Mind the gap: differentiating financial and debt literacy in shaping student financial behavior

Abstract This study investigates the distinct roles of financial literacy and debt literacy in shaping investment and borrowing behavior among university students in Bangladesh. While financial literacy has been widely acknowledged as a key driver of financial decision-making, limited research has explored the separate contribution of debt literacy, particularly in developing-country contexts. Using cross-sectional survey data from 840 students across major public universities, the study employs logistic and ordered logistic regression models to examine the effects of both literacy types on stock market participation and debt position. Results reveal that financial literacy significantly increases the likelihood of stock investment, supporting existing evidence on its role in promoting proactive financial engagement. In contrast, debt literacy shows no effect on investment behavior but emerges as a strong and statistically significant predictor of favorable debt outcomes. Financial literacy, by comparison, does not significantly influence borrowing status. These findings highlight the domain-specific relevance of financial knowledge and suggest that financial and debt literacy are not interchangeable. Policy implications include the need for targeted financial education programs that differentiate between general financial competence and borrowing-specific knowledge. Tailoring interventions to specific financial behaviors can enhance the effectiveness of national financial literacy initiatives and promote long-term financial well-being among youth.