The Impact of Financial Socialization and Financial Literacy on Financial Behaviors: An Empirical Study in Indonesia

The research aims to evaluate college students’ financial behavior and provide empirical insight into factors that may influence their financial behavior by investigating whether financial socialization, financial experience, and financial literacy are meaningful for students’ financial behavior. The surveys data was conducted with 595 college students from all over Indonesia then analyzed using Structural Equation Model (SEM). The results demonstrate that financial socialization positively influences financial literacy and financial behavior. On the other hand, financial experience has a negative influence on financial literacy, yet a positive one on financial behavior. Furthermore, the result also shows financial socialization are the key determinant of financial literacy and financial literacy is vital and plays an essential role for financial behavior and it may derive from financial socialization and financial literacy. It indicates that the influence of social agents can benefit students in improving their financial literacy and behavior. However, experience also can influence their financial behaviors. The lack of experience of college students leads to inadequate financial knowledge and raises their risk of financial decisions. Students with sufficient financial knowledge and exhibiting good financial behavior can make wise decisions in financial planning and management, thus may prevent financial issues in the future.