Do Financial Knowledge and e-Payment Awareness Affect Saving and Spending Behavior? The Mediating Role of Financial Risk Tolerance

Vera Intanie Dewi; Nury  Effendi; Eva  Ervani; Militcyano Samuel  Sapulette

doi:10.22146/gamaijb.v27i2.21214

Vera Intanie Dewi Universitas Katolik Parahyangan
Nury Effendi Universitas Padjajaran
Eva Ervani Universitas Padjadjaran
Militcyano Samuel Sapulette College of Business and Economics, Australian National University

DOI: https://doi.org/10.22146/gamaijb.v27i2.21214

Keywords: Financial knowledge, financial risk tolerance, e-payment, spending behavior, savings behavior

Abstract

This study investigates the role of financial risk tolerance in mediating the impact of financial knowledge and e-payment awareness on saving and spending behavior. A total of 400 questionnaires were distributed, with 396 completed by respondents and used for analysis. This research employs partial least squares-based structural equation modeling (PLS-SEM) to validate and estimate the proposed research models, with SmartPLS software analyzing the data and estimating the relationships between its latent variables. Our study’s estimation provides evidence of the positive and significant role of financial risk tolerance in mediating the impact of financial knowledge and e-payment awareness on spending and saving behavior. This study also reveals differences in the level of financial risk tolerance between male and female participants. Furthermore, the analysis results indicate that most younger people have a risk tolerance level (i.e., risk profile) that falls into the medium (i.e., risk-averse) category in terms of risk speculation, investment risk, and financial risk evaluation.

Author Biographies

Vera Intanie Dewi, Universitas Katolik Parahyangan

Dewi, Vera Intanie, holds the position of Head of Post Graduate Program at Universitas Katolik Parahyangan. She earned her Bachelor’s degree in 2000 in Management from Universitas Katolik Parahyangan, her Master’s degree in 2005 in Magister Management from Universitas Katolik Parahyangan, and her Doctoral in 2020 in Management Science from Universitas Padjadjaran. Her research interests include Finance, Personal Finance, and Financial Literacy. She has published several Books and academic journals and a peer-reviewed journal in Economics, Management, and Business.

Author’s contact detail: Address: Jl.Ciumbuleuit No.94, Hegarmanah, Kota Bandung, Jawa Barat, Indonesia 40141; phone number: +6281321396616 ; Email: vera_id@unpar.ac.id

Nury Effendi, Universitas Padjajaran

Effendi, Nury, holds the position of Head of the Economics Department at Universitas Padjadjaran. He earned his Bachelor’s degree in 1983 in economics from Universitas Padjadjaran, his master's degree in 1987 in arts (economics) from the Ohio State University, and a PhD in 2001 in economics from the University of Oklahoma. His research interests include finance, macroeconomics, and development economics. He has published and edited several books and papers in peer-reviewed journals.

Author’s contact detail: Address: Universitas Padjadjaran, Jl. Dipati Ukur No.35, Lebakgede, Kota Bandung, Jawa Barat, Indonesia 40132; phone number: +62818638136; Email: nury.effendi@unpad.ac.id

Eva Ervani, Universitas Padjadjaran

Ervani, Eva, holds the position of lecturer at Universitas Padjadjaran. She earned her Bachelor’s degree in 2000 in Economics of Development Studies from Universitas Padjadjaran, Her Master’s degree in 2008 from Universitas Gadjah Mada, and her Doctoral in 2018 in Economics from Universitas Gadjah Mada. Her research interests include International Economics, International Trade, Development Economics, and Macroeconomics. She has published in several academic journals.

Author’s contact detail: Address: Universitas Padjadjaran, Jl. Dipati Ukur No.35, Lebakgede, Kota Bandung, Jawa Barat, Indonesia 40132; phone number: +628156052511; Email: eva.ervani@unpad.ac.id

Militcyano Samuel Sapulette, College of Business and Economics, Australian National University

Sapulette, Militcyano Samuel holds the position of Officer at the Finance Integration Division, ASEAN Secretariat. He earned his bachelor’s degree in 2020 in economics from Universitas Padjadjaran and his master's degree in applied economics from the Australian National University. His research interests include banks and financial technology, and development economics. He has published and edited several books and papers in peer-reviewed journals.

