Impact of Financial Literacy on Financial Behaviour: Based on the Evidence from the Middle-Class of Bangladesh

Abstract

Financial Literacy, refers to the knowledge about financial terms and the ability to employ that knowledge wisely in making financial decisions. This paper is an effort to study the impact of financial literacy and financial behaviours of the urban middle-class people of Bangladesh. Most of the available research on financial literacy has focused on developed and industrialised economies whereas, this study attempts to highlight the condition of financial literacy and how it impacts financial behaviour in a developing economy. The results of the study imply that the individuals have a moderate degree of financial literacy in terms of risk-return, inflation, interest rate and numerical aptitude. The financial behaviour of individuals in terms of risk aversion, payment obligations and so forth has been found to be associated with the degree of financial literacy and some other factors. The results of the study have demonstrated that a higher degree of financial literacy can help individuals make informed decisions. Such decisions or financial behaviours sometimes radiate prudence and lead to positive behaviour and sometimes not. The findings from this research acknowledge that financial literacy does not necessarily adhere to any universal approach. Diverse populations exhibit varying degrees of financial literacy and necessitate tailored strategies to attain financial well-being. The findings of the research reinstate the fact that the use of financial education can serve as a potent mechanism for fostering financial aptitude, enhancing financial resilience, and mitigating financial distress among individuals.