Parental influence, financial literacy and investment behaviour of young adults

Abstract

Purpose Parents are the first and leading socialization agents for young adults. It is vital to recognize the influence of perceived parental financial behaviour in shaping the financial literacy and investment behaviour of their children. In this context, this paper aims to test the perceived parental influence on financial literacy. Additionally, the direct and indirect influence of financial literacy on investment behaviour of young adults is examined. Design/methodology/approach This paper uses survey-based cross-sectional data. The partial least squares-structure equation model has been used to estimate and test the hypothesized relationships. Findings Perceived parental financial behaviour has been found to significantly impact the level of financial literacy. In turn, financial literacy positively influences the investment behaviour of young adults. Moreover, the young adults’ perception of confidence over ability to take right financial decisions drives their decision to invest. Social implications The results of this study imply that there is a need to have planned interventions from policymakers to ensure that young adults are financially literate. This may require introduction of planned programmes or workshops at middle or senior school levels. These programmes should help young adults understand the need for focused and long-term investing in the absence of social benefits. Originality/value This study is one of the preliminary works to examine the perceived parental influence on young adults’ financial literacy and further linking these with actual investment behaviour.