Author’s contact details: Address: The Australian National University, Canberra, Australia; Phone number: +6285318841930; Email: militcyano.sapulette@asean.org

References

Abidin, S. N. Z., Jaaman, S. H., & Bakar, A. S. A. (2023). The Analysis Level of Optimism that Influence Investor’s Risk Tolerance in Asset Allocation. Sains Malaysiana, 52(10), 2999–3011. https://doi.org/10.17576/jsm-2023-5210-20

Almas, I., Freddi, E., & ThØgersen, Ø. (2020). Saving and Bequest in China: An Analysis of Intergenerational Exchange. Economica, 87, 249–281. https://doi.org/10.1111/ecca.12303

Aslam, M., Gulzar, M. F., Shahzad, M. A., Muhammad, Maqbool, M., & Chaudhary, M. H. (2020). Impact of Financial Knowledge and Investment Experience on Investment Decision Making with and without Risk Tolerance Mediation. Enterprise Risk Management, 6(1). https://doi.org/10.5296/erm.v6i1.16930

Atkinson, A., & Messy, F.-A. (2012). Measuring Financial Literacy: Results of the OECD. OECD Working Papers on Finance, Insurance and Private Pensions, 44(2), 296–316.

Azmi, N. F. B., & Ramakrishnan, S. (2018). Relationship between Financial Knowledge and Spending Habits among Faculty of Management’s Staff. Journal of Economic Info, 5(3), 1–6. https://doi.org/10.31580/jei.v5i3.102

Bapat, D. (2020). Antecedents to responsible financial management behavior among young adults: moderating role of financial risk tolerance. International Journal of Bank Marketing, 38(5), 1177–1194. https://doi.org/10.1108/IJBM-10-2019-0356

Chavali, K. (2020). Saving and spending habits of youth in sultanate of Oman. Journal of Critical Reviews, 7(2), 718–722. https://doi.org/10.31838/jcr.07.02.132

Chin, W. W. (2010). How to Write Up and Report PLS Analyses. In Handbook of Partial Least Squares (pp. 655–690).

Dew, J., & Xiao, J. (2011). The financial management behavior scale: Development and validation. Journal of Financial Counseling and Planning, 22(1), 43–59. https://scholarsarchive.byu.edu/facpub/4521/

Dewi, V. I., Herwani, A., Widyarini, M., & Widyastuti, U. (2023). Factors Affecting the Intention to Invest in Crypto Assets Among Indonesian Youth. Jurnal Aset (Akuntansi Riset), 15(1), 155–166. https://doi.org/10.17509/jaset.v15i1

Garg, K., Goel, N., & Garg, A. (2018). Study of customer awareness towards digital or E-payment. IAHRW International Journal of Social Sciences, 6(9), 1798–1802.

Garg, N., & Singh, S. (2018). Financial literacy among youth. International Journal of Social Economics, 45(1), 173–186. https://doi.org/10.1108/IJSE-11-2016-0303

Gilliam, J., Chatterjee, S., & Grable, J. (2010). Measuring the Perception of Financial Risk Tolerance: A Tale of Two Measures. Journal of Financial Counseling and Planning, 21(2), 40–53. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2061313

Goyal, K., Kumar, S., & Jian Xiao, J. (2021). Antecedents and consequences of Personal Financial Management Behavior: a systematic literature review and future research agenda. International Journal of Bank Marketing, ahead-of-p(ahead-of-print). https://doi.org/10.1108/IJBM-12-2020-0612

Grable, J. E. (2016). Financial Risk Tolerance. In Handbook of Consumer Finance Research (pp. 19–31). Springer, Cham. https://doi.org/10.1007/978-3-319-28887-1_2

Grable, J. E. (2018). Financial Risk Tolerance: A Psychometric Review. In Risk profiling and tolerance: Insights for the private wealth manager (pp. 35–54). https://books.google.co.id/books?hl=id&lr=&id=8fYtDwAAQBAJ&oi=fnd&pg=PA1&dq=%22financial+knowledge%22+and+%22risk+tolerance%22+and+%22financial+behavior%22&ots=ZKe_o3ZAVt&sig=4kCT9oCjaBPqyvZK-B-qJTlYZGA&redir_esc=y#v=onepage&q&f=false

Grable, J. E., Joo, S. H., & Kruger, M. (2020). Risk tolerance and household financial behaviour: A test of the reflection effect. IIMB Management Review, 32(4), 402–412. https://doi.org/10.1016/J.IIMB.2021.02.001

Gunawan, V., Dewi, V. I., Iskandarsyah, T., & Hasyim, I. (2021). Women’s Financial Literacy: Perceived Financial Knowledge and Its Impact on Money Management. Economics and Finance in Indonesia, 67(1), 63. https://doi.org/10.47291/efi.v67i1.720

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM) (Third Edit). SAGE Publications Ltd.

Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). Partial Least Squares Structural Equation Modeling ( PLS-SEM ) Using R. Springer Nature. https://doi.org/https://doi.org/10.1007/978-3-030-80519-7

Hilgert, M., Hogarth, J., & Beverly, S. (2003). Household financial management: the connection between knowledge and behavior. Federal Reserve Bulletin, Jul, 309–322.

