The Interplay of Financial Literacy on the Financial Behavior and Well-being of Young Adults: Evidence from Nigeria

The financial stability of young adults worldwide is under threat due to widespread impulsive online purchasing and the economic strain brought on by the COVID-19 pandemic. This study, therefore, examines the role of financial literacy as a mediator between financial behavior and the financial well-being of young adults, specifically in Nigeria. The research involved 120 respondents, 60 undergraduate and 60 postgraduate students from three selected universities in Western Nigeria. Information was gathered through a structured questionnaire. Data analysis was conducted using Structured Equation Modeling with STATA version 15. The findings reveal a positive association between financial behavior and financial well-being, although this relationship lacks statistical significance. However, significant positive correlations are observed between financial literacy (FL) and financial well-being (FW), as well as between financial behavior (FB) and financial literacy (FL). Furthermore, the analysis uncovers a positive indirect effect of financial literacy on the relationship between financial behavior and financial well-being. This suggests that while the direct link between financial behavior and well-being may be weak, improved financial behavior can indirectly enhance well-being through heightened financial literacy. In essence, the study underscores the crucial role of financial literacy in improving young adults’ financial behaviors and well-being. By investing in education, support services, and policies that encourage positive financial behaviors, both individuals and policymakers can collaborate toward constructing a more financially secure future for the younger generation.