Understanding Risky Borrowing Tendencies in Young Adults

Purpose
Risky financial decisions are especially critical for young adults and may hinder their future ability to accumulate wealth. This study aims to develop a conceptual framework aimed at understanding risky borrowing tendencies of young adults.

Design/methodology/approach
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.

Findings
The results show that young adults’ risky borrowing intention is significantly predicted by subjective norm and financial trust. Also, this study reveals that the relationship between risky borrowing intention and actualized risky borrowing behavior is negatively moderated by risky borrowing perceived risk – but not by risky borrowing perceived complexity.

Practical implications
This study provides insights and guidance to financial authorities, managers and politicians on how to reduce young adults’ risky borrowing intentions and, ultimately, prevent them from carrying out risky financial decisions.

Originality/value
Although various studies have considered constructs such as social norms, financial literacy, perceived risk and financial trust in different settings, little is known about how such factors work together to influence risky borrowing behavior. By developing and investigating a conceptual framework that holistically investigates these elements and their interplay, this study increases our understanding of young adults’ risky borrowing behavior.