Chapter 1

Introduction

Rationale of the Study

Financial independence can be defined as being able to handle whatever

challenges life throws at you. (Yellen,2017). Financial Independence is somewhat the

most critical part to be an adult. Being in a state in which we can live through deriving

and earning an income to sustain our personal and economical needs in order to

survive herein the fast-paced world (Hamm,2017). The problem arises when we start

to contemplate of what are those factors that drives a person to be a financially

independent, from mentally to socially.

There are so many things to consider to arrive an important decisions that

college students nowadays have to make, in order to support of their ultimate goal to

become financially independent. It is somewhat a matter of a responsible handling of

money to lower the financial stress (McCusker,2015). The cost of being a college

student and the fact that today they are not prepared, is an alarming status that

numbers of them has a poor understanding of managing the basic finances and

budgeting. The reason is that the expectation to live with parents longer because of

they are not totally so sure about their ability to budget and use the money

(White,2013).

Lee and Mortimer (2009) suggests that educational attainment of young adults

may also affect their financial independence. They further stresses that economic self-

efficacy is an important factor for young adults financial independence. A study of

Whittington and Peters (1996) with the used of the PSID data indicates that the peak

age of full financial independence was in the range of 25-26. As there be changes in
the environment, it has therefore become an essential role for young adults to not only

earn but also to build an awareness in managing their finances with efficiency in order

for them to secure their socioeconomic stability as a financially independent adults.

The characteristics of a college student is due to the influencing psychological

factor and as well as the role of the family. According to studies, families spend

approximately 10% of their annual income to support their young adult children of ages

18 to 21 (Settersten and Ray, 2010). As the fundamental unit of the society, the family

establishes and raises the biggest part in terms of responsibility in children's financial

socialization (Kim,LaTaillade and Kim,2011).

Financial literacy is important in order to accomplish the goals that lead to the

path of financial independence and for the financial wellbeing of young people as they

transition toward adulthood (Chen and Volpe, 2002; Lusardi, Mitchell and Curto, 2010;

Huston, 2012). Financial literacy plays an important role to assess students in

developing their financial decision making ability.

Being financially independent is necessary to build a sustainable and well-

rounded society. It takes time to be financially independent because it merely depends

in the standards for training and education required by the society. This study is build

aiming to provide and determine the those factors which plays an important part in

influencing the likelihood of young adult, specifically to the BSA/BSAT students to be

a financially independent member of the society.

Objectives

General

This study aims to determine the factors that influence the perceived financial

independence to the college students, specifically UM BSA/BSAT college students.

Specific

1. To determine the characteristics of BSA/BSAT students in terms of:

1.1 Economic factors

1.2 Family factors

2. To determine the perceived level of financial independence of the BSA/BSAT

students in terms of:

2.1 Economic self-efficacy

2.2 Money management

3. To determine the significant influence of the BSA/BSAT students characteristics to

their perceived level of financial independence.

Statement of Hypothesis

Ho: There is no significant influence of the BSA/BSAT students characteristics to

their perceived level of financial independence.

References:

Chen, H. & Volpe, R. P. (2002) Gender differences in personal financial literacy

among college students. Financial Services Review, 11, 107-128.

Hamm, T. (2017).Financial Independence on Smaller Income.Retreived November

23, 2017, from https://www.thesimpledollar.com/financial-independence-on-a-

smaller-income/

Kim, J., LaTaillade, J. & Kim, H. (2011) Family processes and childrens financial

socialization. Journal of Family and Economic Issues, 32, 668-679.

Lee, J. C. & Mortimer, J. T. (2009) Family socialization, economic self-efficacy, and

the attainment of financial independence in early adulthood. Longitudinal and Life

Course Studies, 1, 45-62.

McCusker, M. (2015). 3 Important Financial Considerations for College Students.

Retrieved November 23, 2017, from https://blog.ed.gov/2015/08/3-important-

financial-considerations-for-college-students/

Settersten, Jr., R.A. & Ray, B. (2010) Whats going on with young people today? the

long and twisting path to adulthood. The Future of Children, 20, 19-41.

