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ISSN 2738-2028 (Online) | Vol. 9 | No. 1 | 2025 January
66 | P a g e
Factors Affecting Personal Financial Well-Being of Young Working
Adults in Colombo District, Sri Lanka
Weerasinghe H. A. 1, Samarakoon S.M.A.K. 1, Malalage G. S. 1*
1 Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka
*Corresponding Author: gimanthim@kln.ac.lk
ABSTRACT
This paper aims to identify the factors affecting personal financial well-being of young
working adults in the Colombo district, Sri Lanka. Given the increasing importance of fi-
nancial stability in today’s economic landscape, this study seeks to understand how finan-
cial literacy, financial attitudes, and financial behaviors contribute to an individual's finan-
cial well-being. A quantitative research approach was adopted, utilizing a structured ques-
tionnaire to collect data from a sample of 384 young working adults derived from a con-
venience sampling technique in the Colombo district. The data were analyzed using multi-
ple regression analysis to test the hypothesized relationships between the constructs. The
findings of the study revealed that financial attitudes, financial literacy, and financial be-
havior indicate weak positive correlations with financial well-being, suggesting that im-
proved attitudes, literacy, and behavior are slightly associated with improved financial
well-being. Moreover, financial literacy, financial attitudes, and financial behavior have a
significant positive impact on personal financial well-being. Furthermore, prudent financial
behaviors, such as budgeting, saving, and responsible spending, are strongly associated
with improved financial well-being. By understanding the key factors influencing financial
well-being, stakeholders can develop targeted financial education programs and create
products promoting financial literacy and fostering positive financial attitudes and behav-
iors. Such initiatives can help young working adults in Sri Lanka achieve greater financial
stability and security, ultimately contributing to the financial well-being of future genera-
tions.
Keywords: Financial Attitude, Financial Behavior, Financial Literacy, Personal Financial
Wellbeing
Journal of Business and Technology
International peer-reviewed journal | Publish semi-annually
Received: 07.07.2024, Accepted revised version: 02.12.2024
DOI: https://doi.org/10.4038/jbt.v9i1.139
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67 | P a g e
INTRODUCTION
Financial well-being is a holistic concept
encompassing an individual's perception
and reality of their financial situation. As
articulated by Rath and Harter (2010) fi-
nancial well-being involves how effec-
tively individuals manage their economic
lives, encompassing their ability to meet
current and ongoing financial obligations,
feel secure in their financial future, and
make choices that allow them to enjoy life.
Iramani and Lutfi (2021) emphasize that
financial well-being is not just a matter of
financial management but is integral to a
person's overall quality of life. High levels
of financial well-being are characterized
by financial freedom, enabling individuals
to make decisions that enhance their life
satisfaction and overall well-being.
Expanding on this, Lavonda et al. (2021)
noted that financial well-being includes
subjective and objective elements. While
it is concerned with happiness and mate-
rial satisfaction, it also encompasses in-
come, savings, available opportunities,
and a sense of material security. This ho-
listic view suggests that financial well-be-
ing is not merely about having money but
about how money impacts one's life and
sense of security.
Previous studies have demonstrated that
demographic factors as age, education,
marital status, and socioeconomic factors
like income level and employment status
can significantly affect financial well-be-
ing (Osman & Madzlan, 2018; Prawitz et
al., 2006; Salignac et al., 2020). However,
this study aims to delve deeper into the
subjective aspect of financial well-being.
According to Lavonda et al. (2021) and
Gerrans et al. (2014), financial well-being
is a complex, multidimensional construct
including financial satisfaction, attitudes,
and behaviors. A single measure cannot
fully capture these dimensions, indicating
the need for a more nuanced approach to
understanding financial well-being.
Focusing on subjective financial well-be-
ing allows for a more comprehensive
understanding of how individuals per-
ceive their financial status and manage
their finances, which is especially relevant
in specific cultural and economic contexts.
In the context of Sri Lanka, where eco-
nomic conditions, cultural attitudes to-
wards money, and financial behaviors
may differ significantly from other re-
gions, assessing subjective financial well-
being can provide valuable insights. This
approach helps understand Sri Lankan in-
dividuals and families' unique financial
challenges and opportunities, thereby in-
forming more effective financial policies
and interventions tailored to their needs
(Abeyrathna, 2020).
On May 18, 2022, Sri Lanka officially de-
faulted on its debt for the first time since
its formation in 1948 (George et al., 2022).
The economic crisis in Sri Lanka caused
the country's economy to decline 12.4 per-
cent year over year in the fourth quarter of
2022, which is the second-worst contrac-
tion on record. Rising inflation, low strong
currency reserves, a lack of oil and ferti-
lizer, and a worsening debt crisis follow-
ing the government's default on debt in the
second quarter plagued Sri Lanka's econ-
omy. The entire year, Sri Lanka's GDP
shrank by 7.8 percent, the highest ever
(Department of Census and Statistics,
2023). Sri Lanka's current economic crisis
and bankruptcy result from decades of fi-
nancial mismanagement (George et al.,
2022). Therefore, financial management
is important whether applied to a country,
a commercial organization, a household,
or an individual person (Abeyrathna,
2020).
