CHAPTER -V

ANALYSIS – II: FINANCIAL LITERACY

- IMPACT ON FINANCIAL WELL-BEING
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CHAPTER -V

ANALYSIS – II FINANCIAL LITERACY : IMPACT ON

FINANCIAL WELL-BEING

5.1 Introduction

In this chapter the financial well-being of the individual is examined. The

inter linkage between financial literacy and financial well-being is studied. The
impact of financial literacy on financial well-being is analysed. A structural equation
model is used tested to understand the implications of financial literacy on financial
well-being.

5.2 Financial Well-being

According to Joo (2008) Financial well-being is achieved when ‘an

individual in a healthy financial situation, free from anxiety based on a subjective
situation.’ In other words, it means that an individual has a good financial well-
being if he or she has a low level of loans, active savings, retirement plans and well
–organized expenses. Delafrooz and Paim (2011) asserted that economic well-being,
financial wellness and financial satisfaction are interchangeable terms of financial
well-being. Jasmine Adele Mutony et al (2017) found that financial literacy was
positively related to financial well-being.

Financial well-being is both a subjective measure of how satisfied a person

feels about the state of their finances and an objective assessment of their financial
position. The Consumer Financial Protection Bureau (CFPB) highlights that,
consumers can experience financial well-being or a lack of it regardless of income.
It is a personal state not fully described by objective financial measure. Instead,
well-being is defined as having financial security and financial freedom of choice in
the present and in the future.

To understand and measure financial well-being of the respondents in this

study a total of 10 questions were asked or a 5 point likert scale. These question
were grouped into 3 factors namely: (1) control over finances and on track financial
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goals (ii) capacity to absorb financial shock and (iii) freedom to make choices and
enjoy life. A confirmatory factor analysis is carried out to ensure the grouping of the
questions into the respective factors.

Financial well-being on the whole is categorized into high, moderate and low
based on the scores given by the respondent. The Australian Unity survey (2014)
and the CFPB used similar classification.

The results of the study show that 26% (202 respondents out of a total of
770) have low financial well-being, 50% (385 respondents out of a total of 770)
have moderate financial well-being and 24% (183 respondents out of a total of 770)
have high level of financial well-being.

Table 5.1: Mean and SD of financial well-being statements

S.No Financial well-being statements Mean SD

1. My income is enough to pay my monthly expenses. 3.864 0.969

2. My finances are out of my control. 3.712 1.087

3. I can enjoy life because of the way I am managing my

3.700 0.928
money.

4. I am satisfied with my financial status. 3.644 0.991

5. I have too much loan right now. (Personal loan, vehicle

3.612 1.162
, housing etc.)

6. I have money left over at the end of the month always 3.514 1.012

7. I could handle a major unexpected expense 3.438 1.034

8. Giving a gift for a wedding, birthday or other occasions

3.282 1.154
would put a strain on my finances for the month.

9. I am concerned that the money I have or save won’t last. 2.926 1.053

10. My financial situation limits my ability to do things that

2.791 1.148
are important to me.
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The table reflects mean and SD of the respondents’ financial well-being.

The mean values show that respondents strongly agree that, their income is
sufficient to pay their monthly expenses (3.86) followed by the situation where
respondents feel their finances are out of their control (3.71). Most respondents also
feel they can enjoy life because of the way they are managing money (3.70), and are
satisfied with their financial status (3.64). Mean values ranging from 3.64 to 3.86
indicate that respondents on an average opine they are able to meet with their
expenses; they enjoy life based on their money management decisions and are
reasonably satisfied with their financial status. However on an average respondents
feel their finances are out of their control. Respondents have a close to neutral stand
when it comes to their financial situation limiting their ability to do things important
to them (2.79).The highest SD value was found for the statement “I have too much
loan now” (1.162) indicating differences in the debt situation of the respondents and
the lowest SD was observed for the statement “I can enjoy life because of the way I
am managing my money” (0.928) indicating a similar mind set among respondents
while responding to this statement.

5.2.1 Factors of well-being

To understand the financial well-being of the respondents, the variables are

grouped into three factors

Table 5.2 : Mean and SD of factors of financial well-being

Maximum
S.No Factors of Financial well-being Mean SD
possible score
1 Control over finances 14.09 20 4.11
2 Capacity to absorb financial shock 9.47 15 2.86
3 Freedom to make choices and
9.76 15 2.88
enjoy life
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5.2.1.1 Control over finances

This factor consists of four statements which would reflect if an individual

has control over his or her finances and are on track to meet their financial goals.
This factor aims to measure if a person is satisfied with his financial status, see if
there is money left over at the end of every month, check if finances are out of one’s
control and finally if a person’s income is enough to pay his monthly expenses. The
respondents have a mean score of 14.09 out of a maximum possible score of 20.
This score reflects a neutral to slightly positive state of control over finances of the
respondents.

5.2.1.2 Capacity to absorb financial shock

This factor consists of three statements which are used to assess if the
respondents would be able to meet with an unexpected expense in a month and still
be in a situation to balance out their financial position for that month. The
statements used in this factor are “I could handle a major unexpected expense”
‘Giving a gift for a wedding or birthday would put a strain or the finances for the
month and “I am concerned that the money I have or save won’t last” . These
statements help to assess if the respondents have the capacity to absorb a financial
shock. The respondents on an average have a score of 9.47 out of a maximum
possible score of 15. This reflects a moderate level of financial well-being with
regard to the aspect of absorbing a financial shock.

5.2.1.3 Freedom to make choices and enjoy life

The ultimate goal of an individual is to attain freedom to make financial

choice as one wishes and thereby enjoying life. This factor consists of three
statements to assess their well-being with respect to the above factor. The statements
are “I have too much loan right now”, “My financial situation limits my ability to do
things that are important to me” and “I can enjoy life because of the way I am
managing my money” The average score given by the respondents for this factor is
9.76, out of a maximum possible score of 15. The mean score reflects a moderate
level of freedom one has, to make financial choices and enjoy life.
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Figure 5.1: Factors of Financial Well-Being

5.2.2 Friedman Test

Null Hypothesis: There is no significant difference among mean ranks towards

factors of financial well-being.

Table 5.3: Freidman test for significant difference among mean ranks towards
factors of financial well-being.

Mean Chi-
S.No Factors of financial well-being P value
Rank square
1 Control over finances 2.46
2 Capacity to absorb financial shock 1.66 291.04 <0.001**
3 Freedom to make choices and enjoy life 1.89

Since p value is less than 0.01 the null hypothesis is rejected at 1% level of
significance. It can be concluded that there is a significant difference among mean
ranks towards factors of financial well-being. Based on mean ranks, control over
finances and on track financial goals (2.46) is the most effective factor of financial
well-being, followed by freedom to make choices and enjoy life (1.89) and last is
capacity to absorb financial shock (1.66). The results highlight that it is most
important to have a control over ones financial situation and this in turn will help an
individual to be on track to achieve their financial goals and objectives.
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Overall it is essential to have a good level of financial literacy as numerous

studies have proved that a higher level of financial high levels of financial literacy is
followed by financial well-being. Higher financial literacy leads to lesser financial
concerns and ultimately higher financial wellbeing reduces financial concerns.

