FINANCIAL LITERACY AND MONEY MANAGEMENT AMONG TERTIARY

INSTITUTION STUDENTS.

A STUDY OF SELECTED UNIVERSITIES IN OSUN-STATE , NIGERIA

By

1. Mrs. AKINYEDE O.M (Ph.D),

Department of Financial Studies, Redeemer University Ede, Nigeria.
akinyedeo@run.edu.ng +2347069328922
2. Mrs. OWOLABI, A.O (Ph.D),
Department of Financial Studies, Redeemer University Ede, Nigeria.
owolabiade@run.edu.ng +23427311897
3. Mrs. AKINOLA, .A.A
Department of Financial Studies, Redeemer University Ede, Nigeria.
akinolaabi@run.edu.ng +2347051417082

Abstract

The study was conducted to determine the relationship between financial literacy and money
management (spending, savings, investments and budgeting) among tertiary institution students.
Tertiary education is the stage where students are at a decisive time in their lives as they move from
financial dependence to financial independence. A good money management skill helps in the
transfer of funds from a period of surplus to the period of deficit. Necessary sample size of 385 for
the infinite population of tertiary institution students was used. The use of factor analysis was used/
justified on the ground that the survey questions were largely based on patterns of behaviour and
attitudes, with no ostensible right or wrong answers. Results showed positive significant
relationship between all measures of money management and financial literacy. The study gives
evidence of students knowledge in personal finances and the importance of a good and viable
financial literacy programme so as to improve the quality of life of the young adults and their
disposition to money. Results of the study are of interest to policymakers concerned with financial
well-being and the balance between personal and institutional responsibility. Targeting financial
education programmes on young adults that need them most could increase their effectiveness and
proper plan for a better tomorrow.
Key Words: Financial Literacy, Money Management, Tertiary Education, Personal Finances

Electronic copy available at: https://ssrn.com/abstract=2996430

1.1 Introduction
Financial literacy is a basic concept in understanding money and its use in daily life which includes

the way income and expenditure are managed and the ability to use the common methods of

exchanging and managing money (Sarnovics, Mavlutova, Peiseniece, & Berzina, 20161). Financial

literacy is important at several levels and this has major implications for the welfare of individuals

in the management of their financial affairs. Financial literacy influences how people save, borrow,

invest and manage their financial affairs. It therefore affects their capacity to grow their wealth and

income, and has significant implications for people’s lifestyle choices.

In turn, it influences the allocation of resources in the real economy and therefore the longer term

potential growth rate of the economy. Financial literacy furthermore plays a consistent part in

influencing financial institutions. Investment decisions, economic resource allocation and

risk/return tradeoffs are influenced by the level of financial literacy. (Cude, Danns, & Kabaci,

2016)2.

Students tend to have similar spending behaviour with family members. Specific social and

financial environments depending on family background influence their behaviours. Naturally,

wards are influences by Parents management and spending habits therefore imbibing similar

attitude and principle (Rivera, 2016)3. The extent of financial literacy in the family will ultimately

impact student at an early stage; family determine and influence the literacy of wards. Attitude

towards money also motives of financial literacy. Financial literacy eventually affect all aspect of

one's welfare, from in the early stages of life till retirement when the benefits from financial

planning and savings should be enjoyed (Kumar, 2016)4.

University students experience certain difficulties caused by lack of financial knowledge leading to

irresponsible overspending on consumption, financial problems, hence poor academic performance.

Gudmunson, Zuiker, Katras, & Sabri, (2015)5 states that poor financial management can also affect

Electronic copy available at: https://ssrn.com/abstract=2996430

academic performance, mental and physical well-being, and even the ability to find a job after

graduation.

Tertiary level of education is the stage where students are at a decisive time in their lives as they

move from financial dependence to financial independence (Rasoaisi & Kalebe, 2015)6. Most of the

students enter into this stage without having gained adequate knowledge concerning money

management. Consequently, their wrong financial decisions often result into a lot of problem such

as emotional instability among others which eventually might lead to poor academic performance.

In light of the above this study seeks to examine the relationship between financial literacy and

money management (spending, savings, investments and budgeting) among university student

2. 1 Conceptual Review

Different definitions of financial literacy and personal finance are presented in the literature.

