The Impact of Financial Literacy Dimensions on Youths’ Financial Well-Being
Keywords:
financial literacy, financial attitude, financial behavior, financial knowledge, financial well-being
Abstract
The purpose of the research is to assess how financial literacy affects young people's well-being in accordance with the Theory of Planned Behavior (TPB). This research was designed to investigate how the theory's conception functions in the context of Indonesian youths, based on the theory's conceptual framework. The statistical analysis was performed on the sample of 150 respondents. To investigate this research idea, Partial Least Squares – Structural Equation Modeling (PLS-SEM) was selected. Financial well-being is positively impacted by one's financial attitude. Financial well-being is also influenced by financial behavior. However, financial knowledge has no impact on financial well-being. The research’s findings contribute to the literature by adding another empirical confirmation from Indonesian youths’ viewpoint. It offers useful information and provides youths with financial literacy skills. This research also contributes to the advancement of knowledge in relation to the financial literacy in youths. It could help governments to make decisions on youth financial well-being. Moreover, it highlights the direction which a government or policymaker can take to pursue youth financial literacy and its well-being.
References
Ajzen, I. (1991). The Theory of Planned Behaviour. Organizational Behavior and Human Decision Processes, 50(2), 179–211. https://doi.org/10.1016/0749- 5978(91)90020-t
Alqam, M. A., & Hamshari, Y. M. (2024). The impact of financial literacy on financial inclusion for financial well - being of youth: evidence from Jordan. Discover Sustainability, 5(28), 1–21. https://doi.org/10.1007/s43621-024-00704-6
Atahau, A. D. R., Sakti, I. M., Hutar, A. N. R., Huruta, A. D., & Kim, M.-S. (2023). Financial literacy and sustainability of rural microfinance: The mediating effect of governance. Cogent Economics and Finance, 11(2), 2230725. https://doi.org/10.1080/23322039.2023.2230725
Atkinson, A., & Messy, F.-A. (2012). Measuring financial literacy: results of the OECD infe pilot study. In OECD Working Papers on Finance, Insurance and Private Pensions (Vol. 15, Issue 15). https://www.oecd.org/content/dam/oecd/en/publications/reports/2012/03/measuri ng-financial-literacy_g17a210b/5k9csfs90fr4-en.pdf
Brüggen, E. C., Hogreve, J., Holmlund, M., Kabadayi, S., & Löfgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research, 79, 228–237. https://doi.org/10.1016/j.jbusres.2017.03.013
Chaity, N. S., Kabir, S. Bin, Akhter, P., & Bokhari, R. P. (2024). How Financial Literacy Impacts Financial Well-Being: The Influence of Financial and Technical Efficacy. International Journal of Economics and Financial Issues, 14(2), 207–217. https://doi.org/10.32479/ijefi.15806
Chong, K. F., Sabri, M. F., Magli, A. S., Rahim, H. A., Mokhtar, N., & Othman, M. A. (2021). The Effects of Financial Literacy, Self-Efficacy and Self-Coping on Financial Behavior of Emerging Adults. Journal of Asian Finance, Economics and Business, 8(3), 905–915. https://doi.org/10.13106/jafeb.2021.vol8.no3.0905
Consumer Financial Protection Bureau. (2015). Measuring financial well-being: A guide to using the CFPB Financial Well-Being Scale. Consumer Financial Protection Bureau.
Hair, J. F., Black, W.C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). Pearson.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2018). Multivariate Data Analysis, Eighth Edition. Cengange Learning.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM) (2nd ed.). Sage.
