Financial literacy as a mediator of personal financial health during COVID-19: A structural equation modelling approach

Abstract

The coronavirus disease 2019 (COVID-19) pandemic has become a global humanitarian challenge. This scourge has impacted people from all walks of life as well as every economic sector and activity, from travel to automotives, hotels to banking, and supply chain to retail. The pandemic has affected not only physical and mental health but also financial health. Studies have examined the pandemic’s economic impact, but very few have examined its impact on personal finances. Efforts to contain the pandemic’s spread, such as lockdowns, have resulted in suspended business operations throughout the world that have intensified joblessness. To prepare and protect people from such unforeseen situations, financial education and planning are necessary. We attempt to expand the evidence on this issue by applying a structural equation modelling approach to identify the mediating role of financial literacy programs in preparing and protecting household wealth against sudden worldwide setbacks. The research design is descriptive and exploratory using snowball sampling technique. The data was collected through an internet survey. In total, 400 survey responses were obtained. After testing the measurement model for key validity dimensions, the hypothesised causal relationships are examined in several path models. The results indicated that coronavirus awareness exerts a direct or indirect influence on the financial health of individuals through financial literacy. We conclude that financial literacy has a full mediating effect on the personal finance of individuals during the COVID-19 pandemic. The findings not only contributed to the need and understanding of financial literacy but also have managerial implications. Financial literacy programs provide investment advice and suggestions which are actionable and also work to help individuals to come out stronger in terms of knowledge and skill set when the COVID-19 crisis passes.

The road to recovery: Financial resilience and mental health in post-apartheid South Africa

“…Moreover, the analysis of the various dimensions of financial resilience using the KLS technique is presented in Table 8 . Specifically, our findings indicate that the dimensions of access to economic resources, financial resources, and financial literacy are associated with enhanced mental wellbeing, consistent with prior research ( Anand et al, 2021 ; Boyas et al, 2009 ; Clayton et al, 2015 ; Schreiter et al, 2020 ; Taft et al, 2013 ). One plausible explanation for this pattern of findings is rooted in the notion that individuals who possess a broad array of economic resources, such as savings, adept debt management skills, ample income, access to financial products and services, and financial literacy, are better equipped to effectively manage financial stressors and preserve their mental well-being as argued by Jayasinghe et al (2020) , Nanda and Banerjee (2021) and Stevenson et al (2022) .…”

“…Access to insurance products covering households against unexpected shocks has also been shown to reduce mental stresses and improve general wellbeing through increased financial stability in the US and Ghana ( Finkelstein et al, 2012 ; Gyasi et al, 2020 ). Anand et al (2021) claim that financial literacy improved the mental and financial wellbeing of Indian households during the COVID-19 pandemic. Furthermore, Zheng et al (2021) show that financial literacy has improved the mental health and general wellbeing of urban residents in China.…”

Determinants of Financial Wellness of Rural Households in the Hill Districts of Uttarakhand: An Empirical Approach

“…According to (Anand et al, 2021), (Word Bank, 2020 financial knowledge contributes to the financial wellness of rural households and makes them more robust for tough times. The study also found that rural households have sound financial knowledge about different financial schemes and welfare programs.…”

Financial Literacy, Financial Attitude and Financial Well-being of University of Cape Coast Staff During COVID-19 Pandemic

“…The world has witnessed the adverse impact of the COVID-19 pandemic on all facets of life. The pandemic has heightened concerns for major socio-economic and political uncertainties as it directly or indirectly interrupts and hinders all events, activities, and processes about global development (Anand, Mishra, Verma & Taruna, 2021). The impact was even aggravated for developing countries, although developed countries also had their share of this same phenomenon.…”