to perform the Pooled-CFA when all individual constructs have achieved the respective thresholds of validity and reliability (Nawal et al. 2020 ; Sarwar et al. 2022 ).

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The results of pooled-CFA for all constructs in the study

This study decided to conduct the CFA procedure separately for every second-order construct. Once the individual CFA assessment for second-order construct is completed, the study would perform the item-parceling process to simplify the second-order construct into first order by taking the mean score of items in every component to represent that particular component in measuring the respective construct. At the end of the process, all second order constructs would become first order.

The pooled CFA would combine all first order constructs to assess the discriminant validity among these constructs. Prior to modelling the structural model and executing SEM, the researcher needs to prove that all constructs involved in the model are discriminant of each other or they are not highly correlated, especially between the exogenous constructs (Kashif et al. 2015 , 2016 ; Mahfouz et al. 2019 , 2020 ). If the two exogenous constructs are highly correlated (correlation greater than 0.85), then there exists a serious problem called multi-collinearity, and the study needs to utilise their respective remedial measures.

The assessment for convergent validity and composite reliability

To establish convergent validity, the study computes Average Variance Extracted (AVE). The construct is said to be convergent valid if its AVE exceeds the threshold value of 0.5. (Awang et al. 2018 ; Mahfouz et al. 2019 , 2020 ). To analyse composite reliability (CR), the study computes convergent validity, and its value must be greater than 0.6 for this reliability to be achieved (Mahfouz et al. 2019 , 2020 ). Table ​ Table3 3 shows that all the average variance extracted (AVE) and composite reliability (CR) values are greater than their respective threshold values of 0.5 and 0.6 (Sarwar et al. 2022 ). As a result, the study concludes that all the model's latent constructs have Convergent Validity and Composite Reliability.

The average variance extracted (AVE) and composite reliability (CR)

ConstructItemsFactor loadingCR
(above 0.6)
(above 0.5)
Financial literacyFLC10.84
Financial behaviourFBC10.70
Financial socialisationFSC10.73
Financial technologyFTC10.69
Financial well-beingFWB10.79

The assessment of discriminant validity among constructs

The study also evaluates discriminant validity, which is a sort of model validity. The purpose of the discriminant validity assessment is to guarantee that the model does not contain any redundant constructs. A redundant construct occurs when any two constructs in a model are closely related. To measure discriminant validity, the discriminant validity index summary, as shown in Table ​ Table4, 4 , must be developed. The diagonal line in bold represents the square root of AVE, and the other figures show the correlation coefficient between the two constructs. To determine whether the respective constructs achieved Discriminant Validity, the square root of their AVE must be greater than their correlation value with other constructs in the model (Awang et al. 2018 ). Discriminant Validity is achieved if the diagonal values (in bold) are greater than any other values in its row and column, as shown in Table ​ Table4, 4 , and thus Discriminant Validity for the six constructs listed is achieved.

The discriminant validity index summary for all constructs


The assessment of normality for all constructs

SEM is a parametric statistical approach to modelling, thus the normality distribution of all items measuring their respective constructs must be assessed. According to Awang et al. ( 2018 ), the skewness values for all items should not deviate from normalcy. As a result, skewness levels between − 1.5 and 1.5 are acceptable. Table ​ Table5 5 reports the normality distribution assessment results for all elements. The model's components all have skewness values between − 1.5 and 1.5, indicating that their distribution is normal (Awang et al. 2018 ). As a result, the data distribution meets the criteria for normality distribution when using parametric statistical analysis. The completion of the CFA indicates that the validity criterion has been met. After the study has satisfied the requirements for reliability and normality distribution, it can move on to modelling the structural model.

The assessment of normality for all components of the constructs

FWB62.0005.000 − 0.353 − 2.7370.2010.779
FWB52.0005.000 − 0.390 − 3.022 − 0.052 − 0.202
FWB42.0005.000 − 0.069 − 0.532 − 0.422 − 1.637
FWB32.0005.000 − 0.143 − 1.113 − 0.288 − 1.115
FWB22.0005.000 − 0.080 − 0.622 − 0.252 − 0.977
FWB12.0005.000 − 0.375 − 2.9070.2801.085
FTC11.0005.000 − 0.247 − 1.914 − 0.009 − 0.036
FTC22.0005.000 − 0.066 − 0.513 − 0.420 − 1.628
FTC31.0005.0000.0240.188 − 0.144 − 0.560
FTC41.0005.000 − 0.381 − 2.9580.1060.412
FBC32.0005.000 − 0.057 − 0.443 − 0.213 − 0.825
FBC22.0005.000 − 0.287 − 2.229 − 0.260 − 1.009
FBC12.0005.000 − 0.581 − 4.5100.4471.733
FLC31.0005.000 − 0.809 − 6.2761.3095.076
FLC21.0005.000 − 0.616 − 4.7741.0223.964
FLC11.0005.000 − 0.759 − 5.8861.2614.892
SCC11.0005.000 − 0.995 − 7.7210.6392.477
SCC21.0005.000 − 0.829 − 6.4310.4701.824
SCC32.0005.000 − 0.497 − 3.8560.1190.463
FSC11.0005.000 − 0.483 − 3.7440.6902.676
FSC21.0005.000 − 0.131 − 1.012 − 0.220 − 0.852
FSC32.0005.000 − 0.076 − 0.586 − 0.420 − 1.628

The structural model and structural equation modelling (SEM)

Once the CFA report is completed and all results meet the required thresholds for validity and reliability, it can be concluded that the measurement models for all latent constructs in the model have been validated (Sarwar et al. 2022 ). Table ​ Table6 6 shows the statistical analysis employed for each hypothesis statement. To run Structural Equation Modelling (SEM), the constructs should be arranged from left to right, beginning with the exogenous constructs on the far left, followed by the mediator constructs in the middle, and the endogenous construct on the far right (Awang et al. 2018 ). Based on the hypothesis direction, this study uses the single headed arrow to connect the exogenous construct to its associated endogenous construct.

The hypothesis statement for mediator effect for this paper

Hypothesis statementStatistical analysis to employCriterionThreshold
Financial Behaviour mediates the relationship between Financial Literacy and Financial Well-BeingPath Analysis in SEM and BootstrappingPath coefficient estimates and their significance levelSignificant at 5% significance level, i.e. value < 5%
Financial Behaviour mediates the relationship between Financial Socialisation and Financial Well-BeingPath Analysis in SEM and BootstrappingPath coefficient estimates and their significance levelSignificant at 5% significance level, i.e. value < 5%
Financial Behaviour mediates the relationship between Self-Control and Financial Well-BeingPath Analysis in SEM and BootstrappingPath coefficient estimates and their significance levelSignificant at 5% significance level, i.e. value < 5%
Financial Behaviour mediates the relationship between Financial Technology and Financial Well-BeingPath Analysis in SEM and BootstrappingPath coefficient estimates and their significance levelSignificant at 5% significance level, i.e. value < 5%

Finally, as shown in Fig.  3 , the double-headed arrow connects all exogenous constructs. The single headed arrow represents the causal effects of an external construct on the respective endogenous construct being evaluated. If the structural model contains more than one exogenous construct, the double headed arrow should be used to quantify the correlational effects between all exogenous constructs. The study must examine the strength of correlation between the exogenous constructs to analyse and prevent the multi-collinearity problem in the model where the two exogenous constructs are highly linked. When the correlation between two exogenous constructs exceeds 0.85, the constructs are highly correlated, and the multi-collinearity problem exists (Sarwar et al. 2022 ).

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The structural model for the study

The assessment for construct validity

The Absolute Fit category, RMSEA, is 0.046 (less than 0.08), the Incremental Fit category, CFI, is 0.964 (greater than 0.90), and the Parsimonious Fit category, Chi-square/df ratio, is 1.749 (achieved the threshold of less than 3.0). As a result, the Construct Validity criteria were met by the measurement model for all latent constructs (Afthanorhan et al. 2020 ).

Results and discussion

Profile of respondents.

The study was conducted on a total of 400 subjects. Three hundred sixty questionnaires were completed (response rate: 90.0%), and as there were no missing data, all completed questionnaires were included in the analysis. Table ​ Table7 7 summarises the demographic profile of the survey respondents. The respondents profile includes gender, age, educational level, employment status, ethnicity, marital status, monthly income, number of family members and if the COVID-19 pandemic has impacted their income.

Sociodemographic characteristics of respondents ( N  = 360)

CharacteristicsFrequencyPercentage (%)
18–19 years old143.9
20–25 years old30083.3
26–29 years old4612.7
No formal education20.6
Secondary (SPM/STPM)5314.7
Bachelor’s degree23966.4
Master’s degree143.9
Less than RM1,50027075.0
Greater than RM1,5009025.0
No changes17749.2
More than 1220.6

The majority of the participants were females (59.4%), Malay (79.7%) and over 80% of the respondents were between the ages of 20–25. The vast majority of respondents were either enrolled in or had completed college tertiary education. Education has been shown to improve personal financial management and improve financial well-being (Anderloni et al. 2012 ). Only 15.3% of the respondents have SPM/STPM or no formal education. The majority of respondents are single (91.7%), and this is because the respondents are young adults.

