CHAPTER 1

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).

 In a bid to make the Philippines Asia’s “heart” of financial literacy, a leading

insurance 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

2.) Financial Planning Skills Students
3.) Investment Skills
 Independent Variable Dependent
Variable

a. Sex
b. Age
c. Family Economic Status

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:

3.1 Sex

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

Significance of the Study

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.