5.2.3 Demographic analysis with respect to financial well-being

This part of the study deals with analysing the relationship between various
demographic variables such as gender, age, marital status, work profile, occupation,
income, education qualification and financial well-being.

Null Hypothesis: There exists no significant difference between gender with

respect to financial well-being

Table 5.4 : t test for Significant difference between gender with respect to
financial well-being

Gender
Factors of Financial t P
Male Female
Well-being value value
Mean SD Mean SD
Control over Finances 14.31 4.09 13.72 4.14 1.929 0.054
Capacity to absorb financial
9.63 2.86 9.21 2.85 1.971 0.049*
Shock
Freedom to make Choices and
9.84 2.90 9.62 2.86 0.997 0.319
Enjoy Life
Overall Well-being 33.77 8.99 32.55 9.09 1.82 0.069
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.

The table reveals that the P values are less than 0.05 (t=1.971) for the factor
capacity to absorb financial shock, hence the null hypothesis is rejected at 5% level.
It can be said that there is a significant difference among men and women in their
capacity to absorb a financial shock. However as the p values are greater than 0.05,
no significant difference if found between men and women for the factors ‘control
over finances and on track financial goals’ and for ‘freedom to make choices to
enjoy life’.
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Based on the mean values it can be said that men have a better ability to
manage an unexpected expense thereby trying to absorb a financial shock better than
women. However overall there is no significant difference among men and women
in their financial well-being

Null Hypothesis: There exists no significant difference between marital status

with respect to financial well-being

Table 5.5 : t test for Significant difference between marital status with respect
to financial well-being

Marital Status
Factors of Financial
Single Married t value p value
Well-being
Mean SD Mean SD
Control over finances 13.35 4.26 14.45 3.99 3.536 <0.001**
Capacity to absorb financial
8.93 2.87 9.74 2.82 3.740 <0.001**
Shock
Freedom to make choices
9.59 3.02 9.84 2.81 1.099 0.272
and enjoy Life
Overall Well-being 31.87 9.23 34.03 8.87 3.139 0.002**
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.

The analysis shows that the p values are less than 0.01 for the factors, control
over finances and on track financial goals (t=3.536), capacity to absorb financial
shock (t=3.740) and for overall financial well-being (t=3.139). Hence it can be
concluded that there is a significant difference between single and married
respondents and the null hypothesis is rejected at 1% level for the above two factors.
Based on the mean values it can be said that respondents who are married have a
better control over their finances and try to meet even unexpected expenses and still
balance their financial position compared to those who are single. This may be due
to the reason than married people have a moral obligation towards their family and
tend to be more careful in maintaining track of their finances compared to singles.
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The p value is greater than 0.05 for the factor freedom to make choices and
enjoy life, therefore it can be concluded that there is no significant difference
between those who are single and married with respect to this factor.

Null Hypothesis: There exists no significant difference between work profile

with respect to financial well-being

Table 5.6 : t test for Significant difference between work profile with respect to
financial well-being

Work profile
Factors of Financial
Financial Non Financial t value p value
Well-being
Mean SD Mean SD
Control over Finances 14.41 4.05 13.81 4.16 2.030 0.043*
Capacity to absorb financial
9.68 2.81 9.29 2.90 1.864 0.063
Shock
Freedom to make Choices
10.06 2.84 9.50 2.90 2.691 0.007**
and Enjoy Life
Overall Well-being 34.14 8.89 32.6 9.12 2.373 0.018*
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.

The table shows that the p values are less than 0.01 for the factor freedom to
make choices to enjoy life (t=2.691); hence the null hypothesis is rejected at 1%
level. It can therefore be concluded that respondents with a financial work profile
differ significantly compared to respondents with non financial work profile. The p
value is less than 0.05 for the factor control over finance and on track financial goals
(t=2.030) and for overall financial well-being (2.373), hence the null hypothesis is
rejected at 5% level and a significant difference can be reported between
respondents of financial and non financial work profiles with respect to having
control over their finances and being on track their financial goals.

However as the p value is greater than 0.05 for the factor capacity to absorb
financial shock, it can be said that there is no significant difference between
respondents belonging to financial and non financial work profile with respect to
this factor.
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Overall it can be concluded based on the mean values that those with a
financial work profile have a better financial well-being compared to those with a
non financial work profile. Respondents who have a financial work profile are
exposed to more financial concepts and are more confident with dealing with
finances; this may be the reason that people with a financial work profile enjoy a
better financial well-being compared to the respondents belonging to the non
financial work profile.

Null Hypothesis: There exists no significant difference among age groups with
respect to financial well-being

Table 5.7: ANOVA for significant difference among age groups with respect to
financial well-being

Factors of Age Group in years

Financial Up to Above f value p value
Well-being 31-40 41-50
30 50

Control over 13.21a 13.58a 15.21b 15.28b

13.682 <0.001**
Finances (4.29) (4.21) (3.44) (3.85)

Capacity to absorb 8.89a 9.26a 10.25b 9.98b

10.294 <0.001**
financial Shock (2.87) (2.91) (2.48) (2.97)
Freedom to make 9.43a 9.52a 10.34b 10.03ab
Choices and Enjoy 4.492 0.004**
Life (3.05) (2.79) (2.53) (3.00)

31.54a 32.36a 35.80b 35.30b

Overall Well-being 11.226 <0.001**
(9.30) (9.14) (7.72) (9.00)
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.
3. The value within bracket refers to SD
4. Different alphabet among age groups denotes significant at 5% level using
Duncan Multiple Range Test (DMRT)

The table shows that the p values are less than 0.01 for all factors of financial
well-being such as control over finances and on track financial goals, capacity to
absorb a financial shock, freedom to make choices to enjoy life and for overall
financial well-being. Hence the null hypothesis is rejected at 1% level and it can be
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concluded that there is a significant difference among different age groups with
respect to financial well-being.

Based on Duncan Multiple Range Test (DMRT), it can be inferred that,

respondents belonging to the age group 40 to 50 and above 50 years enjoy a better
level of financial well-being compared to the respondents in the 30 to 40 and below
30 years age group, with respect to all the factors of financial well-being. This
reflects that respondents who are middle aged and above experience better financial
well-being, this can be because the source of income may become stable and people
may experience a growth in their income level and slowly be relieved of various
debts or financial commitments which they might have incurred at an earlier stage of
life.