Most of the respondents have a monthly income lesser than RM1,500 (75.0%), and the remaining 25% of them have a monthly income greater than RM1,500. However, despite this, it is noted that the young adults have had their allowances reduced with 42.5% of the respondents indicating a drop of income in view of the COVID-19 pandemic. A whopping 64.2% of respondents also indicated that the number of family members in their household is between 5–8, which is significantly higher than the average national household size. The average household size in Malaysia stands at four persons as of 2019 (Department of Statistics Malaysia 2019 ). This may indicate that many young adults are living with an extended family member.

The relationships between variables

Table ​ Table8 8 displays the relationships between variables of the non-mediation model. The details of the findings are discussed in the following sections.

Regression path coefficient and its significance

Std errorC.R ValueConfidence intervalResult
Financial behaviour → Financial wellbeing0.4800.1553.1030.0020.1360.956Significant
Financial well-being ← Financial technology − 0.0350.084 − 0.4210.674 − 0.2200.147Not significant
Financial well-being ← Self-control0.1580.0871.8180.069 − 0.1740.369Not significant
Financial well-being ← Financial socialisation0.3100.1062.9380.0030.0500.553Significant
Financial well-being ← Financial literacy0.0960.0521.8250.068 − 0.0170.194Not significant

The relationship between financial literacy and financial well-being

This study discovered that financial behaviour has a significant positive influence on financial well-being ( β  = 0.48, t  = 3.10, p  < 0.05) in the non-mediation model. This finding is consistent with recent local studies (Mahdzan et al. 2019 ; Sabri et al. 2022 ), which discovered that being financially healthy and happy necessitates positive financial behaviour, such as regular savings and proper credit management. Interestingly, the researchers discovered that financial literacy has no significant influence on financial well-being ( β  = 0.09, t  = 1.82, p  > 0.05), contrary to previous research that found financial literacy to be important in determining financial well-being (Koposko 2013 ; Rahman et al. 2021 ; Taft et al. 2013 ). Taft et al. ( 2013 ), however, proved a positive impact of financial literacy on financial well-being among Iranians, while Rahman et al. ( 2021 ) confirmed a significant influence of financial literacy on financial well-being among B40 households in Malaysia. These studies sampled the general population and low income households as opposed to the young adults population.

The relationship between financial socialisation and financial well-being

Financial socialisation was found to have a significant influence on financial well-being ( β  = 0.31, t  = 2.93, p  < 0.05). This is consistent with the findings of Jorgensen and Savla ( 2010 ), who discovered that youths acquire their financial learning experiences through positive or negative reinforcement, observations, participation and practise, or family instructions. Young adults' intermediate outcomes, such as their attitude towards money, are primarily influenced by their family members and are strongly related to their financial behaviours and well-being. Prior research has found a causal significant relationship between parental financial socialisation and the well-being of young adults, which supports the findings of this study. Children whose parents who have set a good financial example and educated them well in childhood will be able to manage personal finances well in adulthood (Friedline et al. 2013 ; Sirsch et al. 2019 ). This research also discovered that the majority of young adults' financial socialisation was heavily influenced by their parents. Furthermore, because of proper financial socialisation agents during childhood, respondents strongly believe that they can effectively manage numerous difficulties and achieve successful outcomes.

The relationship between self-control and financial well-being

This study found that self-control is insignificantly related to financial well-being ( β  = 0.15, t  = 1.81, p  > 0.05). Self-control alone cannot guarantee financial well-being. Young adults who exercise self-control but take no action to improve their financial circumstances would not be able to attain financial well-being. Nonetheless, to a certain extent, some practice of self-control will help young adults to have more savings, but this does not guarantee in ensuring that upon exercising such a personality trait, their financial well-being will improve. This disparity arose because young adults are feeling troubled by the global outlook caused by the pandemic and as a result, believe that despite exerting self-control, they may be unable to achieve financial well-being. However, as illustrated by other highlighted studies, there is a strong relationship between self-control and financial well-being.

The relationship between financial technology and financial well-being

The study found that financial technology (fintech) is insignificantly related to financial well-being ( β  = 0.03, t  = 4.21, p  > 0.05). As there are many applications that prey on young adults to spend their money, this research found that there is no causal positive relationship between fintech and young adults’ financial well-being. Applications such as Buy Now Pay Later (BNPL) do not aid in wealth preservation or debt reduction (Wolla 2017 ). Garg and Singh ( 2018 ) discovered that young adults nowadays face greater difficulty managing their money due to the variety of options available in the market. Furthermore, young adults are thought to be more technologically savvy, highly educated, and more talented and motivated to enjoy life through instant gratification (Mahalingam 2017 ; Nga et al. 2010 ). As a result, because young adults do not prioritise personal finance, certain fintech platforms may cause more harm than good (Mahalingam 2017 ).

Using bootstrapping to confirm the results of the mediation test

According to Yusof et al. ( 2017 ), the researcher must use the bootstrapping resampling procedure to confirm the test results once the hypothesis test for mediation has been completed and the mediation effect has occurred in either partial or full mediation. Table ​ Table9 9 reports the findings of the bootstrapping method for examining the financial behaviour as a mediator in the relationships between financial literacy, financial socialisation, self-control and financial technology with financial well-being. The study utilised the maximum likelihood (ML) Bootstrapping using 1000 bootstrap samples, with PC (Percentile) 95% confidence interval and BC (Bias-corrected) 95% confidence interval.

The bootstrapping result for testing financial behaviour as a mediator

VariablesIndirect effect (axb)Direct (c)
Bootstrapping valueBootstrapping value
Financial literacy
SignificantNot Significant
Financial socialisation
SignificantNot Significant
Financial technology
SignificantNot Significant
Financial behaviour
SignificantNot Significant

Dependent variable: Financial well-being

The combined impact of exogenous factors on endogenous variables is explained by the model's R 2 (coefficient of multiple determination) performance (Hair et al. 2021 ). Out of the five path values, only two path coefficients were found to be statistically significant. Based on the findings, financial behaviour had an R 2 of 0.74 and financial well-being had an R 2 of 0.61. With an R 2 of 0.74, it was clear that financial technology, self-control, financial socialisation, and financial literacy together accounted for 74% of the variation in explaining financial behaviour. Similarly, R 2 of 0.61 indicated that 61% of the variation in describing financial well-being was explained by financial literacy, financial socialisation, self-control, financial technology, and financial behaviour.

The results of this study looked into the mediation effect of financial behaviour in the relationships between financial literacy and financial well-being ( β  = 0.071, p  < 0.05), between financial socialisation and financial well-being ( β  = 0.19, p  < 0.05), between financial self-control and financial well-being ( β  = 0.05, p  < 0.05), between financial technology and financial well-being ( β  = 0.01, p  < 0.05), as well as between financial behaviour and financial well-being ( β  = 0.13, p  < 0.05). The findings demonstrate that every mediation relationship showed a strong mediation relationship. Based on the empirical results, H1, H2, H3, and H4 were therefore supported. Financial behaviour is crucial in empowering young adults' financial well-being, based on the mediation analysis' unmistakable and conclusive conclusion. The study used the approach recommended by Awang et al. ( 2018 ) and Kashif et al. ( 2016 ) for examining the mediation effects in the model.

The mediation effects of financial behaviour in the relationships of the factors on financial well-being are further discussed. Financial literacy underlies the cause of one’s financial well-being through their involvement in financial activities. The mediation effect of financial behaviour is in tandem with Xiao and Porto ( 2017 ), Atkinson and Messy ( 2011 ), and Klapper et al. ( 2013 ). As Xiao and Porto ( 2017 ) pointed out, increased financial literacy is frequently associated with increased knowledge acquisition, confidence, and action-taking, all of which contribute to increased financial well-being. The actions taken in financial activities involving various financial matters and the application of financial literacy in financial behaviour would enhance financial well-being. Both past studies by Atkinson and Messy ( 2011 ) and Klapper et al. ( 2013 ) relate on the significant role of financial literacy in creating an enhanced ability to plan, save and react to financial shocks. These past studies are able to justify the mediating effect of financial behaviour in the relationship between financial literacy and financial well-being. The knowledge on finances alone without the action taken using the knowledge may not improve financial well-being significantly, thus the role of financial behaviour is important.

