RESEARCH ARTICLE

Copyright © 2017 American Scientific Publishers Advanced Science Letters

All rights reserved
Printed in the United States of America
Vol. 23, 8762–8765, 2017

Understanding Financial Knowledge, Financial

Attitude, and Financial Behavior of College
Students in Indonesia
Marcellia Susan1 ∗ and Hamfri Djajadikerta2
1
Maranatha Christian University, Indonesia
2
Parahyangan Catholic University, Indonesia

Individuals have goals to be achieved throughout their life and require an understanding of financial management
to achieve their financial goals. Financial literacy research has increased nowadays, but the results of previous
researches have shown an inadequate level of personal financial knowledge among students. This research is
conducted with the purpose of illustrating the description of financial knowledge, financial attitude, and financial
behavior of college student in Bandung, West Java, Indonesia. The research makes use of primary data obtained
from the distribution of questionnaires on associated variables. This research also analyzes the effect of financial
knowledge on financial attitude and its impact on financial behavior. Structural Equation Modeling is used in
order to determine the causal relationship between related variables. The result of this research shows that
descriptively the college students have financial knowledge understanding. They have an agreement with respect
IP: 193.203.10.108 On: Fri, 17 Apr 2020 15:00:04
to power-prestige, retention planning, anxiety, and achievement-esteem, and also making plans how to reach
Copyright: American Scientific Publishers
the financial goals. The results also indicate the effect of financial knowledge on financial attitude and its impact
on financial behavior.
Delivered by Ingenta

Keywords: Financial Knowledge, Financial Attitude, Financial Behavior.

1. INTRODUCTION have shown an inadequate level of personal financial knowledge

In the context of a business enterprise, financial manage- among students.1
ment refers to an effective and efficient money management In Indonesia, the problem associated with an inadequate level
to accomplish organization’s objectives. Comprehensive under- of financial literacy is one of a national issue that is currently
standing of financial management determines the accuracy of become one of government concerns. The results of a national
the financial decisions in order to achieve the objectives of the survey on the level of financial literacy in 2013 showed that
organization. only 21.84% of Indonesian societies are well literate.2 The
Nowadays the ability to manage personal finance has become results of this survey, which was conducted in 27 provinces with
an important issue. Major changes in the external environ- 8,000 respondents, revealed the fact that majority of Indonesian
ment have made personal finance more critical today. Personal society were not well literate. The data also shows the low level
financial management is not only done for short-term financial of bank accounts ownership, as well as savings ownership in for-
affairs but also for long-term prospects.1 In this case, personal mal financial institutions, whereas the level of the community
financial management is intended to achieve individual finan- welfare is in line with financial literacy.
cial goals. Individuals require an understanding of financial man- Colleges have the competencies in educating and disseminat-
agement in order to achieve their financial goals. Throughout ing the financial information, and students as a member of the
their life, individuals have goals to be achieved, such as to send College could be expected to improve their financial literacy
their children to college, or to have a comfortable life in their level. Through the teaching and learning process, students are
golden age. expected to acquire financial knowledge, which is expected to
Financial literacy research has increased due to increased com- build their financial attitudes, and ultimately determining positive
plexities of macro external factors and availability of different financial behavior.
financial products. Nevertheless, the results of previous studies The purpose of this research is therefore to assess variables
related to financial knowledge, financial attitude, and financial
∗
Author to whom correspondence should be addressed. behavior of college students. The other purpose of the study is

8762 Adv. Sci. Lett. Vol. 23, No. 9, 2017 1936-6612/2017/23/8762/004 doi:10.1166/asl.2017.9966
Adv. Sci. Lett. 23, 8762–8765, 2017 RESEARCH ARTICLE

to analyze the effect of financial knowledge on financial attitude

and its impact on financial behavior. Financial Knowledge Financial Attitude Financial Behavior

Fig. 1. Research model.