Null Hypothesis: There exists no significant difference among educational

qualification with respect to financial well-being

Table 5.8: ANOVA for significant difference among educational qualification

with respect to financial well-being

Factors of Educational Qualification

Financial Upto f value p value
UG PG Professional
Well-being HSc
Control over 14.26b 13.20a 13.94ab 15.34c
9.884 <0.001**
Finances (3.67) (4.55) (4.04) (3.51)
Capacity to absorb 9.21a 8.91a 9.42a 10.40b
10.13 <0.001**
financial Shock (2.49) (2.90) (2.79) (2.88)
Freedom to make 9.29a 9.40a 9.75a 10.47b
Choices and Enjoy 5.943 <0.001**
Life (2.71) (3.10) (2.81) (2.65)
32.77a 31.50a 33.11a 36.21b
Overall Well-being 9.968 <0.001**
(7.79) (9.75) (8.82) (8.31)
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.
3. The value within bracket refers to SD
4. Different alphabet among Educational Qualification denotes significant at
5% level using Duncan Multiple Range Test (DMRT)
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The table shows that the p values are less than 0.01 for all factors of financial
well-being such as control over finances and on track financial goals, capacity to
absorb a financial shock, freedom to make choices to enjoy life and for overall
financial well-being. Hence the null hypothesis is rejected at 1% level and it can be
concluded that there is a significant difference among various educational
qualifications with respect to financial well-being.

Based on Duncan Multiple Range Test (DMRT), it can be inferred that, for
the factor control over finances and on track financial goals, respondents who are
under graduates differ significantly with those who received education only up to the
higher secondary level and post graduates. Those who were educated up to the high
school level and post graduates experienced a better level of financial well-being
compared to under graduates, and professionals enjoyed the highest level of
financial well-being in comparison to all other category respondents.

It is interesting to note that respondents with high school education fared

better than under graduates with respect to having a control over their finances. This
can be due to the reason that the lack of education creates the need for additional
concentration while dealing with money to compensate their lack of formal
graduation. With regard to the factors capacity to absorb a financial shock, freedom
to make choices to enjoy life and for overall financial well-being professionals have
a higher level of financial well-being compared to respondents with all other
education qualifications. It can be observed that those who had education up to high
school, graduated and post graduated enjoy a similar level of financial well-being
with respect to the factors capacity to absorb a financial shock, freedom to make
choices to enjoy life and for overall financial well-being.
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Null Hypothesis: There exists no significant difference among occupation with

respect to financial well-being

Table 5.9: ANOVA for significant difference among occupation with respect to
financial well-being

Factors Occupation
of
Financia f p
l Privat value value
Governmen Busines Professiona Retire
e
Well- t Sector s l d
Sector
being
Control 15.23 13.76 14.73 14.27 15.04
over 2.940 0.020*
Finances (3.47) (4.16) (3.86) (4.36) (4.40)
Capacity 9.77 9.24 10.04 9.95 9.76
to absorb
2.603 0.035*
financial (2.44) (2.84) (2.72) (3.16) (3.61)
Shock
Freedom 9.90 9.62 10.14 10.04 9.88
to make
Choices 1.007 0.403
and Enjoy (2.77) (2.86) (2.74) (3.31) (3.32)
Life
Overall 34.90 32.62 34.92 34.25 34.68
Well- 2.400 0.049*
being (7.99) (9.02) (8.41) (10.13) (10.71)
Note: 1.** denotes significant at 1% level
2. * denotes significant at 5% level.
3. The value within bracket refers to SD

The analysis reveals that the p value is less than 0.05 for the factors control
over finances and on track financial goals, capacity to absorb financial shock and for
overall well-being, hence the null hypothesis is rejected at 5% level. It can be
concluded there is a significant difference among occupation with respect to factors
‘control over finances’, ‘capacity to absorb financial shock’ and for overall well-
being.

However as the p value is greater than 0.05 for the factor freedom to make
choices and enjoy life, the null hypothesis is accepted and it can be said that there is
no significant difference among occupation with regards to making financial choices
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to enjoy life. Duncan Multiple Range Test (DMRT), did not reveal any difference
among various occupations with respect to financial well-being of the respondents

Null Hypothesis: There exists no significant difference monthly income with

respect to financial well-being

Table 5.10 : ANOVA for significant difference among monthly income with
respect to financial well-being

Monthly Income
Factors of Financial
f value P value
Well-being Up to 25001- 50001- Above
25000 50000 75000 75000
12.98a 13.71ab 14.20b 15.86c
Control over Finances 17.994 <0.001**
(4.18) (4.25) (4.06) (3.25)

Capacity to absorb 8.59a 9.07a 9.73b 10.87c

24.986 <0.001**
financial Shock (2.67) (2.95) (2.70) (2.55)

Freedom to make 9.16a 9.55ab 9.81b 10.72c

10.437 <0.001**
Choices and Enjoy Life (2.95) (3.02) (2.81) (2.40)
30.74a 32.33ab 33.73b 37.45c
Overall Well-being 20.735 <0.001**
(8.78) (9.41) (8.90) (7.43)
Note: 1. ** denotes significant at 1% level
2. * denotes significant at 5% level.
3. The value within bracket refers to SD
4. Different alphabet among monthly income denotes significant at 5% level
using Duncan Multiple Range Test (DMRT)

The table shows that the p values are less than 0.01 for all factors of financial
well-being such as control over finances, capacity to absorb a financial shock,
freedom to make choices to enjoy life and for overall financial well-being. Hence
the null hypothesis is rejected at 1% level and it can be concluded that there is a
significant difference among respondents with various monthly income levels with
respect to financial well-being.
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Based on Duncan Multiple Range Test (DMRT), it can be inferred that, those
who have a monthly income of above Rs.75000/- enjoy a highest level of financial
well-being and have a track of their finances and on track in achieving their financial
goals, have the best capacity to absorb a financial shock and can make financial
choices to enjoy life compared to all respondents earning below Rs.75000 p.m.
Respondents with a monthly income of Rs.50,000 to Rs.75,000 and Rs.25,000 to
Rs.50,000 experience a similar level of financial well-being, however those with a
monthly income of less than Rs.25,000 have the least level of financial well-being. It
can be inferred that income plays a vital role in providing financial well-being.
Overall it can be absorbed that higher the income level greater the financial well-
being. Money plays a vital role in one’s life, there for people with a higher net worth
tend to experience a sense of financial security, they do not worry about day to day
expenses and are in a position to have surplus funds. This allows them to easily
absorb unexpected expenses and ultimately make few financial choices thereby
enjoying life.

5.3 Financial Knowledge, Financial Attitude, Financial Behaviour and

Financial Well-Being Inter-Linkages

One of the objectives of the study is to investigate the inter link between the
three dimensions of financial literacy (ie) knowledge, attitude and behaviour and its
link to financial well-being.

Research suggests that a positive relationship between financial knowledge,

behaviour and attitude, will have a positive effect on the financial well-being of an
individual. These inter relationships are inspected and studied to gain more insight
about how each of the dimensions of financial literacy influence each other and
impact financial well-being.
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5.3.1 Correlation Analysis

To find the relationship between the dimensions of financial literacy (ie)

knowledge, behaviour and attitude and financial wellbeing, Karl Pearson’s
correlative coefficient was calculated and a chi square test is performed to check for
association among the various dimensions of financial literacy.