For the significant mediation effect of financial behaviour in the relationship between financial socialisation and financial well-being, it is about the role of financial socialisation, especially among parents with young adults. Parents play an important role in shaping the knowledge and skills related to financial matters of their children, which is required for a sound financial behaviour. Financial socialisation, especially by parents, contributed to the increase of financial well-being through their involvement in financial activities. A proper saving and monetary arrangement opens for improvement of the financial behaviour of individuals through more family financial socialisation (Jorgensen et al. 2017 ). Similarly, contended by Firmansyah ( 2014 ), the conduct of saving is influenced by parents and guardians’ eagerness. The financial behaviour of children resembles the financial behaviour posed by their parents. Either the positive or the negative financial behaviour of parents or the people around them would eventually show when they grow up, leading to a better or worse financial well-being.

In explaining the mediation effect of financial behaviour in the relationship between self-control and financial well-being, the ability of financial behaviour to mediate the relationship is by amplifying the self-control of young adults. Kiyosaki ( 2014 ) discovered that young adults with better self-control have better financial behaviour and can better manage their financial resources, which leads to financial well-being. In line with the findings of this paper, he discovered that they optimally allocate their resources. High self-control would guide their financial behaviour to a good extent. Furthermore, Kahnemann ( 2011 ) justified that people with cognitive abilities always manage their finances to achieve set goals and foreseeable expenses, emphasising the importance of self-control.

The use of fintech is mediated by financial behaviour in its relationship with financial well-being. Mastering fintech only may not contribute to elevating financial well-being of young adults. Fintech, as it was discovered, benefits young adults as an enabling ecosystem but does not significantly benefit them in terms of financial well-being if they fail to pay attention to their own financial behaviour. Therefore, to benefit from financial technology, young adults must practise responsible financial behaviour. Hence, the mediation result of financial behaviour in the relationship between fintech and financial well-being alleviates the function of fintech in improving financial well-being with the role of financial behaviour in the process.

Robustness checks

Robustness checks were carried out to evaluate the sensitivity of the empirical findings to alternative estimation using the Sobel-Goodman mediation test suggested by Sobel ( 1982 ). The variables were constructed using the aggregate (calculated by the combination of several separate elements) for each category. Those with more financial literacy, financial socialisation, self-control, and financial technology, tend to report better financial well-being. A possible mediation explanation is that higher financial behaviour is associated with financial well-being. The theoretical causal process is shown in Fig.  4 , where a and b are coefficients, a  ×  b is indirect effect and c’ is direct effect.

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Object name is 41264_2023_234_Fig4_HTML.jpg

Theoretical causal process

The empirical results are reported in Table ​ Table10. 10 . Based on the Sobel-Goodman mediation results, the findings are robust to the alternative estimation method, where the results are in line with Tables ​ Tables8 8 and ​ and9. 9 . As shown in Models 1–4, all the indirect effect tests ( a  ×  b ) revealed in the first Sobel-Goodman mediation tests table show very small p values ( p  < 0.001), providing support for the explanation that financial behaviour mediates the effects of financial literacy, financial socialisation, self-control, and financial technology on financial well-being. In addition, there is a direct effect from financial literacy on financial well-being as demonstrated by the c’ coefficient. The last row of Table ​ Table10 10 implies that the effects of financial literacy are reduced by about 48.1% after accounting for financial behaviour as shown in Model 1.

Robustness checks using the Sobel Goodman mediation test

VariablesModel (1)Model (2)Model (3)Model (4)
Financial behaviour0.996***0.849***1.210***1.045***
Financial literacy0.443***
Financial socialisation0.675***
Financial technology0.286***




































Sobel-Goodman mediation test









Proportion of total effect that is mediated48.1%39.9%52.0%58.8%

Standard errors in parentheses (). 95% confident interval in brackets []

*, ** and *** denote significant at 1%, 5% and 10% levels, respectively

Theoretically, this suggests that about 48.1% of the effects of financial literacy on financial well-being is explained by the indirect effects of financial literacy on financial behaviour. Financial technology accounts for the biggest percentage of these four explanatory factors at 58.8%. This suggests that the indirect impact of financial technology on financial behaviour accounts for around 58.8% of the influence of financial technology on financial well-being. Among the factors being mediated by financial behaviour in these models, financial technology is revealed as the factor that required financial activities to be performed highly, thus the high involvement of financial behaviour for those financial technology savvy individuals would increase financial well-being more than the other factors. Financial literacy is the second factor being mediated highly by financial behaviour, followed by financial socialisation and self-control.

Conclusion and implications

This study examines the determinants of young adults' financial well-being, considering financial behaviour as a mediator, using the structural equation modelling multivariate approach. The empirical findings indicated that financial behaviour was the most important element in influencing young adults' financial well-being. In addition, the study found that financial literacy, financial socialisation, self-control, and financial technology were statistically significant determinants of financial behaviour. Moreover, financial behaviour plays an essential role in mediating the determinants that affect the financial well-being of young adults in Malaysia. Among the mediators, financial technology is ranked first, followed by financial literacy, financial socialisation and self-control. The robustness check using other estimation methods also demonstrated that the mediating results of these four variables were robust and remain unaltered.

Theoretical implications

The study offers few theoretical implications. First, this study had deliberated on the results of the relationships between the independent variables (financial literacy, financial socialisation, self-control and financial technology) and the mediating variable (financial behaviour). The application of Systems Theory, Theory of Social learning, Theory of Self-Control, the Unified Theory of Acceptance and Use of Technology (UTAUT), had successfully explained the current research framework and contributed to the body of knowledge and understanding of financial well-being through the integration of these theories. The systems theory includes structural and process constructs (e.g. input, throughput, and output). Danes and Yang ( 2014 ) explained that these are developmental sequences that are needed in order to achieve successful financial satisfaction or a sense of well-being derived from demands being met (Deacon and Firebaugh 1988 ).

This study also contributed by examining a personality trait variable—self-control, which has not been examined as a variable in preceding studies. The study offers evidence for self-control as an internalised measure that must be practiced by young adults in their pursuit of attaining positive financial behaviour. Moreover, the research findings expanded the existing understanding by integrating the mediating effect of financial behaviour on the relationship between financial literacy, financial socialisation, self-control and financial technology with financial well-being. In addition, this study explains the inconclusive evidences for the effectiveness of financial literacy on financial behaviour, arguing that personality traits such as self-control in determining sound financial behaviour is important.

Practical implications

Financial well-being is an important milestone in a young adults’ life. What happens during these years has profound and long-lasting implications for young adults' future employment and career paths and for their economic security, health, and well-being. Financial missteps early in life of an individual, if not corrected, can have severe consequences in an individual’s lifetime. This study offers important practical implications and offers inferences for young adults, policy makers and other stakeholders. This research has shown considerable evidence that young adults’ financial well-being can only happen with positive financial behaviour. The results of the study could assist government and like-minded organisations to formulate policies for improvement and possible intervention programmes to assist young adults with their financial behaviour in order to achieve financial well-being.

This study reiterated the importance of financial socialisations. A certain level of family financial activities must take place for parents to have confidence and allow children the opportunity to gain hands-on experience in managing their money. Based on the results of the present study, there should be awareness programmes for the parents as well as children. These programmes should highlight the importance of sharing and practising positive financial practices at homes. Financial advisors and consultants may design training programmes which focus on certain skills such as self-control and financial technology.

Fintech and financial literacy may help young adults attain financial well-being. In this regard, policies should be drawn to help young adults attain financial well-being by the right framework of content. The findings could be employed to develop financial education programmes that will help young adults to impart the knowledge and skills to manage their personal finances and thus, improve their overall financial well-being. Precisely, the intervention policies should be geared towards moulding the financial behaviours of young adults. Increasing financial resources of young adults could feasibly work to improve young adults’ financial well-being as an alternative direct intervention. An extensive young adults’ awareness campaign is possible by utilising various communication platforms, primarily platforms that are accessible to young adults. Awareness, coupled with changes in their financial behaviour, will yield actions such as preparing an emergency fund, a retirement plan or purchasing insurance coverage for themselves. One research finding that has been clear is that financial literacy is inadequate of helping young adults’ financial well-being and as such, government agencies such as Credit Counselling and Debt Management (AKPK) or the Financial Education Network (FEN) must look at newer measures of moulding young adults’ financial behaviours.

A move away from a specific programme approach (a one size fits all) may be necessary. The effort to identify the best practice and innovative delivery remains a struggle even for the regulators in Malaysia. Segmenting individuals according to a cohort will help to provide more customised programmes. The approach must be geared to target financial behaviours using appropriate means. In addition, the use of technology-driven educational platforms will ensure that financial well-being could be intensified through the development of more engaging content.

