(above 0.6)
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
Construct | FL | FS | FB | SC | FT | FWB |
---|---|---|---|---|---|---|
FL | ||||||
FS | 0.60 | |||||
FB | 0.64 | 0.78 | ||||
SC | 0.17 | 0.24 | 0.34 | |||
FT | 0.57 | 0.63 | 0.73 | 0.24 | ||
FWB | 0.57 | 0.71 | 0.75 | 0.32 | 0.56 |
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
Variable | Min | Max | Skew | c.r | Kurtosis | c.r |
---|---|---|---|---|---|---|
FWB6 | 2.000 | 5.000 | − 0.353 | − 2.737 | 0.201 | 0.779 |
FWB5 | 2.000 | 5.000 | − 0.390 | − 3.022 | − 0.052 | − 0.202 |
FWB4 | 2.000 | 5.000 | − 0.069 | − 0.532 | − 0.422 | − 1.637 |
FWB3 | 2.000 | 5.000 | − 0.143 | − 1.113 | − 0.288 | − 1.115 |
FWB2 | 2.000 | 5.000 | − 0.080 | − 0.622 | − 0.252 | − 0.977 |
FWB1 | 2.000 | 5.000 | − 0.375 | − 2.907 | 0.280 | 1.085 |
FTC1 | 1.000 | 5.000 | − 0.247 | − 1.914 | − 0.009 | − 0.036 |
FTC2 | 2.000 | 5.000 | − 0.066 | − 0.513 | − 0.420 | − 1.628 |
FTC3 | 1.000 | 5.000 | 0.024 | 0.188 | − 0.144 | − 0.560 |
FTC4 | 1.000 | 5.000 | − 0.381 | − 2.958 | 0.106 | 0.412 |
FBC3 | 2.000 | 5.000 | − 0.057 | − 0.443 | − 0.213 | − 0.825 |
FBC2 | 2.000 | 5.000 | − 0.287 | − 2.229 | − 0.260 | − 1.009 |
FBC1 | 2.000 | 5.000 | − 0.581 | − 4.510 | 0.447 | 1.733 |
FLC3 | 1.000 | 5.000 | − 0.809 | − 6.276 | 1.309 | 5.076 |
FLC2 | 1.000 | 5.000 | − 0.616 | − 4.774 | 1.022 | 3.964 |
FLC1 | 1.000 | 5.000 | − 0.759 | − 5.886 | 1.261 | 4.892 |
SCC1 | 1.000 | 5.000 | − 0.995 | − 7.721 | 0.639 | 2.477 |
SCC2 | 1.000 | 5.000 | − 0.829 | − 6.431 | 0.470 | 1.824 |
SCC3 | 2.000 | 5.000 | − 0.497 | − 3.856 | 0.119 | 0.463 |
FSC1 | 1.000 | 5.000 | − 0.483 | − 3.744 | 0.690 | 2.676 |
FSC2 | 1.000 | 5.000 | − 0.131 | − 1.012 | − 0.220 | − 0.852 |
FSC3 | 2.000 | 5.000 | − 0.076 | − 0.586 | − 0.420 | − 1.628 |
Multivariate | 46.203 | 13.507 |
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 statement | Statistical analysis to employ | Criterion | Threshold | |
---|---|---|---|---|
Financial Behaviour mediates the relationship between Financial Literacy and Financial Well-Being | Path Analysis in SEM and Bootstrapping | Path coefficient estimates and their significance level | Significant at 5% significance level, i.e. value < 5% | |
Financial Behaviour mediates the relationship between Financial Socialisation and Financial Well-Being | Path Analysis in SEM and Bootstrapping | Path coefficient estimates and their significance level | Significant at 5% significance level, i.e. value < 5% | |
Financial Behaviour mediates the relationship between Self-Control and Financial Well-Being | Path Analysis in SEM and Bootstrapping | Path coefficient estimates and their significance level | Significant at 5% significance level, i.e. value < 5% | |
Financial Behaviour mediates the relationship between Financial Technology and Financial Well-Being | Path Analysis in SEM and Bootstrapping | Path coefficient estimates and their significance level | Significant 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 ).
