Gadjah Mada International Journal of Business Vol.
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: 149-173 AUAUDo Financial Knowledge and e-Payment Awareness Affect Saving and Spending Behavior? The Mediating Role of Financial Risk ToleranceAU Vera Intanie Dewia*.
Nury Effendib.
Eva Ervanib.
Militcyano Samuel Sapulettec Universitas Katolik Parahyangan.
Indonesia Universitas Padjadjaran.
Indonesia Australian National University.
Australia Abstract: AUAUThis study investigates the role of financial risk tolerance in mediating the impact of financial knowledge and e-payment awareness on saving and spending behavior.
A total of 400 questionnaires were distributed, with 396 completed by respondents and used for analysis.
This research employs partial least squares-based structural equation modeling (PLS-SEM) to validate and estimate the proposed research models, with SmartPLS software analyzing the data and estimating the relationships between its latent variables.
Our studyAos estimation provides evidence of the positive and significant role of financial risk tolerance in mediating the impact of financial knowledge and e-payment awareness on spending and saving behavior.
This study also reveals differences in the level of financial risk tolerance between male and female participants.
Furthermore, the analysis results indicate that most younger people have a risk tolerance level .
, risk profil.
that falls into the medium .
, risk-avers.
category in terms of risk speculation, investment risk, and financial risk evaluation.
Keywords: financial knowledge, financial risk tolerance, e-payment, spending behavior, savings behaviorAU JEL Classification: G20.
G41.
G51.
G53 AU *Corresponding authorAos e-mail: vera_id@unpar.
ISSN: PRINT 1411-1128 | ONLINE 2338-7238
https://journal.
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Introduction Financial behavior is a critical issue in the welfare of individuals, and its effects are also felt by households, communities, countries, and globally.
Recent developments in financial literacy suggest that financial behavior is explored as an interesting research topic and that it plays a crucial role in achieving financial well-being.
Zulaihati & Widyastuti .
define financial behavior as behavior related to money managementAithat is, spending and saving behaviorAithat plays a crucial role in individualsAo financial well-being.
Moreover.
Setiawan et al.
state that the development of digital technology and e-commerce may change consumersAo saving and spending behavior and the value of their Digital payment awareness is also important in todayAos increasingly cashless society.
Individuals who are familiar with digital payment methods are more likely to track their expenses, make convenient and secure transactions, and take advantage of features such as automatic savings or budgeting applications .
A previous study found that customer awareness of digital or e-payment also affects their financial behavior.
Suraj .
states that electronic .
-)payment system awareness is affected by factors, such as convenience, cost, demography, processing charges, security, and risk.
Garg et al.
also find that customersAo awareness of e-payment satisfies their needs for accessibility, convenience, and an alternative choice of payment system, while security and network issues are sources of dissatisfaction and act as barriers.
Dewi et al.
find that the three aspects of electronic payment adoption behavior rated the highest were alertness to security issues, ease of use, and ability to be readily adopted.
Another factor essential for enhancing responsible financial management behavior is financial knowledge.
Gunawan et al.
reveal that financial knowledge affects financial management behavior, such as saving behavior, shopping behavior, long-term planning, and short-term planning.
Individuals with more financial knowledge are also more likely to engage in recommended financial behaviors (Hilgert et al.
, 2.
Knowing about and understanding financial products and services are important and can lead to the making of rational financial decisions.
Individuals with a higher level of financial knowledge are more likely to make informed decisions about their spending and saving Iram et al.
state that financial literacy is a global issue, with poor financial behavior possibly having fatal impacts at both the individual and global economic levels.
This issue needs to be understood and addressed, especially in developing countries with their comparatively low levels of financial literacy, poor digital platform security infrastructure, and significant presence of digital financial fraud (Sapulette & Dyana, 2.
Changes in consumer behavior and other related issues have created a chain reaction encouraging policymakers, especially those in the financial sector, to focus more on increasing financial literacy.
Moreover, the financial literacy model proposed by the Organisation for Economic Co-operation and Development (OECD) mentions the following three comprehensive aspects of financial literacy: financial knowledge, financial attitudes, and financial behavior (N.
Garg & Singh, 2.
According to the studies cited above, financial knowledge and digital payment awareness are two factors that can greatly influence these behaviors.
Moreover, risk tolerance is another factor that can mediate the relationship of financial knowledge and digital payment awareness with spending and saving behavior.
Risk tolerance is frequently discussed in a financial decision context (Ali et al.
, 2.
Individuals with a higher risk tol150 Dewi et al erance may be more willing to make financial decisions that have the potential for greater returns but also come with higher risks.
On the other hand, individuals with a lower risk tolerance may prefer safer and more conservative financial strategies, even if that means potentially lower returns.
Noman et al.
, in investigating the relationship between the financial risk-taking behavior of individual investors and their subjective and objective knowledge, reveal that individual investorsAo risk tolerance behavior is associated more with their subjective knowledge than their objective knowledge.
Aslam et al.
provide evidence that financial risk tolerance, as a mediating variable, strengthens the relationship between financial knowledge and investment decisions.
Similarly.
Bapat .
demonstrates that financial risk tolerance affects the relationship between financialAUAUAUAUknowledge and financial management behavior.
