Open AccessEffect of Financial Literacy on Individual Savings Behavior; the Mediation Role of Intention to Saving
Author(s) -
T. U. I. Peiris
Publication year - 2021
Publication title -
european journal of business and management research
Language(s) - English
Resource type - Journals
ISSN - 2507-1076
DOI - 10.24018/ejbmr.2021.6.5.1064
Subject(s) - financial literacy , mediation , path analysis (statistics) , structural equation modeling , sri lanka , psychology , social psychology , indirect effect , finance , business , economics , political science , computer science , socioeconomics , machine learning , law , tanzania
This study investigated the effect of financial literacy on savings behavior, considering the mediation effect of intention to savings. A structured questionnaire was distributed among 206 employed individuals in the Colombo district, Sri Lanka. Three Stage Least Squares technique was initially used to analyze the structural equations model fitted to measure the hypothesized mediation effect. Then the result was rousted using path analysis. The findings indicated that financial literacy has a direct and positively significant influence on savings behavior. Moreover, the mediation effect of intention was also found as positively significant in the above relationship. This indicates that the knowledge of the financial system leads to good savings behavior, and especially it creates an intention to save more. Therefore, policymakers and financial institutions can consider enhancing financial literature among individuals as a worthy strategy when encouraging savings as it both encourages savings behavior and the intention to do so.