Undermining Shoestring Budget: Financial Capability Determinants of Millennial Generation Nadia Asandimitra 1* , Achmad Kautsar 2 , Trias Madanika Kusumaningrum 2 , Ika Diyah Candra Arifah 1 1 Department of Management, Universitas Negeri Surabaya, Surabaya 60231 Indonesia 2 Department of Management, Universitas Airlangga, Surabaya 60115, Indonesia Corresponding Author Email: nadiaharyono@unesa.ac.id https://doi.org/10.18280/ijsdp.180417 ABSTRACT Received: 16 December 2022 Accepted: 27 February 2023 Financial capability can help millennials address their risky financial behaviours and, in particular, provide low-income millennials with opportunities to develop healthy financial behaviours. This study aims to fill the research gap by exploring how millennials' financial capability is influenced by a combination of financial literacy and financial attitudes (as an intrinsic factor) and financial inclusion (as an extrinsic factor) mediated by financial behaviour. This research method is explanatory causality with the Millenial Generation population in East Java using purposive sampling techniques and SEM-AMOS analysis tools. The study result shows that millennial financial capability is influenced by a combination of financial attitudes and financial literacy (as an intrinsic factor) and financial inclusion (as an extrinsic factor) mediated by financial behaviour. This means that by having an excellent financial attitude supported by sound financial literacy and having access to financial services, millennials will create good financial behaviour to make sound financial decisions. Keywords: millennials, financial capability, financial literacy, financial attitude 1. INTRODUCTION The topic of the millennial generation is currently widely discussed in the world because the millennial generation has different characteristics compared to the previous generation. The millennial generation will play an essential role in various aspects for the next 10 to 20 years. In Indonesia, this topic is a critical issue. According to BPS data, 50% of the productive age population currently comes from the millennial generation. From 2020 to 2030, it is estimated to reach 70% of the productive age population [1]. This is a demographic bonus where the population of productive age is greater than that of non-productive age. One of the benefits of the demographic bonus is that it can change the level of the economy in a country either through its participation in the workforce or their participation as investors or savers [2]. As one of the main targets of the Indonesian government's financial inclusion policy, the financial capability of the millennial generation will assist them in determining financial products/services that help them to improve a better standard of living/financially well-being [3]. However, the shoestring budget phenomenon in the millennial generation, a condition where a person does not have enough money (in the form of cash or savings) to meet their basic needs, occurs in many big cities in the world, including Indonesia [4]. The shoestring budget condition is also heavily influenced by the economic background of families who are categorised as low-income earners or who are categorised as poor with an average income of less than $200 per month [5] and lack of family support or limited access to financial assistance [4, 6]. This condition puts low-income millennials challenging to prepare for their financial future, such as education or health [7]. The unexpected drop in income or unexpected expenses is a common experience in low-income households [8, 9]. However, millennials also have no emergency savings [10], and low-income millennials have savings with an average accumulation of around U$ 200 [11]. Based on the Indonesia Millenial Report by the IDN Research Institute (2019), which researched 5,500 millennials throughout Indonesia, 51.1 per cent of the millennial generation's income was spent for routine needs, including entertainment, debt instalments, investments, and internet subscription fees. The generation born between 1980-2000 set aside 10.7 per cent of total income to savings, which is still far from the ideal 30% of income for savings [12]. With no savings to cover the unexpected needs, millenials usually borrow from friends or family [13, 14] or do not pay the bill [8]. Millennials also have to pay tuition fees during their transition to adulthood. Low-income millennials carry a higher debt burden [15] and are more likely than their wealthier counterparts [16]. Millennials struggle to complete their degrees or avoid defaulting on loans indicate that their transition to adulthood coincides with substantial debt that can hinder their financial well-being [16]. With limited preparedness for emergencies, increased use of alternative financial products, and the accumulation of burdensome debt, millennials face obstacles that can threaten their overall financial happiness, future financial goals, and the transition to financial independence [17]. On the other hand, the millennial generation between 25-34 years old in Indonesia is the primary e-commerce user. Ali and Purwandi [18] show that millennials are the most active and most consumptive internet users. The Kadence Institute conducted research and found that the Indonesian people have an unhealthy consumptive lifestyle, 28% of the total International Journal of Sustainable Development and Planning Vol. 18, No. 4, April, 2023, pp. 1137-1147 Journal homepage: http://iieta.org/journals/ijsdp 1137