However, only a few studies investigate this topic from the perspective of an emerging economy or developing country (Aslam et al.
,2020.
Bapat, 2020.
Dewi et al.
, 2.
Previous studies analyze financial knowledge as an antecedent of financial management behavior, but few studies analyze the key role of financial risk tolerance as an antecedent of financial management behavior (Goyal et al.
, 2.
Additionally, in discussing financial knowledge as an element of financial literacy, e-payment awareness, which has increased significantly in developing countries, must also be a central theme.
Previous work is limited to the role of financial knowledge in saving and spending behavior or financial behavior.
Despite this interest, to the best of our knowledge, no one has studied the issue of financial risk mediating the impact of financial knowledge and e-payment awareness on saving and spending behavior.
Therefore, the present study addresses the following questions.
Firstly, does electronic payment awareness affect financial risk tolerance? Secondly, does financial knowledge affect financial risk tolerance? Thirdly, does financial risk tolerance affect saving behavior? Finally, does financial risk tolerance affect spending behavior? Our objective is to investigate the role of financial risk tolerance in mediating the impact of financial knowledge and e-payment awareness on saving and spending behavior.
Subsequently, our study analyzes a comprehensive model based on existing ideas and generates a considerable opportunity to extend the theoretical implications.
Accordingly, this research is essential in helping financial service providers and regulators to improve their policies to increase the utilization of digital financial services and products.
The main finding of this study is how financial risk tolerance mediates the relationships of financial knowledge and adoption of e-payments with spending and saving In practical terms, this finding contributes to financial institutionsAo ability to identify the type of customer risk profile before offering the financial product.
An individual with an aggressive character will have a high-risk tolerance, tending to choose investment instruments with a high level of risk.
In contrast, an individual with a conservative character and a low-risk tolerance will tend to choose low-risk investment instruments.
Individuals can develop good saving and spending habits and behaviors with good knowledge and understanding of financial matters and products.
This finding also contributes to the literature, with this studyAos results serving as a reference for developing a financial literacy research model.
The following section presents the literature review, along with the theory and conceptual framework.
The development of hypotheses is then discussed, followed by the Gadjah Mada International Journal of Business - May-August.
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studyAos data collection, methodology, results, discussion, limitations, conclusions, and implications.
AULiterature ReviewAU Financial management behavior (FMB) is one of the dimensions of financial literacy.
Most previous studies define financial literacy as multi-dimensional, with Atkinson & Messy .
stating that financial literacy can be explained in three dimensions:
financial knowledge, financial behavior, and financial attitude.
Furthermore.
Morgan & Long .
and Morgan & Trinh .
define financial literacy not only as financial knowledge but also as actual behavior, skills, and attitudes.
Financial management behavior in the present study is assessed through saving and spending behavior, following the study conducted by Moenjak et al.
Previous studies find that individuals with higher financial literacy scores are more likely to have a good saving habit (Morgan & Long, 2.
Nguyen & Doan .
and Peiris .
provide evidence that financial literacy is a factor that influences individual saving behavior.
Azmi & Ramakrishnan .
demonstrate that financial knowledge has a positive relationship with spending habits.
these previous studies show, individuals with less financial management knowledge tend to have poor financial behavior.
thus, financial knowledge has important implications for well-being.
AUFinancial Knowledge (FIN).
Saving Behavior (SVB) and Spending Behavior (SPB) Financial knowledge is a form of investment in human capital which has implications for individualsAo well-being (Lusardi & Mitchell, 2.
The terms Aufinancial knowledgeAy and Aufinancial literacyAy are frequently used interchangeably (Lind et al.
, 2.
Personal financial knowledge comprises two dimensions: .
objective financial knowledge which refers to the individualAos personal knowledge of specific financial matters, such as interest rates, effects of inflation on savings, time value of money, and benefits of diversification.
subjective knowledge which comprises the individualAos awareness of financial matters, pleasure in financial activities with financial matters, and confidence to make financial decisions (Robb & Woodyard, 2011.
Woodyard, 2013.
Woodyard et al.
, 2.
Lind et al.
Heriyati et al.
use subjective financial knowledge and objective financial knowledge to predict financial behavior.
Their study employs objective financial knowledge to estimate relationships between financial literacy variables.
The results of these previous studies show that financial knowledge has a significant impact on financial management behavior including saving and spending behavior.
Robb & Woodyard .
and Woodyard et al.
estimate the relationships of objective financial knowledge and subjective financial knowledge with financial behavior.
They find that improving subjective and objective knowledge reinforces financial behavior.
Furthermore.
Nuris et .
and Khoirunnisaa & Johan .
state that financial behavior has various form including of saving and spending behavior.
Moreover.
Mahdzan & Tabiani .
and Peiris .
find that financial literacy had a positive impact on individual saving, and Azmi & Ramakrishnan .
find that financial knowledge has a positive relationship with spending behavior.
Furthermore.
Chavali .
reveal that the financial literacy of youth is significantly correlated with the saving and spending habits of youth.
Therefore.
Dewi et al considering the findings of these previous studies on financial knowledge, saving behavior, and spending behavior, our study formulates the following hypothesis:
AUH1: Financial knowledge affects saving behavior.