Hamid, A., Mardhiah, A., & Midesia, S. (2019). Factors Influencing the Intention to Stock Investment Among Muslim Investors in Langsa. Share: Jurnal Ekonomi Dan Keuangan Islam, 8(2), 142–161. https://doi.org/10.22373/share.v8i2.4679
Ilyas, M., Moeljadi, M., & Djawahir, A. H. (2022). The effect of financial knowledge and financial well-being on investment intention mediated by financial attitude. International Journal of Research in Business and Social Science, 10(8), 175–
188. https://doi.org/10.20525/ijrbs.v10i8.1530
Indonesia Central Bureau of Statistics. (2024). Number of Population Aged 15 Years and Over According to Age Group, 2024. Indonesia Central Bureau of Statistics. https://www.bps.go.id/id/statistics-table/2/NzE1IzI=/jumlah-penduduk-usia-15- tahun-ke-atas-menurut-golongan-umur.html
Indonesian Financial Services Authority. (2024). Joint Press Release: OJK And Statistics Indonesia Present National Survey On Financial Literacy And Inclusion 2024 Findings. https://ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/OJK- And-Statistics-Indonesia-Present-National-Survey-On-Financial-Literacy-And- Inclusion-2024-Findings.aspx#:~:text=On the contrary%2C 15-17,percent and
52.51 percent respectively.
Kaiser, T., & Menkhoff, L. (2017). Does financial education impact financial literacy and financial behavior, and if so, when? World Bank Economic Review, 31(3), 611–630. https://doi.org/10.1093/wber/lhx018
Lusardi, A. (2015). Financial literacy: Do people know the ABCs of finance? Public Understanding of Science, 24(3), 260–271. https://doi.org/10.1177/0963662514564516
Lusardi, A., & Messy, F.-A. (2023). The importance of financial literacy and its impact on financial wellbeing. Journal of Financial Literacy and Wellbeing, 1(1), 1–11. https://doi.org/10.1017/flw.2023.8
Lusardi, A., & Mitchell, O. S. (2011). Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10(4), 509–525. https://doi.org/10.1017/S147474721100045X
Lusardi, A., & Tufano, P. (2015). Debt literacy, financial experiences, and overindebtedness. Journal of Pension Economics and Finance, 14(4), 332–
368. https://doi.org/10.1017/S1474747215000232
Megananda, T. B., & Faturohman, T. (2022). Improving Financial Well-being in Indonesia: The Mediating Role of Financial Behavior. Review of Integrative Business and Economics Research, 11(4), 201–219.
Quan, L., Al-Ansi, A., & Han, H. (2022). Assessing customer financial risk perception and attitude in the hotel industry: Exploring the role of protective measures against COVID-19. International Journal of Hospitality Management, 101, 103123. https://doi.org/10.1016/j.ijhm.2021.103123
Shi, K., Yang, Y., De Vos, J., Zhang, X., & Witlox, F. (2022). Income and commute satisfaction: On the mediating roles of transport poverty and health conditions. Travel Behaviour and Society, 29, 297–307. https://doi.org/10.1016/j.tbs.2022.07.004
Shim, S., Xiao, J. J., Barber, B. L., & Lyons, A. C. (2009). Pathways to life success: A conceptual model of financial well-being for young adults. Journal of Applied Developmental Psychology, 30(6), 708–723. https://doi.org/10.1016/j.appdev.2009.02.003
Shim, S., Tang, C., & Xiao, J. (2009). Acting for happiness: Financial behavior and life satisfaction of college students. Social Indicators Research, 92(1), 53–68. https://doi.org/10.1007/s11205-008-9288-6
Talwar, M., Talwar, S., Kaur, P., Tripathy, N., & Dhir, A. (2021). Has financial attitude impacted the trading activity of retail investors during the COVID-19 pandemic? Journal of Retailing and Consumer Services, 58, 102341. https://doi.org/10.1016/j.jretconser.2020.102341
Utkarsh, Pandey, A., Ashta, A., Spiegelman, E., & Sutan, A. (2020). Catch them young: Impact of financial socialization, financial literacy and attitude towards money on financial well-being of young adults. International Journal of Consumer Studies, 44(6), 531–541. https://doi.org/10.1111/ijcs.12583
Xiao, J. J. (2008). Applying behavior theories to financial behavior. In Handbook of consumer finance research. Springer.