5.3.1.1 Correlation between financial knowledge and financial attitude

In order to understand the relationship between financial knowledge and

financial attitude, correlation is calculated between factors of financial knowledge
and factors of financial attitude.

Table 5.11: Correlation between financial knowledge and financial

attitude

Confidence in
Knowledge on Belief in Propensity to personal Overall
Attitude Planning Save financial Attitude
management
Basic Knowledge 0.542** 0.479** 0.613** 0.656**
Advanced Knowledge 0.489** 0.473** 0.599** 0.629**
Overall Knowledge 0.545** 0.507** 0.646** 0.683**
Note: ** Denotes significant at 1% level

The correlation results reveal that, basic knowledge and advanced knowledge
have a positive relationship with all the factors of financial attitude (i.e.) Belief is
planning, propensity to save and confidence in personal financial Management.

(i) On comparison of the correlation coefficients among various

knowledge factors with attitude factors, it is found that both, basic
knowledge (47.9%) and advanced knowledge (47.3%) has least
degree of correlation with ‘propensity to save’.

(ii) A high degree of correlation between basic knowledge and

‘confidence in personal financial management’ (61.3%) and
advanced knowledge and ‘confidence in personal financial
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management’ (59.9%) is found. The results indicate that overall with

the increase in financial knowledge there is a higher level of positive
attitude among individuals. The results are significant at 1% level.

(iii) Overall knowledge has a 68.3% positive correlation with overall

attitude.

5.3.1.2 Correlation between financial knowledge and financial behaviour

The relationship between financial knowledge and financial behaviours was

explored by calculating the correlation among mean scores of financial knowledge
factors and mean score of financial behaviour factors.

Table 5.12: Correlation between financial knowledge and financial behaviour

Knowledge Monitoring Long

Debt Emergency Advice Overall
on Personal Term
Management and Risk Seeking Behaviour
Behaviour Finance Planning
Basic
0.661** 0.629** 0.556** 0.575** 0.533** 0.679**
Knowledge
Advanced
0.670** 0.588** 0.547** 0.565** 0.529** 0.666**
Knowledge
Overall
0.712** 0.646** 0.588** 0.608** 0.567** 0.717**
Knowledge
Note: ** Denotes significant at 1% level

The results indicate that there exists a positive relationship between basic
knowledge and all factors of financial behaviour.

(i) For basic knowledge, the highest degree of positive relationship is found
with the behaviour factor ‘debt management’ (66.1%) and the lowest degree
of relationship basic knowledge has, is with the behaviour factor ‘Advice
seeking’ showing a 53.3% positive relationship.

(ii) For advanced knowledge, highest degree of positive relationship is

exhibited with the behaviour factor ‘Debt Management’ (67%) and least
degree of positive relationship is exhibited for the behaviour factor ‘Advice
seeking’ 52.9%.
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(iii) It can be concluded that, overall knowledge is important in fostering a

positive behaviour among individuals as 71.7% positive correlation is found
between financial knowledge and financial behaviour. This shows that those
individuals with a good level of financial knowledge with be able to manage
their debts, pay bills on time and manage their monthly expenses more
effectively.

5.3.1.3 Correlation between financial attitude and financial behaviour

The relationship between various factors of financial attitude and the various
factors of financial behaviour are examined using correlation

Table 5.13: Correlation between financial attitude and financial behaviour

Monitoring Long
Attitude on Debt Emergency Advice Overall
Personal Term
Behaviour Management and Risk Seeking Behaviour
Finance Planning
Belief in
0.605** 0.641** 0.590** 0.607** 0.529** 0.688**
Planning
Propensity
0.552** 0.599** 0.499** 0.483** 0.389** 0.590**
to Save
Confidence
in personal
0.616** 0.676** 0.610** 0.649** -0.57** 0.717**
financial
management
Overall
0.702** 0.760** 0.681** 0.698** 0.500** 0.794**
Attitude
Note: 1. ** Denotes significant at 1% level

(i) ‘Belief in planning’ has a positive relationship with all the factors of
financial behaviour. The highest degree of association was found with
nurturing personal finance (64.1%) and belief in planning was least
associated with advice seeking (52.9%). This shows that those individuals
who believe in planning always have a close watch on their financial affairs.

(ii) Propensity to save has a positive relationship with all factors of financial
behaviour. Debt management has the maximum level (59.9%) of positive
correlation with propensity to save. Advice seeking (38.9%) exhibits the
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least degree of positive correlation with propensity to save. This shows that
if an individual is able to manage his/her consumption and try to save money
they would be able to manage their debts in an effective manner.

(iii) Confidence in personal financial management has a positive relationship

with all factors of financial behaviour except advice seeking. The factor
monitoring personal finance (67.6%) has the highest degree of positive
relationship and ‘advice seeking’ has a negative relationship with confidence
in personal financial management. This shows that individuals who have a
close watch on the personal financial affairs are exhibit high level of
confidence in managing their finances. However the results also indicate that
individuals who possess a high degree of confidence in managing their
finances usually do not seek advice from friends or professionals.

(iv) Overall the results show that there is a 79.4% positive relationship between
financial attitude and financial behaviour and the results are significant at 1%
level.

5.3.1.4 Correlation between financial knowledge and well-being

The relationship between various factors of financial knowledge and the

various factors of financial well-being is examined using correlation

Table 5.14: Correlation between financial knowledge and well-being

Capacity to Freedom to
Control Overall
Knowledge on absorb make
over Well-
Well-being financial Choices and
Finances being
Shock Enjoy Life
Basic Knowledge 0.673** 0.600** 0.650** 0.703**
Advanced Knowledge 0.656** 0.593** 0.642** 0.691**
Overall Knowledge 0.708** 0.636** 0.689** 0.744**
Note: ** Denotes significant at 1% level

Basic and advanced financial knowledge are found to be positively

correlated with all the factors of financial well-being namely ‘control over finances
and on track financial goals’, ‘capacity to absorb financial shock’ and ‘freedom to
make choices and enjoy life’.
 188

(i) Basic knowledge has the highest degree of positive relationship

(67.3%) with the well-being factor ‘control over finances and on
track financial goals’

(ii) The least degree of positive relationship is found between advanced

knowledge and the factor ‘capacity to absorb financial shock’
(59.3%).

(iii) Overall a 74.4% positive relationship is found between overall

knowledge and overall well-being. This indicates that with a good
level of financial knowledge a person can achieve a high level of
financial well-being.

