The Nexus Between Financial Literacy and Consumption–Savings Patterns: Behavioral and Socioeconomic Insights

Grade XI, EuroSchool Whitefield, Bengaluru, India 560048

Abstract

Financial literacy is increasingly recognized as a cornerstone of economic resilience, yet its critical link to the everyday financial decisions of saving and spending remains underexplored in the complex urban environment of India. This article investigates how key competencies, including practical budgeting, an understanding of compounding interest, credit awareness, risk assessment, and the implications of inflation, directly shape financial behavior among a diverse sample of Mumbai residents. Drawing on questionnaire data from multiple age and income groups, the analysis examines whether theoretical knowledge translates into tangible action, namely disciplined saving and controlled consumption, or if it is overshadowed by behavioral biases and structural pressures. Situating these behavioral patterns within Mumbai’s high-cost, high-inflation context allows the study to highlight specific gaps in applying knowledge and to pinpoint opportunities for targeted, context-aware financial education that addresses the real-world challenges faced by urban Indians.

Keywords: Financial literacy; Savings behavior; Spending patterns; Credit awareness; Inflation; Compound interest; Mumbai case study