Xiao, J. J., & Porto, N. (2017). Financial education and financial satisfaction: Financial literacy, behavior, and capability as mediators. International Journal of Bank Marketing, 35(5), 805–817. https://doi.org/10.1108/IJBM-01-2016-0009
Xiao, J. J., Tang, C., & Shim, S. (2009). Acting for happiness: Financial behavior and life satisfaction of college students. Social Indicators Research, 92(1), 53–68. https://doi.org/10.1007/s11205-008-9288-6
Alqam, M. A., & Hamshari, Y. M. (2024). The impact of financial literacy on financial inclusion for financial well - being of youth: evidence from Jordan. Discover Sustainability, 5(28), 1–21. https://doi.org/10.1007/s43621-024-00704-6
Atahau, A. D. R., Sakti, I. M., Hutar, A. N. R., Huruta, A. D., & Kim, M.-S. (2023). Financial literacy and sustainability of rural microfinance: The mediating effect of governance. Cogent Economics and Finance, 11(2), 2230725. https://doi.org/10.1080/23322039.2023.2230725
Atkinson, A., & Messy, F.-A. (2012). Measuring financial literacy: results of the OECD infe pilot study. In OECD Working Papers on Finance, Insurance and Private Pensions (Vol. 15, Issue 15). https://www.oecd.org/content/dam/oecd/en/publications/reports/2012/03/measuri ng-financial-literacy_g17a210b/5k9csfs90fr4-en.pdf
Brüggen, E. C., Hogreve, J., Holmlund, M., Kabadayi, S., & Löfgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research, 79, 228–237. https://doi.org/10.1016/j.jbusres.2017.03.013
Chaity, N. S., Kabir, S. Bin, Akhter, P., & Bokhari, R. P. (2024). How Financial Literacy Impacts Financial Well-Being: The Influence of Financial and Technical Efficacy. International Journal of Economics and Financial Issues, 14(2), 207–217. https://doi.org/10.32479/ijefi.15806
Chong, K. F., Sabri, M. F., Magli, A. S., Rahim, H. A., Mokhtar, N., & Othman, M. A. (2021). The Effects of Financial Literacy, Self-Efficacy and Self-Coping on Financial Behavior of Emerging Adults. Journal of Asian Finance, Economics and Business, 8(3), 905–915. https://doi.org/10.13106/jafeb.2021.vol8.no3.0905
Consumer Financial Protection Bureau. (2015). Measuring financial well-being: A guide to using the CFPB Financial Well-Being Scale. Consumer Financial Protection Bureau.
Hair, J. F., Black, W.C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). Pearson.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2018). Multivariate Data Analysis, Eighth Edition. Cengange Learning.
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM) (2nd ed.). Sage.
Hamid, A., Mardhiah, A., & Midesia, S. (2019). Factors Influencing the Intention to Stock Investment Among Muslim Investors in Langsa. Share: Jurnal Ekonomi Dan Keuangan Islam, 8(2), 142–161. https://doi.org/10.22373/share.v8i2.4679
Ilyas, M., Moeljadi, M., & Djawahir, A. H. (2022). The effect of financial knowledge and financial well-being on investment intention mediated by financial attitude. International Journal of Research in Business and Social Science, 10(8), 175–
188. https://doi.org/10.20525/ijrbs.v10i8.1530
Indonesia Central Bureau of Statistics. (2024). Number of Population Aged 15 Years and Over According to Age Group, 2024. Indonesia Central Bureau of Statistics. https://www.bps.go.id/id/statistics-table/2/NzE1IzI=/jumlah-penduduk-usia-15- tahun-ke-atas-menurut-golongan-umur.html
Indonesian Financial Services Authority. (2024). Joint Press Release: OJK And Statistics Indonesia Present National Survey On Financial Literacy And Inclusion 2024 Findings. https://ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pages/OJK- And-Statistics-Indonesia-Present-National-Survey-On-Financial-Literacy-And- Inclusion-2024-Findings.aspx#:~:text=On the contrary%2C 15-17,percent and
52.51 percent respectively.