Due to high inflation, prices have in-
creased from two to threefold in every
product and service commodity in the
country. However, most professions have
no similar increase in an individual’s
monthly remuneration. So, financial well-
being has affected many individuals due to
a lack of knowledge in personal finance
and the need to manage their tight budgets
(O’Neill & Bernhard, 2023). Individuals
who lack savings face difficulties
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adjusting to this situation and tend to get
loans and borrowings to survive and fulfill
their urgent needs. This research will fo-
cus on young adults who are in the active
labor force and whether their awareness of
personal finance, financial behavior and
financial attitude impact their financial
well-being. At the same time, they face
this kind of economic crisis in the country
will be concerned (O’Neill & Bernhard,
2023).
Many researchers have found that, among
other citizens, young adults have tended to
spend too much money on improving
technology (Ayuningtyas & Irawan, 2021;
Jamal et al., 2015; Lone & Bhat, 2024;
Salignac et al., 2020). For example, the in-
ternet provides a convenient way to shop,
and the credit card system provides a con-
venient and transparent way of borrowing
money. Most young adults have credit
cards, which they routinely use to buy var-
ious goods and services. Several new stud-
ies have discovered that an increasing
number of college students are risking
their finances by misusing or improperly
managing their credit cards (Johan et al.,
2021). These trends signal that young
adults' savings are quite low and insuffi-
cient since many young individuals would
rather spend money to improve their living
standards than save for future require-
ments. This raises the concern about the
necessity of educating youth about future
preparation, particularly educating them
on the significance of starting their sav-
ings early to secure adequate income for
adjusting to emergencies or retirement
(Ayuningtyas & Irawan, 2021). Therefore,
the challenges young people face, there is
a growing need for support to help them
understand and navigate the increasingly
complex financial world (Johan et al.,
2021). In the Sri Lankan context, very few
studies are available about the concept of
financial well-being and personal finance
management behavior and related factors
(George et al., 2022; Lokuge & Kumari,
2023). Hence, this paper tries to fill the ex-
isting research gap through this study. So,
the identified problem of this research is
whether financial well-being affects a
young adult. At the same time, they face
an economic crisis in the country and
whether their financial awareness, finan-
cial behavior and financial attitude affect
their financial well-being.
Many studies investigate the factors that
affect financial well-being and the rela-
tionship between financial well-being and
personal characteristics such as financial
knowledge, financial attitude and personal
financial management behavior (Jamal et
al., 2015; Lone & Bhat, 2024; Salignac et
al., 2020). However, such studies in the
Sri Lankan context are limited. Therefore,
the main purpose of this study is to iden-
tify the factors affecting financial well-be-
ing in the Colombo district, Sri Lanka.
Research Questions and Objectives
Research Questions
1. What is the impact of financial lit-
eracy on personal financial wellbe-
ing?
2. What is the impact of financial atti-
tude on personal financial wellbe-
ing?
3. What is the impact of financial be-
havior on personal financial well-
being?
Research Objectives
1. To identify the impact of financial
literacy on personal financial well-
being
2. To identify the impact of financial
attitude on personal financial well-
being
3. To identify the impact of financial
behavior on personal financial
wellbeing
LITERATURE REVIEW
Financial Literacy
In the literature, awareness of personal fi-
nance has arisen through the term “finan-
cial literacy". Both terms have indicated a
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similar concept of how people should
manage their money and deal with money-
related issues. According to Abdullah and
Chong (2014), financial literacy is the
ability to make good judgments about the
use and management of money and other
assets. Financial literacy refers to the per-
son's ability to understand finances and
confidently apply that expertise or
knowledge to make sound financial deci-
sions. Knowledge of effective financial
decision-making is a skill that is required
in today's environment, regardless of age.
People who understand financial literacy
know the consequences of their financial
decisions.
To describe the components of financial
literacy further, Hahn et al. (2014) and
Kiliyanni and Sivaraman (2018) have ar-
gued that basic financial concepts such as
inflation and interest compounding are
components of financial literacy because
the knowledge of those terms would im-
prove an individual ability to prepare a
personal budget and calculate interest
rates, an attitude toward savings and in-
vestments to protect their financial future.
Individuals cannot save unless they de-
velop the habit of saving, have positive in-
tents to save, have favorable attitudes to-
ward saving, and simultaneously encour-
age themselves to save money rather than
spend impulsively. According to Ong
(2022) younger generations are less cau-
tious and more likely to use money as a
form of control. Younger individuals are
more prone to borrow money. However,
they are also less likely to save money,
even though they are typically better edu-
cated, and more receptive to institutional
innovations in economic and social life
due to changing lifestyles, which is one of
the critical causes many young individuals
would rather spend money now than save
it for later needs to raise their standard of
living. Also, Gilenko and Chernova
(2021) mentioned that those who are fi-
nancially literate are more likely to engage
in better financial conduct, leading to
greater financial security and savings.
Financial Behavior
As described by Mahendru et al. (2022) fi-
nancial behavior is any individual behav-
ior connected to money management.
