CHAPTER I

INTRODUCTION

It is very essential that each person should have the ability to understand how money

works; how to manage it to earn and to invest or how to donate it to help others (IEF, 2013).

Financial literacy provides the necessary knowledge, skills and tools for individuals to make

informed financial decisions with confidence, to manage personal wealth with efficiency and to

increase financial competence to demand for better financial services (Ali, 2013). JumpStart

(2009) noted and argued that students who took up financial literacy courses were not better off

than those who did not.

The dilemma is that most students especially graduating students nowadays are

unqualified in terms of financial management. The government doesn’t give too much attention

to it that is why most people are still financial illiterate, they don’t know how to budget and save

their money. A current national concern is the low financial literacy of college students. College

students are not receiving the financial knowledge necessary to be successful in today’s fast

paced economy. Due to an increasingly complex marketplace, college students need greater

knowledge about their personal finances and the economy. The financial decisions made early in

life create habits difficult to break and affect students’ ability to become financially secure

adults. Most recent studies show average personal financial scores declining with average scores

close to a failing grade (Chair, Allen and Hayhoe, 2007).

firm has intensified its campaign in educating Filipino children to be more responsive when it

comes to money matters (Horario, 2013). So far, no national surveys on financial literacy have

been conducted in the lowest income country grouping as defined by the World Bank, although

the World Bank is planning surveys in Malawi, Zambia, and other countries. However, the

nationally representative FinScope surveys, which focus mainly on financial access and behavior

but also measure a few aspects of financial literacy, have been widely implemented in the Africa

region as well as in Pakistan (Zu and Zia, 2012).

A mall in Davao City has initiated the conduct of financial literacy sessions for interested

dabawenyos as part of its advocacy program. According to NCCC Group of Companies

communications manager Aileen Gajo, this activity falls under their NCCC Cares program to

educate the public on basic financial management. The activity was held Sunday with

participants coming from the academe, banana companies, entrepreneurs and some walk-in

registrants held at the Food Cove of NCCC Mall in Matina district here. Gajo said that as we are

now heading towards December, it is appropriate that people get insights on how to prioritize

spending during the holidays.

The NCCC, she said, partners with the Personal Finance Advisers of the Philippines

headed by Efren Cruz. Cruz said the participants after the lecture session will undertake a 30-

Day Financial Milestone Journal. This way they would be taught to come up with their personal

financial guide. Following a guide Cruz said will allow participants to establish their current

financial situation, articulate their goal, and make a plan transforming the goals to action.
Cruz also said that by writing down their actions the records will help them track the sources and

uses of their cash and let them know quickly how, where and how fast they are spending their

money. He also said that a budget stays relevant and achievable if there is accuracy in record

keeping, consistency of effort and discipline in controlling spending. Cruz advised the

participants to pay down debts fast so that one can start saving right away.

The researchers conducted this study to give the importance on the level of financial

literacy to students and how it affects the behaviors of the respondents and its outcome. Result

of the study will help the respondents gain knowledge about financial literacy in order to know

how to manage their wealth and the principles in making financial decisions. It is not enough that

people work and get paid. It is also important where to put their money and let their money earn

as well.

Theoretical and Conceptual Framework

The theoretical construct predominantly used when studying financial decisions and

resource management practice is systems theory (Goldsmith, 2005). The present research used

family resource management theory (Deacon and Firebaugh, 1981), based in systems theory, to

understand the financial management practices of college students. The four stages (inputs,

throughputs, outputs, and feedback loop) in the family resource management model explain how

people make financial decisions and develop financial behaviors.

This study combined social learning theory by Bandura (1986) and family resource

management theory in a way that considers environmental influences that shape where a person

currently is in regards to their knowledge, attitudes, and personal characteristics. Social learning

theory helps explain the environmental influences college students have had that shape them into
who they are today. As students learn over the years through social interaction (Bandura, 1986),

they begin to understand and form their values, knowledge, and attitudes about finances. Family,

friends, school, community, nation, church and media all shape college students’ knowledge and

attitudes over time (Bubolz and Sontag, 1993).

