Parental influence, financial literacy and investment behaviour of young adults

What is it about?

Parents are the first and leading socialization agents for young adults. It is vital to recognize the influence of parental financial behaviour in shaping the financial literacy and investment behaviour of their children. In this context, this paper aims to test the parental influence on financial literacy. Additionally, the direct and indirect influence of financial literacy on investment behaviour of young adults is examined. 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. Results of the study imply that there is a need to have planned interventions from policy makers to ensure that young adults are financially literate. This may require introduction of planned programs or workshops at middle or senior school levels. These programs should help young adults understand the need for focused and long-term investing in the absence of social benefits. These financial literacy interventions also need to provide understanding of risks involved in investments. This study is among preliminary works to examine parental influence on young adults’ financial literacy, and further linking these with actual investment behaviour.

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