Credit, saving, investment and cash man-
agement are basic financial behaviors.
Prior studies identified financial behavior
as one of the contributors to financial
well-being (Aryani & Khaddafi, 2021;
Shim et al., 2009). The corresponding lit-
erature also showed that individuals who
reported more frequently engaging in poor
financial habits, such as lack of savings,
late in paying bills, had worse perceived
financial wellbeing (Ameliawati & Seti-
yani, 2018). In fact, according to Joo
(2008) and Shim et al. (2009) financial be-
havior is the primary factor in determining
how satisfied a person is with their finan-
cial situation. Overall, it shows a positive
correlation between good financial behav-
ior and financial well-being (Shim et al.,
2009). Additionally, Aryani and Khaddafi
(2021) and Shim et al. (2009) have men-
tioned a positive relationship between fi-
nancial behaviors like credit management,
saving, and cash management and individ-
uals' overall well-being.
Saving is essential for generating money,
protecting the family from financial disas-
ter, and boosting economic well-being
(Gilenko & Chernova, 2021). From a psy-
chological standpoint, saving behavior re-
lates to how people deal with uncertainty
in the future and how appropriately they
make provisions and ensure they have as-
sets for future consumption (Abeyrathna,
2020). Jamal et al. (2015) have mentioned
that parents are highly influential in shap-
ing their children's financial behavior and
should serve as role models for their chil-
dren in managing their financial affairs.
Also, Alshebami and Aldhyani (2022)
mentioned that parents are their children's
most reliable source of financial
knowledge and clarity. From birth until
adolescence, parents' purposeful instruc-
tions, parental practices, understanding of
financial concerns, and explicit teaching
can influence their children's level of
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financial literacy, including their views,
values, and money behavior. Depending
on parental knowledge, parents' financial
behavior, abilities, and knowledge can af-
fect how their children behave. To ensure
improved financial well-being and a better
life, parents must teach their kids about
various financial topics, financial behav-
ior, and financial literacy (Al-Nasser
Mohammed & Joriah Muhammed, 2017).
Peer influence is a major social compo-
nent that influences individuals' behavior
in general. Peer influence is the extent to
which individuals' moods, behaviors, and
ways of thinking are influenced by their
peers (Putri & Wijaya, 2020). Peers might
encourage others to follow similar finan-
cial behaviors by acting as role models for
the individual. Since they spend much
time together and share numerous behav-
iors, peers have a significant influence on
their colleagues therefore, the ability of
students to adopt saving behavior is also
tied to peer influence (Kumar et al., 2023).
Financial Attitude
Ameliawati and Setiyani (2018) define fi-
nancial attitude as a state of mind, opinion,
and judgment about finance. These as-
pects of attitude directly connect to the hu-
man mind and can influence financial de-
cision-making, affecting financial satis-
faction. According to Arifin (2018), finan-
cial attitude considerably influences fi-
nancial well-being and is positively af-
fected by financial attitude. This link
shows that a person's financial content-
ment increases with improved money
management. This is shown by the capac-
ity to generate income and spend it, to de-
velop saving habits, to have financial ob-
jectives, and to create future financial
plans. One's attitude is greatly influenced
by their education. People will know how
to deal with financial management to ob-
tain wealth and financial satisfaction be-
cause those with excellent educational
backgrounds tend to have a good under-
standing of finance. The findings of
Rosalina et al. (2023) denoted a favorable
relationship between financial attitude and
financial satisfaction.
Financial Wellbeing
Iramani and Lutfi (2021) have defined fi-
nancial well-being as essential in deter-
mining a person's quality of life. People
who have a high level of financial well-
being feel financially free to make deci-
sions in their lives. Lavonda et al. (2021)
mentioned that besides happiness, finan-
cial well-being concerns one's material
pleasure with income, savings, available
opportunities, and a sense of material se-
curity. A state wherein a person can fully
meet current and ongoing financial obliga-
tions, feel secure in their financial future
and make choices that allow enjoyment of
life.
Financial wellness is another name for fi-
nancial well-being, a broad term that can
be expressed in objective and subjective
measurements. However, researchers
studying financial well-being have always
considered it a subjective assessment
(Mokhtar & Husniyah, 2017). According
to Joo (2008) having a financially stress-
free, healthy, and pleasant assessment of
one's financial status is a sign of financial
well-being. It has been mentioned that fi-
nancial well-being comprises financial be-
havior, financial satisfaction, and finan-
cial or subjective perceptions, including
financial attitude and financial
knowledge. As well as objective status
such as financial ratio and income. Finan-
cial experts often define financial well-be-
ing as a person's attitude toward a situation
based on objective indicators and subjec-
tive judgment. The objective indicator is a
person's financial condition, such as in-
come, debts, savings, and financial ele-
ments, whereas subjective perception ca-
pacities include happiness with the current
financial situation and future financial
prospects (Mokhtar & Husniyah, 2017).
According to Salignac et al. (2020) finan-
cial well-being is a person's feelings re-
garding their current financial status,
which emphasizes thoughts and emotions
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about one's financial condition rather than
income or other materials they own.