The structural model for the study
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 ).
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)
Characteristics | Frequency | Percentage (%) |
---|---|---|
Male | 146 | 40.6 |
Female | 214 | 59.4 |
Malay | 287 | 79.7 |
Chinese | 43 | 11.9 |
Indian | 12 | 3.3 |
Others | 18 | 5.0 |
18–19 years old | 14 | 3.9 |
20–25 years old | 300 | 83.3 |
26–29 years old | 46 | 12.7 |
No formal education | 2 | 0.6 |
Secondary (SPM/STPM) | 53 | 14.7 |
Diploma/certificate | 40 | 11.1 |
Bachelor’s degree | 239 | 66.4 |
Master’s degree | 14 | 3.9 |
Others | 12 | 3.3 |
Single | 330 | 91.7 |
Married | 28 | 7.8 |
Divorced | 2 | 0.6 |
Less than RM1,500 | 270 | 75.0 |
Greater than RM1,500 | 90 | 25.0 |
Increased | 30 | 8.3 |
No changes | 177 | 49.2 |
Reduced | 153 | 42.5 |
1–4 | 94 | 26.1 |
5–8 | 231 | 64.2 |
9–12 | 33 | 9.2 |
More than 12 | 2 | 0.6 |
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.
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 error | C.R | Value | Confidence interval | Result | |||||
---|---|---|---|---|---|---|---|---|---|
LB | UB | ||||||||
Financial behaviour | → | Financial wellbeing | 0.480 | 0.155 | 3.103 | 0.002 | 0.136 | 0.956 | Significant |
Financial well-being | ← | Financial technology | − 0.035 | 0.084 | − 0.421 | 0.674 | − 0.220 | 0.147 | Not significant |
Financial well-being | ← | Self-control | 0.158 | 0.087 | 1.818 | 0.069 | − 0.174 | 0.369 | Not significant |
Financial well-being | ← | Financial socialisation | 0.310 | 0.106 | 2.938 | 0.003 | 0.050 | 0.553 | Significant |
Financial well-being | ← | Financial literacy | 0.096 | 0.052 | 1.825 | 0.068 | − 0.017 | 0.194 | Not significant |
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.
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.
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 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 ).
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
Variables | Indirect effect (axb) | Direct (c) |
---|---|---|
Bootstrapping value | Bootstrapping value | |
Financial literacy | ||
Significant | Not Significant | |
Financial socialisation | ||
Significant | Significant | |
Self-control | ||
Significant | Not Significant | |
Financial technology | ||
Significant | Not Significant | |
Financial behaviour | ||
Significant | Not 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 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.
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
Variables | Model (1) | Model (2) | Model (3) | Model (4) |
---|---|---|---|---|
Financial behaviour | 0.996*** | 0.849*** | 1.210*** | 1.045*** |
(0.0996) | (0.102) | (0.0907) | (0.106) | |
[0.80,1.19] | [0.64,1.05] | [1.03,1.38] | [0.83,1.25] | |
Financial literacy | 0.443*** | – | – | – |
(0.0799) | ||||
[0.28,0.59] | ||||
Financial socialisation | – | 0.675*** | – | – |
(0.0929) | ||||
[0.49,0.85] | ||||
Self-control | – | – | 0.222*** | – |
(0.0722) | ||||
[0.08,0.36] | ||||
Financial technology | – | – | 0.286*** | |
(0.0729) | ||||
[0.14,0.42] | ||||
Constant | 6.935*** | 6.325*** | 7.226*** | 7.683*** |
(1.017) | (0.990) | (1.142) | (1.024) | |
Observations | 360 | 360 | 360 | 360 |
R-squared | 0.417 | 0.448 | 0.383 | 0.393 |
coefficient | 0.412*** (0.036) | 0.529*** (0.039) | 0.199*** (0.041) | 0.391*** (0.030) |
coefficient | 0.996*** (0.100) | 0.849*** (0.102) | 1.210*** (0.091) | 1.045*** (0.106) |
× | 0.411*** (0.055) | 0.449*** (0.063) | 0.241*** (0.053) | 0.408**** (0.052) |
coefficient | 0.443*** (0.080) | 0.675*** (0.093) | 0.222*** (0.072) | 0.286*** (0.073) |
Sobel-Goodman mediation test | 0.411*** (0.055) | 0.449*** (0.063) | 0.241*** (0.053) | 0.408*** (0.052) |
Proportion of total effect that is mediated | 48.1% | 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.
