A Predictive Model for Financial Literacy among the Educated Youth in Kerala, India

ABSTRACT

The economic importance of financial literacy among individuals necessitates policy intervention. Estimation of financial literacy is a prerequisite for strategies to improve financial literacy. This paper, using data collected from the educated young adults in Kerala, the most literate state in India, builds a predictive model for financial literacy employing logistic regression. The study reveals the low level of financial literacy in the state. The model points to the significance of gender, age, religion, discipline of study, occupation, and personal income as determinants of financial literacy. The findings have implications for policies aimed at improving the financial literacy of young adults in India.

KEYWORDS:

• Financial literacy
• determinants of financial literacy
• predictive model
• India

Acknowledgments

We acknowledge the feedback from the panel and participants of COSMAR 2016, the doctoral consortium at the Indian Institute of Science, Bangalore and International Conference on Financial Markets & Corporate Finance (ICFMCF 2017) at the Indian Institute of Technology Kharagpur, where prior versions of this paper were presented.