Determining the Impact of Financial Knowledge on Investment Intention of

Millennials and Generation Z: The Mediating Role of Financial Attitude

I. Introduction
According to Thavva (2021), financial literacy enhances people's abilities and
competences to make more informed decisions, hence fostering positive financial
behaviors. Ghilenko and Chernova (2021) observed that individuals who possess higher
levels of financial literacy typically exhibit superior decision-making skills garding
investments, retirement plans, and savings. This study determines the impact of
financial information on the investment intentions of Generation Z and Millennials. As
stated by Thomala (2021), due to the Internet and other technological advancements
readily available, Millennials and Generation Z have increased accessibility to
investment opportunities. Consequently, there is a high level of investment activity
among Millennials and Generation Z showing a strong intention to invest. In light of the
growing accessibility of investment opportunities for younger people, understanding
their financial decision-making processes becomes vital. According to a study
conducted by Manulife (2021), the pandemic has significantly influenced the financial
behaviors of Millennials and Gen Z. These groups are now more financially conscious
due to various economic challenges, leading them to reassess their priorities to better
prepare for the future.
As Millennials and Generation Z’s interest in investment continuously grow, Ilyas
et al. (2021) cites Fear of Missing Out (FOMO) as a factor prompting this continuous
growth of enthusiasm. FOMO influencing one’s intention to invest undermines the goal
of investing and prompts oversight on investment pursuits, ie., possessing a higher risk
of loss. According to Dennison (2018), FOMO causes irrational investment decisions.
Thus, considering it as a factor for investment is likely to raise issues and financial
drawbacks.
Financial knowledge is the ability to understand, analyze, as well as manage
finances which leads to making the appropriate financial decisions (Ilyas et al., 2021) . It
has become comparatively more accessible than the past; thus, its relationship with
one’s investment intention is being implored. Another factor perceived to be affecting
one’s intention to invest is financial attitude. It is characterized as an individual's
attitude, viewpoint, and assessment regarding money which shapes an individual’s
budget behavior and propensity to financially prepare for the future.
Precursory research reveals contradicting results in the relationship between
financial knowledge and investment intention. Manurung et al. (2018) indicated financial
knowledge significantly impacts one’s investment intention. This was also supported by
the study of Lim et al. (2018) who assessed that financial knowledge has a positive
relationship with the behavioral intention to invest. On the contrary, Hamid et al. (2019)
claims financial knowledge does not bear an effect on investment intention. Further,
traditional investment theory studies how risk tolerance affects the desired investment
horizon; limiting risk assessments on financial factors and excluding the impact of
personality measures and behavioral finance biases on investment intentions (Ferreira-
Schenk & Dickason-Koekemoer, 2022).
Several variables, such as financial knowledge, undoubtedly impact the
inclination to engage in investment. According to Yong et al. (2018), financial literacy
includes understanding and applications that influence financial decision-making
processes. An individual's level of financial literacy serves as a yardstick for evaluating
how effectively they handle their financial affairs, including their investment practices
(Ilyas et. al 2021). The primary objective of this study is to find out how financial
knowledge affects the desire to invest among Generation Z and Millennials in selected
Dasmariñas, while considering the mediating role of financial attitude. Another goal of
this study is to help Millennials and Generation Z people make smart financial choices
by looking into how financial knowledge affects investment plans through the lens of
financial attitude. This research is beneficial as it has the potential to result in the
creation of tools and programs that educate young individuals on better money
management and foster a positive attitude towards money. Eventually, these
developments could empower them to become financially independent and resilient.

Review of Related Literature

The Theory of Reasoned Action (TRA) was introduced by Fishbein and Ajzen in
1975 (Ilyas et al., 2021), which connects intention, attitude, behavior, and beliefs
(Hasyim, 2018). According to Ilyas et al. (2021), the TRA focuses on the idea that
behavior is driven by an individual’s intention to do so and is conducted by their own
volition (volitional). Wherein Volitional behavior implies that an individual’s behavior is
based on one’s logical reasoning, consideration of all available information, and the
weight of the consequences of one’s actions, whether consciously or subconsciously
(Ilyas et al., 2021). Moreover, TRA is influenced by two main factors: behavioral
attitudes (endogenous factors), which originate from within oneself, and subjective
norms (exogenous factors), which, according to Septyanto (2013), stem from external
influences and include beliefs and attitudes towards objects, demographics, task
characteristics, personality characteristics and situational. The theory of Reasoned
Action as a theoretical framework can help examine and understand how an individual’s
financial knowledge, financial well-being, and subjective norms interact to shape one’s
investment intentions mediated by their financial attitude.

The millennial generation, individuals born between 1982 and 2002, have risen to
positions of leadership in businesses and hold important positions in the economy. The
intention to invest is influenced by a variety of factors, including financial literacy.
Understanding and applications of financial information influence financial decision-
making. (Jensen, 2019). Financial knowledge is deeply rooted in the general knowledge
about money, information pertaining to savings and borrowings, including the trends to
different type of mutual funds investment. A person's financial knowledge becomes a
benchmark in seeing how well he manages his financial situation, one of which is by
looking at whether he invests or not.
 Another factor that can influence investment intention is financial well-being. If an
individual has a secure retirement, ideology about risks in his finances internally and
externally, maximizing opportunities of generating wealth. Logically, the more
prosperous a person's finances are, the more likely it will stimulate their desire to invest.

