CHAPTER I: INTRODUCTION
Context Information
Financial literacy is the basic skills, ability and knowledge required for an individual to
effectively and efficiently manage his personal finance (Murmu & Singh, 2022). Financial
literacy empowers individuals to make informed choices regarding budgeting, spending, savings,
and investments, which in turn reduces financial vulnerability and promotes long-term financial
stability (Lusardi & Mitchell, 2014). A lack of financial literacy not only affects personal
financial health but can also have broader economic consequences, including increased default
rates, reliance on social welfare programs, and limited participation in capital markets (Hastings,
Madrian, & Skimmyhorn, 2013).
In Kazakhstan, Financial literacy level has an impact on investment decision-making. The impact
of financial literacy on effective investment decision-making is dependent on age, education, and
financial criteria (Bayakhmetova, 2023). In Jakarta, financial literacy has a positive effect on
investment decision, investors with high level of financial literacy will be able to manage and
allocate their money in the right instruments because financial literacy encourages the
understanding of risks and financial concepts of investment (Tifany & Pamungkas, 2023). In
Jaffna district of Srilanka, financial literacy significantly positively impacts on investment
decisions of individual investors. There is a statistically significant difference in the level of
financial literacy among different groups of investors based on working experience, average
monthly income groups and the number of years involvement in investment activities (Balagobei
& Prashanthan, 2021).
In Nepal, a positive and significant relationship between the dimensions of financial literacy and
investment decisions in the Nepalese share market. Low financial literacy and lack of financial
information affect the ability to save and make sound financial decisions. Ignorance of basic
financial concepts results in negative behavior in saving and investment decisions (Subedi,
2023). Investors who are participating in the Nepalese stock market have a high level of basic
financial knowledge on taxes, time value of money, money illusion, and inflation. Investors have
advanced financial knowledge with positive financial behavior and attitudes which implies a
higher level of financial literacy of stock investor (Lamichhane, 2022). Financial attitude and
financial awareness have a positive and significant impact on investment decisions. Financial
knowledge, being positively correlated, does not have a substantial effect on investment
decisions (Sharma & Pokharel, 2025).
Financial literacy plays an important role in making investment decisions. Financial literacy
helps people to understand financial activities like saving, investing and budgeting. In many
country including Nepal there is significantly positive effect on investment decision. Low
financial understanding affect the saving or investing decision. Financial literacy helps to make
an informed investment decision. Investment decision can be taken properly or chosen when
people have proper knowledge about every financial activities like saving, investing, and
budgeting. Financial literacy also helps people to understand financial risk, taxes, time value of
money and inflation.
Financial literacy is not only an individual concern but also a matter of public policy and social
development. Governments and financial institutions recognize that promoting financial literacy
contributes to economic growth, financial inclusion, and reduced inequality (Atkinson & Messy,
2012). Improving financial literacy can encourages responsible financial behavior, encourage
early investment and savings habits, and ultimately contribute to the development of a generation
capable of achieving financial independence and stability. By assessing the current level of
financial literacy, this study aims to identify gaps in knowledge, highlight areas for educational
intervention, and provide evidence-based recommendations for policymakers and educators. The
issues that arise while conducting the research are:
1. What are the key factors that influence college students’ investment decisions?
2. What factors determine college students’ preferences for various investment options?
Purpose of the study:
The main purpose of this study are given below:
1. To examine the factors that influence the investment decisions of college students.
2. To assess the factors that determine the investor’s preference towards various investment
options among college students.
Significance of the study:
Research Methods:
Research Design:
The research design is the conceptual structure and strategy of investigation conceived to define a
research problem. It is the plan of a proposed study to specify the appropriate research methods and
procedures for obtaining specific findings with validity, objectivity, and accuracy as possible. Actually,
research design presents a series of guideposts to enables the researcher to process in the right direction in
order to achieve the goal. The research design followed in this study is descriptive and causal research
design.