Murugiah, (2016)7 have identified financial knowledge as understanding the principles and

terminology needed for a successful management of personal financial issues. Personal financial

management, skills and information was viewed by Ramadan, Armada, & Leal. (2017)8 as

‘personal financial knowledge’. The word ‘knowledge’ was considered as known conditions,

practices, rules and norms required for performing financial duties. The term financial involves a

wide range of daily dealings with money includes activities such as check control to credit card

management, budget preparation, purchasing insurance and investment. Gerrans & Hershey,

(2017)9 financial literacy includes knowledge, consciousness and financial tools and their use in

business and personal life. A financial literate must be is able to manage money and near money in

the changing society in order to achieve necessary goals, develop skills money management and be
able to understand the inference of personal financial decisions on everyone. (Baharuddin, Alias,

Rashid, & Mansor, 2016)10.

Increased financial literacy has a positive impact on people’s personal and business life. The

financial knowledge helps reducing social and psychological pressures and increasing the welfare

of the family in the personal life. Financial knowledge reduces stress, illness, financial disputes,

abuse of children and conflict among the families. People raised in families with high financial

knowledge and well-being are less depressed, show less aggressive and anti-social behaviour and

have more self-confidence (Vosloo, 2014)11.

Money management also as refereed to investment management is the process of managing money

which includes expense tracking, investment, budgeting, banking and taxes. Money management is

a strategic technique employed to make money yield the highest interest-yielding value for any

amount spent. Spending money to satisfy cravings (regardless of whether they can justifiably be

included in a budget) is a natural human phenomenon.

MONEY
TERTIARY MANAGEMENT
FINANCIAL
EDUCATION
 Spending
LITERACY
 Savings
 Investments
 Budgeting

PROCESS OUTPUT
INPUT

2.3 Empirical Review

In a new trend, there is an increase in the true number of college or university students borrowing to

finance high education. For future research is required to determine the behaviour and spending
habits of school students' change at that time they spend in the school setting. The frame of mind of

adults toward spending takes on a vital role in sustainability perspectives of the finance and is a

significant variable in financial prudence (Pillai, Carlo, & D'souza , 2010)12.

Financial capacity is precisely the skills to manage financial resources in a way that one can

improve the use of a single penny received or put in. Zakaria & Sabri (2013)13 predicated on review

of studies conducted in 10 different countries attempted to formulate signals of financial potential

also determined four indicators, used with slight variance in the contextual application. Financial

ability effort is beyond imparting knowledge to developing behaviour of training suggested

personal financial management tools and techniques, such as budgeting and financial planning,

keeping personal financial files, seeking relevant information to use in making keeping, investment,

borrowing and other financial decisions.

Mahdzan & Tahiani (2013)14 also explored the impact of financial literacy on individual saving in

Malaysia. For the purpose a study data from 200 respondents with diverse demographic and

economic characteristics were examined using a probit style of regression which showed that

financial literacy, both advanced and basic knowledge are related with high keeping. The study

suggested that government should promote financial education to be able to enhance the saving in

the populace. Suwanaphan (2013)15 also argued for the same predicated on the evaluation of sample

survey of 400 sample academics support staffs of Change Mi School in Thailand which confirmed

an overall low financial literacy negatively affected saving action or brings about overspending.

Xiao, Ahn, Serido, & Shim, (2014)16 studied the association of earlier financial literacy and later

financial behaviour of college students. Financial literacy was measured by both subjective and

objective knowledge and financial behaviours were categorized into risky paying and borrowing

behaviours. data was collected at two time points from a panel of college students at a major state
university in the USA, the results showed that the association between earlier knowledge and later

financial behaviours differed by the specific type of knowledge (subjective vs. objective), with

stronger effect of subjective knowledge, compared with objective knowledge on both composite

and individual measures of risky borrowing and paying behaviours. Navickas, Gudaitis &

Krajnakova (2014)17 also analyzed how level of financial literacy inspired personal money

management of Lithuanian society, aged between 18 and 30. A descriptive examination of data

from an online survey of 437 sample respondents from various areas of the country unveiled low

degree of financial literacy, which relates to unsatisfactory personal money management that they

argued contributes to spends a total lot of cash because of impulsive or pointless buying, which

eventually contributes to lower saving rates and lower investment returns.

Bhattacharjee (2014)18 used questionnaire survey in examining financial literacy and its influencing

factors in India of investors in three villages of Barpeta district of Assam, collected data on basic

and advanced personal financial knowledge, focused on: financial products and services, and

instruments as indicator of financial literacy. The result indicated that, majority have basic

knowledge about saving account and basic financial instruments like life insurance policies, public

provident fund and national saving certificate. Nevertheless, advanced knowledge pertaining to

financial market instruments, existence of capital market, mutual fund were found low. The

correlation and regression analysis implemented in this study also showed demographic factors:

education, income, age, nature of employment and place of work has significant relationship with

level financial knowledge. Accordingly, an increase in age, income, and education are more related

to better financial literacy; whereas, there was no significant effect of gender.