Holzhauer, H. M., Lu, X., Mcleod, R., & Wang, J. (2016). RiskTRACK: the five-factor model for measuring risk tolerance. The Journal of Risk Finance, 17(4), 428–445. https://doi.org/10.1108/JRF-04-2016-0054

Iram, T., Bilal, A. R., & Ahmad, Z. (2023). Investigating The Mediating Role of Financial Literacy on The Relationship Between Women Entrepreneurs ’ Behavioral Biases and Investment Decision Making. Gadjah Mada International Journal of Business, 25(1), 93–118.

Jamal, A. A. A., Ramlan, W. K., Mohidin, R., & Osman, Z. (2016). Determinants of Savings Behavior Among University Students In Sabah, Malaysia. International Journal of Accounting, Finance and Business, 1(1), 24–37. http://www.ijafb.com/PDF/IJAFB-2016-01-09-04.pdf

Jekielek, S., & Brown, B. (2005). The Transition to Adulthood: Characteristics of Young Adults Ages 18 to 24 in America. Annie Casey Foundation:Kid’s Count, May.

Khoirunnisaa, J., & Johan, I. R. (2020). The Effects of Financial Literacy and Self-Control towards Financial Behavior among High School Students in Bogor. Journal of Consumer Sciences, 5(2), 73–86. https://doi.org/10.29244/jcs.5.2.73-86

Lind, T., Ahmed, A., Skagerlund, K., Strömbäck, C., Västfjäll, D., & Tinghög, G. (2020). Competence, Confidence, and Gender: The Role of Objective and Subjective Financial Knowledge in Household Finance. Journal of Family and Economic Issues, 41(4), 626–638. https://doi.org/10.1007/S10834-020-09678-9

Long, T. Q., Morgan, P. J., & Yoshino, N. (2023). Financial literacy, behavioral traits, and ePayment adoption and usage in Japan. Financial Innovation, 9(1). https://doi.org/10.1186/s40854-023-00504-3

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5–44. https://doi.org/10.1257/JEL.52.1.5

Mahdzan, N. S., & Tabiani, S. (2013). The Impact of Financial Literacy on Individual Saving: An Exploratory Study in the Malaysian Context. Transformations in Business and Economics, 12(1), 41–55.

Moenjak, T., Kongprajya, A., & Monchaitrakul, C. (2020). Fintech, Financial Literacy, and Consumer Saving and Borrowing: The Case of Thailand. Asian Development Bank Institute. www.adbi.org

Morgan, P. J., & Long, T. Q. (2020). Financial literacy, financial inclusion, and savings behavior in Laos. Journal of Asian Economics, 68, 101197. https://doi.org/10.1016/J.ASIECO.2020.101197

Morgan, P. J., & Trinh, L. Q. (2020). Fintech and Financial Literacy in Viet Nam (ADBI Working Paper Series). https://www.adb.org/publications/fintech-and-financial-literacy-viet-nam

Nguyen, L. T. M., Nguyen, P. T., Tran, Q. N. N., & Trinh, T. T. G. (2022). Why does subjective financial literacy hinder retirement saving? The mediating roles of risk tolerance and risk perception. Review of Behavioral Finance, 14(5), 627–645. https://doi.org/10.1108/RBF-03-2021-0036

Nguyen, V. T., & Doan, M. D. (2020). The Correlation between Financial Literacy and Personal Saving Behavior in Vietnam. Asian Economic and Financial Review , 10(6), 590–603. https://doi.org/10.18488/JOURNAL.AEFR.2020.106.590.603

Nitzl, C., Roldan, J. L., & Cepeda, G. (2016). Mediation analysis in partial least squares path modelling, Helping researchers discuss more sophisticated models. Industrial Management and Data Systems, 116(9), 1849–1864. https://doi.org/10.1108/IMDS-07-2015-0302

Noman, A., Chu, L., & Rahman, M. (2023). Subjective and Objective Financial Knowledge and Their Associations with Financial Risk Tolerance. Journal of Financial Counseling and Planning, 34(2), 219–237.

