Mastering Money: How Financial Literacy Shapes Personal Planning and Risk Tolerance?

Abstract

Financial literacy is the ability to make informed and effective decisions regarding the management of one’s finances. This study explores the relationship between various dimensions of financial literacy—encompassing financial knowledge, awareness, behavior, and attitudes—and how they influence personal financial planning and risk tolerance among individual investors. The research involved a sample of 619 stock market investors from various national and limited corporations in Delhi. A structured survey based on a 5-point Likert scale was administered, using purposive sampling for participant selection. The data analysis utilized the Goodness of Fit test and Structural Equation Modeling (SEM) with AMOS software. Path analysis was conducted to test the hypotheses linking the four independent variables to the dependent variables. The results revealed a strong correlation between all aspects of financial literacy and the two dependent factors: personal financial planning and financial risk tolerance.