Determinants of UK students’ financial anxiety amidst Covid-19: Financial literacy and attitudes towards debt

Due to the increased financial pressure—exacerbated by the COVID-19 pandemic—that students in higher education need to endure, considerable attention is being drawn towards the determinants of student financial anxiety. A conflicting picture has been captured about financial literacy, which has been shown to either be associated with better financial well-being or to be unrelated to financial stress. While discerning between financial knowledge (‘objective’ financial literacy) and perceived ability to manage personal finances (‘subjective’ financial literacy), this study also explores the impact that students' attitudes towards debt may exert on their financial anxiety. In a sample of 174 university students from the UK, we measured students' financial anxiety, objective and subjective financial literacy, attitudes towards debt and perceived impact of COVID-19 on financial behaviour. Bayesian analyses revealed that only attitudes towards debt and perception of the impact of the pandemic predicted students' financial anxiety. While the evidence in regard to financial literacy was inconclusive, mediation analyses showed that objective financial literacy indirectly impacted financial anxiety by increasing fear of debt. The findings suggest that students' financial anxiety may be reduced by adopting strategies that focus on the subjective perception of debt and of economic circumstances.