Limitations and directions for future research

There are certain limitations of the present study which deserve attention and could potentially become areas for future research. First, the survey sample is restricted to young adults between the ages of 18–29 only; thus, future researchers need to be cautious while generalising the results of this study. In order to increase the generalisability of the current theme, more coverage to the sample should be given beyond the ages of 18–29 by considering other adult population. Second, the sampling method applied for the current research study was multi-stage random sampling. Therefore, future studies may include responses from all states in Malaysia to yield a more accurate understanding on young adults’ financial well-being. Further, this study used a subjective measure of financial well-being, which is well documented. Future studies may include subjective measures along with objective measures of financial well-being. In addition, this study did not analyse young adults from different backgrounds of education, compared to young adults who come from wealthy families. Therefore, to tackle, understand, and compare young adults’ outcomes from different perspectives, the inclusion of young adults from all socio-economic backgrounds must be examined thoroughly. Even though it is understandable that young adults from high-income families have many advantages, there have been many cases where they had turned out to be problematic to the society, and not all have become successful in the many aspects of their lives, especially their financial well-being. Finally, there are other factors affecting young adults’ financial well-being that were not included in the study which provide opportunities for further analysis. Future studies may also examine the childhood experience and digital financial literacy aspects.

Below is the link to the electronic supplementary material.


This study was funded jointly by the Geran Putra Universiti Putra Malaysia (UPM/800/2/2/4-Geran Putra—The Influence of Personal Finance and Psychological Factors on Financial Health among Malaysian Millennial Youth) and the Association of Consumer Interests and Marketing (UPM-AACIM/2020/6380044—Development of Financial Vulnerability Model for Malaysian and Indonesian Civil Servants towards Achieving Financial Sustainability).


is a Professor and the Dean, Faculty of Human Ecology, Universiti Putra Malaysia. He holds a Master of Science (Consumer Science) from Universiti Putra Malaysia and holds a doctorate (Ph.D.) from Iowa State University, USA. He actively conducts research in the fields of consumer finance, consumerism and financial education for all age groups. Fazli holds professional qualification as a Certified Financial Planner (CFP) from the Financial Planning Association of Malaysia and the Shariah Registered Financial Planner (SRFP) from the Malaysian Financial Planning Council.

is the Head of External Relations, Research and Publication Department of the Malaysian Financial Planning Council. He graduated from Universiti Tunku Abdul Rahman with bachelor’s degree in Mass Communication and then received his Master’s in Business Administration degree with a specialisation in Corporate Finance from University of Abertay Dundee, UK and a Ph.D. in Family Economics from UPM in the year 2022.

is a Professor in the School of Business and Economics of Universiti Putra Malaysia. He holds a Ph.D. in economics from the University of Leicester, United Kingdom. He was a visiting scholar at Department of Economics, University of California Santa Cruz and Nanyang Technological University of Singapore. Currently he is the Chief Editor, International Journal of Economics and Management (indexed in Scopus). He was listed as top 2% scientists in the world in the field of economics.

is an Associate Professor at the Faculty of Human Ecology, UPM. She holds a doctorate in the field of Family Financial Management and Investment Decision, obtained a Master in Business Administration (Corporate Finance), graduated in Bachelor of Science with Honours (Chemistry) in 1985 and attained a postgraduate Diploma of Education. She is a Certified Financial Planner (CFP) since 2002. Research projects involved and publications were on investment behaviour, consumer credit behaviour, financial risk management, job productivity, personal financial planning, family financial management and financial wellbeing.

is a senior lecturer at the Faculty of Human Ecology, Universiti Putra Malaysia (UPM). He graduated from Sultan Idris Education University in 2009 with a Bachelor Degree in Education (Biology), and followed by completing his Master of Economics degree from UPM majoring in development economics. Dr. Burhan received a Doctor of Philosophy from Universiti Malaysia Kelantan. His research area of interests includes the study on happiness and subjective well-being, cognitive skills, and economic development.

is a Country Liaison (Malaysia) for Southeast Asia One Health University Network (SEAOHUN) Secretariat. Her previous experience was as a Research Officer at the Corporate Communications Unit, Ministry of Health, Malaysia. She received her Ph.D. in science and technology in 2021 from the Faculty of Medicine and Health Sciences, Islamic Science University of Malaysia. She has been conducting research at the intersection of mixed method research, including systematic review, quantitative and qualitative research. Her work covers managing regional knowledge for One Health curricula from multiple disciplines connected to the health of humans, animals, and the environment.


The authors declare that they have no conflict of interest.

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  • Published: 01 November 2021

The role of financial behaviour, financial literacy, and financial stress in explaining the financial well-being of B40 group in Malaysia

  • Mahfuzur Rahman   ORCID: orcid.org/0000-0003-2072-5829 1 ,
  • Che Ruhana Isa 1 ,
  • Muhammad Mehedi Masud 2 ,
  • Moniruzzaman Sarker 3 , 4 &
  • Nazreen T. Chowdhury 1  

Future Business Journal volume  7 , Article number:  52 ( 2021 ) Cite this article

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Understanding the financial well-being of lower-income group is a critical concern of any government as this group struggles most to meet up with their necessities. Despite the significance, little is known about financial well-being of low-income group. This study attempts to investigate the relationship between financial literacy, financial behaviour, financial stress, and financial well-being of B40 group in Malaysia. A total of 412 usable responses was derived from a survey in Klang Valley and analysed the data following partial least squares structural equation modelling (PLS-SEM) techniques. The results demonstrate that financial behaviour is the key antecedent followed by financial stress and financial literacy in predicting financial well-being. Hence, balancing between income and expenditure, managing financial stress, and increasing financial literacy would be necessary to assure financial well-being of lower-income group people. Governmental and institutional interventions are essential to equip the low-income group people with employment opportunities and financial knowledge to manage their basic living standards.


Financial well-being is an essential concern for individuals, societies as well as for countries. Generally, well-being encompasses the broad aspect of overall living quality which includes the level of income, job security, housing facilities, quality of living standard, healthcare access, education facilities, environment and social bonding, etc. [ 39 ]. Financial well-being is one of the critical aspects of overall well-being [10]. Malaysia is doing good concerning the UN Sustainable Development Goals (SDGs), as there is remarkably a low level of unemployment rate, infrastructural development, and high in healthcare satisfaction. As a developing country, the vision of Malaysia is to evolve progressively into a high-income nation by the year 2024. Despite the fluctuation of the universal economy over the past decade, a rising trend in the gross domestic product (GDP) of Malaysia signposts that a positive growth continued throughout the years of 2019. For instance, the Department of Statistics Malaysia (2020) reports a 4.3% growth of GDP in 2019, which continued to increase in the first quarter of 2020. These numbers show that the nation could be on track to obtain its sight of becoming a large earning state. It is worth mentioning that the current global pandemic appears as a challenge for every nation and slows down the pace of economic development globally. Hence, along with tackling the economic challenge caused by this pandemic, assuring financial well-being is essential for every government to expedite the economic development.

The economic strength of a country is linked to earnings and wealth allocation of the citizen, particularly the poverty level, real per capita income, the Gini co-efficient, construction, in notably transport and communication. The Malaysian Well-being Index (MWI) is used to measure the degree of society’s well-being and overall quality of life. The index covers two holistic components of economic and social well-being. The economic well-being components include income and distribution, education, transport, communications, and working life, whereas the social well-being component covers areas such as housing, public safety, culture, health, family, leisure and other social aspects. There are some initiatives taken by the Malaysian government to help low-income households to tackle the stress of increasing cost of living. These measures include the cost of living support (direct cash transfers) to the “B40” (people belonging to the bottom 40% income group) and gradual increases over the next five years of the monthly minimum wage to MYR 1,500 from the current MYR 1100 [ 63 ]. Is signposts that financial well-being is one of the critical drivers of economic development.

The studies on financial well-being have been acknowledged as crucial related to overall well-being. Brüggen et al. [ 9 ] define financial well-being as “the perception of being able to sustain current and anticipated desired living standard and financial freedom” (p. 229). A precise understanding of financial well-being may help to initiate an effective economic policy for achieving sustainable living standards. Hence it is necessary to conduct more research to improve a unified set of knowledge on this area. According to Agyei et al. [ 2 ], financial well-being refers to “a condition where an individual is satisfied and comfortable with his or her financial situation including the ability to (i) meet current expenses from current income, (ii) save; (iii) maintain debt at sustainable levels; (iv) deal with financial problems; and (v) being generally satisfied with one’s financial condition.” (p. 224). Financial well-being is not related to micro-level factor only such as individual or organisation; instead, it is a macro-level issue (i.e. national and universal). As mentioned by Hsiao et al. [ 40 ], individual financial well-being is a requisite of state balance in society. An individual with unsatisfactory financial well-being not only becomes a burden to themselves or their immediate circles but also has an impact on the health of economic and financial systems of a country [ 88 ]. It is since people with financial difficulties may have a negative impact on their productivity, physical health, economic and psychological state [ 50 ].

