Building Financial Resilience in Emerging Adults: The Role of Financial Capability and Financial Self-Efficacy

Abstract

To examine the role of financial capabilities in building financial resilience and how perceived financial self-efficacy affect this relationship, we conducted a cross-sectional study with 201 emerging adults aged between 18-34 years (n=187, 93%) in India who were experienced users of digital financial services. We used PROCESS macro to test the hypotheses. Results revealed full mediation of financial self-efficacy in the relationship between financial capability and financial resilience, highlighting the importance of emerging adults’ perceived confidence on their ability to undertake financial decisions and take control of their finances. While previous research on financial resilience was mostly associated with financial knowledge, which is a subset of financial capability. This study examined financial capability (a measure which includes financial knowledge and financial inclusion as its determinants) among emerging adults. Additionally, we employed multiple resilience-building behaviors to measure financial resilience including savings, money management, and risk management strategies.