The Role of Financial Literacy on Financial Behavior

Abstract

A number of previous empirical studies found that, financially speaking, literate people tends to do budgeting, saving, controlling expenses, managing debt well, participating in stock market and planning pension fund, etc. In other words, the higher an individual’s knowledge and understanding of financial concept, the more likely they are to behave financially well in their daily life. Financial literacy is needed by everyone, including womenpreneur because not only they have to be able to manage their personal finance, they should also manage their business finance. Financially literate people are more likely to get access to external funding and to develop their business. This research aims to examine the role played by financial literacy on financial behavior of womenpreneur in Malang. Financial literacy was measured using 11 questions modified from Lusardi & Mitchell (2011) and financial behavior was measured using 8 questions taken from INFE. The sample was 95 respondents who were female (owners of) Micro, Small and Medium Enterprises in Malang. The data were collected using questionnaire. We used Partial Least Square with Smart PLS 3 to examine the variables. After the first bootstrapping process, we drop some invalid indicators and then perform the second bootstrapping. The result showed that all of the remaining indicators were valid and financial literacy had been found to have positive significant (influence) on financial behavior.

The Effect of Financial Literacy on Financial Management Behavior in the Community of Kupang

“…According to Mahdzan & Tabiani (2013), financial literacy can be seen in individual financial decision making, starting from making mature financial plans and being able to manage every pattern of financial behavior. This opinion is in line with research conducted by Humaidi et al (2020) and Andarsari & Ningtyas (2019) which revealed that financial literacy affects financial management behavior. The research emphasizes that financial literacy has an important role in shaping one's wealth equity.…”

“…With the various financial activities carried out by the Kupang community, financial literacy is needed to help the community in managing their finances responsibly and not make mistakes in making financial decisions. Based on research conducted by Humaidi et al (2020), Andarsari & Ningtyas (2019) show that financial literacy has an influence on financial management behavior. The research confirms that having a good financial understanding can help individuals make wise financial decisions such as saving more for retirement funds, managing personal finances better, and managing investments carefully.…”

The Impact of Financial Knowledge, Financial Self-Efficacy, and Saving Behaviour on Junior High School Students: A Case Study of Rural and Urban Area Students

“…Financial knowledge has a significant influence on financial behavior. Financial knowledge positively correlates with financial behavior (Andarsari & Ningtyas, 2019;Amagir et al, 2020). Financial education has an essential contribution to financial knowledge and financial behavior to be better [7].…”

Does Financial Literacy Influencing the University Student’s Decision to Use M-Payment?

“…Moreover, 40% -50% of respondents are most in the criteria of not literate. Not literate respondents are considered to not having an understanding or trust in financial services institutions, financial products and services, also not having skills in using financial products and services [41].…”