FINANCIAL LITERACY AND INVESTMENT BEHAVIOUR AMONG YOUNG ADULTS

Abstract

The growing middle class in India and the rapid financial digitalization has given rise to opportunity and vulnerability for young urban investors. The present study involves the financial literacy and investment behaviour among young adults (18-40 years) of urban India and the result of this study is based on the primary data of survey conducted to 100 respondents across Tier 1 city of India. The demographic characteristics of the sample give an indicative picture of digitally connected young adults in the city. The age group 26-30 years is the biggest group of respondents (30%), while majority of respondents (40%) have incomes between ₹25,000-₹50,000 per month. There is a near equal split between males (49%) and females (36%) and those who identify as other (15%). Low awareness of key investment concepts is still very prevalent, with 70% of young professionals showing only low or moderate awareness of the basic investment concepts; diversification, inflation, and compounding. 30% have high awareness. Mutual Funds, followed by Stocks/SIP and FD/RD, with around 19-21% coming from each of these instruments, and then Cryptocurrency and Real Estate, each with a set share of 13-14% were the preferred instruments with none holding a majority. The near-uniform distribution, along with the finding that there is not a statistically significant relationship between investment horizon and instrument choice (χ² = 2.09, p = 0.98), suggests that instrument choice among young investors is not strategically influenced by time horizon. Instead, it's merely the ease of access, the influence of others and familiarity with the platforms. The majority of respondents are of moderate risk appetite (45%) while 30% have high risk appetite and 25% have low risk appetite. It is noteworthy that there was no statistically significant relationship between monthly income and risk appetite (χ2 = 2.41, p = 0.88) which contradicts the general notion that high income is related to high risk appetite. This means that psychological and behavioural aspects - not financial means - are the primary factors influencing risk preference. Investment awareness and investor confidence are found to be the most significant finding of the study as the near-deterministic relationship exists between investment awareness and investor confidence (χ² = 156.07, p < 0.0001, Cramér's V = 0.88). v The pattern is clear: all the respondents who were very aware said that they were "confident in investment decisions," whereas all the respondents who were not very aware said that they were "not confident," and the moderately aware group split with a majority saying that they were "sometimes confident. With this very strong connection, the one most important influencing factor for enhancing investor participation and investment decisions is financial awareness. Digital platforms are used widely, with Zerodha (25%) being used as much as Groww (24%), Upstox (24%) and Paytm Money (24%) with 3% not using any platform. The availability of platforms, however, has not led to well informed decision making. Information sourcing is a structural issue: 31% of all respondents trust YouTube influencers, 31% trust friends and family, 18% trust qualified financial advisors. This strong reliance on unregulated, informal channels places young investors at risk of misinformation and poor financial results. While some of these gaps exist, there is a high level of receptivity to formal financial education: 50% of respondents were definitely interested in financial literacy workshops and 30% were possibly interested, with only 20% showing no interest. This demand-side readiness is a major and impactful opportunity for regulators, financial institutions and policymakers. To summarise, the evidence reveals a stark lack of a knowledge system to use digital infrastructure and investment platforms effectively for most young urban investors. The three priority interventions that this study recommends for making India's digitally connected workforce financially literate are: targeted financial literacy programmes, behavioural risk profiling tools and regulated information channels. informed and investment ready.