Gerrans et al. (2014) and Lavonda et al.
(2021) also mentioned that financial well-
being is a multidimensional concept com-
bining financial satisfaction, the financial
situation's objective status, financial atti-
tudes, and behavior that cannot be as-
sessed by one measure. As a result, objec-
tive and subjective methods are com-
monly used to measure financial well-be-
ing. Objective measurement will provide
more tangible evidence that is easier to un-
derstand and will be used to evaluate ob-
jects that represent reality (Tenney &
Kalenkoski, 2019). However, that tech-
nique cannot provide information on the
financial situation of individual percep-
tion (Brüggen et al., 2017). The subjective
technique, according to Zemtsov and
Osipova (2016) enables researchers to
pinpoint ideas, sentiments, and impres-
sions regarding a person's financial situa-
tion. The analysis relates personal pleas-
ure to one's present financial condition
and prospects. According to Prawitz et al.
(2006), the subjective measure not only
assesses how the financial condition might
be observed, but it can also meet require-
ments not met by objective assessment.
Furthermore, Zemtsov and Osipova
(2016) acknowledged that the subjective
measure provides a better explanation of a
consumer's financial behaviors and assists
researchers in studying consumer percep-
tions about their financial state and their
response to their financial circumstances.
Even a subjective metric is relevant be-
cause of a growing emphasis on the indi-
vidual's perspective rather than the real
situation. This is because two people with
the same income may have different levels
of financial well-being (Tenney &
Kalenkoski, 2019).
Employees with higher levels of financial
well-being are more productive, and busi-
nesses with contented workers typically
make more money and have better share
prices (Mokhtar & Husniyah, 2017). Fur-
thermore, individuals suffering from
financial troubles are less productive at
work since they focus on money worries
(Osman & Madzlan, 2018; Tenney &
Kalenkoski, 2019).These emotions signif-
icantly impact employees' confidence and
concentration at work, as well as employ-
ees’ productivity and the productivity of
their employers. They also promote absen-
teeism and tardiness, which reduces
productivity and significantly impacts
companies. Hence, financial pressures re-
sulted in significant financial losses for the
employer and the state due to economic
and social expenses. Due to that, em-
ployee financial security is crucial for both
the individual and the governance, as it
promotes productivity and economic
growth (Lavonda et al., 2021).
Theoretical Review
Personal financial well-being is a complex
and multifaceted concept encompassing
various dimensions of an individual's fi-
nancial health, stability, and satisfaction.
Scholars and researchers have developed
numerous theories to understand and ex-
plain the factors influencing personal fi-
nancial well-being. This paper delves into
two major theories: the Behavioral Eco-
nomics Theory and the Financial Capabil-
ity Theory. These theories provide valua-
ble insights into the psychological and be-
havioral aspects and the skills and
knowledge necessary for individuals to
achieve and maintain financial well-being.
Behavioral Economics Theory
Behavioral economics recognizes that in-
dividuals have limited cognitive resources
and often struggle with self-control. The
seminal work of Simon (1957) highlights
the concept of "bounded rationality," sug-
gesting that due to cognitive limitations,
individuals make satisfying rather than
optimizing decisions. Individuals may not
always make the most economically ra-
tional decisions in personal finance. As
discussed by Ainslie (1975) the bounded
nature of willpower further contributes to
understanding financial decision-making.
People might succumb to immediate
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gratification, even if it goes against their
long-term financial interests. This lack of
self-control can manifest in impulsive
spending, inadequate savings, and poor in-
vestment decisions, ultimately affecting
financial well-being (Barber et al., 2024).
Behavioral Economics challenges the tra-
ditional economic assumption that indi-
viduals always make rational decisions
(Zamir, 2023). This theory recognizes that
psychological and emotional factors sig-
nificantly influence economic behavior.
Kahneman, a Nobel laureate, introduced
the concept of prospect theory, which sug-
gests that individuals evaluate potential
outcomes based on perceived gains or
losses relative to a reference point rather
than in absolute terms (Sunstein, 2023).
In the context of personal financial well-
being, behavioral economics highlights
how cognitive biases and heuristics can
impact financial decision-making. For ex-
ample, the "loss aversion" bias may lead
individuals to avoid financial risks, even
when potential gains outweigh potential
losses. Additionally, the "present bias" ex-
plains why individuals prioritize immedi-
ate rewards over long-term financial
goals, such as retirement savings (Ainslie,
1975; Sunstein, 2023).
Research has consistently demonstrated
the relevance of behavioral economics to
personal finance. Thaler and Sunstein
(2008) work on "nudging" shows that sub-
tle changes in how choices are presented
can significantly influence financial deci-
sions. Policies and interventions that align
with behavioral insights, such as auto-
matic enrollment in retirement savings
plans, have proven effective in improving
individuals' financial outcomes (Barber et
al., 2024).
Behavioral economics provides a rich
framework for understanding the factors
influencing personal financial well-being.