Despite the prior attempts devoted to understanding financial well-being, it is still a fertile area to investigate more due to the lack of proper framework and study setting [ 49 ]. For instance, previous literature deems that financial well-being could be dissimilar based upon what is valued most. The value, which remains inside individual, may be affected by financial literacy, financial management, and stress towards finance [ 16 , 73 ]. Likewise, the relationship between financial literacy, types of money attitudes, debt management have a positive influence on financial well-being [ 1 ]. On the other hand, Xue et al. [ 94 ] described that financial literacy significantly improves financial well-being and has a positive effect on financial well-being. Delafrooz and Paim [ 16 ] investigated the relationships between financial literacy, financial management practices and financial stress influenced financial problems and saving behaviour. Mokhtar and Husniyah [ 58 ] reported that financial stress, work environment, locus of control and financial behaviour were significantly associated with the financial well-being of Malaysian public sector employees. Mahdzan et al. [ 56 ] investigated subjective well-being of different income groups in Malaysia and reported a significant difference exists among the groups concerning financial behaviour, internal locus of control, financial knowledge, and financial stress. Despite these efforts, predicting key antecedent of financial well-being among the lower-income group people is still scary. To address this gap, we accounted for the variables such as financial behaviour, financial literacy, and financial stress which are directly and indirectly manifested by behavioural factors external to the individual. Even though these three predictors have been discussed in the literature, they received few attentions in the lower-income group setting. Hence, this study considers financial behaviour, financial literacy, and financial stress in predicting financial well-being of B40 income group in Malaysia. Precisely, this study aims at—(1) investigating the key factors affecting financial well-being and (2) exploring which demographic variables account for the significant difference within the study variables among the low-income group in Malaysia.

Literature review and research framework

  • Financial well-being

Most commonly, financial well-being implies the financial circumstance as well as enough money to meet one’s needs with security and freedom of choice. Various educational disciplines have been studied in financial well-being including economics, financial advising and organisations, developmental psychology, consumer decision-making and services marketing. Several scholars define financial well-being with different perspectives. For instance, according to Brüggen et al. [ 9 ], financial well-being is the perception of being able to preserve present and expected aspiration for living standards and financial freedom. Financial well-being refers to an objective and subjective concept, where it contributes to an individual’s evolution of his/her current financial condition [ 87 ]. Similarly, financial well-being can meet for needs and liability of recent and anticipated lifestyle [ 9 , 51 ]. Muir et al. [ 59 ] ascertained that the strongest influencers of financial well-being are financial capability, financial inclusion, social capital, income, and (mental) health. The influence of financial well-being extends far ahead of the financial context. For example, Netemeyer et al. [ 60 , p. 68] found in the USA that perceived financial well-being is “a key predictor of overall well-being and comparable in magnitude to the combined effect of other life domains”. Positive perception of financial well-being endures happiness, feeling, encouragement, excellent health, and well-established mutual relationships [ 48 , 86 ].On the other hand, negative perception of financial well-being may cause worry, brutality, exhaustion as we as weak health [ 8 , 23 ]. Similarly, Evidence shows that poor financial well-being can affect physical, mental and social well-being, which in turn can result in poor job performance, short-term decision-making, a reduced ability to concentrate, absenteeism and lower productivity [ 64 ].

  • Financial behaviour

Financial behaviour can perform a central role where individuals’ well-being including household, society, nation as well as around the world can be influenced by financial behaviour. According to Perry and Morris [ 66 ], financial behaviour is defined as the management of a person’s savings, expenditure, and budget, whereas Xiao [ 92 ] asserts that human activities related to money management such as cash, savings, and credit are regarded as financial behaviour. In a wider view, financial behaviour includes broad concepts including investment behaviour for short-term and long-term, savings behaviour, credit usage, expenditure behaviour, etc. [ 26 ]. This study conceptualises financial behaviour based on Xiao [ 92 ]’s definition as regular money management of cash, savings, and credit is more relevant to people in the bottom line.

Brüggen et al. [ 9 ] report that financial behaviour has a direct effect on financial well-being. Similarly, Joo and Grable [ 47 ] postulate that financial well-being is, directly and indirectly, related to financial behaviour. According to Falahati et al. [ 21 ], financial behaviour refers to the individual ability to operate their finances to become successful in their life. In another study by Klontz and Britt [ 55 ], individual financial behaviour means to the financial management capabilities acquired by them. There have also been several previous studies that explained financial behaviour from different perspectives. For instance, individual’s aspect of financial concepts such as financial behaviour associates with financial management techniques [ 55 , 89 ] and their financial satisfaction [ 5 , 21 ]. Financial behaviour and financial knowledge related to individuals’ financial satisfaction [ 68 , 75 ]. On the other hand, Osman et al. [ 64 ] researched the federal territory of Labuan in Malaysia and reported that there was no significant relationship between financial behaviour and financial well-being. In the same manner, Taft et al. [ 85 ] investigated the correlation between financial literacy, financial well-being and financial concerns. Their findings showed that age and education were positively connected to financial literacy and financial well-being. Thus, it is assumed that financial behaviour might have positively influenced on financial well-being of lower-income group in Malaysia. Based on this discussion, this study is hypothesised that:

H1. Financial behaviour has a positive effect on financial well-being.

  • Financial literacy

Financial literacy implies the capacity to understand and examine options for funding, preparing for the future, and responding adequately to the situations. Financial literacy also provides individual’s successful experience to involve in economic activities via increased deposits, appropriate buying decision, correct investing, land management, employing security, debt as well as enhancing the financial well-being. According to Kaur et al. [ 50 ], financial literacy is a necessary life ability for individuals to gain financial well-being. Similarly, Remund [ 71 ] postulates that financial literacy means a person’s ability to understand and use financial matters. Hung et al. [ 42 ] define financial literacy as ‘‘knowledge of basic economic and financial concepts, as well as the ability to use that knowledge and other financial skills to manage financial resources effectively for a lifetime of financial well-being’’ (p. 12). Huston [ 44 ] explains that ‘‘financial literacy should be conceptualized as having two dimensions—understanding (personal finance knowledge) and use (personal finance application)’’ (p. 306). Xiao et al. [ 93 ] measured financial literacy using an individual’s understanding of financial knowledge (subjective knowledge) and accurate, stored knowledge regarding credit content (objective knowledge). As marginalised community might have limited access to the personal finance application due to low-income level, this study focuses mainly on the understanding of personal financial knowledge to define financial literacy.

Financial literacy plays a significant role to make financial decisions in retiring households [ 94 ]. Previous research affirmed a positive relationship between financial literacy and financial well-being [ 11 , 30 , 82 ]. It asserts that retired households with high-level financial literacy are more probably to be pleased with their financial situation. Dvorak and Hanley [ 20 ] studied financial literacy and designing retirement plans. Their findings show that a lower level of financial literacy among people was found among low income and low education group and respondents in consulting and finance training courses lead to raising financial literacy. The study of Xiao et al. [ 93 ] on consumer financial capability and financial satisfaction postulated that financial ability, laudable financial behaviour and subjective financial literacy positively contribute to financial well-being. Therefore, based on this discussion, this study proposed that:

H2. Financial literacy has a positive effect on financial well-being.

  • Financial stress

Financial stress could be defined as complexity engagement, general financial responsibilities due to lack of money. It is also one’s unpleasing feeling that an individual is incapable of fulfilling financial needs, managing the living requirements and having adequate finances to make ends meet. Davis and Mantler [ 15 ] assert that stress involves the impressions of frightening, distress and scare, but may also anger and dissatisfaction. It is a point to note that the concept of financial stress and financial distress are not similar [ 56 ]. Financial stress is related to the major financial inadequacies to meet up individual financial needs, whereas financial distress is an opposite viewpoint of financial well-being. Financial stress primarily derives from the inadequacy of fund due to personal, family, and shocks in financial situations [ 47 , 69 ]. The increase of financial stress, such as debt increase or financial shortages, would reasonably intensify the state of financial distress [ 7 ], which lowers the level of financial well-being. One of the key concerns of marginalised community is having a lack of enough finance which put them into financial constrain and economic hardship.

Steen and MacKenzie [ 84 ] explain that financial stress raises the endanger of hopelessness and negatively affects an individual’s health and psychological well-being. Similarly, financial stress may also drive negative results, such as lower job performance [ 46 , 53 , 62 ] as well as diminishes overall well-being including state of health [ 19 , 52 ]. Bialik [ 6 ] reported that 45% of employees, who had financial challenges, were more stressful in their lives, jobs, health or relationships combined. The study of Netemeyer et al. [ 60 ] explains that financial literacy has a small negative partial impact on perceived future financial security and there was no effect on money management stress. It is also recognised that buyers are more vulnerable with their lower income and loss of financial well-being due to their lower levels of financial reserves [ 31 ]. Grable and Joo [ 29 ] reported that college students’ credit card debt increases their financial stress. Thus, based on these arguments, this study is postulated that:

H3. Financial stress has a negative effect on financial well-being.