AUH2: Financial knowledge affects spending behavior AUe-Payment Awareness (EPA).
Saving Behavior (SVB) and Spending Be- havior (SPB) AU The term Aue-payment awareness (EPA)Ay refers to awareness of products and services available using online payment methods.
The adoption of electronic payments .
-payment.
has been growing at a significant rate with developments in financial technology.
Financial technology .
is not only expected to encourage financial inclusion and financial literacy, but also to promote better financial management behavior.
In Indonesia, the current level of financial inclusion and financial literacy on digital financial products and services indicates that areas can be potentially improved.
Previous studies, conducted by Morgan & Trinh .
and Moenjak et al.
, use the adoption and awareness of fintech to investigate the impact on consumersAo financial behavior.
Morgan & Trinh .
use e-banking services, e-payment services, and e-transfer services as elements of the adoption of fintech services and employ digital borrowing, digital lending, digital money .
, e-walle.
, digital insurance, and digital financial advisors as elements of fintech awareness.
In keeping with Nuris et al.
and Khoirunnisaa & Johan .
, this study examines saving and spending behavior as a form of financial behavior.
Therefore, considering the findings of previous studies on e-payment awareness, saving behavior, and spending behavior, the present study proposes the following hypothesis:
AUH3: e-Payment awareness affects saving behavior.
AU 4: e-Payment awareness affects spending behavior.
AURelationships of Financial Risk Tolerance (FRT) with Financial Knowledge (FIN), e-payment Awareness (EPA), and Saving and Spending Behavior (FMB) AUFinancial risk tolerance (FRT) is related to the level of variability of return on investment (ROI) that investors are willing to accept as a risk.
Risk tolerance is defined by general definitions that focus on either the amountAUAUof volatility one can tolerate or the number of losses one is willing to bear (Holzhauer et al.
, 2.
Risk tolerance is the converse of risk aversion, an economic term that describes an individualAos reluctance to accept a choice with an uncertain payoff when a more certain option is available (Grable.
Grable .
further defines risk tolerance as Authe willingness to engage in a risky behavior in which possible outcomes can be negative.
Ay AUThe three types of people, based on their risk tolerance, are the AUAUAUAUaverse type, the neutral type, and the risk seeker (Abidin et al.
, 2.
Pompian .
divides types of investors by their risk tolerance level into four
AUAUAUAU
The first type is conservative investors who have a low level of risk tolerance.
Conservative investors are careful not to take excessive risks.
They are focused on taking care of family members and future generations, especially by funding life-enhancing experiences, such as education and homeownership.
The second type is moderate investors who have a moderate level of risk tolerance.
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generally follow professional advice when they receive it, but they can experience difficulties at times as they neither enjoy nor have an aptitude for the investment process.
The third type is growth investors who have a medium to high level of risk tolerance.
They are the most likely to be contrarian which can sometimes work to their advantage.
Some are obsessed with outperforming the market and may have concentrated portfolios.
The fourth type is aggressive investors who have a high level of risk tolerance.
They make quick decisions and may pursue higher-risk investments in which their friends or associates are Some do not believe in basic investment principles such as diversification and asset allocation.
they are frequently Auhands-onAy and want to be involved in investment decision making.
Rahman .
states that risk tolerance is the key to the modern financial planning process and investment management decision-making model.
AUFinancial behavior, which encompasses activities such as spending, saving, and borrowing, is influenced by interplay of financial knowledge and risk tolerance.
By understanding these interconnections, individuals, financial educators, and policymakers can work to promote financial literacy, encourage appropriate risk-taking, and foster responsible financial behaviors, ultimately leading to improved financial well-being and security.
In studies conducted by researchers to estimate the relationships of financial risk tolerance with financial knowledge and financial behavior, they employ financial behavior defined in terms of saving behavior and spending behavior.
Samanez-Larkin et al.
estimate that financial risk tolerance is associated with financial knowledge.
In their study.
Tavor & Garyn-Tal .
confirm that risk tolerance has a relationship with saving behavior for retirement programs, other savings programs, and real products with a high-risk tolerance preference for retirement savings and less tolerance for other financial risks and real People with more financial knowledge tend to be more risk-tolerant or to be risk seekers (Nguyen et al.
,2.
Furthermore, the authors find that subjective financial knowledge is positively associated with risk tolerance but has no significant direct impact on saving behavior.
Subjective financial knowledge is found to indirectly influence saving behavior through risk tolerance, risk perception, and saving intention (Bapat, 2.
Wang .
states that objective knowledge, subjective knowledge, and risk taking are highly correlated, while Noman et al.
find that individual investorsAo risk tolerance behavior is associated more with their subjective knowledge than with their objective Moreover.
Dewi et al.
reveal that financial knowledge and e-payment behavior affect financial risk tolerance.
Nguyen et al.
Song et al.
argue that financial risk tolerance mediates the association between financial literacy and financial Finally, financial risk tolerance plays a significant role in shaping individual financial behavior (Grable, 2016.
Grable, 2.
Therefore, considering findings in the previous studies, the present study formulates the following hypothesis:
AUH5: Risk tolerance mediates the relationship between financial knowledge, e-payment awareness, and financial saving and spending behavior.
