The Influence of Financial Literacy and Education Level on Financial Management and Its Impact on Residents' Income
Abstract
Purpose – This study analyzes the influence of financial literacy and education level on financial management and its impact on the income of residents of Pasirkratonkramat Village, Pekalongan City.
Design/methodology/approach – This quantitative research uses a survey method of 78 members of the Village Community Institution selected through accidental sampling. The data were analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS) to test the direct and indirect influence between variables.
Findings – Financial literacy and education level have a positive but not significant effect on financial management. Financial literacy does not have a significant effect on citizens' income, while education level has a positive and significant effect. Residents' income has a positive and significant effect on financial management, as well as mediating the relationship between education level and financial management, but does not mediate the relationship between financial literacy and financial management.
Research limitations/implications – The research sample is relatively small and taken from one village through accidental sampling, so the generalization of the results is still limited. These findings imply that people's financial management is more determined by income than financial literacy alone, so empowerment policies need to prioritize improving education and income access, accompanied by contextual financial management assistance.
Originality/value – This study offers new insights by examining residents' income as a mediator between financial literacy, education level, and financial management at the village community level, a context that has rarely been studied before. These findings contribute to Human Capital Theory, showing that education influences financial management primarily through income, rather than directly.
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