Effects of Self-Esteem on Financial Behavior Through Self-Regulation and Anxiety: Evidence from Millennials in India

Millennials face unique financial challenges and behavioral tendencies, influenced not only by sociodemographic factors and financial knowledge levels, but also by psychological characteristics. This study examines the role of self-esteem on millennials’ financial behavior, proposing that self-esteem relates to financial behavior both directly and indirectly through self-regulation and anxiety. Drawing on data from a multistage random sample of 500 millennials, analyzed using Ordinary Least Squares (OLS) regression, this study reveals that self-esteem is significantly related to millennials’ financial behavior, controlling for financial knowledge and sociodemographic factors. The relationship between self-esteem and financial behavior could be both direct and indirect through self-regulation and anxiety. The indirect effects of self-esteem on financial behavior suggest that millennials with high self-esteem are likely to exhibit more self-regulation and less anxiety and thus engage in responsible financial behavior. This study highlights the potential benefits of integrating psychological dimensions such as self-esteem and emotional resilience into financial education and policy, providing impactful implications for policymakers, financial therapists, and mental health professionals.