AUFigure 1 presents the conceptual framework that explains the relationships between financial knowledge (FIN), e-payment awareness (EPA), financial risk tolerance (FRT), and financial management behavior (FMB).
Figure 1 is constructed based on theoretical concepts and previous studies.
Regarding the associations between variables, it can be hypothesized that FIN and EPA affect FRT which, in turn, affects spending and saving behavior, thus reflecting financial behavior.
Dewi et al Figure 1.
Conceptual Framework Methods The present study used partial least squares-based structural equation modeling (PLS-SEM) (Hair et al.
, 2.
to estimate the model of the relationships between financial knowledge, e-payment awareness, financial risk tolerance, saving behavior, and spending All variables were constructed as latent variables.
Therefore, each variable was constructed using relevant indicators as shown in Table 1.
To measure financial knowledge, this study used two approaches from Singh & Berwal .
, namely, objective financial knowledge (OFK) and subjective financial knowledge (SFK).
Objective financial knowledge (OFK) was measured by five indicators, comprising compounding interest (Atkinson & Messy, 2012.
Singh & Berwal, 2.
inflation (Atkinson & Messy, 2012.
Singh & Berwal, 2.
investment risk.
and mutual funds.
True or false questions were used to measure objective financial knowledge (OFK).
The correct answer was calculated by the mean percentage of correct scores and then grouped into a range from 1Ae4 .
omparatively very high to comparatively very lo.
where 1 = very low and 4 = very high, while subjective financial knowledge (SFK) was measured through self-assessment of financial The study proposed to measure e-payment awareness by eight indicators derived from Dewi et al.
and using the forced 4-point Likert scale, where 1 = strongly disagree, 2 = disagree, 3 = agree, and 4 = strongly agree.
Financial risk tolerance was measured by employing the risk-tolerance measure items derived from Dewi et al.
Total risk-tolerance scores were obtained by summing .
dding u.
the individual scores from the four questions (Table .
These were then scaled using a range of 1Ae4, with 1 being most risk-averse and 4 being most willing to take a risk (Gilliam et al.
, 2.
The investor type was next divided into four: 1 = conservative investor .
isk avoide.
isk tolerance level is lo.
2 = moderate investor .
, risk-avers.
isk tolerance level is mediu.
growth investor .
isk-toleran.
isk tolerance level is hig.
and 4 = aggressive investor .
isk seeke.
isk tolerance level is very hig.
(Pompian, 2018.
Grable et al.
, 2.
Saving behavior (SVB) had four indicators and spending behavior (SPB) had three indicators measured using the 4-point Likert scale, where 1 = strongly disagree and 4 = strongly agree.
The indicators was derived from Dew & Xiao .
Zulaihati et al.
and Gunawan et al.
This research gathered 396 responses from a sample of young adults in Indonesia.
The age of the respondents was from 18Ae24 (Jekielek & Brown.
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Respondents were found through the convenience sampling technique with data collected using an online survey.
The study distributed 400 questionnaires, but only 396 respondents completed the questionnaires with valid responses.
The number of responses fulfilled the minimum sample size, as suggested by Hair et al.
With 30 indicators, the minimum sample size is 300.
consequently, sample of 396 meets the minimum sample size requirement.
Results In terms of gender, 36.
36% of respondents were male and 63.
64% were female.
About 55.
30% of respondents were aged 20Ae21.
Most respondents earnt income in the following ranges: from Indonesian rupiah (IDR) 1.
5AeIDR 2.
5 million .
83%) and less than IDR 1.
5 million .
57%).
In our studyAos sample, the top three financial products owned by respondents were e-money .
67%).
deposit and saving accounts .
52%).
and digital banking .
87%) (Table .
The adoption of e-financial products was ranked the highest, followed by digital banking.
The frequency of using the e-payment method in the past month showed that most respondents used server-based e-money and rarely used SMS banking .
ee Table .
The study results showed the top three choices for the first financial goal in the next five years.
Most respondents had goals of saving to establish an emergency fund, buying their first house, and saving to start a business .
ee Table .
The study also found that Millennials used electronic money and e-commerce platforms mostly due to their practicality and the promotion of these services.
The current study revealed the promotional and practical factors that influence the adoption of electronic money and e-commerce platforms (Table .
An interesting point was that respondents reported a high level of disagreement with the attribute that the e-payment system saves their money.
Table 1.
Demographic and Socio-Economic Data Criteria < Indonesian rupiah (IDR) 1,500,000 IDR 1,500,001AeIDR 2,500,000 IDR 2,500,001AeIDR 3,500,000 > IDR 3,500,000 Gender Male Female Age 18Ae19 20Ae21 22Ae24 Income Financial products holding e-Money/Wallet Dewi et al Deposit and Saving Account Digital Banking Traditional Insurance Mutual Funds Insuretech Gold Cryptocurrency P2P (Person to Perso.
Lending Bitcoin Source: Computed using Microsoft (MS) Excel Table 2.
Frequency of Using e-Payment Methods in the Past Month
e-Money
ServerBased Cash
Never
1Ae4 times 5Ae9 times 10Ae14 times 15Ae19 times 20Ae24 times 25Ae30 times more than 30 times Source: Computed using Microsoft (MS) Excel
Mobile Debit
Banking Card
e-Money
ChipBased Internet Credit
SMS
Banking Card Banking Table 3.
