Authors: Associate Professor Dr. Baby. M. S
Abstract: This study explores the causal connection between financial literacy (FL) and investment decision quality among urban Indian young adults aged 18 to 30 years. This mixed-methods study uses a structured survey sample of 450 participants and an experimental investment decision scenario involving 120 individuals to assess the influence of budgeting skills, risk assessment knowledge, compound interest awareness, and digital financial skills on decision making. We find a significant positive correlation (r = 0.72, p < 0.001) between FL score and prudence, defined in terms of diversification of portfolio, risk-return tradeoff, and non-speculative nature of investment decisions. Only 34% of individuals could understand compound interest, and 58% failed to define mutual funds. Comparing investment decision quality in four FL intervention groups, we find that gamified simulation was significantly more effective than traditional lecture-based instruction in improving decision quality by 41%.
