Financial Literacy and Its Impact on Spending Habits of College
Students
Md. Rza Ansari, Amity Business School, Amity University Chhattisgarh
Dr. Shilpa Pandey, Assistant Professor, Amity Business School, Amity University Chhattisgarh
Abstract
In the modern financial landscape of India,
understanding money management is vital
The study concludes that early financial
especially for students who are beginning
education can significantly improve
their journey toward financial independence.
students' financial health and recommends
This study investigates how financial
integrating financial literacy into academic
literacy, or the lack of it, impacts the
curricula, promoting budgeting habits, and
spending habits of college students. By
using digital tools for money management.
examining their knowledge of budgeting,
saving, credit use, and digital tools, the
research aims to identify behavioural
1. Introduction
patterns and provide recommendations to
improve their financial decisions. Financial literacy is the ability to understand
and effectively use various financial skills,
Using a mixed-method approach, data was
including personal financial management,
collected through surveys and interviews
budgeting, and investing. For college
from 86 students across disciplines. Results
students in India, acquiring these skills is
show that while most students are familiar
crucial. As they step into adulthood, students
with basic financial terms, few understand
begin managing their own money, often
deeper financial concepts like taxation,
without any formal education on how to do
investing, or loan management. Moreover,
so.
many students admitted to not tracking
expenses or maintaining budgets, leading to In India’s rapidly evolving financial
frequent overspending. ecosystem, students are frequently exposed
to digital banking, credit cards, and “Buy To recommend strategies to enhance
Now, Pay Later” services. However, many financial awareness and responsible
lack the knowledge to navigate these tools spending.
responsibly. The temptation of consumer
culture and peer pressure further pushes
students toward impulsive spending. 3. Research Methodology
This study explores the connection between Research Approach
financial literacy and student spending A mixed-method approach was used,
habits. It seeks to understand how combining quantitative (survey) and
knowledge (or the absence of it) shapes qualitative (interview) methods. The
behaviour and what can be done to equip quantitative component helped
students with lifelong financial skills. measure knowledge levels and
spending habits, while the qualitative
part explored motivations,
2. Objectives of the Study challenges, and influences behind
those behaviours.
General Objective
To examine the relationship between
financial literacy and the spending habits of Research Design
Indian college students. The study adopted a cross-sectional,
descriptive, and analytical design.
Specific Objectives
This allowed for data to be collected
To assess the level of financial at a single point from a diverse group
literacy among college students. of students, enabling comparisons
across gender, discipline, and
To understand students’ income
background.
sources and spending patterns.
To identify the key factors Target Population
influencing spending behaviours. The target population included
undergraduate students from arts,
commerce, science, and engineering
colleges in urban and semi-urban Validity and Reliability
areas of India. These locations offer Validity was ensured through expert
a representative mix of socio- review and pilot testing. Construct
economic diversity and digital validity was aligned with RBI and
exposure. OECD standards. Cronbach’s alpha
of 0.78 confirmed reliability.
Sampling Technique
Stratified random sampling was used Ethical Considerations
to ensure fair representation across Informed consent was obtained.
disciplines, gender, and years of Confidentiality was maintained. No
study. Students were randomly personal identifiers were collected,
selected from each stratum to reduce and students could skip questions
bias. they were uncomfortable answering.
Data Collection Tools
1. Structured questionnaires (Likert 4. Data Analysis and Interpretation
scale + multiple choice)
Age Distribution
2. Open-ended questions
Most participants (71%) were aged
3. Focus group discussions and
18–21, representing early-stage
short interviews
undergraduates—an ideal group for
financial education initiatives.
Data Analysis
Gender
Quantitative data was analysed using
There was near equal representation,
SPSS, applying descriptive stats
with 53.5% female and 46.5% male,
(mean, SD) and inferential tools
offering balanced insights.
(correlation, ANOVA). Qualitative
responses were thematically analysed
Formal Financial Education
to extract meaningful insights.
Around 54% had received some
financial education; 46% had not
indicating a gap that needs Spending Priorities
addressing. The top spending categories were
food, clothing, and entertainment.
Understanding Level Very few students reported spending
Majority rated their financial on savings or investments.
knowledge as average (44%), while
only 23% felt highly confident. Very
few rated themselves poorly. 5. Key Findings
A significant number of students lack
Topic Familiarity
formal financial education.
Most students understood "Saving"
well (73%), but fewer were familiar Most spending is focused on
with "Investing," "Loans," and consumption rather than planning or
"Taxes"—showing lack of exposure saving.
to complex topics.
Digital convenience and peer
pressure strongly influence student
Sources of Financial Knowledge
spending.
Top sources included family (30%),
online platforms like YouTube There is a notable gap between
(27%), and social media (22%). theoretical understanding and
Around 21% reported not learning practical application of financial
finance from any source. skills.
Financial behaviour varies by stream,
Tracking Expenses & Budgeting
with commerce students showing
Only 41% tracked expenses
better awareness.
regularly, and the same percentage
maintained a budget. Many admitted
to overspending due to a lack of
planning.
6. Recommendations Teach students how to set financial
goals.
Integrate financial education into
college curricula. Conduct mock financial planning
assignments.
Conduct campus-wide financial
literacy workshops. Encourage peer mentorship in
finance literacy.
Promote digital tools and budgeting
apps. Promote part-time income
management tips.
Encourage parents to discuss finance
at home. Use real-life simulations of
budgeting and debt handling.
Use gamified learning for better
student engagement. Involve alumni in sharing financial
lessons.
Focus on emotional spending and
peer pressure in awareness programs. Make financial education part of
orientation programs.
Offer internships with banks or
fintech startups. Offer certified online modules on
personal finance.
Create student-led finance clubs.
Partner with SEBI, RBI, and NCFE
for resources. 7. Conclusion
Develop multi-language materials to This study demonstrates a clear connection
reach diverse student groups. between financial literacy and the spending
behaviour of college students in India. While
Track student spending behaviour
most students understand basic money
over time.
management, a lack of deeper financial
Provide expert-led seminars on knowledge and practical application often
loans, credit, and taxes. leads to poor financial decisions. The
research emphasizes the need for early
intervention through formal education, Mandell, L. (2008). The Financial
awareness campaigns, and digital tools to Literacy of Young Adults.
help students develop sound financial habits. JumpStart.
With rising financial independence among RBI (2021). Financial Education
youth, and increasing access to credit and Initiatives. www.rbi.org.in
digital transactions, equipping students with
NCFE (2020). National Strategy
the right financial mindset is crucial.
for Financial Education.
Strengthening financial literacy will not only
www.ncfe.org.in
benefit individual students but also
contribute to building a financially SEBI (2022). Investor Education
responsible future workforce. Resources. www.sebi.gov.in
OECD (2017). Toolkit for
Measuring Financial Literacy.
8. References
Tiwari, R., & Bansal, S. (2019).
Agarwal, S., & Amromin, G.
Financial Literacy in Indian
(2014). Financial Literacy and
Colleges. IJRAR.
Financial Planning: Evidence from
India. NBER.
Atkinson, A., & Messy, F. (2012).
Measuring Financial Literacy.
OECD.
Chakrabarty, S., & Roy, A. (2020).
Financial Behaviour among Indian
Youth. Int. J. of Financial
Research.
Lusardi, A., & Mitchell, O. (2011).
Financial Literacy and Planning.
NBER.