Top-Ranked Financial Goals in the Next Five Years Statement Saving for an Emergency Fund Buying First Home Saving to Start a Business Vacation Buying First Car I don't have a financial goal yet Source: Computed using Microsoft (MS) Excel Table 4.
e-Payment Awareness Code
EPA1
EPA2
EPA3
e-Payment Adoption Behavior Statements* e-Payment systems save my time e-Payment systems save my money e-Payment systems are better than cash Gadjah Mada International Journal of Business - May-August.
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EPA4
EPA5
EPA6
EPA7
EPA8
Being alert to e-payment security issues e-Payment offers a greater choice for consumers e-Payment systems can be readily adopted e-Payment systems can be easily used Aware of the potential risks of e-payment Notes: SD = strongly disagree.
D = disagree.
A = agree.
SA = strongly agree.
* adopted from Dewi et al.
Source: Computed using Microsoft (MS) Excel.
As shown in Table 5, financial risk tolerance (FRT) covers the areas of speculative risk, investment risk, and evaluated financial risk.
In all, 39.
9% of respondents scored a low FRT level, while 25.
76% had a high FRT level on speculative risk.
This shows that most respondents were conservative .
, risk-avoiding investor.
, as opposed to aggressive investors .
, risk taker.
In terms of investment risk and evaluated financial risk, most respondents .
% and 69.
96%, respectivel.
had a medium FRT level .
, moderate Tables 6 and 7 provide a descriptive analysis of FRT variables and their dimensions in relation to the four basic types of investors, gender, and level of income.
Table 5.
Dimensions and Indicators of Financial Risk Tolerance (FRT) Dimensions and Indicators Risk Tolerance Level and Four Basic Investor Types Conservative .
Low = risk Moderate .
Medium = risk-averse Growth High = risk-tolerant Aggressive .
Very high = risk seeker FRT1-Speculative Risk (%) Suppose that before tossing a coin .
ide A: Fish head, side B: Fish tai.
, you are asked to choose one of the following options for the prize you will receive:
Guess which side (A or B) will appear and, if correct, you will receive IDR 100,000 Guess if side A will appear and, if correct, you will receive IDR 200,000.
If side B appears, you will not receive anything.
Suppose you won a quiz with a cash prize of IDR 500,000.
You are given the opportunity to choose IDR 500,000 which you have won, but without being able to have the second quiz round opportunity.
Take the second quiz round with an 80% chance of winning IDR 1 million: if you lose, you will receive nothing at all FRT2-Investment Risk (%) If you unexpectedly received IDR 100 million to invest, what would you invest in the funds? 100% savings and deposits 50% savings and term deposits, 50% mutual funds 50% mutual funds and 50% stocks 100% stocks FRT3-Evaluated Financial Risk (%) How many losses can you accept in investing? Up to 50% Up to 75% Source: Computed using Microsoft (MS) Excel Dewi et al Table 6.
Financial Risk Tolerance (FRT) by Gender Gender Risk Tolerance Level and Four Basic Investor Types Conservative .
Low = risk avoider Moderate .
Medium = risk-averse Growth High = risk-tolerant Aggressive .
Very high = risk seeker FRT1-Speculative Risk Level (%) Male Female FRT2-Investment Risk (%) Male Female Male Female FRT3-Evaluated Financial Risk (%) Source: Computed using Microsoft (MS) Excel Table 7.
Financial Risk Tolerance (FRT) by Income Income Risk Tolerance Level and Four Basic Investor Types Conservative .
Low = risk Moderate .
Medium = risk-averse Growth High = risk-tolerant Aggressive .
Very high = risk seeker FRT1-Speculative Risk Level (%) < IDR 1,500,000 IDR 1,500,001AeIDR 2,500,000 IDR 2,500,001AeIDR 3,500,000 > IDR 3,500,000 FRT2-Investment Risk Level (%) < IDR 1,500,000 IDR 1,500,001AeIDR 2,500,000 IDR 2,500,001AeIDR 3,500,000 > IDR 3,500,000 FRT3-Evaluated Financial Risk Level (%) < IDR 1,500,000 IDR 1,500,001AeIDR 2,500,000 IDR 2,500,001AeIDR 3,500,000 > IDR 3,500,000 Source: Computed using Microsoft (MS) Excel AUAUAUTables 8Ae10 show the results from measuring the level of financial knowledge on the objective and subjective aspects of financial knowledge.
Subjective financial knowledge (SFK) was measured using indicators of perceived level of financial knowledge.
shown in the results, 67.
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ry of investment knowledge.
Only 2.
02% considered themselves to know about investment at the very high level (Table .
Table 9 shows the percentages of correct answers to each question on objective financial knowledge (OFK), comprising compounding interest .
26%), inflation .
32%), saving .
04%), investment risk .
61%), and mutual funds .
13%).
MeanwAUAUAUAUhile.
Table 10 shows that 40.
66% of respondents were rated as having a very high level of objective financial knowledge (OFK), with these results indicating that young people had a good understanding of financial knowledge.
Financial knowledge is one of the important factors shaping good financial management behavior, especially in saving and spending behavior.