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.
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.
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.
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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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.
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 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 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 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 ).
Research framework
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.
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.
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 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.
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 ].
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 ].
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 ].
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.
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.
PLS-SEM results of hypotheses testing using 5000 bootstrapping
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.
The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.
Common method bias
Common method variance
Composite reliability
Exploratory factor analysis
Gross domestic product
Heterotrait–Monotrait ratio of correlations
Kaiser–Meyer–Olkin
Malaysian ringgit
Malaysian Well-being Index
Non-government organizations
Principal axis factoring
Partial least squared structural equation modelling
Sustainable Development Goals
Structural equation modelling
Statistical Package for the Social Sciences
Variance inflation factor
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We would like to acknowledge the financial support provided by the Fundamental Research Grant Scheme (FRGS) [Grant Number FP058-2017A].
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Mahfuzur Rahman, Che Ruhana Isa & Nazreen T. Chowdhury
Department of Development Studies, Faculty of Economics and Administration, University of Malaya, 50603, Kuala Lumpur, Malaysia
Muhammad Mehedi Masud
Department of Marketing, Sunway University Business School, Sunway University, Subang Jaya, 47500, Bandar Sunway, Malaysia
Moniruzzaman Sarker
School of Business and Economics, United International University, Dhaka, Bangladesh
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MR and MS conceived the core idea of the manuscript and conducted empirical studies, analysed the data, and drafted the manuscript. NTC helped with the literature review and discussion. CRI and MMM updated the background, literature review, and discussion. All authors have read and approved the manuscript.
Correspondence to Mahfuzur Rahman or Moniruzzaman Sarker .
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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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DOI : https://doi.org/10.1186/s43093-021-00099-0
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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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College student financial wellness: student loans and beyond.
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Michael Gutter
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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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Calvin Mudzingiri
7Th European Conference on Innovation and Entrepreneurship
Vitorino Martins
Dudung Nuris
students are currently dominated by students born between 2000 and 2005. These students get the designation as Generation Z, whose population is very large today, and the millennial population worldwide reaches 75 percent of the entire Earth's population (Rey-Ares et al., 2021). Generation Z grows and develops in the digital age so that everything related to their behavior and lifestyle cannot be separated from technology (Kartawinata et al., 2021; Kustono, 2021). One of the student behaviors related to this is financial behavior. Financial behavior refers to the actions and decisions individuals make concerning managing their money. This includes how they earn, save, invest, spend, borrow and repay money. Financial behavior can be influenced by various factors, such as personal values, cultural background, socioeconomic status, education level, personality traits, and life experiences. Financial behavior can have a significant impact on an individual's financial well-being and overall quality of life. Good financial behavior can lead to financial security, reduced stress, and increased opportunities, while poor financial behavior can lead to debt, financial instability, and limited options. Therefore, it is important to develop good financial habits and make informed decisions in regard to managing money. Generation Z is a generation with a productive age, so it is expected to be able to manage finances independently and spend according to needs (Kartawinata et al., 2021). Students obtain pocket money from parents to use for daily needs, so the money received from parents is expected