Analysing the mediating role of financial capability in the relationship between financial literacy and personal financial decisions: a study of Indian individuals

In India, financial decisions are regarded as a common personal issue and frequently have a family connotation. Each and every decision is a phenomenon that gives life purpose. Persons can motivate their family mentally and physically by making wise decisions in life. Growing benefits of 'behavioural finance' have been recognised at individual and family levels. This research explores the mediating effect of financial capability on financial literacy and personal financial decisions among individuals in Haryana, India. Recognising that financial decisions often have personal and family dimensions in India, the research addresses a gap in empirical studies on how financial literacy enhances personal financial decisions through financial capability. Data from 420 respondents was analysed using structural equation modelling (SEM), revealing a positive relationship between 'financial literacy and personal financial decisions'. The findings also indicated that financial capability partially mediates this link. This study contributes to understanding how enhancing financial literacy and capability can improve financial decision-making, potentially benefiting families, society, and the global economy. It aims to guide individuals in integrating values at home to foster better financial well-being.