THE IMPACT OF FINANCIAL LITERACY ON INVESTMENT DECISIONS - WITH SPECIAL REFERENCE TO UNDERGRADUATES IN WESTERN PROVINCE, SRI LANKA

Oct 15, 2026

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Financial literacy is defined as knowledge and skills enabling informed, effective money management, supporting financial development and economic growth. In Sri Lanka, this study evaluates whether undergraduates—future investors—possess necessary understanding of financial concepts. It analyzes the impact of financial literacy on investing decisions among 200 students from four government universities in the western province. Results show a positive, significant influence, with financial skills the strongest dimension, while knowledge of financial products is least significant.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages17

Reading Time43 min

AccessFree to download

Introduction

Background on financial literacy

Importance for consumers and markets

Abstract

Definition and study purpose

Method and sample

Key findings

Asian Journal of Contemporary Education ISSN(e): 2617-1252 DOI: 10.18488/journal.137.2020 .42.110.126 Vol. 4, No. 2, 110-126. © 2020 AESS Publications. All Rights Reserved. [URL:](URL: www.aessweb.com)[ ](URL: www.aessweb.com)[www.aessweb.com](URL: www.aessweb.com) THE IMPACT OF FINANCIAL LITERACY ON INVESTMENT DECISIONS: WITH SPECIAL REFERENCE TO UNDERGRADUATES IN WESTERN PROVINCE, SRI LANKA Kumari D.A.T Article History Received: 23 October 2020 Revised: 13 November 2020 Accepted: 30 November 2020 Published: 21 December 2020 Keywords Financial literacy Investments decisions Financial products Investment options Money management Financial skills. Department of Banking and Finance, Wayamba University of Sri Lanka, Sri Lanka. ABSTRACT Financial literacy is defined as the possession of knowledge and skills that enable informed and effective money management. Financial literacy is enhancing the financial developments and economic growth of the country. In the face of these developments, it is important to assess if the younger generation, especially undergraduates who are seen as the future investors, movers and transformers of the economy, have the necessary knowledge of financial concepts. This study examines the impact of financial literacy on investing decisions among undergraduates in the western province in Sri Lanka. A total of 200 students from 4 government universities in the western province of Sri Lanka participated in this study. The present study employed a few determinants to assesses financial literacy as students’knowledge about financial products, Accessing financial products, money management, knowledge about financial investment option, and financial skills. The study focused to examine, how a student's level of financial literacy influences his/her financial opinions, decisions and practices. The findings revealed that financial literacy positively and significantly influenced on the undergraduates’ investment decisions. Further, when it focused on the dimensions of financial literacy, the most significant dimension was financial skills. The knowledge about the financial product is identified as the least significant dimension on investment decision of the undergraduates. Finally, the researcher provides some suggestions for financial institutions and policy decision-makers to develop financial literacy level by promoting financial knowledge for enhancing the investment decision making power among the young generation in Sri Lanka. Contribution/ Originality: This study contributes to existing literature by examining the impact of financial literacy on investing decisions among undergraduates in the western province in Sri Lanka. 1. INTRODUCTION In the last couple of years, financial literacy received special attention from researchers, financial institutions and policy makers (Kumari, 2017; Lusardi, 2019) . The capability to manage personal finances has become increasingly important in today's world. People must plan for long-term investments for their retirement and children's education. They must also decide on short-term savings and borrowing for a vacation, education, emergency, a house, a car loan, and other items. Additionally, they must manage their own medical and life insurance needs (Chen & Volpe, 1998) . Financial literacy is a basic concept in understanding money and its use in daily life. This includes the way income and expenditure are managed and the ability to use the common methods of exchanging and managing money. Also, financial literacy incorporates an understanding of everyday situations that need to be understood such as savings, borrowings, credit and insurance (Roy & Jane, 2018; Singh & Kumar, 2017) . The understanding of financial terminologies and concepts includes an understanding of key financial views central to investing and managing funds to increase wealth and security. Individuals require an awareness of features available for borrowing and

FAQs

How is financial literacy defined in the study?

Financial literacy is defined as possessing knowledge and skills that enable informed and effective money management. The study also treats it as the ability to use that knowledge to make beneficial financial decisions.

What is the study’s main objective and target population?

The study examines the impact of financial literacy on investing decisions among undergraduates in the western province of Sri Lanka. Undergraduates are highlighted as future investors and key economic contributors.

What did the findings show about the relationship between financial literacy and investment decisions?

Financial literacy positively and significantly influenced undergraduates’ investment decisions. Among its dimensions, financial skills was the most significant, while knowledge about financial products was the least significant.

Oct 15, 2026

Uploaded by Dipper