Millennials’ financial literacy and risk behavior: evidence from India

How you manage your personal finances today will define your financial well-being in the future. Awareness of one’s financial literacy and risk behavior enhances one’s ability to make informed financial decisions. This paper examines the association between financial literacy and factors affecting the risk behavior of millennial investors. The questionnaire used for the study was divided into three parts asking questions on millennials’ demographic features, financial literacy, and risk behavior. A convenience sample of 318 millennials residing in Delhi NCR was used. The results of the exploratory factor analysis indicate that the risk behavior of millennials is influenced by three factors, among which risk capacity seems to have the strongest influence on risk behavior. As far as the millennials' level of financial literacy is concerned, the majority possess low financial knowledge. ANOVA was used to study the association between financial literacy and risk profile and the findings revealed a significant relationship between the level of financial literacy and two factors: risk capacity and risk propensity of millennials. Findings from the study will prove helpful to policymakers, practitioners, financial planners, and educators in understanding the basis of millennials' financial decisions.