In recent years, the financial landscape has undergone significant transformation due to the rapid expansion of financial markets, digital investment platforms, and innovative financial products (Lusardi & Mitchell, 2014; OECD, 2020). As a result, individuals are increasingly required to possess adequate financial knowledge and skills to make informed economic decisions. Financial literacy, which encompasses understanding basic financial concepts such as saving, budgeting, the risk–return trade-off, inflation, and investment instruments, has become an essential life skill, particularly for young adults (Huston, 2010; Atkinson & Messy, 2012).

College students represent a crucial segment of future investors, as they are at the threshold of independent financial decision-making. Exposure to part-time employment, scholarships, education loans, and digital payment systems has increased their interaction with

financial products at an early age (Shim et al., 2009). However, despite greater access to financial information and investment avenues, many students still lack

sufficient financial literacy, which may lead to poor investment choices, excessive risk-taking, or avoidance of investments altogether (Mandell, 2008).

In a growing educational and industrial hub like Coimbatore, college students are increasingly influenced bypeer networks, social media, fintech applications, and emerging investment trends such as mutual funds, equity trading, and crypto currencies (Chen & Volpe, 2002). While these opportunities provide potential for wealth creation, they also require a sound understanding of financial principles to evaluate risks and returns effectively. The absence of adequate financial literacy may expose students to behavioral biases, misinformation, and impulsive investment decisions (Kahneman, 2011; Lusardi & Tufano, 2015).

Against this backdrop, the present study seeks to examine the impact of financial literacy on the investment behavior of college students in Coimbatore. Specifically, the study aims to understand how varying levels of financial knowledge influence students’ investment awareness, preferences, risk tolerance, and decision-making patterns. By identifying the relationship between financial literacy and investment behavior, this study intends to highlight the importance of financial education and provide insights for educators, policymakers, and financial institutions to design targeted literacy programs for young investors.

Factors Influencing Financial Literacy and Investment Behavior

Financial literacy and investment behavior among college students are influenced by multiple interrelated factors. Demographic variables such as age, gender, and academic discipline affect students’ exposure to financial concepts and their confidence in investment decision-making (Lusardi & Mitchell, 2007).Socio-economic background, including family income and parental financial involvement, plays a crucial role in shaping financial awareness and early investment habits (Xiao et al., 2011).

Formal financial education and awareness significantly enhance students’ ability to understand financial instruments, assess risk, and make informed investment choices (Mandell & Klein, 2009).Psychological factors, including risk tolerance, overconfidence, herd behavior, and financial self-efficacy, influence how financial knowledge is applied in practice (Puri & Robinson, 2007; Atkinson & Messy, 2012).

Additionally, technological exposure through digital banking and online investment platforms has increased market participation among students, though insufficient digital financial literacy may lead to impulsive or speculative behavior (Klapper et al., 2013).Information sources such as peers, social media, and financial influencers further shape students’ investment decisions, emphasizing the need for sound financial knowledge to counter misinformation (Lusardi & Tufano, 2015).

Objective of the Study

• To evaluate the level of financial literacy among college students in Coimbatore.
• To analyze the influence of financial literacy on the investment behavior of college students in Coimbatore.

Statement of the Problem

The increasing availability of digital financial products and investment platforms has expanded investment opportunities for college students. However, many students lack adequate financial literacy to make informed investment decisions, often relying on informal advice and market trends.

 In Coimbatore, differences in financial knowledge, socio-economic background, and behavioral factors may influence students’ investment behaviour. Limited empirical evidence on this relationship highlights the need to examine the impact of financial literacy on the investment behaviour of college students in the region.

Need for the Study

College students are future investors, and their financial decisions have long-term implications for personal and economic well-being. Understanding the role of financial literacy in shaping investment behavior is essential to identify knowledge gaps and promote responsible investing. This study is particularly relevant for Coimbatore, where growing access to digital finance necessitates targeted financial education initiatives for young investors.

Justification for Selecting College Students and Their Income

College students are at a stage in life where they start managing money independently and developing basic financial habits such as saving, budgeting, and investing. The financial decisions made during this period often shape their future financial behaviour. Therefore, studying college students helps in understanding how financial literacy influences investment behaviour at an early stage.

Most college students donot have a fixed or regular income. Their income mainly comes from sources such as parental support, scholarships, stipends, or part-time work, which are often irregular and uncertain. Because of this, their income level plays a major role in determining how much they can save or invest the type of investment options they choose, and the level of risk they are willing to take.

Despite not having a fixed income, many college students today have access to digital banking and online investment platforms, which allow them to start investing with small amounts. This makes them an important group for studying how financial knowledge and attitudes influence investment decisions under income uncertainty.

Hence, selecting college students and considering their income level is appropriate, as it captures the real financial situation of young individuals and helps in understanding the role of financial literacy in shaping responsible investment behaviour even in the absence of a fixed income.

Conceptual Framework

The conceptual framework illustrates the relationship betweenfinancial literacyand investment behaviorof college students, along with relevantcontrol (demographic) variables.

1. Independent Variable

Financial Literacy

Financial literacy refers to the ability of individuals to understand and apply financial knowledge in decision-making. In the present study, financial literacy is measured through the following dimensions:

• Financial Knowledge
• Financial Attitude
• Financial Skills / Financial Awareness

2. Dependent Variable

Investment Behavior

Investment behavior represents the actions and decisions taken by students while investing their money. It includes:

• Saving and investment planning
• Risk tolerance
• Choice of investment instruments
• Investment frequency and duration

3. Control Variables (Demographic Factors)

The following demographic variables are included to control their influence on the dependent variable:

• Gender
• Age
• Course of Study
• Level of Study
• Monthly Income
• Family Income

Hypotheses

The study tests the following hypotheses:

H₁: Financial literacy has a significant impact on the investment behavior of college students.

