Impact of financial literacy on savings behavior: the moderation role of risk aversion and financial confidence

Abstract

This research examines the impact of financial literacy on the savings behavior of investors residing in the Gulf Cooperation Council (GCC) region. It also investigates the moderating impact of financial confidence and risk aversion in the relationship between financial literacy and savings behavior. The primary data was collected from 357 respondents through a structured questionnaire using the snowball sampling method. The findings of this study suggest that financial literacy has a positive impact on investors' savings behavior. Further, the study also found that risk aversion significantly moderates the relationship between financial literacy and savings behavior. The three-way interaction between financial literacy, risk aversion, and financial confidence significantly affects the investors' savings behavior. The study suggests that policymakers should emphasize training programs for investors on financial literacy, financial confidence, and risk aversion.

Financial Literacy: A Case Study for Portugal

“…Recent instabilities in the financial markets, driven by events such as pandemics or armed conflicts, and the increasing digitalization of financial products as well as new products, have underlined the critical importance of financial literacy as a socially relevant tool (Ananda et al 2024). These developments have revealed gaps in financial literacy, with many individuals facing difficulties in understanding basic financial concepts or making prudent financial decisions, leading them to face difficulties during these recent crises (Mawad et al 2022).…”

“…In general, women have lower levels of overconfidence compared to men; however, under specific conditions, they tend to overestimate their knowledge. Individuals who hold degrees, and those who pursue fields of study related to finance, tend to have high levels of overconfidence (Mawad et al 2022;Ananda et al 2024). The gender gap in overconfidence is observed predominantly among students, while the influence of academic specialization and the possession of degrees on overconfidence decreases and intensifies, respectively, within this group.…”