QUESTION: Is financial management prominent for university students?

TOPIC: The importance of financial management for students

By: Nur Syakirah and Mahani Azam

Students, mainly university students are in a transition phase from teenagers to being

young adult, as majority of them are in the age ranking from 18 to 25 years old. Hence, as

they are in the phase of young adult, and learning into being in the adultery phase, they need

to learn managing many things on their own, including their financial. Cunningham (2001)

stated that students often begin their university education without ever having been solely

responsible for their own personal finances. This is due to the fact that during childhood and

teenage phase, students barely care about their financial matters as they were under parental

guidance and depend a lot on their families. Hence, when they start facing the university life,

they have to manage their own financial resources and expenses in order to survive. Students

may be shock to be in this situation which lead them to manage their financial poorly. Thus,

every student should be exposed with the prominence of financial management that begins

with their life in university.

First and foremost, students need to manage their finance wisely to pay back their

education loan. In Malaysia, the National Higher Education Fund Corporation (PTPTN) is the

major source for financing tertiary education. Besides, other financial institutions also

provide loan for studies which some of them apply interest on the loan. Mohd Rafi (2016)

mentioned in his study that “in fact, one-third of our students are having student loans, of

which more than half are concerned that they will not able to pay off those loans. Many of

them were associated with ineffective financial behaviours, including low saving, poor record

keeping, and some of the students also involved in credit card debt.” Due to these matters,

students should fix their financial behaviours concerning the fact that they will have to pay

back those loans once they finish their studies and start working. In order to manage their
financial wisely, students should realise that the study loans are supposed to be used to

finance their study fees, equipment and materials; not to be wasted on unnecessary stuffs

which may be the main reason of why students cannot practise effective financial behaviour.

By doing so, students are actually abusing their education loan which will affect their

financial management and consequently resulted to inadequate money at the end of the

month. This was supported by Sabri (2008) as he conducted a study among Malaysian

college students and found that, most of them were uncertain about where their money is

spent and that they bought unnecessary things and lent money to friends.

Besides, students should be able to manage their finance sagely in order to prevent

financial crisis. Students have wide resources of finance as explained by Leskinen and Raijas

(2006), parents, loans, credit card and income from part time jobs are their basic financial

sources. As wide as its availability, students should utilise them sagely as to prevent excuses

such as inadequate capacity of money. Students’ unawareness of the importance to manage

finance smartly is the reason of their financial crisis, as most of recent studies found that

many university students fail to plan their expenditure which resulted to them experiencing

financial problems unexpectedly. University students report having high debt, serious credit

card usage, and high stress as well as low financial satisfaction (Norvilitis and Santa Maria,

2002). Due to financial crisis, many students get negative impacts as it affect their academic

performance. They feel anxious as it brings pressure on them and this eventually affect their

studies. A research findings among university students in the US reveal that, financial

pressure is the most frequently cited reason for students discontinuing their education

(Chiang, 2007). This is the worst result of financial crisis, which is causing them to withdraw

or extend their studies. One of the reasons of why financial problems occur among students

is that they lack of financial education and skills. It is generally accepted among researchers

that financial education plays a key to decrease financial problems, especially among young
adults. Kempson et al. (2006) define financial skills and ability as the knowledge and

understanding that allows people to acquire the skills to deal with everyday financial matters

and make the right choices. Hence, a proper financial education is the main thing that

students need, as they should have priority in spending their money in order to prevent

financial problems and manage their financial resources wisely.

Other than that, students need to understand that their financial behaviour will affect

their future. If their current financial behaviour is poor, there is no guarantee that it will be

better in future if no action is taken. Students need to have well financial behaviour since it

will have an important impact on their future life and personal well-being. In order to do so,

students should empower their financial planning. They need to plan and budget their money

on specific things with priority by differentiate their needs and wants. This is due to the

reason that poor financial planning can lead to financial crisis, as mentioned earlier which

will affect students’ future if it is not solved. Joyce K.H. Nga, Lisa H.L. Yong and

Rathakrishnan D. Sellappan (2010) said that students nowadays are lacking of financial

awareness in financial planning concepts. This can be proven as previous research found that

many college and undergraduate students in the UK, USA and Australia possess low financial

knowledge leading to high level of debts, risk of bankruptcy and lacking retirement planning

skills among young adults. In the meantime, Goi and Nee (2008) conducted a research in

Malaysia that shockingly founded that credit card bankruptcies tripled from 2006 to 2007 and

study loan default increase by 103 percent in the same period time. Thus, with all these facts,

students should aware that poor financial planning can affect their future as bad as being

declared as a bankrupt. Nevertheless, students can have bright future by setting financial

goals, which they will benefit a lot from it. For example, a common financial goal for a

student is to buy houses, cars, and to cover marriage expenses. By having strong

determination to achieve their financial goals, students will be willing to change their
financial wellbeing including to have some savings. Achieving financial goals, similar to the

determination of achieving other life goals should be implied by every student in order to

inculcate proper financial management among them, thus as an assurance to their future.

Student must prioritize their financial aid to right source to avoid reckless spending.

In the ages past, book stationeries, clothes, and other similar items for study were bought by

the students. In the present time, student’s needs have increased for sure, when laptops or

desktops are needed for assignments, hand phones and for some, transportation outside the

basic necessities that a student should be spending on. The advances in technology and viral

trends also have led to increases in student’s expenses. As the Malay saying goes, that new

generation has habit of “Biar Papa Asal Bergaya” meaning that new generation have the

mentality of not minding to have no money as long as they are following the trend and being

up to date. Male students in particular are attracted to buy gadgets that are known to be

costly, while the females more likely spent on shopping for make up, clothes, bags and shoes

that are thought crucial, because they want to look nice going to classes. (Shahryar

Sorooshian & Tan Seng Teck, December 29, 2013). This should not be a mentality of

students nowadays because it will lead them to financial crisis. Thus, financial management

is important for students acknowledge the right source to flow their financial aid such as

education and personal necessities.

Financial management education more likely produce a wiser scholar regarding

consumer decision. This is because students are significantly influenced by the major course

they took in University. In addition, the exposure of economy and financial literacy in their

personal knowledge influenced student’s in decision making in any kind financially related.

As to exemplify, Chen & Volpe (1998) find that non-business majors are more likely to be

less knowledgeable about personal financial than business majors particularly in finance and

accounting. Other than that, the educational background made an impact on the average
financial knowledge score, with business majors and students with higher class rank scoring

better on the test of financial knowledge rather than students who are not in business major.

According to Beal and Delpachitra (2003), Chen & Volpe (1998), Volpe, Chen, & Pavlicko

(1996), Peng et al. (2007), and Robb & Sharpe (2009) have indicated that business majors are

more knowledge about personal finance than non-business majors.

Next, financial management amongst university students helps to prepare themselves

in future because it will get more complicated once students step into working life and

financial crisis has been one of major cause of students stress. While, in a study conducted by

researchers Roberts and Jones (2001), some students had credit card debt before they entered

higher education. According to one study, 62% of incoming college freshman had access to a

credit or charge card, and 50.9% had some kind of debt (Jones 2005) this enhance the fact of

students having financial stress before they going in to work field. Moreover, good financial

management reduce stress amongst the student and also prepare student for more challenging

financial situation.

In the nutshell, money management is vital in one’s student life because money is

undeniably important in student life but it can be dangerously affect student if they do not

take financial management seriously. Thus, it is important to have strong fundamental in

financial management to prepare students in stepping working life.

References
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