Lastly, financial attitude is also a factor in the growing intention to invest. A

financial attitude is defined as a person's tendency to be financially prepared for the
future, reflecting the tendency to save money and manage expenses (Utkarshet al.,
2020). Belief in planning, capacity to save, and prosperity to consume are the factors
being considered that affect the financial attitude of Gen Z and Millennials. These items
will influence strategy and decision-making. It is anticipated that Gen Z and Millennials
would gain better financial literacy and attitudes, which will spark their interest in more
specialized investments. The future financial well-being of Gen Z and millennials will
also benefit from this counsel.

It is evident that millennials and Generation Z have a high development of

interest in investments. As stated by Utkarsh et al. (2020), a person's financial attitude is
characterized by their propensity to manage their spending and save money to be
financially prepared for the future. Millennials, currently aged between 18-34 years, are
at a productive age. At this age range, millennials are expected to be a driver in
economic growth. Financial fragility is the incapacity of an individual to absorb
unforeseen expenses. Millennials must make financial decisions throughout this time
regarding their career, education, marriage, debt, home purchase, and retirement
savings. Since money is involved in every activity, finance plays a significant role in
contemporary life. They need to have strong financial standing to form good financial
behavior. Given that the millennial generation will eventually control the consumer
market, studying them is crucial. The millennial generation's growing population will
impact the market more. Because of their way of living, this generation is perceived as
having extremely high spending power. They also must deal with issues like growing
living expenses and restricted financial resources. As a result, having personal financial
knowledge is crucial to making wise money management decisions.

Financial knowledge has a significant influence towards investment intention

since it can be utilized by individuals to produce innate and useful property of the
knowledge as well as make reasoning and explanation regarding their financial
decisions. Lim et al. (2018) stated individuals with higher objective financial knowledge
tend to employ category-based processing, developing clearer expectations about
financial products. This suggests that financially literate individuals comprehend
financial information better due to their actual knowledge, making them less threatened
by it. Individuals are anticipated to grasp investment concepts and risks more clearly
and can easily identify relevant indicators affecting investment performance. Financially
literate individuals tend to be open-minded, positive about investments, and recognize it
as an effective strategy for wealth preservation against inflation. (Lim, Thien Sang et al.
2020)

H1a. Financial knowledge has a positive influence on investment intention.

Coskun and Dalziel (2020) expresses that higher future earnings and higher
saving rates are correlated with financial knowledge as it affects an individual’s financial
attitude. It explains how universities are valuable platforms to give financial education to
people who will eventually be exposed to daily financial decisions such as payments to
long-term decisions like investment. However, in addition to a curriculum that includes
financial literacy courses, individual attitudes play a crucial role in molding financial
behavior. Maintaining a sustainable financial behavior can only be achieved not just by
learning financial matters, but by finding better educational mechanisms to reflect the
financial knowledge they acquire on their financial attitude. In this manner, there is a
greater likelihood of obtaining improved financial behavior to improve the person's well-
being.

H1b. Financial knowledge has a positive influence on financial attitude.

Numerous studies have highlighted the positive impact of financial attitude on

investment intention across various demographic groups and cultural contexts. For
instance, research by Smith and Jones Journal of Economic Psychology, 35(2), 189-
201 found that individuals with a proactive financial attitude were more likely to express
intentions to invest in both traditional and alternative assets. The growing empirical
evidence of inconsistency between attitudes and behaviors (Wicker 1969) has
encouraged researchers to investigate the moderating effects of various situational,
conditional, contextual, and personal factors on the relationship between attitude and
behavior (Ajzen and Fishbein 2005). Studies have indicated that when cognitive skills or
abilities, for example, obtaining information from one’s surroundings, understanding the
situation on the basis of information, planning how to act, and executing a behavior
(Shinohara 2016), interact with attitudes, they can better explain the behavioral
intentions in financial decision making (Agarwal and Mazumder 2013; Ali et al. 2021;
Hayat and Anwar 2016; Kaur and Arora 2021; Nadeem et al. 2020).
Moreover, since investment decisions in the stock market are financial decisions
that concern asset accumulation for welfare and consumption smoothing (Cole et al.
2012); consequently, the successful planning for future financial investment and the
perception of well-being achieved from those decisions should affect the behavioral
intentions of the individuals in stock market participation. Few studies to date, however,
have sought to investigate the impact of financial planning and financial satisfaction on
the nexus of investors’ attitudes and behavioral intentions for stock market participation.
Another key determinant of investment decision making in the stock market is the
perception of individuals regarding risk. Nevertheless, like any other financial decision,
stock market investment decisions involve both risks and benefits. According to a study
by Liu et al.(2013), perceptions regarding price benefits and convenience can influence
an individual’s financial decisions; therefore, it can be inferred that investors’ beliefs
regarding potential benefits are likely to influence their investment decisions in the stock
market.
H2. Financial attitude has a positive influence on investment intention.

Conceptual Framework
The identified hypothesized relationships developed the study’s conceptual
framework (see Figure 2). The framework shows how financial knowledge affects
investment intention and how financial attitude can indirectly bridge the connection
between financial knowledge and investment intention. Financial knowledge is
hypothesized to positively influence financial attitude and investment intention (H1a and
H1b). Additionally, it is postulated that financial attitude has a positive influence on
investment intention (H2).
 Figure 2. Conceptual Framework

Previous studies show contradicting relationships between investment intention

and financial knowledge. Hence, Figure 2 bridges the research gap of financial
knowledge that has no direct effect on investment intention.
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