Financial Literacy and Financial Wellbeing among Indian Households

Rajesh Mishra

doi:10.5539/ijbm.v17n4p98

Abstract

This study is conducted to explore the impact of financial literacy on financial wellbeing of Indian households. Various measures like financial knowledge, financial attitude, and financial behaviour were assessed using survey data of 47,132 Indian households taken from the Financial Inclusion Insights (FII) survey, wave 5, conducted by Intermedia. The results from logistics regression indicate that financial knowledge (objective and subjective), financial attitude and financial behaviour are significant predictor of financial wellbeing. It is evident from the study that both financial attitude and financial behaviour of an individual strongly and positively influence financial wellbeing. Though actual financial knowledge might not influence much financial wellbeing whereas subjective financial knowledge i.e., self-assessed financial knowledge might strongly impact financial wellbeing in case of deviation between actual and self-assessed knowledge. Financial wellbeing significantly varies with age, education, working profile and urban-rural area category while gender attribute does not significantly impact financial wellbeing.

Highlights

With the introduction of new financial products and services worldwide and increasing accessibility, the small investors have got a wider choice for investments as well as borrowings
Logistics regression was applied to measure the financial wellbeing that is dependent on the independent variables, financial knowledge, financial attitude and financial behaviour
Current study reveals the fact that financial wellbeing of Indian household depends to a large extent on what is the level of financial knowledge and how much good in exhibiting financial attitude and financial behaviour

Summary

Introduction

With the introduction of new financial products and services worldwide and increasing accessibility, the small investors have got a wider choice for investments as well as borrowings. In 2016, OECD conducted survey to compare the financial knowledge, behaviour, attitudes and inclusion of 101,596 adults aged 18 to 79 in 21 countries and found the average score of 60% indicating that there is substantial possibility for enhancement in terms of overall levels of financial literacy (OECD, 2016). ANZ Survey of Adult Financial Literacy in Australia and New Zealand since 2002 has been evolved from just measuring financial literacy level primarily based on financial knowledge to behaviourally-based financial capability in 2011 and later in 2017 adopted the Financial Wellbeing conceptual model developed by Kempson, Finney, and Poppe (2017). According to Australian Securities and Investments Commission (ASIC), enhanced financial literacy can help all irrespective of socio-demographic attributes by assisting in making best use of money, understanding and managing financial risk, and guiding properly to avoid financial downsides which could overall have a constructive effect on the financial wellbeing of individuals and society (ASIC, 2014)

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Results

Conclusion