Why Income Is Not Enough: Financial Literacy Drives Household Saving in Demak

Efriyani Sumastuti (Department of Management, Faculty of Economic and Business, Universitas Persatuan Guru Republik Indonesia Semarang, Semarang)
Maharsa Pradityatama (Department of Industrial Engineering, Faculty of Engineering, University of Mataram, Mataram)

Jurnal Manajemen
Vol. 30 No. 2 (2026): June-September 2026

This study investigates why income is not sufficient to strengthen household saving by examining the roles of education, work, and financial literacy among rural households in Demak, Indonesia. The research addresses the relationships among education, work, income, financial literacy, and household saving, focusing on the behavioural mechanism that converts socio-economic conditions into saving outcomes. A cross-sectional household survey was conducted, and respondents were selected using purposive sampling. The data were examined using Partial Least Squares Structural Equation Modelling (PLS-SEM). The results show that household saving is mostly driven by financial literacy, while income does not directly translate into higher saving when capability pathways are considered. Education and work influence saving primarily through financial literacy, highlighting the importance of capability-building interventions. The study provides practical implications for designing financial education and rural saving programmes that prioritise financial literacy as a leverage point.