Financial Literacy Leads to Retirement Financial Planning: A Structural Equation Modelling Approach

The present article examines (i) the dimensions of financial literacy and (ii) financial literacy as a second-order (higher order) factor measuring retirement financial planning of working individuals in the city of Delhi. The study incorporated cross-sectional data of working individuals (N = 538) from different public/private sector organisations in Delhi & NCR. For data collection, a well-designed online questionnaire was framed on a five-point Likert scale and data were analysed using the AMOS (version 20) software using structural equation modelling approach (SEM). The results of the study showcased that when dimensions of financial literacy modelled directly with retirement financial planning (RFP), only financial knowledge, financial behaviour, and financial attitude are significantly associated with RFP, whereas financial awareness is not found to be associated in a significant manner. However, when financial literacy modelled as a second-order (higher order) factor with RFP, the results showed a significant association with RFP. Thus, financial literacy as a second order is the preferred model.