3.1 MATERIALS AND METHODS

Qualitative descriptive research design with the research design which is used to describe the

relationship between financial literacy and money management Tertiary institution students in the

Osun state Nigeria was employed. The population comprises of all tertiary institutions in Osun

state. Stratified sampling was used to group institutions by owners which include Federal, state and

private institutions and convenience sampling was used select one sample from each strata. Three

institutions were selected in all which are Obafemi Awolowo University, Ile-Ife; Osun State

University, Oshogbo and Redeemers University, Ede. The selected is designed to obtain adequate

and diverse views pertaining to financial literacy.

Snowballing sampling technique was used and the sample was drawn from the selected sample

size. In determining the sample size the formulae employed by Saunder, Lewis and Thornbil

(2003) was used in determining the sample size for the purpose of this study at 95%confidence

level, 50% standard deviation and+/-5% confidence interval were randomly selected therefore a

sample of at least 390 was used. The information for the accomplishment of the objectives of this

study was gathered through primary sources through the use of a well structured self-designed

questionnaire administered via mail through the use of google form.

.3.2 Model specification

Regression model constructed based on the variables contained in the research objectives:
MONEY MANAGEMENT = F (FIN LIT )

BUD = βo + β1FLT …………………………………… i

SPH = βo + β1FLT …………………………………… ii
SAH = βo + β1FLT …………………………………… iii
INV = βo + β1FLT …………………………………… iv
Where:
FLT = Financial Literacy
BUD =Budgeting Habit
SPH= Spending Habit
SAH= Saving Habit
IND- Investment Decision
ei= Error Term
βo= Intercept
β1, = Regression Coefficients

4.0 RESULT AND DISCUSSION

Table 1: Model Summary showing relationship between Financial Literacy and
Money Management
R R Durbin-
Square Watson
Budget= f(FL) 0.482 0.233 1.812
Spending =f(FL) 0.331 0.109 1.926
Savings=f(FL) 0.428 0.183 1.645
Investment= f(FL) 0.473 0.224 1.953
Researcher Field Survey 2017

The table which is the model summary shows the regression result between (budget and financial

literacy) of 0.482 which is 48.2%, and 47.3 between Investment and Financial Literacy this shows a

strong positive linear relationship. The R squared of 0.233 which implies that about 23.3%

variations in dependent variable (budget) are explained by independent variable (financial literacy).

Variations in dependent variable (investment) are explained by independent variable (financial

literacy stands at 22.4%.

The result of 0.428 (savings and financial literacy) and 0.331(spending and financial literacy)

shows a moderate positive linear relationship between the dependent variable (spending / savings)
and independent variable (financial literacy). The R squared of 0.109 which implies that about

10.9% variation in dependent variable (spending) is explained by independent variable (financial

literacy) and 18.3% variation in dependent variable (savings) is explained by independent variable

(financial literacy).

Table 2: Summary of Coefficients between Financial Literacy and Money Management

Variables Coeffic t-stat F-value Greater or Less Significance

ient (βi) Than 0.05
Significance
Level
Budget= f(FL) 0.351 10.317 106.437 Less Yes
Spending =f(FL) 0.242 6.567 43.127 Less Yes
Savings=f(FL) 0.442 8.870 78.684 Less Yes
Investment= f(FL) 0.308 10.067 101.339 Less Yes
Researcher Field Survey 2017

5.0 Conclusion and Recommendation

The findings of this study will provide evidence of students‟ knowledge in personal finance for the

development of guidelines for implementing an effective financial literacy programme so as to

improve the quality of life of the students in Nigeria. It also adds to the available literature in the

field and helps create the necessary atmosphere for future studies in Nigeria as well as other

developing countries. This research could also be a source of useful information for curriculum

development on personal finance by Universities in Nigeria.

Results of the study are of interest to Individuals, families and societies concerned with financial

well-being and the balance between personal and institutional responsibility. Targeting financial

education programmes to the groups that need them most could increase their effectiveness.

Information on factors that influence the accumulation of financial knowledge reported in this study
can aid policymakers trying to help younger consumers navigate today’s increasingly complex

financial marketplace. Understanding the factors that contribute to or detract young consumers from

the acquisition of financial knowledge can help policymakers design effective interventions

targeted at the young population

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