2. LITERATURE REVIEW AND HYPOTHESIS
DEVELOPMENT
knowledge.12 13 In addition Rajna used knowledge on financial
2.1. Personal Finance
management.14
Personal finance covers a study of economic factors and personal Attitudes towards money could be the basis of someone’s per-
decisions which affect individual financial well-being.3 Individu- sonality and management style.5 Attitude is subjective tendencies
als make many decisions throughout their lives that might affect to do something and expressed through favorable or unfavorable
and are affected by personal finance. evaluation of a particular object.15
Personal financial management is a critical issue today. Some researchers conducted research about the relationship of
It requires discipline in financial management. Critical fac- initial financial knowledge, credit attitudes, and students’ finan-
tors in making good financial decisions are financial knowl- cial behavior.16 When they examined relationship between finan-
edge and ability to manage money.4 Determining current and cial behavior and financial knowledge, financial behavior was not
future spending patterns is an important part of personal money determined by the financial knowledge, but the results showed
management.5 that students’ financial knowledge was a predictor of their credit
attitude.
2.2. Financial Knowledge, Financial Attitude, and Based on literature review and previous empirical research,
Financial Behavior it was hypothesized that:
Money might become a primary motivator of personal behav- H1: Financial Knowledge affects Financial Attitude of college
ior, but the importance and the role of money in someone’s students.
life might be different among individuals.5 People may receive Financial decisions require individuals’ correct judgment and
greater respect and lead a better life when they have control over cannot rely only on external resources. Although people may
their money.6 Individual success is determined by the ability to have financial knowledge, they are still confused in taking the
make financial decisions regarding money management.7 right financial decision. Besides the importance of financial
It is essentially important knowing how earning money as well knowledge, attitudes toward money can be one key factor affect-
as how spending, investing, saving, and controlling it. It relates ing individual financial behavior.8 Evidence also suggests that
3 attitudes toward credit card usage are related to individual finan-
to an individual effort to achieve financial goals. Without per-
sonal finance knowledge as a foundation,IP: 193.203.10.108 On: Fri,cial
it is definitely that 17behavior.
Apr 2020 16 15:00:04
In general, attitude has an impact on behavior.
Copyright:
people, especially young people, have difficulties American
managing their Scientific Publishers
There is also evidence that the development of behavior
personal finance effectively. Delivered bytoward
Ingentamoney is preceded by attitudes, and has a contribution in
Bir used financial knowledge and financial literacy inter- predicting financial practices. The results of research on financial
changeably throughout his study.6 Financial literacy is indi- issues showed that attitudes toward money are important aspects
vidual knowledge and understanding of financial concepts.8 that determine individual financial behavior, and Ajzen and Fish-
Another definition stated that financial literacy is individual abil- bein with their theory of reasoned action provide a theoretical
ity in making judgments and decisions effectively in money basis for understanding attitudes’ role in determining behavior.17
management.9 Financial literacy describes individuals’ ability Based on literature review and previous empirical research,
to understand the financial knowledge and skills in financial it was hypothesized that:
resources management. From the many definitions of financial H2: Financial Attitude affects Financial Behavior of college
literacy, one of important paradigm is level of financial knowl- students.
edge and informed judgments.9 The research model is depicted in Figure 1 as follows.
Since 2000, many financial literacy conceptual definitions have
focused on five categories, which are financial concept knowl-
edge, ability in communicating about financial concepts, aptitude 3. RESEARCH METHODS
in managing personal finances, skill in making appropriate finan- Primary data are obtained through the distribution of question-
cial decisions, and confidence in planning effectively for future naires. The data are obtained through direct surveys and a ques-
financial needs.10 tionnaire was designed to collect data from college students in
There are two lines of research on financial knowledge. Bandung as the population. Bandung is chosen as it is one of
Respondent could answer questions related to general financial many capitals in Indonesia with the best rating universities. The
knowledge or specific financial knowledge is used as a proxy for sampling technique used purposive sampling, and the sample is
financial literacy.11 college students in Bandung who ever take subjects pertaining
In regard to financial literacy measurement,8 Chen and Volpe financial management.
conducted financial literacy research in four main areas: per- There are 516 respondents of college students in this
sonal financial knowledge, financial literacy in general, invest- research. The filling-in process of the questionnaires of the
ments, financial planning and taxes, while Ronald and Haiyang respondents is conducted with supervision to make certain
developed knowledge scale that includes skill and knowledge that the data obtained goes along with the purpose of the
related to deposit and debit, insurance and investment item, and research. The total number of questionnaires distributed was 550.
financial information in general. Financial knowledge also can A total of 516 questionnaires were completed, producing
be measured by a person’s self-assessment of financial matter 93.8 percent response rate. This is in line with the rules of thumb