The results shown in Table 10 reveal that a high level of financial knowledge at a young age plays an important role and is a positive move towards sound financial management.
This outcome shows the importance of financial knowledge dissemination to people in general, besides younger people, given that knowledge about financial aspects, irrespective of age category, is imperative for overall financial management.
Table 8.
Subjective Financial Knowledge (SFK) SFK: How would you assess your knowledge of investment .
n a 4-point scale.
1 meaning very low and 4 meaning very hig.
? Scale Total Note: Number and percentage of respondents (N = .
Source: Computed using Microsoft (MS) Excel Table 9.
Objective Financial Knowledge (OFK) Answer Correct Incorrect Compounding Interest Inflation Saving Investment Risk Mutual Funds Note: Number and percentage of respondents (N = .
Source: Computed using Microsoft (MS) Excel Table 10.
Level of Objective Financial Knowledge (OFK) OFK Index 1-Very Low 2- Low 3-High 4-Very High Male Female Source: Computed using Microsoft (MS) Excel Tables 11, 12, 13,and 14 show the measurement model .
uter mode.
used to evaluate validity and reliability.
Tables 15 and 16 show the results of the structural model evaluation .
nner mode.
which explains the relationship between the following variables:
FIN.
EPA.
FRT.
SVB, and SPB.
The evaluation of the outer model shows the results for the Dewi et al evaluation of indicator reliability .
actor loading valu.
, composite reliability (CR), and convergent validity (AVE).
The evaluation of the outer model comprised the evaluation of indicator reliability .
oading factor valu.
, composite reliability (CR), collinearity statistics (VIF).
Cronbach's alpha, and average variance extracted (AVE) .
ee Table 11 and Table 12 provides the outer model estimations, showing that the model is reliable and valid, as no composite reliability (CR) values are less than 0.
7 and no convergent validity (AVE) values are less than 0.
5 (Hair et al.
, 2021.
Ringle et al.
, 2.
As shown in Table 11, all indicators have a factor loading of more than 0.
The present study used a latent variable indicator with a factor loading of 0.
6, based on Setiawan et al.
The inner model estimations show that no indicator had a collinearity problem, with the results of the collinearity test shown in Table 11.
All indicators have a variance inflation factor (VIF) value of less than 5 (Hair et al.
, 2.
, suggesting that multicollinearity is not a problem.
The results of tests for discriminant validity .
sing the heterotraitAemonotrait [HTMT] ratio and FornellAeLarcker criterion correlatio.
are shown at Tables 13 and 14.
In the first iteration, four heterotraitAemonotrait (HTMT) ratio matrix values were more 9 .
etween FIN and FRT .
FIN and SVB .
FIN and SPB .
EPA and FIN .
), which leads to OFK, the manifest variable of FIN, needing to be removed from the model.
After OFKAos removal from the model, all the heterotraitAemonotrait (HTMT) ratio matrix values were less than 0.
ee Table .
, meaning that all constructs used in the model had good convergent consistency (Hair et al.
, 2.
Tables 15 and 16 present the results for the significance and relevance of path coefficients and effect size .
in Table 15, and evaluation of the prediction model (Q2, root mean squared error [RMSE] and mean absolute error [MAE]) in Table 16.
As shown in Table 16, the Q2 values for financial risk tolerance (FRT), saving behavior (SVB), and spending behavior (SPB) 231, 0.
104, and 0.
048, respectively, with more than zero being the cut-off value.
This indicates that the model has predictive relevance (Chin, 2010.
Jamal et al.
, 2.
The mediation analysis, presented in Table 17, shows FRT as having a complementary partial mediation role in the relationships of e-payment awareness with both saving and spending behavior.
In the relationship between financial knowledge and saving behavior.
FRT has a full mediation role.
Furthermore, in the relationship between financial knowledge and spending behavior.
FRT has a competitive .
artial mediatio.
role: The direct effect is negative and significant, but the indirect effect is positive and significant.
Figure 2 shows the estimation of the structural model and the relationships between the variables and their indicators, along with the factor loading for each one.
The present study finds positive relationships between financial knowledge, e-payment awareness, financial risk tolerance, and saving and spending behavior.
Figure 2 illustrates the path coefficient of each independent variable and the effect on its dependent variable.
Meanwhile.
Tables 16 and 17 explain the t-test of each indicator and independent variable.
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Table 11.
Measurement Model Evaluation Ae Factor Loading of the Outer Model
Variables and Indicators Code
Criteria
VIF
Factor Loading First Factor Loading Second t-test > 0.
> 0.
> 1.
Financial Knowledge Objective financial knowledge (OFK) OFK
Subjective financial knowledge (SFK) SFK
N/A
e-Payment systems save my time (EPA.
EPA1 e-Payment systems save my money (EPA.
EPA2 e-Payment systems are better than cash (EPA.
EPA3 Being alert to security issues of e-payment (EPA.
EPA4 e-Payment offers a greater choice (EPA.
EPA5 e-Payment systems can be readily adopted (EPA.
EPA6 e-Payment systems can be easily used (EPA.
EPA7 Aware of the potential risks of e-payment (EPA.
EPA8 Speculative risk (FRT.
FRT1 Investment risk (FRT.
FRT2 Evaluated financial risk (FRT.