Nuris, D. M., Sahid, S., & Hussin, M. (2023). Factors Influencing Financial Behavior of Undergraduate Students: A Systematic Review. Review of Economics and Finance, 21(January), 1–10. https://doi.org/10.55365/1923.x2023.21.1

Peiris, T. U. I. (2021). Effect of Financial Literacy on Individual Savings Behavior; the Mediation Role of Intention to Saving. European Journal of Business and Management Research, 6(5), 94–99. https://doi.org/10.24018/ejbmr.2021.6.5.1064

Pompian, M. (2018). Risk Profiling through a Behavioral Finance Lens. In Risk profiling and tolerance: Insights for the private wealth manager (pp. 17–34). https://books.google.co.id/books?hl=id&lr=&id=5PCqCwAAQBAJ&oi=fnd&pg=PT6&dq=RISK+PROFILING+THROUGH+A+BEHAVIORAL+FINANCE+LENS&ots=7ylKfrBXMJ&sig=uwHcXZy-U-4OeOJL6W9nCrNUOoI&redir_esc=y#v=onepage&q=RISK PROFILING THROUGH A BEHAVIORAL FINANCE LENS&f=false

Rahman, M. (2020). Propensity toward financial risk tolerance: an analysis using behavioural factors. Review of Behavioral Finance, 12(3), 259–281. https://doi.org/10.1108/RBF-01-2019-0002

Ringle, C. M., Sarstedt, M., Mitchell, R., & Gudergan, S. P. (2018). Partial least squares structural equation modeling in HRM research. The International Journal of Human Resource Management, 31(12), 1617–1643. https://doi.org/10.1080/09585192.2017.1416655

Robb, C. A., & Woodyard, A. S. (2011). Financial Knowledge and Best Practice Behavior. Journal of Financial Counseling and Planning, 22(1), 60–70. https://eric.ed.gov/?id=EJ941903

Samanez-Larkin, G., Mottola, G., Heflin, D., Yu, L., & Boyle, P. (2020). Overconfidence in financial knowledge associated with financial risk tolerance in older adults. PsyArXiv. https://doi.org/10.31234/OSF.IO/P5GEC

Sapulette, M. S., & Dyana. (2020). Does Fintech Growth Affect Bank Stability: An Empirical Evidence from Indonesia Banking Industry. BRKP Buletin Riset Kebijakan Perbankan, 2(1), 151–179. https://www.ojk.go.id/id/data-dan-statistik/research/prosiding/Documents/BRKP Vol.2 Oktober 2020.pdf

Setiawan, M., Effendi, N., Santoso, T., Dewi, V. I., & Sapulette, M. S. (2022). Digital financial literacy, current behavior of saving and spending and its future foresight. Economics of Innovation and New Technology, 31(4), 320–338. https://doi.org/10.1080/10438599.2020.1799142

Singh, K., & Berwal, K. (2021). Financial Knowledge, Saving and Investment Behaviour among Women: A Review. Journal of Contemporary Issues in Business and Government, 27(02), 6912–6934. https://doi.org/10.47750/cibg.2021.27.02.662

Song, C. L., Pan, D., Ayub, A., & Cai, B. (2023). The Interplay Between Financial Literacy, Financial Risk Tolerance, and Financial Behaviour: The Moderator Effect of Emotional Intelligence. Psychology Research and Behavior Management, 16, 535–548. https://doi.org/10.2147/PRBM.S398450

Suraj, S. (2017). Study of awareness about E-Payment among the people of Indore ( Urban as well as Rural Area ). Asian Journal of Management, 8(4), 1196–1202.

Tavor, T., & Garyn-Tal, S. (2016). Risk tolerance and rationality in the case of retirement savings. Studies in Economics and Finance, 33(4), 688–703. https://doi.org/10.1108/SEF-10-2015-0240

Wang, A. (2009). Interplay of Investors’ Financial Knowledge and Risk Taking. Journal of Behavioral Finance, 10(4), 204–213. https://doi.org/10.1080/15427560903369292

Woodyard, A. (2013). Measuring Financial Wellness. Consumer Interests Annual, 59, 1–6.

Woodyard, A. S., Robb, C., Babiarz, P., & Jung, J. (2017). Knowledge and Practice: Implications for Cash and Credit Management Behaviors. Family and Consumer Sciences Research Journal, 45(3), 300–314. https://doi.org/10.1111/FCSR.12202

Zhang, P., Yang, Z., & Chen, Y. (2022). Effects of Financial Knowledge on Risk Tolerance in College Students : A Moderated Mediation Model. In Lecture Notes on Data Engineering and Communications Technologies (pp. 72–86).

Zhao, X., Lynch, J. G., & Chen, Q. (2010). Reconsidering Baron and Kenny: Myths and truths about mediation analysis. Journal of Consumer Research, 37(2), 197–206. https://doi.org/10.1086/651257

Zulaihati, S., Susanti, S., & Widyastuti, U. (2020). Teachers’ financial literacy: Does it impact on financial behaviour? Management Science Letters, 10(3), 653–658. https://doi.org/10.5267/j.msl.2019.9.014

Zulaihati, S., & Widyastuti, U. (2020). Determinants of consumer financial behavior : Evidence from households in Indonesia. Accounting, 6, 1193–1198. https://doi.org/10.5267/j.ac.2020.9.008