Chapter 1

Introduction

There are many factors that influence the financial behavior of an individual. To

the millennial nowadays specifically employees, knowledge of a certain financial

management skills and money management helps them in making such a good

financial decisions. According to the Philippine Statistic Authority reported January 2019

millennials are the largest number of employed person, with 27.5 % of the total

employed. There are 42 million millennial Filipino employees who are part of the

workforce. By 2020, the millennials are expected to make up approximately 50 percent

of the global workforce. When it comes to money management, almost 62% of

millenials are living paycheck to paycheck and only 38% feel financially stable

(leonhardt, 2019). Moreover, millennial employees who work in RVM School may have

knowledge and skills in handling their personal income. However, they are still unable to

manage their personal income and tend to go deep into debt because they have low

level of financial literacy.

In the research study of Mudzingiri, Mwamba and Kesyser (2018) revealed that

low financial literacy in university students can lead individuals to settle for lower return

financial choices. They also added that low financial literacy students are risk loving,

impatient, overconfident and it can cause ignoring crucial market information in decision

making. Which strengthen the argument of Lusardi and Mitchel (2005) that individuals

have a high level of financial literacy achieve better life outcomes, in contrast low level

of financial literacy individuals achieve poor financial outcomes. In addition, less

financially literate individuals are less likely to plan for retirement, less likely to

participate in the stock markets and more likely to have more costly debt (Lusardi and

Mitchel, 2011)

Some researchers have already study the level of financial knowledge that can

influence financial behavior among student such as Kasman, Heuberger and Hammond

(2018), Mitchell (2016) and Herawati, Candiasa, Yadyana and Suharsono (2018).

Herawati, Candiasa, Yadyana and Suharsono (2018) mentioned that there are three

factors influencing the financial behavior of the student in Bali such as financial literacy,

self-efficacy and social economic status. Based on the data they found out that financial

literacy has positive and significant effect on financial behavior and having sufficient

level in financial literacy is the factors that make the student succeed in their careers

and life (Mitchell, 2016). Moreover Kasman, Heuberger and Hammond (2018) cited that

an effective way to improve knowledge and attitudes about personal finance is that

allow students to allocate allowances according to their financial goals. The result of

their study can influence the student financial behavior. However there is no findings

that how millennial behave in savings, budgeting and spending in regards to their level

of financial knowledge.

The purpose of this study is to measure the level of financial literacy among

millennial who work on RVM school in Cagayan de Oro City and to know if their level of

knowledge can influence on their financial behavior. The researchers also choose this

topic because they want to find out whether the level of knowledge and their application

in real life will differ on their age, gender and personal income that they have. And by
this, the researchers will be able to come up with a result that could answer whether

their behavior would vary depending on the knowledge or there is no relationship at all.

Theoretical and Conceptual Framework

This study is hinged on the assumption that the level of financial literacy in terms

of personal factor, saving and budgeting and investing has influence on the financial

behavior of an individual. Specifically, the Social-Cognitive/Learning Theory (SCT) was

used to establish the direction of this study.

The Social-Cognitive/Learning Theory (SCT) was created by Albert Bandura

in1986. The theory explains that environmental influences, personal factors and

attributes of the behavior itself have great effects on individual’s financial behavior

(Ozmete & Hira, 2011). SCT also explains the environmental influences to individual

such as parents and peers influence on the young’s financial knowledge, attitudes and

behavior.

Financial Planning and Management. Planning and money management can

influence a person’s knowledge in terms of decision making. Munohsamy (2015) cited

that personal financial knowledge allows a person to control his/her income and

organize its expenses through a detailed financial planning. The importance of financial

planning and management is reflected in all areas of personal and business life.

According to J.Scott (2009) as cited by Munohsamy (2015) states that only having

personal financial knowledge is not enough, it needs planning, organizing and

managing personal finances.

 Saving. Saving is one of the components of personal finance. According to Sood

& kaur (2015) saving of money help an individual in the long run and if an individual has

savings for future, then the uncertainties can be faced by him and stress will be less.

Moreover, In terms of behavior, millennials are different from earlier generations

regarding to saving. They have already saved and planned for their future. Douwes &

McIntosh (2018) states that millennials are saves earlier than previous generations. In

addition, according to Generation Money Talks study of Chase as cited by Douwes &

McIntosh (2018) at the age of 23 millennials starting saving for their retirement,

compared to the later generations like gen x and baby boomers, they start saving at the

age of 30 and 40.

Budgeting. Budgeting is another component of personal finance; it is a process of

creating a plan that allocates future personal income towards expenses, savings and

debt repayment. According to Walther (2009) relative to acquiring and using resources,

a budget is a detailed financial plan that tells future expectations and actions. Moreover,

study shows that inspite of some stereotypes that millennials are self-absorbed and

foolish with money, not long-term planners or still dependent with their parents, it turns

out that millennials are better than other generations when it comes to managing money

(Bank of America, 2018).