5.3.1.5 Correlation between financial attitude and financial well-being

The relationship between various factors of attitude and the various factors
of well-being are examined using correlation

Table 5.15: Correlation between financial attitude and financial well-being

Capacity Freedom to
Overall
Control over to absorb make
Attitude on Well-being Well-
Finances financial Choices and
being
Shock Enjoy Life
Belief in Planning 0.617** 0.572** 0.633** 0.663**

Propensity to Save 0.522** 0.497** 0.515** 0.559**

Confidence in personal
0.678** 0.649** 0.626** 0.713**
financial management

Overall Attitude 0.729** 0.691** 0.704** 0.774**

Note: 1. ** Denotes significant at 1% level

i. Belief in Planning has a positive relationship with all the factors of financial
well-being. Freedom to make choices and enjoy life (66.3%) has the most
degree of positive relationship with belief in planning.

ii. Propensity to save has a positive impact on all factors of financial well-
being. The factor ‘control over finances and on track financial goals’ has the
(52.2%) highest level of positive impact on the factor ‘propensity to save’.
 189

iii. Confidence in personal financial management has a positive impact on all

factors of financial well-being. The factor ‘control over finances and on track
financial goals has the highest (67.8%) degree of positive relationship with
confidence in personal financial management.

iv. Overall if is found that financial attitude has a (77.4%) positive relationship
with overall well-being. Thus one can conclude that individuals with a
positive /good financial attitude will enjoy a good level of financial well-
being.

5.3.1.6 Correlation between financial behaviour and financial well-being

The relationship between factors of financial behaviours and financial well-

being are examined using correlation.

Table 5.16: Correlation between financial behaviour and financial well-being

Capacity Freedom to
Overall
Behaviour on Well- Control over to absorb make
Well-
being Finances financial Choices and
being
Shock Enjoy Life
Debt Management 0.694** 0.589** 0.667** 0.715**
Monitoring Personal
0.746** 0.578** 0.646** 0.729**
Finance
Long Term Planning 0.735** 0.580** 0.614** 0.714**
Emergency and Risk 0.730** 0.627** 0.623** 0.730**
Advice Seeking 0.619** 0.509** 0.571** 0.625**
Overall Behaviour 0.816** 0.662** 0.718** 0.810**
Note: 1. ** Denotes significant at 1% level

i) Debt Management has a positive relationship with all the factors of financial
well-being. Maximum degree of positive association (69.4%) was found with
control over finances and on track financial goals’

ii) Personal finance 74.6% positive relationship with factor ‘control over finances
and on track financial goals’.
 190

iii) Long term planning has least degree of positive relationship (58%) with the
factor ‘capacity to absorb financial shock’.

iv) Emergency and risk management has least degree of positive relationship
(62.3%) with the well-being factors ‘Freedom to make choices and enjoy life’

v) Advice seeking has the least degree of positive relationship (50.9%) with the
well-being factor capacity to absorb financial shock.

vi) Over all it is found that there is a 81% positive relationship between financial
behaviour and financial attitude.

5.3.2 Chi Square analysis

To further investigate the inter-linkages between financial knowledge,

attitude, behaviour and well-being a chi-square analysis is performed.

Null Hypothesis: There is no association between level of knowledge and level

of attitude.

Table 5.17: Chi-Square Test for Association between level of knowledge and
level of attitude.

Level of Attitude chi-

Level of
Total square P value
Knowledge Low Moderate High vale
126 58 15
Low (63.30%) (29.20%) (7.50%) 199
[55.50%] [17.70%] [7.00%]
85 185 86
Moderate (23.80%) (52.00%) (24.20%) 356
212.695 <0.001**
[37.50%] [56.40%] [40.00%]
16 85 114
High (7.40%) (39.60%) (53.00%) 215
[7.00%] [25.90%] [53.00%]
Total 227 328 215 770
Note: 1. The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level
 191

The table shows that 63.3% of the respondents who have a low level of
financial knowledge have a low financial attitude. It is found that 52% of the
respondents who have moderate level of knowledge also have a moderate attitude
and 53% of the respondents with high level of knowledge exhibit a positive attitude.
The p value is less than 0.01, (chi square value 212.69) so it can be concluded that
there is an association between level of knowledge and level of attitude at 1% level.

Null Hypothesis: These is no association between level of knowledge and level of

behaviour.

Table 5.18: Chi-Square Test for Association between level of knowledge and
level of behaviour.

Level of Behaviour chi-

Level of
Total square P value
Knowledge Low Moderate High vale

131 59 9

Low (65.80%) (29.60%) (4.60%) 199

[65.20%] [15.90%] [4.50%]

53 212 91

Moderate (14.90%) (59.60%) (25.50%) 356

257.705 <0.001**
[26.40%] [57.30%] [45.70%]

17 99 99

High (8.00%) (46.00%) (46.00%) 215

[8.40%] [26.80%] [49.80%]

Total 201 370 199 770

Note: 1.The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level

The table reveals that 65.8% of the respondents with low level of knowledge
exhibit an undesirable or bad financial behaviour. 59.60% of the respondents with
 192

moderate level of financial knowledge exhibit moderate financial behaviour and

46% of the respondents having high level of financial knowledge exhibit moderate
financial behaviour. Another 46% show a desirable financial behaviour. The p value
is less than 0.01, (chi square value 257.70) and hence if can be concluded that there
is an association between level of knowledge and level of behaviour at 1% level.

Null Hypothesis : There is no association between level of knowledge and level

of well-being.

Table 5.19: Chi-Square Test for Association between level of knowledge and
level of well-being.

Level of Well-being chi-

Level of
Total square P value
Knowledge Low Moderate High vale

130 54 15

Low (65.30%) (27.20%) (7.50%) 199

[64.40%] [14.00%] [8.20%]

56 227 73

Moderate (15.70%) (63.80%) (20.50%) 356

255.615 <0.001**
[27.70%] [59.00%] [39.90%]

16 104 95

High (7.40%) (48.40%) (44.20%) 215

[7.90%] [27.00%] [51.90%]

Total 202 385 183 770

Note: 1. The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level

From the table it is evident that 48.4% of the respondents with high level of
knowledge have moderate level of well-being. In the moderate knowledge level
category 63.8% of the respondents have moderate level of well-being and 65.3% of
 193

the low knowledge level respondents have low level of well-being. Since the p
value less than 0.01, (chi square value 255.61) it can be said that there is a
association between level of knowledge and level of financial well-being at 1%
level.

Null Hypothesis: There is no association between level of attitude and level of

behaviours.

Table 5.20: Chi-Square Test for Association between level of attitude and level
of behaviour.

Level of Behaviour chi-

Level of
Total square P value
Attitude Low Moderate High vale
134 83 10
Low (59.00%) (36.60%) (4.40%) 227
[66.70%] [22.40%] [5.00%]
57 215 56
Moderate (17.40%) (65.50%) (17.10%) 328
336.422 <0.001**
[28.30%] [58.10%] [28.10%]
10 72 133
High (4.70%) (33.50%) (61.80%) 215
[5.00%] [19.50%] [66.90%]

Total 201 370 199 770

Note: 1. The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level

It is found that 59% of the respondents with negative attitude exhibit an

undesirable financial behaviour. 65.5% of the respondents with moderate financial
attitude have a moderate financial behaviour and 61.9% of the respondents with
positive financial attitude exhibit good or desirable financial behaviour. The p value
is less than 0.01, (chi square value 336.42) hence there is a strong association
between financial attitude and financial behaviour.
 194

Null Hypothesis : There is no association between level of attitude and level of

well-being

Table 5.21: Chi-Square Test for Association between level of attitude and level
of well-being.

