Decoding Financial Behavior: Investigating The Power Of Knowledge And Psychological Control In The Presence Of Risk Appetite

Abstract

This study investigates the antecedents of financial management behavior (FMB) among young adults, emphasizing the moderating role of financial risk tolerance. It examines how financial knowledge, financial attitude, and internal locus of control influence FMB and whether financial risk tolerance moderates these relationships. Using a causalcomparative research design and primary data, the study found that all three predictor’s financial knowledge, financial attitude, and internal locus of control significantly and positively influence FMB. Furthermore, financial risk tolerance significantly moderates the relationship between financial knowledge and FMB, suggesting that those with higher risk tolerance and strong financial knowledge manage finances more effectively. However, moderation effects for financial attitude and internal locus of control were not statistically significant. These findings underscore the importance of financial literacy, attitude, and psychological control beliefs in shaping young adults’ financial behavior. The study recommends tailored financial education programs, psychological empowerment strategies, and risk-awareness initiatives to foster responsible financial practices among Nepalese youth.