Impact of Financial Literacy and Financial Distress on Financial Wellness among Public University Students in Sri Lanka

Abstract

The term "financial wellness" is increasingly used to assess an individual's financial situation. Amidst a severe economic crisis in 2021 and 2022, Sri Lanka is grappling with significant challenges, including a scarcity of foreign currency, impending debt payments, inflation, and shortages of essential supplies. This crisis has particularly affected the younger generation, impacting both their education and businesses. Public university students in Sri Lanka face rising costs of living, including food, accommodation, transport, and educational materials. The financial crisis has exacerbated these challenges, limiting students' ability to meet their daily expenditures. While state universities offer free education, the quality and accessibility are constrained by severe competition and standardized programs. This study aims to examine the impact of financial literacy and financial distress on the financial wellness of public university students in Sri Lanka. Despite extensive international research on financial literacy, distress, and wellness, there is a notable gap in understanding these dynamics in the Sri Lankan context. Primary data collection involved distributing survey questionnaires to a randomly selected sample of public university students. The questionnaire assessed demographic information, financial literacy, financial distress, and financial wellness, totaling 61 questions. Data analysis was conducted using EVIEWS and Excel. The study found a strong positive relationship between financial literacy and financial wellness, supporting Hypothesis 01. While Hypothesis 02 suggested a negative relationship between financial distress and financial wellness, it was not statistically significant. However, Hypothesis 03 confirmed a significant combined impact of financial literacy and distress on financial wellness. Despite the economic challenges in Sri Lanka, public university students exhibit higher financial literacy and effective financial management. The study underscores the significant impact of financial literacy and distress on financial wellness, providing valuable insights for policymakers and educational institutions.