8763
RESEARCH ARTICLE Adv. Sci. Lett. 23, 8762–8765, 2017

for determining sample size in multivariate research which the Table II. Financial knowledge measurement.
sample size should be several times (preferably 10 times or more) Corrected item-total
as large as a total number of variables in the study, even though No Item correlation Mean
a sample size larger than 30 and less than 500 is appropriate for
VAR00001 Know about interest rate, .821 4.5698
most research.18 finance charges, and
The research variables are Financial Knowledge, Financial credit terms
Attitude, and Financial Behavior of college students. To mea- VAR00002 Know about credit ratings .902 4.6609
sure the operationally defined elements of the variables, numer- VAR00003 Know about managing .829 5.0446
finance
ical scale, with a 7-point scale which is an interval scale, VAR00004 Know about invest money .869 5.2326
was used. Financial knowledge measurement in this study is VAR00005 Know about the balance .897 4.9147
a person’s self-assessment about financial matter knowledge, on bank statement
as mentioned previously in the literature review. Financial atti-
tude measurement included four dimensions: retention planning,
power prestige, anxiety, and achievement-esteem, while financial Table III. Financial attitude measurement.
behavior was measured by five questions of general management Corrected item-total
practices. No Item correlation Mean
The obtained data were tested for their validity and reliability VAR00006 Power prestige .897 5.2519
beforehand to make sure that all items are valid and reliable. VAR00007 Retention planning .888 5.1686
The data were organized and analyzed descriptively to give a VAR00008 Anxiety .841 5.1337
detailed picture about financial knowledge, attitude, and behavior VAR00009 Achievement-esteem .847 4.8159
of college students. Structural Equation Modeling (SEM) through
LISREL was used to test the research model in this study in order
to determine the causal relationship between related variables. Table IV. Financial behavior measurement.

Corrected item-total
No Item correlation Mean
4. RESULTS VAR000010Creating financial goals .915 4.4477
Based on data collection conducted by questionnaires distribu- VAR000011Making plans on how to .910 4.5814
tion among college students, a total of 516 fully-filled question- reach the financial goals
naire data pertaining Financial Knowledge, Financial Attitude, VAR000012 Setting specific financial .929 4.5252
goals for the future
and Financial Behavior was obtained.IP: 193.203.10.108 On: Fri,VAR000013
17 Apr 2020 15:00:04
Knowing roughly how .903 5.2151
The results show that the alpha values Copyright:
of the three constructs
American Scientific Publishers
much money needed
used in this study exceeded the minimum requirement Delivered
for a reli- byVAR000014
Ingenta Discussing financial goals .922 5.2500
ability of 0.70, as they are greater than 0.9. The results of the with spouses
reliability test show that measurement items were highly reliable
in measuring each construct. Table I shows Cronbach’s alpha
The questionnaire concerning Financial Attitude, which
reliability estimates for each of all constructs.
includes items associated with retention planning, power-
The result also shows that each indicator of all three constructs
prestige, anxiety, and achievement-esteem, yields results that
had corrected item-total correlation values relatively high which
range in between 4.8159 to 5.2519 on a 1–7 scale. The relatively
are more than 0.8 (see Tables II–IV). This shows that all the
above average scale values of Financial Attitude shows agree-
indicators were valid to measure all the constructs.
ment in respect to retention planning, power-prestige, anxiety,
The description of Financial Knowledge, Financial Attitude,
and achievement-esteem.
and Financial Behavior of college students is conducted by orga-
The questionnaire result for the items associated with stu-
nizing the data based on the assessment of each item in the
dents’ Financial Behavior ranges in between 4.4477 to 5.2500.
questionnaire (see Tables II–IV). The questionnaire result indi-
This shows that students consider creating financial goals, mak-
cates that the average respondents’ answer (for items representing
ing plans on how to reach the financial goals, and setting specific
Financial Knowledge which consists of their knowledge about
financial goals for the future. They also know roughly how much
interest rate, finance charges, and credit terms; credit ratings;
money needed and tend to discuss financial goals with spouses.
managing finance; investing money; the balance on their bank
The Structural Equation Modeling specifies the causal rela-
statement) ranges in between 4.5698 to 5.2326 on a 1–7 numer-
tionships among constructs. The goodness of fit indices (GFI) =
ical scale. It means the students have relatively above average
0.87, Normed Fit Index (NFI) = 0.94, and Comparative Fit Index
understanding of financial knowledge. In this case, students have
(CFI) = 0.94. The assessment of the results of the coefficients
more understanding in how to manage finance and to invest
indicates that financial knowledge significantly affects the finan-
money than the other three indicators.
cial attitude of college students, with p = 0.036 (<0.05), b =
0.98, and R2 = 0.97. This result suggests that individual’s under-
Table I. Cronbach’s alpha reliability estimates. standing of the financial concepts will determine his or her sub-
jective tendencies in evaluating the financial problems.
No. Construct Cronbach’s alpha
The results also show that financial attitude significantly
1 Financial Knowledge 0.950 affects financial behavior of college students, with p = 0.030
2 Financial Attitude 0.943
3 Financial Behavior 0.969
(<0.05), b = 0.91, and R2 = 0.83. This result suggests that indi-
vidual who has tendencies to evaluate favorable aspects of the