From the limitations of rationality and
willpower to the biases inherent in deci-
sion-making, these behavioral insights
shed light on why individuals may deviate
from traditional economic models in man-
aging their finances. Acknowledging and
addressing these behavioral factors is es-
sential for developing effective strategies
to improve financial literacy, promote re-
sponsible financial behavior, and ulti-
mately enhance overall personal financial
well-being (Barber et al., 2024; Sunstein,
2023)
The Life-Cycle Theory
The life-cycle theory is a fundamental
framework for understanding individual
saving and consumption patterns over a
lifetime. The central idea is that individu-
als plan their consumption and saving be-
havior based on their anticipated lifetime
income (Modigliani & Brumberg, 1954;
Setiawan et al., 2024). According to Ando
and Modigliani (1963) in the life cycle
theory, people aim to maintain a stable
standard of living throughout their lives,
adjusting their consumption and saving
patterns as their income changes. During
their working years, individuals typically
save a portion of their income to support
themselves during retirement. As income
decreases in retirement, accumulated sav-
ings are used to maintain a consistent life-
style (Jiang et al., 2023).
The life-cycle theory highlights the im-
portance of long-term financial planning.
It suggests that individuals save during
their peak earning years to ensure a com-
fortable retirement. However, the theory
assumes rational behavior and perfect
foresight, which may not always align
with human behavior (Becker, 1981; Jiang
et al., 2023). The life-cycle theory and be-
havioral economics theory offer valuable
perspectives on personal financial well-
being. While the life-cycle theory focuses
on rational, planned decision-making over
the life course, behavioral economics
sheds light on the psychological factors
that often lead to deviations from rational
behavior. Integrating these theories can
provide a more comprehensive under-
standing of individual financial decisions
and contribute to developing effective
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strategies for improving financial well-be-
ing (Setiawan et al., 2024).
Financial Literacy and Personal Fi-
nancial Well-being
Financial literacy has become an essential
skill that is required for everyday life
around the world. Because of the instabil-
ity in the global economy, consumers face
financial decisions that have become more
complex due to the increased variety of fi-
nancial products and challenges (Hogarth,
2007; Lusardi & Mitchell, 2023). For this
reason, the significance of financial man-
agement skills in personal life has in-
creased, and more studies have explored
this issue in the last decade. The global fi-
nancial crisis has highlighted the signifi-
cance of financial literacy and the need for
financial knowledge and education. Fur-
thermore, financial literacy contributes to
a financial attitude that leads to financial
well-being. Financial knowledge is the
key element for making sound financial
decisions and is essential to financial well-
being. Financial literacy is understanding
and analyzing financial options, planning,
and responding appropriately to events
(Lusardi & Mitchell, 2023). This ability
can influence the conditions of life and
work and can be very helpful in anticipat-
ing the future to increase income. Unfor-
tunately, despite the importance of finan-
cial literacy, research has shown that this
ability in people around the world, espe-
cially in developing and underdeveloped
countries, is not substantial. These popu-
lations face barriers such as the complex-
ity of financial life, many decision-making
options, and insufficient time and money
to learn about personal finance issues
(Philippas & Avdoulas, 2021). Therefore,
these barriers cause low financial literacy
in developing countries (Vitt, 2014).
Shim et al. (2009) and Prawitz et al.
(2006) indicate that financial literacy af-
fects personal financial well-being. Finan-
cial literacy develops a positive financial
attitude that leads to personal financial
well-being. They have found a strong
positive relationship between financial lit-
eracy and personal financial well-being.
Joo and Grable (2004) show that increased
financial literacy affects financial content-
ment, eventually becoming personal fi-
nancial well-being. Further, Fazli Sabri et
al. (2012) and Philippas and Avdoulas
(2021) also show that financial literacy is
related to personal financial well-being.
The following hypothesis was formulated
according to the findings of previous stud-
ies.
H1: Financial literacy of an individual
has a positive impact on personal fi-
nancial well-being
Financial Attitude and Personal Fi-
nancial Well-being
According to Mustafa et al. (2023) finan-
cial is a person's way of thinking and han-
dling their money. Positive financial atti-
tudes regularly evaluate their earnings, ex-
penses, savings, and investments. This in-
sight allows people to evaluate their finan-
cial requirements, create appropriate sav-
ings plans, set realistic retirement objec-
tives, and make well-informed decisions.
The following hypothesis was formulated
according to the findings of previous stud-
ies.
Yamauchi and Templer (1982) devised
that financial attitude is an individual's
predisposition towards being financially
prepared for the future, reflecting a ten-
dency to save money and manage ex-
penses. This idea reflects the priority of
young adults moving towards financial in-
dependence and preparing to deal with fu-
ture financial uncertainties. Savings be-
havior is positively associated with finan-
cial satisfaction in college students (Xiao
et al., 2014). Shim et al. (2009) concluded
that subjective norms and financial atti-
tudes are crucial in all aspects of financial
well-being. Attitude towards money was
selected as a determinant because the de-
velopment of a saving and tracking atti-
tude can influence the financial well-being
of individuals (Utkarsh et al., 2020).
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74 | P a g e
Therefore, the following hypothesis was
formulated.
