Factors Affecting Financial Distress Among Sri Lankan Young Working Adults in Sri Lanka

Abstract

Introduction: This study focuses on the factors that influence financial distress, spending behavior, saving behavior, investment behavior, and financial literacy among young working adults in Sri Lanka. Against the backdrop of challenging economic conditions in Sri Lanka, understanding financial behaviors and their impact on financial well-being has become increasingly important. The aim of this study is to determine the factors that contribute to financial distress among young working adults in Sri Lanka, focusing on the relationship between spending behavior, saving behavior, investment behavior, and financial literacy. It attempts to examine how these behaviors and financial literacy affect financial distress in this demographic in Sri Lanka.

Methodology: This study uses a quantitative research design to explore the impact of financial behaviors (spending, saving, and investing) and financial literacy on financial distress among young working adults in Sri Lanka. A structured online questionnaire was used to collect data targeting 384 young professionals aged 18 to 34 years in both the public and private sectors. The survey was distributed via Google Forms and the responses were analyzed using SPSS (27) software. The research follows a descriptive analytical approach in a positive model with hypotheses developed based on empirical literature. The sample size was determined using Krejcie and Morgan’s table to ensure statistical rigor.

Findings: According to the findings, spending behavior, saving behavior, and investment behavior show a statistically significant impact on financial distress among young working adults. Poor spending habits directly contribute to higher financial distress, while positive savings and investment behaviors help mitigate financial challenges by providing financial security and future growth opportunities. On the other hand, financial literacy did not show a statistically significant impact on financial distress in this study. This suggests that knowledge alone is not enough but is accompanied by active financial practices. Moreover, the variation in financial distress across different groups here further highlights demographic insights. Older respondents (aged 31-35) report higher financial distress due to the pressures of midlife and increased family responsibilities. Married individuals, especially those with children, experience higher levels of financial distress compared to singles, reflecting the economic burden of supporting their families. Moreover, low-income earners face greater difficulties in managing spending and savings, and financial difficulties are inversely related to income levels.

Conclusion: The study highlights the critical need for interventions aimed at promoting responsible financial behavior. Targeted financial education programs, practical tools for budgeting, and initiatives to encourage savings and investments can help alleviate financial distress among this demographic. These findings provide valuable insights for policymakers, educators, and financial institutions seeking to enhance the financial resilience of Sri Lanka’s youth workforce.