8764
Adv. Sci. Lett. 23, 8762–8765, 2017 RESEARCH ARTICLE

Fig. 2. Structural model.

Notes: FK = Financial Knowledge, FA = Financial Attitude, FB = Financial Behavior.

financial problems will take action and has a style of handling therefore would affect the results of the study. Future study may
financial issues which are favorable. IP: 193.203.10.108 On: Fri,consider
17 Aprstudents who have taken this subject.
2020 15:00:04
The results of hypothesis testing show that the both hypotheses This study also
Copyright: American Scientific Publishers focused on financial knowledge as an inde-
are proved. Figure 2 shows the structural model. Delivered bypendent
Ingenta variable, and financial attitude as an intervening variable
which affects financial behavior. Future study may consider other
independent or intervening variables.
5. CONCLUSION
The descriptive analysis shows that the college students have rel-
atively above average understanding of financial knowledge, and References and Notes
average scale values of Financial Attitude shows students’ agree- 1. M. E. Ibrahim and F. R. Alqaydi, International Journal of Economics and
Finance 5, 126 (2013).
ment in respect to retention planning, power-prestige, anxiety, 2. http://www.ojk.go.id (2013).
and achievement-esteem. The analysis also shows that college 3. D. Hearth, D. L. Kurtz, and L. E. Boone, Thomson, South Western (2006).
students consider having plans for the future regarding financial 4. R. Anthony and M. F. Sabri, International Review of Management and Busi-
ness Research 4, 1105 (2015).
goals. 5. J. L. Gitman and M. D. Joehnk, Thomson, South Western (2005).
The hypotheses regarding the relationship between financial 6. J. B. R. Bir and Subarna, Economic Literature XII, 69 (2014).
behavior, financial knowledge, financial attitude, are developed 7. G. K. Shapiro and B. J. Burchell, Journal of Neuroscience, Psychology, and
Economics 1 (2012).
and tested. The results of this research confirm that financial 8. T. Y. Shih and S. C. Ke, Serv. Bus 8, 217 (2014).
knowledge positively affects the financial attitude of college stu- 9. M. Samy, H. Tawfik, R. Huang, and A. K. Nagar, International Journal of Eco-
dents. The results also show that financial attitude positively nomic Sciences and Applied Research 1, 55 (2008).
10. D. L. Remund, The Journal of Consumer Affairs 44, 276 (2010).
affects the financial behavior of college students. The structural
11. C. A. Robb and D. L. Sharpe, Journal of Financial Counseling and Planning
equation modeling specifies the causal relationships among these 20, 25 (2009).
constructs and the results show the acceptable range for a good 12. V. Perry and M. D. Morris, The Journal of Consumer Affairs 39, 299 (2005).
model fit. 13. N. T. N. Mien and T. P. Thao, Second Asia-Pacific Conference on Global
Business, Economics, Finance and Social Sciences (2015).
14. A. Rajna and W. P. S. Ezat, International Journal of Business and Manage-
ment 6, 105 (2011).
6. LIMITATION AND FUTURE STUDY 15. F. Pattarin and S. Cosma, Review of Behavioral Finance 4, 113 (2012).
16. L. M. Borden, S. A. Lee, J. Serido, and D. Collins, J. Fam. Econ. 29, 23 (2008).
This research does not take into consideration the respondent
17. L. Falahati and L. H. Paim, Gender in Management: An International Journal
who has taken Personal Financial Planning subject as they might 27, 315 (2012).
have a different financial knowledge, attitude, behavior, and 18. U. Sekaran, 4th edn., John Wiley & Sons, Inc. (2003).

Received: 12 December 2016. Accepted: 2 May 2017.

8765