Investing. Investment is defined the commitment of current financial resources in

order to attain higher gains in the future. It deals with what is called uncertainty

domains. According to US SEC Savings and Investing, when you invest you have a

bigger chance of losing your money than when you save. The money you invest in
mutual funds, securities and other alike investments usually is not federally insured. You

could lose your principal or the money you’ve invested. But you also have the

opportunity to earn more money out of your investment. Millennials ages range between

16 to 36 years old who outnumbered the Baby Boomer generation and also set to

become the most educated generation in history (US Chamber of Congress). However

they face financial challenges because Millennial have a lot of competing goals for their

money like paying mortgage and home-related costs, paying off debt, raising a their

own family, their lifestyle, and taking a vacations citied by (Maximizer CRM). It is

probably why Millennials are always stressed out about money.

Financial Behavior. Financial behavior can be defined as any human behavior

that is relevant to money management such as: saving and budgeting. According to

Herawati, Candiasa, Yadnyana, Suharsono (2018) financial behavior is related to

personal financial management. It is an individual activity comprises with financial

planning, management and control. Moreover, a study of Bank of America/USA today

(2015) states that millennials are better than other generation in money management.

However, Bank of America/USA today (2018) newest findings states that even

millennilas are more confident about money and more focused in their finances, they

also experiencing stress. Due to factors that out of their controls, including volatile

global economy, a changing job market, and student debt.

 Schematic Presentation of the Study

Personal Profile

 Age

 Gender

 Personal Income

Financial Behavior

Financial Knowledge

 Saving
 Budgeting
 Investing
 Planning and
Management
Statement of the Problem

This study seeks to determine the level of financial literacy of the millennial

employee’s in terms of saving, budgeting and investing to financial behavior.

Specifically, it answers the following questions:

1. What is the profile of the respondents according to:

1.1 Age

1.2 Gender

1.3 Personal Income

2. What is the perception of the respondents according to:

2.1 Savings

2.2 Budgeting

2.3 Investing

2.4 Financial Behavior

3. Is there a significant difference between savings, budgeting, investing , and

financial behavior when grouped according to:

3.1 Gender

3.2 Personal Income

4. Is there a significant relationship between savings, budgeting, investing, and

financial behavior?

5. Is there a significant influence on savings, budgeting, investing, to financial

behavior?
Hypothesis

Problems 1 and 2 are hypothesis-free. On the basis of problems 3, 4 and 5, the

following hypotheses are:

Ho1.a There is no significant difference between savings, budgeting, investing, and

financial behavior when grouped according to Gender.

Ho1.b There is no significant difference between savings, budgeting, investing, and

financial behavior when grouped according to personal Income.

Ho2.a There is no significant influence on savings, budgeting, and investing to financial

behavior.

Significance of the Study

The result of this study is significant to the following:

Teachers. The findings of this study could help the teachers to assess how

effective are the lessons taught in school. In this way, the teachers will know what

needs to be improved in the curriculum and instruction.

Students. The result of the study could help the students to gain insight to their

behaviors in term of financial behavior. They will know and understand better what

affects their behavior and how their knowledge had helped them in their money

management.
 The Parents. The result of this study will be beneficial to the parents as it will

help them in understanding the kinds of expenditure their children have. It will also give

them insight on what needs to be improved in their children’s financial literacy and they

will be able to guide their children accordingly.

Future Researchers. Future researchers can use the result of this study as point

of reference for a more comprehensive investigation particularly in exploring the

personal finance knowledge and its effectiveness to financial behavior of students not

only in the field of business but also in other fields.

Scope and Limitation

The study was limited to employees in RVM schools in Cagayan de Oro city

2019-2020. The study was focused on determining the level of financial knowledge of

RVM schools employees if their level of financial knowledge can influence financial

behavior. With the limited time given to conceptualize and finish the study, the

researchers limit the participants to all millennial RVM school employees only.

Definition of Terms

Financial literacy. Financial literacy is defined as the knowledge and

understanding of financial concepts, and the skills, motivation, and confidence to apply

such knowledge and understanding in order to make effective decisions across a range

of financial contexts, to improve the financial well-being of individuals and society,

and to enable participation in economic life (PISA 2012 Financial Literacy

Framework, 2010)
 Personal Finance. Personal Finance is the financial management which an

individual or a family unit performs to budget, save, and spend monetary resources over

time, taking into account various financial risks and future life events.

Saving. Saving is the portion of disposable income not spent on consumption of

consumer goods but accumulated or invested directly in capital equipment or in paying

off a home mortgage, or indirectly through purchase of securities.

Budgeting. Budgeting is the process of creating a plan to spend your

money. A budget is an itemized summary of likely income and expenses for a given

period.

Finance. Finance is the study of money and how it is used. Specifically, it deals

with the questions of how an individual or company acquires the money needed and

how they then spend or invest that money.

Behavior. Behavior or behaviour is the actions and mannerisms made by

individuals, organisms, systems or artificial entities in conjunction with themselves or

their environment, which includes the other systems or organisms around as well as the

physical environment.