Financial literacy has a direct effect on financial well-being [ 30 , 82 ]. Similarly, Xiao et al. [ 93 ] found that subjective financial literacy positively contributes to financial well-being. Financial behaviour is also found to have positive effect on financial well-being [ 9 ]. It is also found that individual’s aspect of financial concepts, such as financial behaviour associates with financial management techniques [ 89 ] and their financial satisfaction [ 5 ]. However, Kaur et al. [ 50 ] argued that financial literacy is a necessary life ability for individuals to gain financial well-being. In contrast, financial stress is found to have negative effect on job performance [ 53 , 62 ] and overall well-being. It is also documented in the literature that the increase of financial stress, such as debt increase or financial shortages, would reasonably intensify the state of financial distress [ 7 ], which lowers the level of financial well-being. Based on the above discussion, it is assumed that financial behaviour might mediate the relationship between financial literacy and financial well-being as well as financial stress and financial well-being. Therefore, this study is hypothesised that:

H4. Financial stress has a negative effect on financial behaviour.

H5. Financial literacy has a positive effect on financial behaviour.

H6. Financial behaviour mediates the relationship between financial stress and financial well-being.

H7. Financial behaviour mediates the relationship between financial literacy and financial well-being.

The above discussion leads to conceptualising a framework that explains the financial well-being of B40 income group in Malaysia. Previous studies such as Mahdzan et al. [ 56 ] examined the financial well-being of Malaysians based on the differences in demographic factors. Hence, to explore the sustained effect of study variables on FWB, we have included four demographic factors in the research model (Fig.  1 ).

figure 1

Research framework

Variable measurement and questionnaire design

This study adapted previously validated scales to measure the study variables. An eight-item scale of Prawitz et al. [ 69 ] was adapted for measuring financial well-being (FWB) and measured by 5-point Likert-scale ranging from 1 = very unhappy to 5 = very happy. Likewise, financial behaviour (FB) was measured using a ten-item scale adapted from Garman et al. [ 27 ] and financial stress (FS) was measured by six items adapted from Grable et al. [ 28 ]. Responses of these two scales were anchored using a 5-point Likert scale ranging from 1 = strongly disagree to 5 = strongly agree, whereas a total of ten-items scale by Sabri et al. [ 74 ] was adapted to measure financial literacy (FL). Respondents were provided with the option “True” and “False” for each item. ‘True’ was rated as ‘1’ and otherwise ‘0’ was assigned from the option ‘False’. Out of these ten items, an overall score for measuring FL was obtained based on the total number of ‘True’ chosen by the respondents.

After the initial selection of measurement scales, a structured questionnaire was designed. This questionnaire was then pre-tested with three academic experts and five participants to confirm the meaning, wording, flow, and comprehensibility of the items [ 43 ]. There were few minor concerns which were taken into consideration for revising the question statement (see Appendix A). Besides, the questionnaire was translated into Bahasa Malaysia and checked by a professional editor. The interpreted version of questionnaire (i.e. Bahasa Malaysia version) was again translated back to English to confirm the meaning and content validity of the scale [ 56 ]. Finally, both English and Bahasa Malaysia languages were used to design the questionnaire.

Sampling and data collection

The target respondents of this study were Malaysian citizens whose income is around RM 5, 000 or less in a month. According to the Department of Statistics Malaysia [ 18 ], the highest population in Malaysia lives in Klang Valley. As a majority of the Malaysian population lives in this region, surveying Klang Valley is suitable for this research. Considering the nature of sample composition, application of the probability sampling method would not be realistic. Scholars explain that careful execution of a survey using non-probability sampling can yield a representative group of a sample if the respondents are chosen based on specific criteria fixed before the survey [ 77 ]. Hence, questionnaires were distributed among the target respondents following purposive sampling technique setting up two criteria, such as education and low-income groups. During the survey period, a total of 467 questionnaires were received. Due to the missing values in the questionnaire, 55 responses were discarded which resulted in a total number of 412 questionnaires as usable responses.

Estimation method

The conceptual model of this study was analysed using Partial least squared structural equation modelling (PLS-SEM) rather than co-variance-based squared structural equation modelling (CB-SEM) techniques. PLS-SEM entails comparative advantages over CB-SEM such as suitability in explorative research, target prediction, flexibility in handling non-normal data and small sample sizes [ 35 , 80 ]. As this research aims at predicting and explaining the key variable such as financial well-being, the PLS-SEM technique is highly suitable. Moreover, concerning any sample size and, or any distributed data, the PLS-SEM method attains superior statistical power [ 32 , 33 , 34 ]. This study used SmartPLS 3.3.2 [ 72 ] to analyse the model, whereas SPSS v23 was utilised to conduct descriptive analysis and F-test, respectively.

We analysed the research model following two-steps procedures recommended in Hair et al. [ 36 , 37 ]. At the first step, measurement scales are examined based on composite reliability, convergent validity and discriminant validity. Once the measurement model is satisfied with benchmark values, in the second step, the structural model is assessed for hypotheses testing, prediction accuracy. Hair et al. [ 36 , 37 ] emphasise that traditional metrics of assessing model prediction such as R 2 , f 2 and cross-validated redundancy Q 2 provide findings concerning prediction accuracy within the sample group (in-sample prediction) only, whereas the out-of-sample predictive accuracy assessment explains the predictive ability of a research model beyond the sample group of respondents [ 83 ]. In the SEM, in-sample prediction is not enough to come to a conclusion about prediction accuracy of a theoretical model. Hence, we employed the PLS predict technique in Shmueli et al. [ 83 ] to evaluate the out-of-sample prediction accuracy of the study model.

Descriptive analysis of the participants

Descriptive statistics results show that the sample consisted of mostly the age group of 25 to 34 (about 59%), female (about 90%), Bumiputera Melayu (91%), and Muslim (about 93%). Besides, about 68% of the respondents’ monthly was below RM 3,000 which confirms the nature of target respondents of the study. The details of the respondents’ profile are presented in Table 1 .

Study variables (such as FWB, FS, FB and FL) were also investigated regarding group differences within the demographic components. Using ANOVA analysis results in Table 2 exhibit that the magnitude of financial well-being and financial literacy significantly varied based on the education level of respondents. Type of employment was one of the essential factors for which level of financial well-being, financial behaviour and financial literacy significantly was significantly diverse. Precisely, self-employed and government job holder exerts a higher level of FWB, FB and FL. Moreover, the amount of monthly household income was a significant indicator for a higher level of FWB and FB, while FB was significantly varied based on the level of monthly individual income only. The analysis also exhibits that respondent’s financial stress was not significantly varied based on any demographic components. It indicates that there might be some psychological aspects such as risk-taking mentality, lifestyle, confidence in facing challenges, etc., are accounted for the level of financial stress of B40 income group. Overall, among the demographic variables, education, type of employment, income level was the essential aspects in varying the level of FWB, FB, FL among the Malaysian low-income citizen. Hence, we included these demographic variables as control factors to assess the stability effect of FL, FB and FS on FWB.

Furthermore, the level of FBW was estimated using descriptive statistics. Results in Table 3 demonstrate that there is a moderate level of financial well-being subsists among the study respondents. All the items measuring FWB scored an average value ranged from 3.70 to 3.36. However, a mean score of 3.70 (Mean = 3.70; SD = 0.99) was calculated in the item FWB6 stating—“how frequently do you find yourself eagerly awaiting for the next payday?” which is the highest among 8 items. Likewise, item FWB7 (Mean = 3.69; SD = 0.77), FWB1 (Mean = 3.51; SD = 0.76), scored an average value of 3.50 or above indicating much effort should be taken to ensure a satisfactory level of FWB of the study respondents.

Assessment of data distributions

Before analysing the model using PLS-SEM techniques, it is important to check data distributional to explore multivariate assumptions are met [ 76 , 80 ]. Using WebPower calculator ( https://webpower.psychstat.org/models/kurtosis/ ), data were investigated for normality of data distribution. The results show that the univariate skewness ranged from 0.067 to 0.374 and the kurtosis ranged from − 0.677 to − 0.017, indicating data is univariate normal [ 13 , 32 , 33 , 34 ]. Regarding multivariate normality assessment, skewness was found to be non-normal (e.g. skewness was significant at \(p<0.05\) ), whereas multivariate kurtosis was found nonsignificant \((p=0.33)\) indicating normal distribution (see Appendix B). Thus, it can be assumed that data is normally distributed having little concern for multivariate normality. Next, multicollinearity was assessed based on the tolerance and variance inflation factor (VIF) using SPSS v23. Tolerance level of the variables was ranged from 0.833 to 0.947 which are higher than 0.20, and all the VIF values (see Appendix C) were below 5 (e.g. VIF is ranged from 1.056 to 1.201), demonstrating that multicollinearity is not a concern in the findings [ 13 , 32 , 33 , 34 , 70 ]. Besides, a homoscedasticity test was performed to explore the linearity assumption. The result in scatter plots exhibits that standardised residual and predicted values are parallel to each other and plotted close to the regression line (see Appendix D). Thus, the linearity assumption is established [ 13 ].