White, M. (2013). Financial Independence? Today's Young people Dont Expect it

Anytime soon. Retrieved November 23, 2017, from

http://businesstime.com/2013/04/04/financial-independence-todays-young-people-

dont-expect-it-anytime-soon/

Whittington, L. A. & Peters, E. H. (1996) Economic incentives for financial and

residential independence. Demography, 33, 82-97.

Significance of the study

The conduct of this study will acquire and provide useful information about the

relevance of students level of financial independence to their budget management.

Hence, this would be beneficial to the following :

Working students. Working students of different year levels since they are probably

financially independent, this can be a guide for them on how to effectively manage

their finances.

Full time students. This study could open their minds on the reality that they may

face in the future. This may assist them on preparing their selves on becoming

independent individuals.

Students Parents. Parents who have been carrying heavy loads just to send their

children to school, this would lighten that load by opening the minds of their children

to start standing on their own.

University of Mindanao Researches. As this would serve as a contribution of ideas to

future researchers relating their topics in this study, for this will be accessible to the

archives of UMs LIC.

Definition of terms
Financial Independence In this study, this refers to the ability to handle and

manage financial difficulties in terms of earnings and finances.

Economic self-efficacy This refers to the factored measured combining

information from questions concerning future expectations, job, and home

ownership.

Problem solving This refers to the ability of students to unravel and cope with the

difficulties in handling his/her finances.

Psychological factor These are factors that may also influence young peoples

financial independence.

Family factor - This refers to the effect of the family member to the independence in

terms of finances of the students.

References:

Chen, H. & Volpe, R. P. (2002) Gender differences in personal financial literacy

among college

students. Financial Services Review, 11, 107-128.

Hamm, T. (2017).Financial Independence on Smaller Income.Retreived November

23, 2017, from https://www.thesimpledollar.com/financial-independence-on-a-

smaller-income/

Kim, J., LaTaillade, J. & Kim, H. (2011) Family processes and childrens financial

socialization.

Journal of Family and Economic Issues, 32, 668-679.

Lee, J. C. & Mortimer, J. T. (2009) Family socialization, economic self-efficacy, and

the

attainment of financial independence in early adulthood. Longitudinal and Life

Course

Studies, 1, 45-62.

McCusker, M. (2015). 3 Important Financial Considerations for College Students.

Retrieved November 23, 2017, from https://blog.ed.gov/2015/08/3-important-

financial-considerations-for-college-students/
Settersten, Jr., R.A. & Ray, B. (2010) Whats going on with young people today? the

long and

twisting path to adulthood. The Future of Children, 20, 19-41.

White, M. (2013). Financial Independence? Today's Young people Dont Expect it

Anytime soon. Retrieved November 23, 2017, from

http://businesstime.com/2013/04/04/financial-independence-todays-young-people-

dont-expect-it-anytime-soon/

Whittington, L. A. & Peters, E. H. (1996) Economic incentives for financial and

residential

independence. Demography, 33, 82-97.

The characteristics of a college student is due to the influencing psychological factor

and as well as the role of the family. Research indicates that psychological factors

which includes motivation and mental skills, places an important distinction in

relation to the performance, potentials and talent development of a child. (Aujla &

Ferrer,2015)

According to studies, families spend approximately 10% of their annual income to

support their young adult children of ages 18 to 21 (Settersten and Ray, 2010). As the

fundamental unit of the society, the family establishes and raises the biggest part in

terms of responsibility in children's financial socialization. (Kim,LaTaillade and

Kim,2011). Children may follow their parent's economical behavior, a study shows

among the college students describes the relations of financial socialization by parents

in terms of financial learning which in turn relates in the financial attitudes and

subsequently to financial behavior.(Shim et al, 2010.)

1. To determine the perceived level of financial independence of the

BSA/BSAT students in terms of:

1.1. Economic self-efficacy

1.2. Money management

 1.3. Problem solving

2. To determine the student achievement of BSA/BSAT students in terms

of

2.1 school Grades

2.1 extracurricular activities

3. To determine the significant influence of the perceived level of

financial independence on students achievement.

Statement of Hypothesis

Ho: There is no significant influence on students achievements by their

perceived level of financial independence.