H2: Financial attitude of an individual
has a positive impact on personal fi-
nancial well-being
Financial Behavior and Personal Fi-
nancial Well-being
Financial well-being is a condition where
a person can meet the needs of life now
and in the future, feel safe with the future,
enjoy life, and cope with unexpected
needs (Prakash et al., 2022). Thus, in-
creasing financial prosperity means pov-
erty alleviation and affects various aspects
of human life. Financial well-being could
affect a person's health and psychological
condition (Arber et al., 2014; Shim et al.,
2009). Problems in financial well-being
could exacerbate social relationships and
emotional distress (Kim et al., 2003) and
life satisfaction (Iramani & Lutfi, 2020;
Shim et al., 2009).
Brüggen et al. (2017) reveal that financial
well-being is influenced by financial be-
havior, and this behavior is influenced by
various financial interventions, such as fi-
nancial education. Brüggen et al. (2017)
also state that financial behavior and
health are influenced by financial
knowledge and skills (Joo & Grable,
2004; Shim et al., 2009; Xiao et al., 2014).
Financial well-being is also influenced by
financial status (Xiao et al., 2009) and fi-
nancial experience (Davis & Helmick,
1985). On the other hand, financial well-
being is influenced by financial behavior
(Joo & Grable, 2004; Shim et al., 2009;
Xiao et al., 2014). Financial behavior can-
not be separated from self-control (Ainia
& Lutfi, 2019; Ajzen, 1991; Iramani &
Lutfi, 2021; Xiao et al., 2014). Perry and
Morris (2005) reveal that perceptions of
self-control influence financial behavior.
Therefore, the following hypothesis was
formulated based on literature.
H3: Financial behavior of an individ-
ual has a positive impact on personal
financial well-being
Conceptual Model of the Study
Three variables examined in this paper fi-
nancial literacy, financial attitude, and fi-
nancial behavior, were considered inde-
pendent variables throughout the study,
using one dependent variable of personal
financial well-being. Figure 1 shows the
developed conceptual framework and ex-
plains the determinants of personal finan-
cial well-being, such as financial literacy,
financial attitude and financial behavior. It
is hypothesized that the independent vari-
ables affect the personal financial well-be-
ing of young working adults in the Co-
lombo district of Sri Lanka.
Figure 1: Conceptual Framework
METHODOLOGY
The researcher uses the deductive ap-
proach as the primary research approach.
This was a positivist research philosophy.
Study results were observable and quanti-
fiable because positivism is rooted in the
belief that knowledge can be obtained
through objective observations and meas-
urements. The current study assumed that
answers can be searched by carefully
measuring and analyzing data, particularly
numerical data. Moreover, the role of the
current researcher was confined to the ob-
jective interpretation of the records series.
Financial literacy, financial attitudes, and
financial behavior are crucial in shaping
financial well-being because they collec-
tively influence how individuals under-
stand, feel about, and manage their fi-
nances. Financial literacy provides the
knowledge and understanding necessary
for informed decision-making, long-term
planning, and avoiding financial mistakes.
Positive financial attitudes, such as
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75 | P a g e
valuing saving and maintaining a healthy
perspective on money, foster disciplined
and balanced financial practices. Financial
behavior translates this knowledge and
mindset into action, such as consistent
budgeting, saving, and investing, which
are essential for building financial resili-
ence and achieving sustainable wealth.
Together, these factors create a synergistic
impact, where knowledge drives behavior,
attitudes motivate action, and responsible
practices lead to measurable outcomes
like reduced debt, increased savings, and
improved financial security. This holistic
interplay ensures not only financial stabil-
ity but also emotional peace of mind, sig-
nificantly enhancing overall financial
well-being.
The described research adopts a quantita-
tive approach, employing deductive rea-
soning and aligning with empiricist and
positivist philosophies. Moreover, this
cross-sectional study utilized that survey
research strategy because this was quanti-
tative research used for gathering data
from a set of respondents. In this research
study, individuals who are employed in
the Colombo district are taken as the pop-
ulation. This study has selected the Co-
lombo district as the select sample because
the individuals who live in the Colombo
district have the highest mean & median
monthly salary levels compared with other
districts in 2023 (Department of Census
and Statistics, 2023). The sample of this
study is young working adults in the Co-
lombo district, Sri Lanka, and 384 individ-
uals between the 20 to 40 age categories.
The unit of analysis of this study is an in-
dividual young working adult in the Co-
lombo district, Sri Lanka. Many research-
ers have found that among other citizens,
young adults have tended to spend too
much money on improvement with tech-
nology (Ayuningtyas & Irawan, 2021).
Several new studies have discovered that
an increasing number of college students
are putting their finances in danger by
misusing or improperly managing their
credit cards (Johan et al., 2021). These
trends send a signal to realize that young
adult savings are quite low and insuffi-
cient due to many young individuals
would rather spend money to improve
their current standard of living than save
for future requirements. This raises the
problem of the necessity of educating
young people about future preparation.
Particularly educating them on the signif-
icance of starting their savings early to se-
cure adequate income for adjusting to
emergencies or retirement. Therefore,
with the challenges young people face,
there is a growing need for support to help
them understand and navigate the increas-
ingly complex financial world. Hence, the
sample of young working adults is more
relevant to this study.