Kaiser, T., & Menkhoff, L. (2017). Does financial education impact financial literacy and financial behavior, and if so, when? World Bank Economic Review, 31(3), 611–630. https://doi.org/10.1093/wber/lhx018
Lusardi, A. (2015). Financial literacy: Do people know the ABCs of finance? Public Understanding of Science, 24(3), 260–271. https://doi.org/10.1177/0963662514564516
Lusardi, A., & Messy, F.-A. (2023). The importance of financial literacy and its impact on financial wellbeing. Journal of Financial Literacy and Wellbeing, 1(1), 1–11. https://doi.org/10.1017/flw.2023.8
Lusardi, A., & Mitchell, O. S. (2011). Financial literacy and retirement planning in the United States. Journal of Pension Economics and Finance, 10(4), 509–525. https://doi.org/10.1017/S147474721100045X
Lusardi, A., & Tufano, P. (2015). Debt literacy, financial experiences, and overindebtedness. Journal of Pension Economics and Finance, 14(4), 332–
368. https://doi.org/10.1017/S1474747215000232
Megananda, T. B., & Faturohman, T. (2022). Improving Financial Well-being in Indonesia: The Mediating Role of Financial Behavior. Review of Integrative Business and Economics Research, 11(4), 201–219.
Quan, L., Al-Ansi, A., & Han, H. (2022). Assessing customer financial risk perception and attitude in the hotel industry: Exploring the role of protective measures against COVID-19. International Journal of Hospitality Management, 101, 103123. https://doi.org/10.1016/j.ijhm.2021.103123
Shi, K., Yang, Y., De Vos, J., Zhang, X., & Witlox, F. (2022). Income and commute satisfaction: On the mediating roles of transport poverty and health conditions. Travel Behaviour and Society, 29, 297–307. https://doi.org/10.1016/j.tbs.2022.07.004
Shim, S., Xiao, J. J., Barber, B. L., & Lyons, A. C. (2009). Pathways to life success: A conceptual model of financial well-being for young adults. Journal of Applied Developmental Psychology, 30(6), 708–723. https://doi.org/10.1016/j.appdev.2009.02.003
Shim, S., Tang, C., & Xiao, J. (2009). Acting for happiness: Financial behavior and life satisfaction of college students. Social Indicators Research, 92(1), 53–68. https://doi.org/10.1007/s11205-008-9288-6
Talwar, M., Talwar, S., Kaur, P., Tripathy, N., & Dhir, A. (2021). Has financial attitude impacted the trading activity of retail investors during the COVID-19 pandemic? Journal of Retailing and Consumer Services, 58, 102341. https://doi.org/10.1016/j.jretconser.2020.102341
Utkarsh, Pandey, A., Ashta, A., Spiegelman, E., & Sutan, A. (2020). Catch them young: Impact of financial socialization, financial literacy and attitude towards money on financial well-being of young adults. International Journal of Consumer Studies, 44(6), 531–541. https://doi.org/10.1111/ijcs.12583
Xiao, J. J. (2008). Applying behavior theories to financial behavior. In Handbook of consumer finance research. Springer.
Xiao, J. J., & Porto, N. (2017). Financial education and financial satisfaction: Financial literacy, behavior, and capability as mediators. International Journal of Bank Marketing, 35(5), 805–817. https://doi.org/10.1108/IJBM-01-2016-0009
Xiao, J. J., Tang, C., & Shim, S. (2009). Acting for happiness: Financial behavior and life satisfaction of college students. Social Indicators Research, 92(1), 53–68. https://doi.org/10.1007/s11205-008-9288-6