to be used wisely. Parents play a role in controlling and advising students to use pocket money for appropriate needs. The role of parents has a significant impact on students' financial behavior (Akben-Selcuk, 2015). Parents who provide sufficient financial literacy to children (students) will be able to plan finances well and make financial decisions effectively. Generation Z is very familiar with the consumptive lifestyle and internet technology. Consumption activities can now be accessed via the internet, making it very easy for everyone to shop with online platforms, including university students. Consumptive behavior supported by technological advances will affect student financial behavior in general (Ramadhan & Asandimitra, 2019). Students often have difficulty making decisions regarding saving or spending their pocket money. In previous research, it was stated that Generation Z or students today have differences related to financial behavior because the financial behavior of students today has been influenced by technological advances so that the rate of saving, spending, and financial planning becomes uncertain (Butar Butar et al., 2021). Financial problems are a common problem faced by young people, especially students, because there is very little knowledge related to financial management. Conversely, financially savvy students tend to face financial problems because they can manage debt better and are more likely to make informed choices about money, such as saving for the future and minimizing spending (Yahaya et al., 2019). From various previous studies, it is stated that the factors that influence financial behavior in students are saving behavior, spending behavior, and
JOJO IVAN INUGUIDAN
Financial literacy is a critical skill that empowers individuals to make informed financial decisions, yet many young adults, including students, often lack sufficient knowledge and skills in this area. This study evaluates the financial literacy levels among engineering students at Baguio Central University (BCU) to provide insights into their financial behaviors, influences, and attitudes. Using a descriptive quantitative approach, data was collected via face-to-face surveys among summer classes attendees. The findings reveal moderate to high levels of financial behavior, with students demonstrating strengths in budgeting and price comparison. However, financial influence scores indicate moderate reliance on parental and school guidance, contrasting with lower influence from media and books. Financial attitudes show a moderate emphasis on financial control and saving behaviors but lower interest in financial reading and discussion. These results underscore the need for targeted financial education programs integrating practical skills development and fostering positive financial attitudes among students. The study contributes valuable insights for enhancing financial literacy initiatives tailored to meet the specific needs of engineering students, thereby promoting their financial well-being and preparedness for future financial challenges.
Public Finance Quarterly
Erzsébet Németh
The survey conducted in 2012–2013 by the State Audit Office of Hungary and its non-governmental partners examined the financial literacy, financial knowledge and risk appetite among higher education students (n=1,743), as well as the factors influencing the same. Our results show that starting a business only appears among the students’ plans and goals to a lesser extent, and some three-quarters of the students are risk averse. It is surprising, at the same time, that their risk appetite does not depend on either the level of their knowledge of finance and economics or on their perception of their own financial knowledge and competence. Excessive risk aversion may prevent the leveraging of financial opportunities and may act as an obstacle to the development of the national economy if it becomes a mass phenomenon. This creates a need for young people with realistic self-perceptions, appropriate attitudes towards risks, and the capability of enterprise.
Nina Ponikvar
International Journal of Management, Knowledge and Learning
This paper presents an insight into the characteristics of how students manage their finances and their general financial literacy. The study was carried out by surveying 259 students from two different faculties. Students from the study programs with economics subjects were statistically better at defining inflation, liquidity and real income. Statistically significant differences between courses were seen also in the area of investment decisions, business students prefer riskier investments like an investment in bonds or gold, whereas non-business students prefer saving the money in a savings account. The results show that students who had economics content in their program more often state they control their finance and have on average better financial knowledge. The results suggest that participation in economic/financial courses increases financial literacy and also feelings of mastery of financial areas, which is important to transfer knowledge into the practice.