The sample was derived utilizing a con-
venience sampling technique. Data was
collected through a structured question-
naire distributed among the sample and
then statistically analyzed to draw mean-
ingful research conclusions. SPSS Soft-
ware package (version 23) was applied to
analyze the data, using statistical tools
such as Pearson’s correlation and multiple
regression.
DATA ANALYSIS
This study presented a quantitative study
to quantify the association between the in-
dependent and dependent variables. To
test reliability, the study has considered
Cronbach’s Alpha value. This analysis
outlines validity, reliability, correlation,
and regression analyses to reveal the find-
ings.
Financial well-being has a Cronbach's al-
pha of 0.742, indicating internal con-
sistency among the items measuring fi-
nancial literacy perceptions. The financial
attitude scale has a Cronbach's alpha of
0.752, indicating moderate internal con-
sistency among the items measuring fi-
nancial knowledge. The financial behav-
ior scale has a Cronbach's alpha of 0.833,
indicating high internal consistency
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76 | P a g e
among the items measuring financial be-
havior. The financial literacy scale has a
Cronbach's alpha of 0.854, indicating
solid internal consistency among the items
measuring financial attitudes. The data ap-
pears reliable and internally consistent for
the independent and dependent variables,
strengthening confidence in the measure-
ment tools used in the research.
Table 1: Reliability of Variables
(Cronbach’s Alpha Table)
Source: Primary Data
Table 2: Test of Normality
Source: Primary Data
Garson (2012) states that the kurtosis and
skewness values must fall between +2 and
-2 to be a normal distribution. Since all
values fall within the thresholds, the data
can be assumed to approximate a normal
distribution. While the data was collected
using a convenience sampling technique,
this does not inherently affect the appro-
priateness of parametric tests, as the data
meets the normality assumption.
Table 3:Test of Correlations
Source: Primary Data
Financial attitudes show a weak positive
correlation with financial behavior. A
weak positive correlation exists between
financial literacy and financial well-being,
suggesting that higher financial literacy is
associated with slightly better financial
well-being. There is a weak positive cor-
relation between financial behavior and fi-
nancial well-being.
Table 4. Model Summary for Financial At-
titude, Financial Behavior, Financial Liter-
acy and Personal Financial Well-being
suggesting that individuals with positive
financial attitudes are more likely to have
higher financial literacy.
Table 4: Model Summary
Source: Primary Data
Moving on to statistical components, R-
squared accounts for 35.8 percent and im-
plies that 35.8 percent of the change of the
dependent variable is explained by the in-
dependent variables in the study. There is
a low value of R2. The reason is that the
model is related to predicting human fi-
nancial behavior. Any field that attempts
to predict human behavior, such as psy-
chology, typically has R-squared values
lower than 50% because humans are
simply harder to predict (Rubinfeld,
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77 | P a g e
2000). According to Rubinfeld (2000)
even if the R-squared value is low, it has a
statistically significant predictor. Still, im-
portant conclusions can be drawn about
how changes in the predictor values are
associated with changes in the response
value.
Table 5: Coefficients for Financial Atti-
tude, Financial Behavior, Financial Lit-
eracy and Personal Financial Well-be-
ing
Source: Primary Data
The study examines the relationship be-
tween financial attitude, financial behav-
ior, financial literacy and financial well-
being. The constant term is 1.997, repre-
senting the estimated value of financial
well-being when all predictor variables
are zero. The coefficients for financial at-
titudes, financial behavior and financial
literacy indicate a positive relationship,
The p-values indicate that these relation-
ships are statistically significant. The
model suggests that financial attitude, fi-
nancial behavior and financial literacy
positively affect personal financial well-
being.
Table 6: ANOVA for Financial Attitude,
Financial Behavior, Financial Literacy
and Personal Financial Well-being
Source: Primary Data
The ANOVA table provides a breakdown
of the regression model, which includes
the dependent variable, “personal finan-
cial well-being”, and “financial attitudes,
financial behavior and financial literacy”.
The regression sum of square 4.005 repre-
sents the explained variation in the de-
pendent variable, while the residual sum
of squares 142.799 represents the unex-
plained variation. The degree of freedom
for the regression (df) is 3, indicating the
number of predictors. The total sum of
squares of 146.804 is the sum of the re-
gression and residual sum of squares, with
the F-statistic of 3.487 calculated as the ra-
tio of the mean square for regression to the
mean square for residuals. The F-statistic
is large, and the ANOVA table suggests
that at least one of the predictors contrib-
utes significantly to explaining the vari-
ance in the dependent variable of personal
financial well-being.
Table 7: Summary of Hypotheses Test-
ing
Source: Primary Data
According to the study's findings of young
working adults in the Colombo district, Sri
Lanka, researchers could identify the fac-
tors of financial literacy, financial attitude,
and financial behavior have a positive im-
pact on personal financial well-being.
