How financial decisions are affected by financial literacy levels, behavioral aspects and individual propensities; an empirical analysis of young Italian adults

Changes in social structure and culture, coupled with technology advancements, have broadened access to financial markets and services. One of the consequences of these changes is that people are asked to take financial decisions when they are young, often as soon as during school years. It is thus important to analyze the behavior of young adults and to study the mistakes they make in taking financial decisions. Several studies on financial literacy stressed the severe limitations in attitudes, skills and knowledge, of young individuals (as well as older ones) when they are asked to take decisions on financial matters. Some of those studies underline the relevance of behavioral aspects and individual propensities in influencing financial choices. The aim of this paper, which is based on the study of a sample of 1,298 young Italian adults, aged 18-24, is to test the relations between financial literacy, behavioral aspects and individual propensities and to understand the combined effect they have on financial decisions.