FRT3 Searched for information about the product item before purchasing it (SPB.
SPB1 Comparison shopped when purchasing a product or service (SPB.
SPB2 Kept a written or electronic record of your monthly expenses (SPB.
SPB3 Saved for a long-term goal (SVB.
SVB1 Invested money (SVB.
SVB2 Began or maintained an emergency savings fund (SVB.
SVB3 Saving money regularly (SVB.
SVB4 e-Payment Awareness Financial Risk Tolerance Spending Behavior Saving Behavior Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method Notes: *objective financial knowledge (OFK) taken from the model.
VIF = variation inflation factor: if a collinearity statistic is less than 5, no collinearity problem is present.
p-value is less than a significance level of 5% Table 12.
Measurement Model Evaluation Validity and Reliability AVE Electronic Payment Awareness (EPA) Financial Risk Tolerance (FRT) Saving Behavior (SVB) Spending Behavior (SPB) Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method Notes: AVE = average variance extracted.
CR = composite reliability Dewi et al Table 13.
Discriminant Validity HeterotraitAeMonotrait (HTMT) Ratio Matrix
EPA
FIN
FRT
SVB
SPB
Electronic Payment Awareness (EPA) Financial Knowledge (FIN) Financial Risk Tolerance (FRT) Saving Behavior (SVB) Spending Behavior (SPB) Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method Table 14.
Discriminant Validity FornellAeLarcker Criterion Correlation Electronic Payment Awareness (EPA) Financial Knowledge (FIN) Financial Risk Tolerance (FRT) Saving Behavior (SVB) Spending Behavior (SPB) EPA
FIN
FRT
SVB
SPB
Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method Figure 2.
Structural Measurement Model:
Adjusted R-Squared.
Path Coefficients and Loadings Gadjah Mada International Journal of Business - May-August.
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Table 15.
Structural Model Evaluation Direct Effect Electronic Payment Awareness Ie Financial Risk Tolerance Financial Knowledge Ie Financial Risk Tolerance Financial Risk Tolerance Ie Saving Behavior Financial Risk Tolerance Ie Spending Behavior Original sample (O) t-statistic > 1.
p-value Sig f2 value Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) method.
Notes: Effect size criteria: f-squared .
= 0.
f2 = 0.
f2 = 0.
sig = significance Table 16.
Prediction Model Evaluation PLSpredict.
Q2.
RMSE, and MAE
Financial Risk Tolerance (FRT) Saving Behavior (SVB) Spending Behavior (SPB) RMSE
MAE
Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method Notes: Predictive relevance criteria: Q2 is more than zero (Q2 > .
(Hair et al.
, 2022.
Ringle et al.
, 2.
mean squared error (RMSE) is less than 1.
MAE = mean absolute error Table 17.
Mediation Test Direct t-value Sig Indirect t-value Sig Conclusion Electronic Payment Awareness Ie Saving Behavior Yes Yes Complementary .
artial Electronic Payment Awareness Ie Spending Behavior Yes Yes Complementary .
artial Financial Knowledge Ie Saving Behavior Yes Indirect only .
ull Financial Knowledge Ie Spending Behavior Yes Yes Competitive .
artial Source: Present studyAos SEM analysis: calculation using the partial least squares (PLS) regression method.
If the sign of the direct effect is positive, the partial mediation is complementary, and if the sign of the direct effect is negative, it is a competitive partial mediation (Hair et al.
, 2.
(Zhao et al.
, 2.
(Nitzl et al.
Dewi et al Discussion This study offers a valuable opportunity to enhance our understanding of personal financial behavior.
It makes a major contribution to research on financial literacy by demonstrating the relationships between financial knowledge and e-payment adoption with saving and spending behavior, with financial risk tolerance as the mediating variable.
The studyAos findings show that financial knowledge (FIN) has a positive effect on financial risk tolerance (FRT) at a 5% confidence interval level.
The coefficient of FIN at 0.
indicated that the direct contribution of FIN to FRT was approximately 7% (= 0.
This result is consistent with the findings of Tavor & Garyn-Tal .
Samanez-Larkin et al.
Nguyen et al.
who established the relationship between financial knowledge and risk tolerance.
Our findings also align with a study in China, which which demonstrated that financial knowledge has a significant positive effect on risk tolerance levels (Zhang et al.
, 2.
as well as with a study in the United States showing that individual investors' risk tolerance behavior is associated with their subjective financial knowledge (Noman et al.
, 2.
Additionally, the present study found that individuals with higher financial knowledge tend to be more risk-tolerant (Nguyen et al.
,2.
This study also found that e-payment awareness positively affected financial risk This study confirms our earlier findings that e-payment behavior positively affected financial risk tolerance (Dewi et al.
, 2.
It aligns with a study in Japan that found a relationship between risk tolerance and e-payment services awareness (Long et , 2.
The coefficient of EPA at 0.
366 indicated that the direct contribution of EPA on FRT was 13% (= 0.
, showing that EPA significantly affected financial risk tolerance (FRT).
The findings also indicated that young people would have a higher level of risk tolerance if they had a higher level of awareness of the e-payment system, as shown by EPA significantly affecting financial risk tolerance (FRT).
Furthermore, financial risk tolerance (FRT), in turn, has positive effects on saving behavior (SVB) and spending behavior (SPB).