CONCLUSION AND IMPLICA-
TIONS
The objective of the current study was to
determine the factors affecting the per-
sonal financial well-being of young work-
ing adults in the Colombo district. The im-
pact of the effect on factors of personal fi-
nancial well-being is sought out through
the three independent variables, financial
attitudes, financial behavior and financial
literacy. After collecting the data, the re-
searcher tested the reliability and validity
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78 | P a g e
of the questionnaire gathered. Internal
consistency is measured through reliabil-
ity analysis. The results suggested that the
current study fulfils both reliability and
validity conditions. Moreover, the re-
searcher tested missing values. According
to the results available, the current study
has satisfied the requirement and went
ahead with the parametric test. The re-
searcher performed multiple regression
analyses to observe the relationship and
impact between independent and depend-
ent variables. According to the survey out-
come, several important insights were re-
vealed regarding the relationships be-
tween financial attitudes, financial behav-
ior, financial literacy, and financial well-
being. A weak positive correlation was
found between financial attitudes and fi-
nancial behavior, suggesting that individ-
uals with more positive financial attitudes
tend to exhibit slightly better financial be-
havior. This implies that an individual’s
mindset towards finances may have a
modest influence on their financial ac-
tions. Further, a weak positive correlation
was observed between financial literacy
and financial well-being, indicating that
higher levels of financial literacy are asso-
ciated with a slight improvement in finan-
cial well-being. While the relationship is
not strong, it suggests that a better under-
standing of financial concepts may con-
tribute to more favorable financial out-
comes. Moreover, a weak positive corre-
lation between financial behavior and fi-
nancial well-being was identified, high-
lighting that individuals who engage in
healthier financial behaviors tend to expe-
rience slightly better financial well-being.
This further emphasizes the role of re-
sponsible financial management in creat-
ing positive financial outcomes. Overall,
significant correlations indicate that finan-
cial attitudes, literacy, and behavior have
positive, though mostly weak, associa-
tions with each other and with financial
well-being. The strongest relationship ob-
served is between financial attitudes and
financial literacy, suggesting that
individuals with positive financial atti-
tudes are more likely to have higher finan-
cial literacy. However, financial behavior
shows a weak association with financial
well-being, highlighting the complex and
varied relationships between these finan-
cial constructs.
The study on the influences of financial at-
titudes, financial behavior and financial
literacy of young working adults in the
Colombo district sheds important light on
the variables affecting personal financial
well-being of young working adults in this
setting. Therefore, promoting the personal
financial well-being of young working
adults is crucial for their long-term finan-
cial stability and overall life satisfaction.
This study identifies some key points re-
searchers suggest and recommends en-
hancing financial well-being.
Firstly, researchers have recognized the
need for early financial education. Advo-
cate for including financial literacy
courses in school and college curricula to
ensure young individuals receive early ex-
posure to essential financial concepts.
Through financial education, it encour-
ages the development of budgeting skills
to help young adults manage their income,
expenses, and savings effectively. A
Guide on setting short-term and long-term
financial goals, including saving for emer-
gencies and retirement. Emphasize the im-
portance of building and maintaining
emergency savings to cover unexpected
expenses and financial shocks. Encourage
automatic transfers to savings accounts to
make saving a consistent habit. Providing
education on basic investment principles
and retirement plans may lead to a clear
understanding of the benefits of starting to
invest early. Through collaborations with
local nonprofits or financial institutions,
they provide information on debt repay-
ment strategies and resources for manag-
ing and reducing student loans, credit card
debt, and other liabilities. Offer guidance
on responsible borrowing and the conse-
quences of accumulating excessive debt.
Promote the availability of financial
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79 | P a g e
counseling services provided by commu-
nity organizations or government agen-
cies—foster collaborations with local
nonprofits or financial institutions to offer
targeted financial well-being programs.
Stakeholders can contribute to building a
financially resilient and empowered gen-
eration of young working adults, setting
the stage for long-term financial success
and well-being.
FUTURE RESEARCH PRO-
SPECTS
The current study has contributed to sev-
eral promising areas for future research re-
lated to personal financial well-being. As
the field of financial well-being is dy-
namic and influenced by various factors,
ongoing research can provide valuable in-
sights into understanding, improving, and
promoting financial well-being. Some po-
tential areas for future research are inves-
tigating the long-term effects of financial
education programs on individuals' finan-
cial behaviors and outcomes. Assess how
early exposure to financial education in-
fluences financial decision-making
throughout different life stages.
With current trends in technologies, it
would be worth studying the impact of
emerging technologies, such as fintech
apps, robot advisors, and blockchain, on
personal financial management and well-
being. Researchers can investigate how
technological advancements can be lever-
aged to enhance financial literacy and ac-
cessibility. Also, the effectiveness of fi-
nancial coaching and counseling services
in improving financial behaviors and well-
being can be evaluated by future research-
ers. Exploring the optimal delivery meth-
ods and characteristics of successful fi-
nancial coaching programs is a good con-
cern for further research. Continued re-
search in these areas can contribute to a
deeper understanding of the complexities
surrounding personal financial well-being
and inform the development of targeted
interventions and policies to enhance
financial outcomes for individuals and
communities.
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