Level of Well-being chi-

Level of
Total square P value
Attitude Low Moderate High vale
125 90 12
Low (55.10%) (39.60%) (5.30%) 227
[61.90%] [23.40%] [6.60%]
66 213 49
Moderate (20.10%) (64.90%) (14.90%) 328
280.462 <0.001**
[32.70%] [55.30%] [26.80%]
11 82 122
High (5.10%) (38.10%) (56.70%) 215
[5.40%] [21.30%] [66.70%]

Total 202 385 183 770

Note: 1. The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level

The table reveals that 56.7% of the respondents with a positive attitude enjoy
a high financial well-being. 55.3% of the respondents with moderate level of attitude
have a moderate level of well-being and 55.1% of the respondents with a negative
financial attitude experience a low level of financial well-being.

Since the p value is less than 0.01, (chi square value 280.46) the null
hypothesis is reject at 1% level of significance and if can be stated that there is an
association between level of attitude and level of well-being.
 195

Null Hypothesis : There is no association between level of behaviour and level

of well-being

Table 5.22: Chi-Square Test for Association between level of behaviour and
level of well-being.

Level of Well-being chi-

Level of
Total square P value
Behaviour Low Moderate High
vale
126 64 11
Low (62.70%) (31.80%) (5.50%) 201
[62.40%] [16.60%] [6.00%]
67 230 73
Moderate (18.10%) (62.20%) (19.70%) 370
259.176 <0.001**
[33.20%] [59.70%] [39.90%]
9 91 99
High (4.50%) (45.70%) (49.70%) 199
[4.50%] [23.60%] [54.10%]
Total 202 385 183 770
Note: 1. The value within () refers to Row Percentage
2. The value within [] refers to Column Percentage
3. ** Denotes significant at 1% level

The analysis shows that 49.7% of the respondents with a good or desirable
financial behaviour enjoy a high level of financial well-being 62.27% of the
respondents with moderate level of behaviour have a moderate level of well-being
and 62.7% of the respondents with a bad or undesirable behaviour lack a good
financial wellbeing. The p value is less than 0.01, (chi square value 259.17)
therefore at 1% level of significance it can be said that there is a strong association
between financial behaviour and financial well-being.
 196

On a close observation of the results found using Karl Pearson’s correlation

and the chi square test, it can be concluded that there is a strong positive relationship
between all three dimensions of financial literacy (ie) knowledge, behaviour and
attitude and financial well-being. Each of the dimensions has an association with the
other and this emphasizes the need to examine how the different aspects of financial
literacy influence each other. These results are helpful to develop a model and
understand how individuals can obtain high financial well-being by gaining a good
level of overall financial literacy.

The findings of this study are consistent with findings of many other studies.
The Financial knowledge and behaviour survey (2013) New Zealand also found a
positive link between financial knowledge and financial behaviour. The IIM(A) Citi
Financial survey (2012) showed financial knowledge leads to more positive
financial behaviour, however they also found attitude was not much affected by
financial knowledge. Ramesh Prasad Chaulagain (2017) found a positive
relationship between financial knowledge and financial attitude, he also found
positive relationship between financial knowledge and financial behaviour.

The OECD/INFE (2012) survey found positive relationship between

financial knowledge and financial behaviour in countries like Malaysia, Norway,
Peru, Poland and the United Kingdom. Further it was also found that there is a good
degree of positive association between financial attitude and financial behaviour in
countries like Czech Republic, Germany and Hungary. The findings of the present
study fall in line with the OECD/INFE survey.

5.4 Impact of Financial literacy on Financial well-being

The main objective of the study is to analyse if higher financial literacy leads
to higher financial well-being. A multiple regression test is performed to measure
the impact of the three dimensions of financial literacy (ie) knowledge, behaviour
and attitude on financial well-being.
 197

Hypothesis : Higher Financial literacy leads to higher financial well-being.

Table 5.23: Variables in the multiple regression analysis

Unstandardised SE of Standardised
Variables t value P value
Co-effecient B Co-efficient
(Constant) -5.023 1.153 - -4.357 <0.001**
Overall
0.494 0.05 0.272 9.824 <0.001**
Knowledge
Overall Attitude 0.256 0.03 0.271 8.554 <0.001**
Overall
0.189 0.016 0.400 12.043 <0.001**
Behaviour

Dependent variable : Financial well-being

Independent variable : 1. Overall knowledge X1
2. Overall Attitude X2
3. Overall Behaviour X3
Multiple R value : 0.858
R square value : 0.736
F value : 711.824
P value : <0.001**

Multiple linear regression was used to understand how financial knowledge,

financial attitude and financial behaviour impact financial well-being. The
correlation coefficient value of 0.858 indicates that the relationship between
financial well-being and the three dimensions of financial literacy is quite positive
and strong.

The coefficients of X1 X2 and X3 represent the partial effect of financial

knowledge, attitude and behaviour respectively on financial well-being holding
other variables as constant.

The estimated financial wellbeing increased by 0.494 for every unit of

increase in financial knowledge, 0.256 for every unit of increase in financial attitude
and 0.189 for every unit of increase in financial behaviour.
 198

The coefficient values are significant at 1% level. Based on standardized

coefficient financial behaviour (0.400) is the most important factor to extract
financial well-being score, followed by financial knowledge (0.272) and financial
attitude (0.271). Therefore, from the analysis it is evident that financial behaviour is
the most important factor influencing financial wellbeing followed by financial
knowledge and financial attitude.

These results are consistent with the findings of the G20 OECD/INFE
(2017) survey which also found that financial behaviour is an important factor in
assessing financial literacy. Kempson (2016), Marzieh Kalentenictaft et.al (2013),
Garman et al (2005), also found that higher financial literacy led to higher financial
well-being. Thus once can conclude that though financial knowledge is imparted to
individuals, and a thought process on managing financial affairs is set in an
individual, ultimately it is the financial behaviour, the execution of one’s financial
decision influences the financial well-being of the individual.

5.5 Confirmatory factor analysis

The present study proposes a model of financial literacy and its impact on
financial well-being for individuals in Chennai. The model proposes the relationship
between three dimensions of financial literacy i.e., financial knowledge, financial
attitude and financial behaviour and its consequent effect on financial well-being.

The model proposes that the first dimension of financial literacy is financial
knowledge. Financial knowledge can be divided into two factors namely basic
financial knowledge and advanced financial knowledge. This is based on the
classification made by Lusardi and Mitchell (2006) and used by several researches
like Van Roogi, Lusardi and Alessie (2007).

The diagram as well as the model fit summary pertaining to financial

knowledge, clearly reveals that the CMIN value is 371.96 which is statistically
significant for the projections of the two factors of financial knowledge namely
basic financial knowledge and advanced financial knowledge. Besides, the GFI
value 0.951 CFI value 0.925 RMSEA value 0.040 are all statistically significant
 199

with respect to their benchmarks. This implies that the dependence of the financial
knowledge of an individual on the two factors namely basic knowledge and
advanced knowledge is empirically proved.

