Financial Literacy and Financial Inclusion among Young Adults: The Mediating Role of Digital Financial Behavior

Abstract

Financial inclusion has become a cornerstone of sustainable economic development, particularly in emerging economies where digital financial services are rapidly transforming the financial landscape. Despite significant improvements in access to formal financial services, many young adults continue to face challenges in effectively utilizing financial products due to inadequate financial literacy and inconsistent financial behaviors. This study examines the relationship between financial literacy and financial inclusion among young adults by investigating the mediating role of digital financial behavior.

Drawing upon Human Capital Theory and the Financial Capability Framework, the study proposes that financially literate individuals are more likely to develop responsible digital financial behaviors, which subsequently enhance their level of financial inclusion. A quantitative research design is proposed using a structured questionnaire administered to young adults aged 18–35 years. Data will be analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to evaluate both the measurement and structural models.

The proposed conceptual model hypothesizes that financial literacy positively influences digital financial behavior and financial inclusion, while digital financial behavior partially mediates the relationship between financial literacy and financial inclusion. The findings are expected to contribute to the growing literature on financial capability by highlighting the importance of digital financial practices in achieving inclusive financial development. The study also offers practical implications for policymakers, financial institutions, and educational institutions seeking to improve financial inclusion among youth through targeted financial education and digital literacy initiatives.