Financial Literacy and Behavior of Generation Z College Students: Evidence from Amaravati, The New Capital of Andhra Pradesh, India

Introduction: Financial literacy and financial behavior are critical determinants of financial wellness, financial satisfaction, and life satisfaction. Notably, young adults in India exhibit a significant deficit in both financial knowledge and sound financial practices. Furthermore, the escalation of loan app scams, characterized by unauthorized lending rates and harassment, has become a pressing concern in recent years. Objective: The objective of this study is to investigate the financial literacy and behavior of Generation Z college students, to determine if and how financial knowledge predicts financial behavior, with financial attitude and general financial efficacy acting as mediating variables. Theoretical Framework: The model is constructed using the theory of planned behavior and financial socialization theory, which offer a robust framework for understanding the context of the investigation. Method: Structural Equation Modeling (SEM) was used as the research method. Data was collected via questionnaires from 575 college freshmen at universities and colleges within a 25km radius of New Amravati city. Results and Discussion: The results indicate that parental socioeconomic status does not directly impact children's financial behavior. However, it indirectly affects their self-efficacy and financial attitude. In contrast, objective financial knowledge plays a greater role by fostering a positive financial attitude and promoting sound financial behavior. Research Implications: Today's youth are the future adults; therefore, it is beneficial that they focus on career growth alongside personal finance knowledge. In addition to academic courses, experiential learning through simulations or games and parental guidance on personal finance should be considered. Children should be educated about banking services, financial and non-financial products and services, micro- and macroeconomic factors influencing the economy, a country's GDP, budget, per capita income, emergency funds, fundamental and technical analysis, the roles of regulatory and monitoring boards, and judicial laws on consumer protection and consumer rights, among other topics. Originality/Value: The study established that Generation Z college students' financial literacy and parental socioeconomic status significantly impact positive financial behavior. The research, employing a complex model and a comprehensive financial behavior questionnaire, yielded results that clearly demonstrate the pivotal role of objective financial knowledge in cultivating a positive financial attitude and encouraging sound financial behavior.