Financial Behavior on Financial Literacy

One of the dimensions of financial literacy is financial behavior. Financial behavior according to
(Rahman et. al, 2021) refers to the way individuals use and manage their available financial resources. It
encompasses the actions and decisions made by individuals regarding their finances such as planning,
budgeting, saving, and investing. Financial literacy is often divided into dimensions of financial literacy,
financial behavior, and financial attitudes. The ability to manage personal finances through appropriate
financial decisions and avoid financial problems is an essential aspect of financial literacy. Financial
literacy and behavior are crucial for achieving financial prosperity and satisfaction.

Managers must possess good financial behavior because it is essential for effective financial
management. As stated earlier, financial behavior involves planning, budgeting, managing, controlling,
and storing financial funds on a day-to-day basis while the financial literacy is the knowledge, skills, and
beliefs that influence attitudes and behavior toward financial management and decision-making. Studies
have shown that individuals with high financial literacy also need to have good financial behavioral
intentions to manage their business finances more carefully (Fawwaz, 2023). As stated by (Younas et al,
2019) in their academic journal entitled “Impact of Self-Control, Financial Literacy and Financial
Behavior on Financial Well-Being”, financial literacy affects financial well-being through financial
behavior, and self-control and financial literacy affect financial well-being through financial behavior. On
the other hand, according to Desiyanti and Kassim (2020), sufficient financial literacy leads to healthy
financial management. Financial literacy is also essential for making effective decisions about the
utilization of financial management (Anwar & Saiffanur, 2021). Therefore, managers with good financial
behavior can make better financial decisions, which can lead to the success of their businesses (Ferinia et.
Al, 2023).

Other related studies suggest, that a wide range of papers has established a strong positive link
between financial literacy and positive economic behavior (Lusardi and Mitchell, 2014; Kaiser et al.
2020; and Santini et al. 2019). A study by Mitchell & Lusardi (2022), entitled “Financial Literacy and
Financial Behavior at Older Ages” explains the effects of financial behavior on the person and the high
understanding of financial literacy when they aged. It documented how the person prioritized their
financial well-being over time and found that the "better condition" financial behaviors are strongly
associated with greater financial literacy in later life. Individuals can improve their financial well-being
and make informed decisions that will align with their desired financial goals, according to studies like
this one that show how well-connected financial behavior is to financial literacy.
References:
Anwar, F, Saifannur, A (2021). The Effect of Financial Literature, Human Resources Competence
and the Utilization of Information Technology on Financial Management in Msmes in
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Desiyanti, Kassim (2020). Financial Literacy among SMEs’ Owners in Sumatera, Indonesia: The Role of
Parents’ Motivation and Experience. JBSEE, 3(6), 1130-1138. https://doi.org/10.26710/jbsee.v6i3.1374
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