Financial Literacy And Financial Resilience: The Mediating Role Of Financial Capability

Abstract

Since the turn of the century, the world has witnessed series of economic, environmental and social changes. These changes have resulted in outcomes that have had either positive or negative impact on the human society. In the case of economic changes, technological innovations have led to fluctuations in the prices of energy, food, housing, and the general cost of living, which ultimately affect the world economy for better or worse. In situations where there is a lack of financial resilience, the resultant shock to a person’s income can be magnified, ultimately leading to more serious consequences ranging from mental health issues, increased debt to reduced quality of life for the children and other dependents. This study examines the effects of financial literacy on financial resilience among NYSC members in North Central Nigeria, using financial capability as a mediator. Data for the study was obtained from primary sources through the administration of questionnaires. The collated data was subjected to series of cleansing to ensure reliability and validity. The applied structural equation model, PLS-SEM. The justification for PLS-SEM is based on the non-normality of the data. The result revealed that financial literacy significantly affects financial resilience and financial capability.  It also revealed that financial capability influences financial resilience and is a good mediator. This study recommends sustained and specific awareness on financial literacy especially to NYSC member by introducing the financial literacy lectures in the NYSC orientation camps and other contact points. The government should equally create the enabling environment to ensure corps members continue to practicalize their financial capability skills. The government should also ensure sustainability of financial capability programmes through lectures and other knowledge transfer models on financial literacy and financial education. Furthermore, awareness sessions on financial literacy and financial capability must go hand in hand. These must be done together given that financial capability mediated the relationship between financial literacy and financial resilience. With the combination of the two (financial literacy and financial capability), people tend to bounce back from a financial shock quicker than when just financial literacy lectures are given. This makes them more financially resilient.