Effect of Financial Literacy on Individual Savings Behavior; the Mediation Role of Intention to Saving



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Submitted Aug 19, 2021
Published Sep 12, 2021
10.24018/ejbmr.2021.6.5.1064

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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.

Keywords: Financial Literacy, Intention to Savings, Mediation Effect, Savings Behavior, Structural Equations Model.

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