The second dimension of financial literacy is financial attitude. In this study

the researcher proposes three factors to measure financial attitude i.e., i) belief in
planning, ii) propensity to save and iii) confidence in personal financial
management. Puneet Bhushan and Yajulu Medury (2014) used four factors i) belief
in financial planning, ii) risk taking attitude, iii) stress in dealing with finances and
iv) satisfaction with financial situations to analyse financial attitude.

The confirmatory factor analysis indicated the derivation of the three

predominant factors of financial attitude namely i) belief in planning, ii) propensity
to save and iii) confidence in personal financial management. These factors fit well
with the financial attitude factors proposed. The model fit summary indicates that
the CMIN value 453.75 GFI value 0.987 and RMSEA value 0.060 are statistically
significant with respect to their benchmark values. The model fit is perfectly
justified and the three factors derived are meaningful in the context.

The third dimension of financial literacy is financial behaviour. The

researcher proposes five factors to measure financial behaviour i.e., i) debt
management ii) monitoring personal finance iii) long term planning iv) emergency
and risk management and v) advice seeking. Puneet Bushan and Yajulu Medury
(2014) used four factors to measure financial behaviour i.e., i) financial planning
behaviour, ii) savings behaviour, iii) bill and loan payment behaviour, iv)
responsible investment behaviour.

The confirmatory factor analysis indicated the derivation of five predominant

factors of financial behaviour namely i) debt management ii) monitoring personal
finance iii) long term planning iv) emergency and risk management and v) advice
seeking. These factors fit well with the financial behaviour factors proposed in the
model. The model fit summary indicates that CMIN value 867.84 GFI value 0.978
and RMSEA value 0.071 are statistically significant with respect to their benchmark
 200

values. The model fit is perfectly justified and the three factors derived are
meaningful in the context.

The model proposed by the researcher is that financial literacy influences

financial well-being. The researcher proposes three factors i.e., i) control over
finances ii) capacity to absorb financial shock and iii) freedom to make choices and
enjoy life. These factors are based on the indicators indentified by the consumer
financial protection bureau.

The confirmatory factor analysis indicated the derivation of the above three
dominant factors of financial well-being. The model fit summary indicates that
CMIN value 91.10 GFI value 0.951 and RMSEA value 0.070 are statistically
significant with respect to their benchmark values. The model fit is perfectly
justified and the three factors derived are meaningful in the context.

Table 5.24: Confirmatory Factor Analysis (CFA) of financial knowledge,

attitude, behaviour and well-being.

Suggested
Indices Knowledge Attitude Behaviour Well- being
value
Chi-square
371.96 453.75 867.84 91.10 -
value
DF 167 127 237 29 -
Chi-usquare/ < 5.00 ( Hair et al.,
2.22 3.57 3.66 3.14
Df 1998)
> 0.90 (Hu and
GFI 0.951 0.987 0.978 0.951
Bentler, 1999)
> 0.90 ( Hair et al.
AGFI 0.939 0.948 0.945 0.931
2006)
> 0.90 (Hu and
NFI 0.941 0.968 0.971 0.951
Bentler, 1999)
> 0.90 (Daire et al.,
CFI 0.925 0.924 0.937 0.922
2008)
< 0.08 ( Hair et al.
RMR 0.008 0.053 0.064 0.076
2006)
< 0.08 ( Hair et al.
RMSEA 0.040 0.060 0.071 0.070
2006)
 201

Figure 5.2: Implications for Financial Well-being

5.6 Structural Equation Model (SEM) for financial literacy and its
implications for financial well-being.

The main purpose of the study is to analyse the implications of financial

literacy on financial well-being. Financial literacy is assessed in three dimensions (i)
financial knowledge (ii) financial attitude and (iii) financial behaviour. Each
dimension of financial literacy is further divided into factors for a better
understanding. A confirmatory fact analysis is done to ensure the grouping of
statements into different factors. Financial knowledge consists of two factors: (i)
basic knowledge and (ii) advanced knowledge. Financial attitude consists of three
factors : (i) belief in planning, (ii) propensity to save and (iii) confidence in personal
financial management. Financial behaviour is divided into five factors: (i)debt
management, (ii)long term planning, (iii)monitoring personal finance,
(iv)emergency and risk management and (v)advise seeking. Financial well-being the
 202

dependent variable is grouped into three factors: (i) control over finances and on
track financial goals, (ii) capacity to absorb a financial shock and (iii) freedom to
make choices to enjoy life.

Based on the above constructs, a structural equation model is drawn up to

measure the impact of financial literacy on financial well-being.

5.6.1 Variables used in the structural equation model

I. Observed, endogenous variables
1. Basic knowledge

2. Advanced knowledge

3. Belief in planning

4. Propensity to save

5. Confidence in personal financial management

6. Debt management

7. Personal finance

8. Long term planning

9. Emergency and risk

10. Advice seeking

11. Control over finances

12. Capacity to absorb financial shock

13. Freedom to make choices and enjoy life

II. Unobserved, endogenous variables

1. Well-being

2. Behaviour

3. Attitude
 203

III. Unobserved, exogenous variables

1. Knowledge
2. e1: Error term for Basic Knowledge

3. e2: Error term for Advanced Knowledge

4. e3: Error term for Belief in planning

5. e4: Error term for Propensity to save

6. e5: Error term for Confidence

7. e6: Error term for Debt management

8. e7: Error term for Personal finance

9. e8: Error term for Long term planning

10. e9: Error term for Emergency and risk

11. e10: Error term for Advice seeking

12. e11: Error term for Control over finances

13. e12:Error term for Financial Shock

14. e13: Error term for Freedom to make choices and enjoy life

15. e15: Error term for Behaviour

16. e16:Error term for Attitude

17. e17:Error term for Well-being

Table 5.25 : Number of variables in the SEM

Number of variables in model : 33

Number of observed variables : 13

Number of unobserved variables : 20

Number of exogenous variables : 17

Number of endogenous variables : 16

 204

Table 5.26: Variables in the structural equation model analysis

Standardised
Unstandardised S.E
Variables co-efficient t value P value
co-efficient (B) of B
(Beta)
Basic knowledge <--- Knowledge 1.826 0.063 0.871 28.909 <0.001**
Advanced
<--- Knowledge 2.731 0.098 0.849 27.865 <0.001**
knowledge
Belief in planning <--- Attitude 0.584 0.025 0.774 23.496 <0.001**
Propensity to
<--- Attitude 0.503 0.025 0.677 19.838 <0.001**
save
Confidence in
personal financial <--- Attitude 1.000 - 0.804 - <0.001**
management
Debt
<--- Behaviour 1.000 - 0.794 - <0.001**
management
Monitoring
<--- Behaviour 1.086 0.038 0.879 28.31 <0.001**
Personal finance
Long term
<--- Behaviour 1.642 0.059 0.87 27.935 <0.001**
planning
Emergency and
<--- Behaviour 0.655 0.024 0.851 27.076 <0.001**
risk
Advice seeking <--- Behaviour 0.543 0.024 0.754 23.04 <0.001**
Control over
<--- Well-being 1.000 - 0.918 - <0.001**
finances
Capacity to
absorb financial <--- Well-being 0.621 0.02 0.82 31.821 <0.001**
shock
Freedom to make
choices and enjoy <--- Well-being 0.658 0.019 0.862 35.498 <0.001**
life
Attitude <--- Knowledge 3.403 0.166 0.828 20.486 <0.001**
Behaviour <--- Attitude 0.741 0.066 0.817 11.31 <0.001**
Behaviour <--- Knowledge 0.487 0.235 0.131 2.073 0.038*
Well-being <--- Knowledge 1.083 0.186 0.287 5.818 <0.001**
Well-being <--- Attitude 0.346 0.098 0.377 3.534 <0.001**
Well-being <--- Behaviour 0.316 0.092 0.312 3.417 <0.001**
Note: ** denotes significant at 1% level
* denotes significant at 5% level
 205