Assessment of common method biases (CMB)

This study also addresses the issues related to CMB. Following the guidelines in Podsakoff et al. [ 67 ], both procedural and statistical remedies were taken into consideration in this research. First, the questionnaire was pretested with three academic experts and five participants to confirm that all the questions were easily comprehensible. Besides, a minor revision was considered in the sentence structure following the suggestion during the pretesting of survey instruments. Second, four reverse coded items were used in the questionnaire. Concerning statistical remedies, it is recommended to apply multiple techniques to assess the presence of CMB in the research findings [ 67 , 81 ]. Third, as a statistical procedure, this study performed Harman’s single factor test to investigate the common method variance (CMV) using SPSS v23. Harman’s single factor test is acknowledged as a reliable test to examine the level of CMV which may cause a bias finding [ 32 , 33 , 34 ]. Following the guidelines, result in Appendix E shows that out of a total 58.17% variance, the first unrotated factor accounted for a variance of 26.67% which is below than a threshold level of 50%. This finding supports that CMB is not of any concern in this research [ 25 , 76 ]. Besides, another statistical technique named as latent variable correlation matrix procedure by Bagozzi and Yi [ 4 ] was followed to investigate the CMV. Using the SmartPLS 3.3.2 result in Table 4 outlines that a correlation score of 0.485 exists between financial behaviour and financial well-being which is the largest among all and below the cut-off level of 0.90. Therefore, this approach also substantiates that CMB is not a concern in the findings [ 57 , 65 ].

Measurement model analysis

The theoretical model of this study consists of a total of three latent variables, such as financial behaviour (FB), financial stress (FS), and financial well-being (FWB) and one observed variable named financial literacy (FL). Following the PLS-SEM method, constructs’ reliability and convergent validity are evaluated using composite reliability (CR), Dijkstra and Henseler’s rho, factor loading, and average variance extracted (AVE) [33]; [ 36 , 37 ]. Using the SmartPLS 3.3.2, the model was analysed following the standard algorithm criteria [33].

The initial assessment of construct reliability was met for FS and FWB but not for FB. Out of a total of ten items of FB, FB5, FB6, FB8 and FB9 resulted in very poor factor loadings (e.g. the highest factor loading among these four items is 0.29) which also caused a very low AVE of 0.277 (see Fig.  2 ). The deletion of these four indicators may increase the value of AVE. However, Wieland et al. [ 90 ] recommend that the researcher has to think of the comprehensiveness of the measurement theory before deleting the indicators based on statistical results. Hence, this study re-visited the measurement properties of FB using exploratory factor analysis (EFA) following the assumption of principal axis factoring (PAF) as indicated in Sarstedt and Mooi [ 79 ]. PAF allows for exploring the underlying measurement dimension of a latent construct [ 79 ].

figure 2

Initial results of measurement model analysis (Loadings and AVE)

EFA test indicated that The Kaiser–Meyer–Olkin (KMO) value was 0.77 and the Bartlett's test of sphericity was significant at \({p}<0.001\) . Following the extraction method as Principal Axis Factoring (PAF), two dimensions were extracted. The items FB1, FB2, FB3, FB4, FB7, and FB10 were loaded into one group, which is regarded as savings behaviour, whereas the items FB5, FB6, FB8, and FB9 were loaded into another group indicating the expenditure behaviour of the respondents. Due to the poor factor loading during EFA, item FB10 and FB5 were discarded, which were lower than 0.40 [ 22 , 35 , 41 ]. Besides, Cronbach’s Alpha of these two constructs also met the satisfactory criteria of above 0.60 due to the exploratory study [ 61 , 70 ] [see Appendix E].

Based on the EFA results, FB construct is conceptualised as a second-order reflective measure with two reflectively measured dimensions regarded as type I higher-order construct [ 78 ]. The theoretical model is re-evaluated for assessing the properties of measurement scale using SmartPLS 3.3.2 (see Table 5 . According to the standard, composite reliability (CR is higher than 0.70, factor loading should be higher than 0.70, and AVE should be above 0.50 to assure the reliability and convergent validity of the measurement model [33]; [ 80 ]. As shown in Table 5 , CR is ranged from 0.71 to 0.92. Likewise, Dijkstra and Henseler’s rho is also above 0.70, indicating a satisfactory level of internal consistency reliability. All the factor loadings except for the item FWB8 (loading = 0.59), FB7 (loading = 0.64), and loading of 0.52 resulted in expenditure (the first-order dimension for savings behaviour) which are above the recommended level of 0.70. Although loadings of these three items were below the threshold level, the AVE values of all the latent constructs are above 0.50, indicating an acceptable level of convergent validity. That is why these three items were not deleted despite having low loadings [ 70 , 80 ].

Discriminant validity was also investigated based on the HTMT criteria. A stringent criterion of 0.85 (HTMT 0.85 ) suggested by Kline [ 54 ] was set to assess the discriminant validity due to the conceptual definition of latent variables [ 24 ]. According to this criterion, any value of HTMT correlation should be 0.85 or below. Results in Table 6 exhibit that the largest correlation value of 0.509 resulted between FWB and FB. Also, none of the values of 95% bias-corrected and accelerated confidence interval include 1 between the lower and upper limit of the correlation assuring discriminant validity is achieved [ 24 , 38 ]. Therefore, reliability and validity of measurement model is established. Next, structural model was examined to hypotheses testing.

Hypotheses testing

After having a satisfactory level of measurement model analysis, a structure model assessment was carried out (see Fig.  3 ). Hypotheses were examined using the bootstrap techniques (5,000 bootstrap subsamples) as suggested in Ali et al. [ 3 ], Sarstedt et al. [ 80 ] [see Table 7 ]. The structural model was initially assessed concerning collinearity between predictor and outcome variables. VIF scores of all the path relationships were ranged from 1.06 to 1.19 which are below 5 demonstrating an acceptable level of collinearity [33], [ 80 ]. Following the standard bootstrap procedures, result exhibits that FB has the largest and positive significant effect of 0.333 on FWB \((\beta =0.333, p<0.01)\) followed by a significant negative impact of FS \((\beta =-0.256,p<0.01)\) and a positive significant effect of FL \(\left(\beta =0.165, p<0.001\right)\) on FWB. FL and FS were also examined to investigate effect on FB. Results exhibited that FS had a significant negative effect on FB \((\beta =-0.353,p<0.01)\) , whereas the effect of FL on FB was insignificant \((\beta =-0.027,p>0.05)\) . Therefore, H1, H2, H3, and H4 were supported. Moreover, using the bootstrapping techniques, mediating hypotheses were examined [33], [ 80 ]. Findings supported that although FB was a significant mediator between FS and FWB \((\beta =-0.118,p<0.01)\) , FB was insignificant when investigated as a mediator between FL and FWB \((\beta =-0.009,p>0.05)\) . Hence, H6 was supported but not H7. However, none of the control variables was statistically significant, explaining that the effect of FL, FB and FS on FWB is stable.

figure 3

PLS-SEM results of hypotheses testing using 5000 bootstrapping

Model’s prediction accuracy

Next, the model’s in-sample predictive ability was examined by R 2 , f 2 and Q 2 . Results in Table 7 show that the theoretical model including four control variables explains 28.3% variance of financial well-being (FWB) [i.e. \({R}^{2}=0.283\) ] which is considered as a close to moderate level of predictive accuracy [ 12 ]. Based on the findings, FB is reported as the key variable, followed by FS and FL in predicting FWB. This finding can be acknowledged as satisfactory as only three predictors such as FL, FB, and FS were accounted for in this study.

The f 2 effect size examines the practical significance of the predictors. Results in Table 7 exhibit that an f 2 effect size of 0.122 has resulted in FB \(\to\) FWB, which is close to a moderate level of practical significance [ 14 ], whereas a small f 2 effect size resulted in FL \(\to\) FWB \({(f}^{2}=0.035)\) and FS \(\to\) FWB \({(f}^{2}=0.076)\) . This finding also supports that the FB is the important predictors of FWB followed by FS and FL.

The predictive relevance of theoretical model is also assessed based on the results of cross-validated redundancy Q 2 value. Using an omission distance, D = 7, Q 2 value of the FWB is reported as 0.143 which is higher than 0, supporting the model’s predictive accuracy [33], [ 80 ]. Besides, q 2 effect size indicates that the relationship FB \(\to\) FWB \({(q}^{2}=0.06)\) and FS \(\to\) FWB \({(q}^{2}=0.04)\) have small effect size related to predictive accuracy while it is negligible \({(q}^{2}=0.01)\) for the path of FL \(\to\) FWB [33].

