Financial Well-being: Understanding Risky Borrowing Behavior Among Young Adults

Risky financial decisions are especially critical for young adults and may hinder their future ability to accumulate wealth. This study develops a conceptual framework aimed at understanding the risky borrowing tendencies of young adults. Two survey samples were used: Sample 1 consisted of 488 young individuals (18–25) who had never taken out a risky loan before, and Sample 2 included 214 young adults (18–25) who had already taken out a risky loan. The results show that a number of factors affect young adults’ intentional risky borrowing behavior, which in turn affects how they actually borrow. Additionally, the study revealed that the relationship between intentional risky borrowing behavior and actualized risky borrowing behavior is negatively moderated by risky borrowing perceived risk – but not by risky borrowing perceived complexity. Specifically, the results suggest that policymakers, financial institutions, and educators should strive to eradicate detrimental social norms concerning financial behavior. Moreover, efforts should be directed towards heightening young adults’ perception of risk associated with risky borrowing, thereby deterring the transition from intentional to actualized risky behavior.