Table 5.27: Model fit summary of Structural Equation Model

Indices Value Suggested value

Chi-square value 178.153 -

DF 59 -
Chi-square value/DF 3.019 < 5.00 ( Hair et al., 1998)
GFI 0.938 > 0.90 (Hu and Bentler, 1999)
AGFI 0.918 > 0.90 ( Hair et al. 2006)
NFI 0.943 > 0.90 (Hu and Bentler, 1999)
CFI 0.949 > 0.90 (Daire et al., 2008)
RMR 0.050 < 0.08 ( Hair et al. 2006)
RMSEA 0.076 < 0.08 ( Hair et al. 2006)

Figure 5.3: structural equation model of financial literacy implications for

financial well-being
 206

Based on the standardized co-efficient awareness about basic financial

concepts (basic knowledge) (0.871) is the most influencing path for financial
knowledge followed by awareness of sophisticated financial concepts (advanced
knowledge) (0.849). Confidence in managing personal finance (0.804) is the most
influencing path for attitude followed by belief in planning (0.774) and propensity to
save (0.677). Monitoring personal finance (0.879) is the most influencing path for
behaviour followed by long term planning (0.870), emergency and risk (0.851) debt
management (0.794) and advice seeking (0.754). Control over finances and on track
financial record (0.918) is the most influencing path for well-being followed by
freedom to make choices and enjoy life (0.862) and capacity to absorb financial
shock (0.820).

Unstandardised coefficient of financial knowledge on financial attitude is

3.403 represents the partial effect of financial knowledge on, financial attitude
holding the other path variables as constant. The estimated positive sign implies that
such effect is positive that attitude would increase by 3.403 for every unit increase in
knowledge and this coefficient value is significant at 1% level.

Unstandardised coefficient of financial knowledge on financial behaviour is

0.487 represents the partial effect of knowledge on behaviour, holding the other path
variables as constant. The estimated positive sign implies that such effect is positive
that behaviour would increase by 0.487 for every unit increase in knowledge and
this coefficient value is significant at 5% level.

Unstandardised coefficient of attitude on behaviour is 0.741 represents the

partial effect of attitude on behaviour, holding the other path variables as constant.
The estimated positive sign implies that such effect is positive that behaviour would
increase by 0.741 for every unit increase in attitude and this coefficient value is
significant at 1% level.

Unstandardised coefficient of knowledge on well-being is 1.083 represents

the partial effect of knowledge on well-being, holding the other path variables as
constant. The estimated positive sign implies that such effect is positive that well-
 207

being would increase by 1.083 for every unit increase in knowledge and this
coefficient value is significant at 1% level.

Unstandardised coefficient of attitude on well-being is 0.346 represents the

partial effect of attitude on well-being, holding the other path variables as constant.
The estimated positive sign implies that such effect is positive that well-being would
increase by 0.346 for every unit increase in attitude and this coefficient value is
significant at 1% level.

Unstandardised coefficient of behaviour on well-being is 0.316 represents

the partial effect of behaviour on well-being, holding the other path variables as
constant. The estimated positive sign implies that such effect is positive that well-
being would increase by 0.316 for every unit increase in behaviour and this
coefficient value is significant at 1% level.

From the above table it is found that the Goodness of Fit Index (GFI) value
(0.938) and Adjusted Goodness of Fit Index (AGFI) value (0.918) is greater than 0.9
which represent it is a good fit. The calculated Normal Fit Index (NFI) value (0.943)
and Comparative Fit Index (CFI) value (0.949) indicates that it is a perfectly fit and
also it is found that Root Mean square Residuals (RMR) value 0.050 and Root Mean
Square Error of Approximation (RMSEA) value is 0.076 which is less than 0.08
which indicated it is perfectly fit.

Based on Standardised coefficient, attitude on well-being (0.377) is the most

influencing path in this SEM model, followed by behaviour on well-being (0.312),
followed by knowledge on well-being (0.287).

The findings of the present study are consistent with several others. Bryce L
Jorgensen (2010) found that financial knowledge had a significant effect on
financial behaviour mediated through financial attitude. Nguyen Thi Ngoc Mien and
Tran Phupng Thao (2015) found financial attitude had the strongest effect on
financial management behaviour. This shows that more positive the financial
attitude more responsible the financial behaviour. Financial attitude had a significant
impact on financial behaviour. Sabri, Mohamed Fazli Fazli (2011) found a direct
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effect of financial knowledge on financial well-being, suggesting that those who had
greater financial knowledge were more likely to report higher financial well-being.
Joo and Grable (2004) indicated financial knowledge had direct effect on financial
satisfaction. O Neill, Xiao, Bristow, Breman and Karbel (2000) found education in
basic personal finance improves financial satisfaction. Roza Hazli Zakaria, Noor
ismawati Mohd Jaafar and Sabithe Marican (2012) in their SEM found financial
knowledge led to practicing responsible financial behaviour. In their study financial
knowledge led to a better financial position mediated by responsible financial
behaviour. Higher income households were found to exhibit better financial
behaviour and the effect was greater if they have financial knowledge. The study
found financial behaviour had largest impact on financial position and financial
behaviour was most influential determinant in financial knowledge. The findings of
the present study also coincide with Vieira K.M et al (2016), Hilgert et al (2003),
Lyons et al (2006), Servon and Kaestner (2008) who found higher levels of financial
literacy positively impacts good financial behaviour.

Overall it can be said that financial literacy with its three dimensions namely
financial knowledge, financial attitude and financial behaviour has a significant
influence on financial well-being. In other world higher the financial literacy greater
will be the financial well-being enjoyed by the individual.

5.7 Chapter summary

This chapter presented the inter linkages between financial knowledge,

financial attitude, financial behaviour and financial well-being. The impact of
financial literacy on financial well-being is measured. A structural modelling
equation is drawn to understand the implications of financial literacy on financial
well-being.

The next chapter provides a summary of findings of the study, identifies

areas of concern. Various suggestions are listed, and scope for further research is
discussed.