H₂: There is a significant difference in financial literacy between male and female students.

H₃: There is a significant difference in investment behavior among students from different courses of study.

Review of Literature

Research Gap

Most existing studies on financial literacy and investment behaviour focus on general investors or students at a national level. There is very limited research specifically on college students in Coimbatore, despite their growing exposure to digital finance and investment platforms.

Moreover, earlier studies do not clearly explain how financial literacy translates into actual investment behavior among students. Hence, this study addresses this gap by examining the impact of financial literacy on the investment behavior of college students in Coimbatore.

Research Methodology: Research Design

This study employed a quantitative research design to examine the relationship between financial literacy and investment behavior among college students in Coimbatore. The research is descriptive and analytical, aiming to understand the level of financial literacy and its influence on students’ investment decisions.

Population and Sample: The population for this study consists of college students in Coimbatore. A sample of 129 students was selected using convenience sampling, considering accessibility and willingness to participate in the survey.

Data Collection: Primary data were collected using a structured questionnaire designed on a five-point Likert scale, covering:

• Financial Literacy: knowledge, attitude, and skills related to financial decision-making
• Investment Behavior: saving habits, risk tolerance, choice of investment instruments, and investment frequency
• Demographic Information: gender, age, course of study, level of study, monthly income, and family income

The questionnaire was personally administered to ensure completeness and accuracy.

Statistical Tools and Techniques

The data collected were analyzed using the following statistical tools:

Descriptive Statistics: To summarize demographic characteristics and assess the levels of financial literacy and investment behavior.

Independent Sample t-Test: To examine whether financial literacy or investment behavior differs significantly between two groups (e.g., male vs. female students).

• One-Way ANOVA: To test whether financial literacy or investment behavior differs significantly across multiple groups (e.g., courses of study or types of investment).
• Regression Analysis: To examine the impact of financial literacy on investment behavior and determine the strength and direction of the relationship.

Data analysis and Interpretation

Table 1: Descriptive Statistics of Financial Literacy and Investment

TABLE-1

Regression Analysis

Table: 2 Comparison of Simple and Multiple Regression – Effect of Financial Literacy on Investment Behavior

Model Summary

Interpretation

Shows the overall effect of financial literacy; explains34% of variation in investment behavior .Breaking FL into sub-dimensions increases explanatory power to42%.Investment Knowledgehas thestrongest individual effectamong sub-dimensions (β = 0.28).All predictors in multiple regression arestatistically significant (p < 0.05).

Table: 2 ANOVA

H1: There is no significant difference in investment behavior among students of different income groups.

H2: There is a significant difference in investment behavior among students of different income groups.

Interpretation

The ANOVA results show a significant difference in investment behavior among college students from different family income groups (p < 0.05). Students belonging to higher-income families demonstrate better investment behavior than those from lower-income groups. Hence, the null hypothesis is rejected, indicating that family income influences students’ investment behavior.

Table-3

T-TEST

Interpretation

The t-test results indicate a significant difference in financial literacy between male and femalestudents (p < 0.05). Male students show a higher level of financial literacy than female students. Therefore, the null hypothesis is rejected.

Conclusion

This study explored how financial literacy affects the investment behavior of college studentsinCoimbatore. Based on responses from 129 students, the analysis revealed several interesting patterns.

First, it was observed that most students have a moderate level of financial literacy. While they understand basic financial concepts like savings and budgeting, many are still unfamiliar with advanced investment options or strategies.

Second, financial literacy was found to significantly influence investment behavior. Students who are more financially knowledgeable tend to make more informed decisions, plan their investments better, and show greater awareness of risk and return.

The study also highlighted the role of demographics. Gender differences were noticeable, with male students generally showing slightly higher financial literacy. Similarly, students from commerce and management courses displayed better investment behavior than those from arts or science streams.

Overall, the findings suggest that financial literacy is key to fostering better investment habits among young adults. Colleges and policymakers should focus on providing practical financial education, workshops, and exposure to investment tools to help students make smarter financial choices. In short, improving financial literacy can empower students to manage money effectively, make sound investment decisions, and build a stronger financial future.

References

1. Atkinson, A., & Messy, F.-A. (2012). Measuring financial literacy: Results of the OECD/INFE pilot study. OECD Working Papers.
2. Chen, H., & Volpe, R. P. (2002). Gender differences in personal financial literacy among college students. Financial Services Review, 11(3), 289–307.
3. Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 44(2), 296–316.
4. Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
5. Klapper, L., Lusardi, A., & Van Oudheusden, P. (2013). Financial literacy around the world. World Bank.
6. Lusardi, A., & Mitchell, O. S. (2007). Financial literacy and retirement preparedness. NBER Working Paper.
7. Lusardi, A., & Tufano, P. (2015). Debt literacy, financial experiences, and overindebtedness. Journal of Pension Economics & Finance, 14(4), 332–368.
8. Mandell, L. (2008). Financial literacy of high school students. Journal of Consumer Affairs, 42(2), 181–208.
9. Mandell, L., & Klein, L. S. (2009). The impact of financial literacy education on subsequent financial behavior. Journal of Financial Counseling and Planning, 20(1), 15–24.
10. Puri, M., & Robinson, D. T. (2007). Optimism and economic behavior. American Economic Review, 97(5), 1949–1976.
11. Shim, S., et al. (2009). Financial literacy of young adults: The importance of parental socialization. Family and Consumer Sciences Research Journal, 37(2), 126–145.
12. Xiao, J. J., Chen, C., & Chen, F. (2011). Consumer financial capability and financial satisfaction. Social Indicators Research, 105, 351–370.