Impact of Financial Literacy on Saving Behaviour of Households
Financial literacy, Saving behaviour, Risk diversification, Digital financial literacy
Financial literacy has emerged as a critical determinant of household financial well-being, shaping the ability to make informed decisions on budgeting, saving, borrowing, and investing. In the context of India—where household savings are often concentrated in physical assets such as gold and real estate rather than formal financial instruments—the role of financial literacy becomes particularly important. This study investigates the effect of financial literacy on the saving behaviour of households in urban and semi-urban regions of India.
The research adopts a quantitative design, surveying 400 households selected through stratified random sampling. Financial literacy was assessed using a 10-item test covering numeracy, inflation, interest, and risk diversification, while saving behaviour was measured through savings rate and choice of instruments. Descriptive findings indicate that the average household saves 18% of its income, with 55% preferring traditional instruments and 45% using formal financial products. The mean financial literacy score was 5.8 on a 10-point scale.
Regression analysis reveals a significant positive relationship between financial literacy and household saving rates (p < 0.01). Households with above-average literacy (scores 6–10) saved nearly double the proportion of income compared to less literate households. However, the results also highlight important moderating factors. Gender differences show that while men score slightly higher on literacy, women display stronger preferences for safer instruments. Income constraints limit saving capacity even among financially literate low-income households, while high-income, high-literacy households exhibit more diversified portfolios.
The findings confirm that financial literacy enhances saving behaviour but is shaped by socio-economic and cultural factors. Policy recommendations include integrating financial education into school curricula, promoting community-based literacy programs, expanding digital financial literacy initiatives, and introducing automatic savings mechanisms to improve household financial resilience.
"Impact of Financial Literacy on Saving Behaviour of Households", IJSDR - International Journal of Scientific Development and Research (www.IJSDR.org), ISSN:2455-2631, Vol.10, Issue 9, page no.a75-a80, September-2025, Available :https://ijsdr.org/papers/IJSDR2509011.pdf
Volume 10
Issue 9,
September-2025
Pages : a75-a80
Paper Reg. ID: IJSDR_304812
Published Paper Id: IJSDR2509011
Downloads: 000153
Research Area: Arts1 All
Country: Bareilly, Uttar Pradesh , India
ISSN: 2455-2631 | IMPACT FACTOR: 9.15 Calculated By Google Scholar | ESTD YEAR: 2016
An International Scholarly Open Access Journal, Peer-Reviewed, Refereed Journal Impact Factor 9.15 Calculate by Google Scholar and Semantic Scholar | AI-Powered Research Tool, Multidisciplinary, Monthly, Multilanguage Journal Indexing in All Major Database & Metadata, Citation Generator
Publisher: IJSDR(IJ Publication) Janvi Wave
