Determinants of Financial Literacy and Investment Decisions Among Generation Z in Indonesia

Abstract

This study examines the major determinants associated with financial literacy and investment choices among Generation Z in Indonesia, a generation of digital natives experiencing severe financial management issues. Utilizing a quantitative approach with multiple linear regression, the research analyzes data from 315 respondents across ten Indonesian provinces to explore the relationships between demographic factors, financial attitudes, behaviors, and knowledge. The findings indicate that demographic variables alone are inconsistent predictors of financial literacy, with gender emerging as the only significant partial predictor (t=-2.380). Instead, a combination of cognitive and behavioral factors, specifically financial knowledge (t=3.352) and access to information (t=3.274), are significantly associated with investment activity, while Model 1 demonstrates the strongest overall fit (F=43.291, R=0.749). The study reveals a notable behavioral gap where responsible daily money management does not necessarily translate into increased investment growth, highlighting income as a critical determinant for market participation. While Generation Z benefits from high digital literacy and easy access to diverse financial products via social media, they often struggle with the "YOLO" (You Only Live Once) mentality, which prioritizes immediate spending over long-term saving and retirement planning. The research offers essential insights for financial institutions and regulators seeking to close the literacy-inclusion gap and empower the forthcoming generation of Indonesian investors.