Money Matters: How Financial Stress, Literacy and Aid Shape Student Success Through Engagement

Financial pressure is one of the most persistent challenges facing university students in low-income countries, and a new study from Sierra Leone offers one of the clearest statistical portraits yet of how money and academic success interact. Researchers surveyed 1,002 students across six universities in Freetown and used a sophisticated modeling technique to trace the pathways linking financial circumstances to grades. Their conclusion is striking: money itself matters less than what students do with the financial resources and knowledge they have. Academic engagement — the energy, dedication and absorption students bring to their studies — emerged as the decisive bridge between financial factors and academic performance, mediating every relationship the researchers tested.

The study, published in Current Psychology by Abdul Karim Kamara of Huazhong University of Science and Technology and Ishmail Bangura of the Institute of Public Administration and Management, University of Sierra Leone, set out to answer a question that has long troubled educators and policymakers in developing economies: do financial difficulties directly damage academic performance, or does their influence travel through more subtle psychological channels? The answer, according to the data, is that the channel matters enormously — and in at least one case, the direction of the effect runs opposite to what intuition would suggest.

The researchers focused on three financial factors. Financial stress captures the anxiety and strain students feel about paying for tuition, accommodation, food and materials. Financial literacy measures students’ knowledge and competence in managing money, budgeting and making informed financial decisions. Financial aid refers to scholarships, grants, bursaries and other forms of support that offset the cost of education. Each of these has been studied before, often in isolation and mostly in high-income countries. What distinguishes the new work is its setting — Sierra Leone, a West African nation still recovering from civil war and the Ebola epidemic, where socioeconomic disadvantage is widespread and university students frequently face acute financial hardship — and its use of a single integrated model that tests all three factors simultaneously while accounting for the mediating role of engagement.

Data were collected from students at six universities in Freetown, the capital, and analyzed using partial least squares structural equation modeling, or PLS-SEM. This technique is well suited to studies that involve multiple interacting variables and latent constructs — abstract concepts like financial stress or engagement that cannot be observed directly but must be inferred from survey responses. PLS-SEM estimates the strength of the pathways connecting these constructs, allowing researchers to quantify both direct effects and indirect effects that operate through a mediator. The method, popularized in methodological work by Hair, Risher, Sarstedt and Ringle, is particularly valuable when sample sizes are large and the goal is prediction and theory testing rather than strict confirmation of a pre-specified covariance structure.

The results upended one of the field’s most common assumptions. Financial stress, on its own, had a negative but statistically non-significant direct effect on academic performance, with a path coefficient of −0.014 and a p-value of 0.569 — far from the conventional threshold for statistical significance. In other words, once the model accounted for other factors, the raw damage that financial worry might inflict on grades essentially disappeared. By contrast, financial literacy showed a significant positive effect on performance (β = 0.198, p < 0.001), financial aid showed an even slightly stronger positive effect (β = 0.205, p < 0.001), and academic engagement itself was the single most powerful predictor in the entire model (β = 0.493, p < 0.001). Students who were absorbed in their studies, invested in their coursework and emotionally connected to their academic goals performed markedly better, regardless of their financial circumstances.

The mediation analysis produced the study’s most surprising finding. Academic engagement significantly mediated the relationship between all three financial factors and academic performance. For financial literacy and financial aid, this followed the expected pattern: students with stronger financial knowledge and better financial support became more engaged, and that engagement translated into better grades. But for financial stress, the indirect effect was positive — β = 0.055, p = 0.003 — even though the direct effect was not. This pattern, the authors note, may reflect what statisticians call suppression, a phenomenon in which the inclusion of a mediator changes the sign or significance of a direct effect. It may also reflect something more psychologically interesting: some students respond to financial challenges not by withdrawing from their studies but by doubling down, increasing their engagement as a deliberate resilience strategy. For these students, financial hardship becomes a motivator rather than a deterrent, channeling anxiety into effort.

This finding resonates with a broader literature on academic resilience and student coping. Prior research in Sierra Leone has documented high levels of stress among university students, and studies from other contexts have shown that financial concern can undermine academic outcomes through reduced belonging and heightened anxiety. But the new results suggest that the relationship is not uniform. Engagement, in this model, acts as a kind of psychological engine that can convert even adverse financial circumstances into academic fuel — at least for some students. The authors caution that this interpretation should be treated carefully, since the suppression pattern may also indicate that the direct and indirect pathways are operating in opposite directions in ways that a cross-sectional survey cannot fully disentangle.

The practical implications are substantial. The findings underscore the importance of expanding financial aid programs, which showed the strongest positive direct effect on performance of any financial factor. They also highlight the value of financial literacy education, which the authors argue should be integrated into university student support services rather than treated as an optional add-on. Students who understand budgeting, debt and financial planning are better equipped to manage the pressures that come with university life, and the data suggest that this competence pays dividends not only in financial well-being but in academic engagement and performance. Finally, the centrality of engagement itself — the strongest predictor in the model — points administrators toward mentorship programs, counseling services and campus initiatives that sustain student motivation and connection.

For governments in Sierra Leone and comparable settings, the message is clear: financial aid is not charity but investment. Prior international research has linked need-based grants to improved persistence and graduation, and studies from China and Europe have shown that financial support systems shape academic development in measurable ways. The Sierra Leone findings extend this evidence to a context where financial hardship is the norm rather than the exception, and where the marginal return on each unit of aid may be especially high. The authors recommend that policymakers expand aid programs and that universities embed financial literacy into the student experience from the moment of enrollment.

The study is not without limitations. It relies on self-reported survey data collected at a single point in time, which means that causal directions cannot be established with certainty and common method biases — a well-known challenge in behavioral research — may influence the results. The sample is limited to Freetown, and students in rural institutions may face different financial dynamics. Nevertheless, the large sample size, the rigorous modeling approach and the consistency of the engagement findings across all three financial factors give the results considerable weight. As universities and governments grapple with how to support students through economic uncertainty, the Sierra Leone study offers a compelling reframing: the goal is not simply to reduce financial stress, but to build the financial knowledge, provide the financial support and cultivate the engagement that together allow students to thrive — even, in some cases, because of the challenges they face.

Subject of Research: How financial stress, financial literacy and financial aid affect the academic performance of university students in Sierra Leone through the mediating role of academic engagement.

Article Title: The impact of financial factors on academic performance among university students: the mediating role of academic engagement

Article References: Kamara, A. K., & Bangura, I. (2026). The impact of financial factors on academic performance among university students: the mediating role of academic engagement. Current Psychology, 45(17), Article 1425. https://doi.org/10.1007/s12144-026-09975-w

Image Credits: AI Generated

DOI: 10.1007/s12144-026-09975-w

Keywords: financial stress, financial literacy, financial aid, academic engagement, academic performance, university students, Sierra Leone, PLS-SEM, structural equation modeling, higher education, student resilience, Current Psychology