The role of psychological mechanisms in enhancing students’ financial wellbeing: An integration of financial literacy and the conservation of resources theory

This study explores how financial literacy affects students’ financial well-being by looking at the psychological factors that play a role—specifically self-control, mental budgeting, and mental accounting—as mediating variables. The research aims to better understand how cognitive and psychological resources help young people achieve financial well-being in a university setting. Using a quantitative, survey-based approach, the study gathered data from 781 students across four Indonesian cities. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to examine both the direct and indirect relationships between the variables. The results show that financial literacy has a significant impact on financial well-being, both directly and indirectly, through the influence of self-control, mental budgeting, and mental accounting. Based on the Conservation of Resources Theory, financial literacy serves as a cognitive resource that helps students protect and manage their financial assets more effectively. The findings suggest that universities and policymakers should develop financial literacy programs that also address psychological aspects such as self-control and budgeting habits. Integrating these elements can help students feel more financially secure and maintain better life balance. Overall, this study offers both theoretical and practical insights by connecting financial literacy with the management of psychological resources, and it points to new directions for developing psychology-based financial education to enhance young people’s financial well-being.