Abstract:
Even though, Sri Lanka is a developing country, educational statistics depict that
primary, secondary and tertiary school enrolments are significantly greater than most
of the other developing countries in the world. Meanwhile, the saving ratio of the
country shows a downward trend over the years. Thus, the positive relationship
expected between financial literacy and savings might not stand in the Sri Lankan
context. This may be due to the lack of intention to savings. Therefore, this study
investigated the relationship between financial literacy and individual savings
behavior in the Sri Lankan context by considering the mediation effect of intention
to saving. The research was conducted using primary data, collected via a structured
questionnaire distributed among 206 respondents who are executive level employees
both from government and private sector organizations. A Structural Equations
Model (SEM) was used when analyzing the hypothesized mediation effect. The
result of the study reported that there is a direct positive relationship between
financial literacy and individual saving behavior while intention to saving is a
positively significant mediator in the above relationship. Thus, findings of the study
further confirm that financial literacy creates an intention to saving, which eventually
leads to a higher saving ratio.
