Understanding Financial Behavior Among Youth: The Roles of Self-Esteem, Emotional Intelligence, and Risk Tolerance

This study investigates the psychological determinants of financial behavior among Indonesian youth, a demographic navigating early transitions into independence and professional life amid economic challenges and social pressures. Specifically, it examines the roles of self-esteem, emotional intelligence, and risk tolerance in shaping financial decision making. A quantitative approach was employed, with data collected from 306 respondents aged 18 to 30 through an online survey targeting youth in the Jabodetabek area, an urban region often seen as representative of broader Indonesian society. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS SEM) to assess the relationships among the variables. The findings reveal that self-esteem (β = 0.558, p < 0.001), emotional intelligence (β = 0.386, p < 0.001), and risk tolerance (β = 0.063, p = 0.015) all exert significant and positive effects on financial behavior. The model explains 80.3 percent of the variance in financial behavior (R² = 0.803), indicating strong predictive power. However, risk tolerance does not significantly mediate the relationship between either self-esteem or emotional intelligence and financial behavior (p > 0.05). These results highlight the critical importance of psychological traits, particularly self-esteem and emotional intelligence, in promoting sound financial practices. Enhancing these internal factors may offer a strategic pathway to improving financial well being among Indonesia’s younger generation.