The coefficient of FRT at 0.
353 indicated that the direct contribution of FRT on SVB was 5% (= 0.
, while the coefficient of FRT on SPB at 0.
257, thus indicating that the direct contribution of FRT on FSB was 7% (= 0.
This study produced results that corroborate the findings of a great deal of the previous work in this field, both in the context of developed and developing countries.
Nguyen et al.
conducted a study in Vietnam, revealing that financial literacy indirectly influences saving behavior through risk tolerance, and Almas et al.
found that risk tolerance has a correlation with saving behavior in China.
Another interesting finding of this research is the competitive .
artial mediatio.
role of financial risk tolerance on the relationship between financial knowledge and spending behavior: The direct effect is negative and significant, but the indirect effect is positive and significant.
This finding indicates the role of FRT in encouraging better spending behavior.
Higher financial knowledge alone does not necessarily ensure better spending behavior.
Our finding suggests that higher financial knowledge must be balanced with more risk-tolerant behavior .
, higher FRT) to achieve better spending behavior, which is consistent with the previous findings of Azmi & Ramakrishnan .
All in all.
The findings of the current study are consistent with those of Bapat .
and Nguyen et al.
, who revealed that subjective financial knowledge is found to influence saving behavior through risk tolerance indirectly.
This finding supports previous research that links risk tolerance and subjective financial knowledge in context-developed countries such as the U.
(Noman et al.
,2.
and developing countries such as Vietnam Gadjah Mada International Journal of Business - May-August.
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No.
2, 2025
(Nguyen et al.
, 2.
However, the current studyAos findings do not support the previous research by Peiris .
, who found that financial literacy has a direct and positively significant influence on savings behavior.
This study provides further evidence of the important link between young peopleAos level of risk tolerance and their financial behavior.
Finally, financial risk tolerance plays a role in shaping an individualAos financial behaviors (Grable, 2016.
Grable, 2.
A higher level of risk tolerance would be significant, in the individual achieving good financial behavior.
Conclusion This study reveals the positive relationships of financial knowledge, e-payment awareness, and financial risk tolerance with saving and spending behavior.
Based on the studyAos findings, financial knowledge and e-payment awareness are factors that are important in the development of a higher level of risk tolerance among young people which, in turn, can affect both saving and spending behavior.
The study also reveals that financial knowledge and e-payment awareness play roles in shaping the individualAos financial behavior through financial risk tolerance.
This study provides evidence that financial risk tolerance has a complementary partial mediation role in this relationship.
The relationship of financial knowledge and e-payment awareness with saving behavior can be either direct or indirect.
At the same time, the relationship of financial knowledge and e-payment awareness with saving behavior is direct only.
The findings of this study reveal three important insights into the relationships between financial knowledge, e-payment awareness, financial risk tolerance, and financial behavior among young adults: .
Financial knowledge positively impacts financial risk Individuals with higher financial knowledge are more likely to have a higher tolerance for financial risks, aligning with previous research indicating that knowledgeable individuals are more comfortable with risk in financial decisions.
E-payment awareness influences both saving and spending behavior, with awareness of e-payment systems leading to better financial risk tolerance and encouraging saving habits.
This suggests that familiarity with digital payment systems can promote more cautious financial behavior by enhancing individuals' comfort with managing financial transactions electronically.
Financial risk tolerance serves as a mediator in the relationship between financial knowledge and spending behavior.
While financial knowledge alone may not directly lead to better spending habits, when combined with higher risk tolerance, it positively influences spending behavior.
This highlights the importance of balancing financial knowledge with risk tolerance for optimal financial behavior.
Based on this studyAos findings, this study highlights the critical role of financial knowledge, digital payment awareness, and risk tolerance in shaping financial behaviors.
The implications for research are that future research could expand on these findings by exploring how these factors interact in different demographic contexts or across diverse economic conditions.
The practical implication is financial institutions and educational organizations can leverage these findings to design programs that increase digital payment awareness and financial knowledge, especially among young people.
By promoting financial literacy programs incorporating digital finance components, financial institutions can help individuals make more informed decisions and build sustainable saving Dewi et al and spending habits.
Moreover, by identifying risk profiles, financial service providers can offer tailored products that align with customersAo risk tolerance levels, ultimately improving customer satisfaction and financial stability.
Finally, the implication for society is improving financial literacy and digital payment awareness can lead to more financially responsible behavior, fostering economic stability within communities.
As individuals become more aware of managing their finances and understanding risk tolerance, they are likely to contribute to a more resilient economy.
Enhanced financial knowledge and digital competency also align with national goals of increased financial inclusion, supporting a well-informed and economically active society.
These implications underscore the importance of targeted financial education and inclusive financial policies to promote responsible financial behavior in a digital era.
Limitations Although the present study successfully demonstrated the relationships between financial knowledge, e-payment awareness, financial risk tolerance, saving behavior and spending behavior, one limitation is the lack of balance in in terms of the number of responses by age, gender, and income level.
The researchers were limited by time and the limited number of respondents willing to fill out the survey.
This meant that the researchers had insufficient time to collect more responses.
Despite this, the sample size met the minimum requirements for statistical validity, ensuring reliability in the core findings.
References