The Influence of Financial Literacy on Investment Decisions and Economic Stability A Study of Young Investors in Emerging Economies

Abstract

Financial literacy has become a key issue and is affecting the behavior of investment by individuals and consequently, economic growth. Empirical evidence suggests that there is a low likelihood that young investors in emerging economies will make informed investment decisions because of various factors, such as: the underdevelopment of financial markets and a lack of formal financial education. This paper examines the relationship between financial literacy, investment behavior and economic stability among young investors operating in emerging economies. A quantitative research design was used, where data were gathered using structured questionnaires administered online and offline to 300 people aged between 18 and 35 years. The empirical results show that there is a significant positive relationship between financial literacy and investments; people with higher levels of financial literacy exhibit higher levels of awareness regarding risk diversification, market fluctuations and long-term financial planning. Furthermore, the results suggest that increasing financial literacy among the young investors not only generates responsible investment behavior but also is part of macroeconomic stability as it helps in stimulating savings, reducing speculative activities, and boosting capital formation. Accordingly, the study calls for joint efforts among governments and education institutions and financial entities to carry out comprehensive financial education programmed targeting the young population to guarantee the sustainability of financial systems of emerging economies.