The Annals of the University of Oradea
Marietta Kiss
Alongside the numerous negative effects of the 2008 economic crisis, we can emphasize perhaps one positive aspect: one consequence of the crisis has been that attention has been paid to the low level of financial literacy among the population and the importance of financial education. Research into financial literacy has given priority to young people, because in order to be able to avoid a crisis similar to the lows of 2008, the next generation must at least have a high level of financial literacy. Therefore, this study focuses on an analysis of the financial literacy of young people. In our primary research we wanted to describe the financial literacy of Hungarian university students of economics and business, and to show any difference in this area compared to “average” young people not receiving this type of education. We also looked at how economic and financial knowledge acquired in high school influences the financial literacy of students. In our research questionnaire we focused on the three components of financial literacy developed by the OECD in 2010: financial knowledge, financial behaviours, and attitudes to and preferences regarding financial matters. Our results show that the financial knowledge of those involved in economic and business education is at about the same level as the financial knowledge of “average” young people; however, financial and economic education in high school has a positive effect on students’ financial literacy. In our analysis of financial behaviour, we came to the conclusion that the factors influencing economics and business students’ choice of a bank are almost identical to those of “average” young people. In addition, similarities were discovered in borrowing, as well as in the willingness to finance everyday consumer goods through loans. However, in terms of the selection of savings provision and financial products, economics and business students are characterized by more conscious behaviour compared to their “average” counterparts. Furthermore, it was found that the financial attitude of all the tested students as well as of “average” young people is above the average, but this is not manifest in their behaviour regarding savings, so any measures taken in the future to improve the financial literacy of the general public should focus in particular on this component.
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Yoko Mimura
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Financial literacy helps individuals make more. assertive and e fficient decisions in the monetary context of their lives. This paper measures. the level of financial literacy of individuals and ...
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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 ...
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Majors are differentiated according to the college they are housed in; 29% business, 27% engineering, 37% art and science, and 9% other. Finally, 39% of respondents reported being first-year students by credits, 26% sophomores, 14% juniors, and 20% seniors. Five questions were used to measure financial knowledge.
The link between financial literacy and financial behavior has been looked at in a number of other studies. The literature of financial literacy first developed to study the link between financial literacy and retirement planning ( Ameriks et al., 2003 , Lusardi and Mitchell, 2007 , Bucher-Koenen and Lusardi, 2015 , Van Rooij et al., 2011b ).
Financial behaviour can also be explained using the life-cycle theory/hypothesis, the prospect theory, and the theory of planned behaviour In relation to the life-cycle hypothesis, Ahmed et al. (2006) argued that it is suitable for explaining financial behaviour, particularly savings behaviour. The life-cycle hypothesis postulates that ...
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Financial literacy is an ability of individual to take considerable decisions in respect of the effective and efficient utilization of money. In present study, authors have presented an association of financial knowledge, financial behaviour and financial attitude towards the financial literacy level among working women in Delhi, India.
This Dissertation/Thesis is brought to you for free and open access by the Student Theses & Publications at The ... There is little research describing the role parental financial behavior has on their college students' efficacy in managing their own financial behaviors once they begin to spend the
Financial behavior, according to Potrich et al. (2016) is financial behavior as an action that reflects good behavior in managing pocket money in accordance with the objectives and financial realization. According to Nababan & Sadalia (2013) and Sari (2016), financial behavior is an individual's responsibility in managing finances with ...
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between financial behavior and quality of life of the students surveyed. Results of bivariate analyses show that frequencies of performing positive financial behaviors are associated with many factors, such as attitude toward performing the behavior, perceived control, parental influence, peer influence, class standing, etc. In addition,
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Savings Behavior and Financial Problems Among College Students: The Role of Financial Literacy in Malaysia. Mandell, L., and Klein, L.S. 2009. The Impact of Financial Literacy Education on Subsequent Financial Behavior. Journal of Financial Counseling and Planning, Vol. 20, No. 1. Modigliani, F. Life Cycle, Individual Thrift, and the Wealth of ...
The study found that there is a significant relationship between financial literacy, family influence, and saving attitude with the student's financial management behaviour, contributing to 63.3% ...
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