Finally, the research model was evaluated for out-of-sample prediction accuracy by setting up a standard algorithm of PLSpredict analysis in Shmueli et al. [ 83 ]. The PLSpredict Q 2 of key endogenous construct (i.e. FWB) was 0.26, which is higher than 0. The results in Table 8 explain that the theoretical model has an acceptable level of out-of-sample predictive ability [ 36 , 37 ]. Next, we examined the indicator level prediction accuracy based on the naïve benchmark such as the root-mean-squared error (RMSE). We compared the RMSE of analysis sample (PLS-SEM) and holdout sample (LM) of each indicator of FWB. The results in Table 8 exhibit that only three indicators of analysis sample such as FWB4, FWB7, FWB8 had lower and FWB3 had equal level of error compared to holdout sample, indicating that the research model entails a moderate level of out-of-sample predictive accuracy [ 36 , 37 , 83 ].


The study findings offer insights about financial well-being of Malaysian low-income households. This study investigated the key antecedent of financial well-being (FWB) of Malaysian low-income (B40) households based on three independent variables, namely financial literacy (FL), financial behaviour (FB), financial stress (FS). The results exhibited that all three hypotheses (H1, H2, and H3) were significantly related to financial well-being. FB and FL have found a positive influence, whereas FS has a negative impact towards financial well-being of the poor urban community. These findings are supported by Ismail and Zaki [ 45 ], Mokhtar and Husniyah [ 58 ].

FB is found to be the most influencing factor followed by FS and FL in predicting FWB of low-income group in Malaysia. It is necessary to ensure a better orientation about financial behaviour towards improving financial well-being of the B40 income households. People with a high degree of financial behaviour are better off financially. Sound financial behaviour encompasses maintaining a balance between monthly income and expenditure, paying the bill on time, and considering savings buffer, etc. The results are supported by the previous studies, which state that financial behaviour is positively associated with well-being directly and indirectly [ 9 , 45 , 47 ]. Hence, the policymakers of any nation should understand the nature of financial behaviour of low-income group and design the economic policy.

The B40 group is the most unstable for its financial well-being. This study found a high level of financial stress among respondents which is an essential predictor of financial well-being. The results show that financial stress negatively influences financial well-being of the poor urban community [i.e. Ismail and Zaki [ 45 ]]. This means, a higher level of financial stress significantly influences the lower level of financial well-being or vice-versa. The financially disadvantaged Malaysians are less happy with their financial condition as indicated by the low level of financial well-being. As most of them are encountered with high financial stress, financial well-being is not assured. One of the prominent causes would possibly be that low-medium households are going through financial stress due to inadequate earnings allocated for vehicle or house maintenances, loan cash to purchase goods and necessities items and budgetary inadequacies. Grable and Joo [ 29 ] reported that credit card debt raises the financial burden of college students. It was found that those with higher rates of self-reported financial stress were less happy with their financial status [ 56 ].

Next, financial literacy has found a significant positive influence on financial well-being of the poor urban community in Malaysia. A positive relationship between financial literacy and financial well- being was also reported in prior studies [ 11 , 30 ]. Financial literacy leads positively to well-being and fosters economic development [ 91 ]. Joo and Grable [ 47 ] asserted that enhanced financial literacy eventually impacts the financial well-being of societies. It signposts that financial knowledge about savings, investment, expenditure is essential to ensure financial well-being.

Moreover, financial stress is found to have a significant and negative influence on financial behaviour of the poor urban community in Malaysia. On the other hand, financial literacy is found to have an insignificant influence on financial behaviour. These findings are inline with the prior literature.

Finally, financial behaviour is found to significantly mediate the relationship between financial stress and financial well-being of the poor urban community in Malaysia. It indicates that the presence of financial behaviour weakens the negative influence of financial stress on financial well-being, whereas financial behaviour is found to be an insignificant mediator between financial literacy and financial well-being.

The results show that although majority respondents (more than 60%) have an academic degree of Diploma or Bachelor, the level of financial knowledge is poor among B40 group. Hence, it is deduced, traditional educations are not enough to gain financial knowledge when the individuals are other than business discipline.

Furthermore, this investigation has discovered that the individuals’ demographic profile, especially their level of education, nature of employment, and level of monthly family earnings substantially differentiate the level of financial well-being, financial behaviour and financial literature. An educated person tends to be exposed to more opportunities than uneducated or low educated individuals. A self-employed person may enjoy independence and contribute a higher income compared to private job holders, whereas government employees enjoy a higher level of job security. Therefore, providing proper education and entrepreneurial opportunities to the Malaysian low-income citizen would help to maintain a higher level of financial well-being.

Financial well-being is one of the most critical issues in financial management in society. This result indicates that those who practice positive financial habits tend to be extra relaxed with their financial well-being. The financial well-being of an individual can be improved through favourable financial behaviour, sound financial literacy and managing financial stress. This study offers some knowledge and practical implications. Among the three predictors of financial well-being, financial behaviour is an essential aspect followed by stress and literacy in assuring the financial well-being of low-income group people. It is quite necessary to have a fundamental understanding of income, expenditure, and saving pattern, which may drive towards financial security of a family. Although people with low-income level generally struggle to meet up their basic needs, balancing between income and expenditure of a family would be a key aspect an individual should pay serious attention to assure financial well-being. Governmental intervention is a must to make sure that low-income group citizens can earn a reasonable amount of money to mitigate their livings. Besides, a supportive economic policy is necessary to help to manage their financial well-being by providing employment, education, lesson, training, etc.

Financial advisors and consultants may design training programs and/or financial stress management consultation sessions. They must have the financial education to enhance the capacity of individuals to control their financial capital as a legislative initiative. Individuals are required to learn how to face unforeseen changes and adverse financial circumstances, for example, losing job, emergencies issues and health problems. An integrated effort is required by both government and or private regulators– financial institutions, NGOs, members of civil society to improve the financial health of the citizens. The efforts to encourage financial literacy should include providing basic financial education programs covering money management, financial planning, valuation of wealth, risk-return diversification and investment opportunities which will strengthen the financial discipline leading towards well-being. This study also reported that despite having a well-educated group of respondents participated in this research, the effect of financial literacy was lower compared to other antecedents that assure financial well-being. The people with non-business backgrounds may not have a proper introduction with financial knowledge during academic education. Hence, the government should introduce some basic financial literacy courses at academic level so that all the citizen is introduced with a basic financial plan in their daily livings. The government is also required to offer training on financial well-being because the findings indicate that the B40 income groups encounter financial stress along with a moderate level of financial literacy. All these supports may improve financial behaviour, reduce stress, and increase the literacy of lower-income group people of Malaysia.

Despite these implications, this study acknowledges a few limitations that ought to be addressed in future research. Firstly, as the study narrowed down the scope to behavioural factors external to individuals and low-income group, only three independent variables were regarded as the determinants of financial well-being. Although the findings provide a deep insight about financial well-being of low-income people, future research could employ other behavioural factors such as financial aid seeking, financial self-efficiency, and demographic variables to explore the effects on financial well-being. The inclusion of such factors would enhance the knowledge on financial well-being of low-income individuals. Secondly, the survey was conducted in the area of Klang Valley (i.e. Kuala Lumpur only) due to the largest regarding population size in Malaysia. Future research could cover the geographical sample from different income groups to overcome this challenge such as results generalisation. Thirdly, it would be useful to have the next effort, which integrates both subjective and objective measures of financial well-being. Overall, this study provides a valuable understanding about financial well-being of low-income people by asserting that favourable financial behaviour, managing individual financial stress, and increasing financial literacy would be the key to assuring financial well-being.

Availability of data and materials

The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.


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Rahman, M., Isa, C.R., Masud, M.M. et al. The role of financial behaviour, financial literacy, and financial stress in explaining the financial well-being of B40 group in Malaysia. Futur Bus J 7 , 52 (2021). https://doi.org/10.1186/s43093-021-00099-0

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Financial Behaviors and Financial Well-Being of College Students: Evidence from a National Survey

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The purpose of this study is to explore the relationship between financial behaviors and financial well-being of college students when controlling demographic and financial characteristics, financial education and financial dispositions. Data ( N  = 15,797) was collected from college students age 18 and over via an online survey from 15 college campuses throughout the United States during spring and fall of 2008. Results of means comparisons showed significant differences on the financial well-being level by various socioeconomic factors and financial behaviors. In addition, regression analysis showed that budgeting, saving, risky credit card behaviors, and compulsive buying were significantly related to financial well-being when controlling for demographic information, financial characteristics, financial education, and financial dispositions.

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Gutter, M., Copur, Z. Financial Behaviors and Financial Well-Being of College Students: Evidence from a National Survey. J Fam Econ Iss 32 , 699–714 (2011). https://doi.org/10.1007/s10834-011-9255-2

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