The environmental influences of parents and educators were focused on for this study

because of the great influence they have on college students’ financial knowledge, attitudes, and

behaviors (Alhabeeb, 1999; John, 1999). Parents tend to have a greater influence on students at a

younger age (Brown et al., 1993; Clark et al., 2005) while educators influence increases as the

student becomes older, especially after entering high school and then moving onto college

(Harris, 1995; John, 1999).

Figure 1 shows the variables of this study. The dependent variables are the financial

literacy measures which are the basic money management skills, financial planning skills and

investment skills. These skills determines if graduating students are financially literate enough or

not when it comes to job preparedness by defining the level of practice of students of such skills.

Measures of Financial Literacy

1.) Basic Money Management Skills Job Preparedness of BSBA-FM

Independent Variable Dependent Variable

Moderating variable

Fig. 1 The Conceptual Paradigm of the Study

Statement of the Problem

The study attempts to identify the Factors that influence the Financial Literacy of the

BSBA-FM Students in Cor Jesu College of Digos.

Specifically, it sought to answer the following sub-problems:

1. What is the socioeconomic profile of the respondents in terms of:

1.1 Sex

1.2 Age

1.3 Family Income (Economic Status)?

2. What is the level of financial literacy among BSBA-FM students in terms of:

2.1 Saving Habits/Investment

2.2 Budgeting/ Spending Habit

2.3 Socioeconomic status?

3. Is there a significant difference in the level of financial literacy among BSBA-FM

student when grouped according to respondents’ socioeconomic people in terms of:

3.2 Age

3.3 Family Income (Economic Status)?

4. Is there a significant relationship between financial literacy level of college students

and their socioeconomic people in terms of:

4.1 Sex

4.2 Age

4.3 Family Income (Economic Status)?

Hypothesis of the Study

The following null hypotheses were formulated for testing at alpha 0.05 level of

significance:

Ho1: There is no significant difference between financial literacy level and students

socioeconomic status in terms of:

a. Sex

b. Age

c. Family economic status

Ho2: There is no significant relationship between financial literacy level and student

socioeconomic status in terms of:

a. Sex

b. Age

c. Family economic status

This study was mainly conducted for the Financial Literacy influencing the BSBA-FM

Students. Specifically, the outcome of the study will be beneficial to the following entities.

BSBA-FM Students. The study would provide responsiveness to the BSBA-FM students

about the factors affecting the Financial Literacy specially it is related to financial education

courses and thus, help and guide students who experience financial illiteracy.

Cor Jesu College Faculty. The study would support the members of the Cor Jesu

College Faculty to seriously focus on teaching the students particularly in financial education

courses in order for the students to be globally competitive.

Cor Jesu College Administration and Management. The study’s interference program

would help build positive image to Cor Jesu College Administration and Management that

consciously support community involvement as part of its social responsibility.

Future Researchers. The study would provide a path for future researchers who want to

conduct an in-depth study on the Financial Literacy affecting the BSBA-FM Students to be able

to craft an intervention programme design to address the problem.

Scope and Limitations of the Study

The study is limited to finding out the factors affecting the Financial Literacy on BSBA-

FM Students. Hence, it is further delimited to the BSBA-FM Students in Cor Jesu College of

Digos as the respondents of the study who is particularly related to the financial education

course.
Definition of Terms

For a better understanding and for the purpose of clarification, the following terms are

operationally defined:

Age refers to the maturity and experience of a student in focusing, handling and

managing when it comes to financial difficulties.

Family Economic Status refers to the income of the head of the family.

Financial Literacy refers to the knowledge of the students when it comes to financial

matters.

Sex refers to the sex of the students whether female or male. The classification of sex is

important to know the comparison and differences between the two. The difference between the

desire of man and women the way they think and the way they response to the object they like or

want to buy.

Socioeconomic Status refers on the family income, parental education level, parental

occupation, and social status in the community (such as contacts within the community, group

associations, and the community's perception of the family).

Year Level refers to the knowledge of Business Administration FM student acquired

from their learnings, as their year level increases.