Liceo de Cagayan University Senior High School Department Page 11

Chapter 1

THE PROBLEM AND ITS SCOPE

Introduction

The capacity to settle on educated and successful choices about utilizing and overseeing

wealth and money is defined as financial literacy (Gale and Levine, 2010). Today, the ever-

changing world is moving in a fast pace, the impressions of being financially literate is a skill

that has become increasingly significant in people's lives, especially on students.

However, the lack of financial literacy affects the capacity of people to satisfy long‐

term goals. Ineficcient money management because of the lack of financial literacy can prompt

personal behavioural patterns that make consumers defenseless against serious financial crises

(Braunstein & Welch, 2002). Financial fallacies influence the well‐being of people and

occurring negative externalities that influence all economy (Huston, 2010). Family members

lacking financial literacy come up with negative choices that influence themselves as well as

their families and the general public by any means (Storm and Levine, 2010).

Students failed to budget efficiently because they spent more than they earned. Their

expenses calculated are more than their income (Wilson, 2008). The act of spending makes

someone feel satisfied. In this manner, it demonstrates that anyone will spend more in order to

make them happier. Hence, students prefer to fork over cash for entertainment instead of

purchasing things ( Lois transporter, CFP ; David Maurice, CFP, 1998 ). Students behaviour

and conception of saving, like all financial behaviour is built inside the social group, achieved
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by particular individuals, helped by institutional and other social offices. Where in one needs

a child centred perspective of financial activity, looking at students as financial specialists in

their own right. It’s opposed that students save more cash as they grow older, however it isn't

clear why (Sonuga-Barke and Webley, 1993).

On the other hand, the advancement of financial literacy in young people has turned

out to be one of the most fundamental issues for policy makers. The first reason is that the

financial decisions faced by young people today are not quite the same as before. Financial

systems, products and services are getting more advanced. The other reason is that young

people will confront more risks in the future because of increased life expectancy, employment

issues, reduced prosperity and uncertain financial outlook (Atkinson and Messy, 2012).

According to an article in the Chronicle of Higher Education, the U. S. Secretary of

Education’s Commission on the Future of Higher Education recommends a promotion of

lifelong learning for students, in order for them to be prepared on their future in entering the

global economy (Field, 2006).

Micomonaco (2003) finds college students tend not to have a budget or calculate credit

card bills based on their actual spending.

It is understood that financial literacy is crucial to successful adulting, FORBES reports

that a mere 17 states require high school students to take a course on financial literacy. A direct

impact was proven by these courses on a student’s ability to make wise financial decisions.

Plus, students who have some personal finance classes under their belts are much more likely

to successfully save money, budget wisely and invest smarter (Hoyt, 2015). A person with

adequate financial knowledge tend to save for the future, retirement and unexpected
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circumstances (Jappelli, 2010). Individuals who have financial literacy at least at a basic level

make better savings (Lusardi and Mitchell, 2011).

However, based on a recent study, looking at what first-year college students know

about finances shows most can only answer about a third of general financial questions

correctly (Metinko, 2015). Most students have low levels of financial literacy and have

difficulty applying financial decision-making skills to real-life situations. According to Tom

Arnold (2015), it is truly disappointing but unexpected for students to lack knowledge of

financial literacy. Incoming freshmen are not very experienced and have more than likely

relied on their parents for financial guidance and financial support.

In today’s economy, consumers are mostly facing difficulties in economic decisions.

Education for these decisions relies on the individual. Although, money can and often does

lead to fulfillment and happiness; however, it can lead to unwanted events if mismanaged.

Therefore, the researchers conduct the study not just because it is aligned with their

strand, but because it is a unique and interesting study that is relevant to students having a hard

time dealing with their financial decisions. With this reason, the researchers are hoping that by

identifying the influence of financial literacy to students’ financial decisions, particularly the

students of Liceo de Cagayan University - Paseo del Rio Campus, some measures may be

helpful to the students and also to the teachers creating ways to train student in making wise

financial decisions.
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Theoretical and Conceptual Framework

The paper will rely on a few theoretical groundings and framework. Firstly, according

to the Rational Choice Theory, an individual should have a proper understanding of his or her

own selection of goals and the consequences of that selection. Rational people always choose

only those options that can offer good results. By means, people will choose to know more on

financial literacy, considering that it will influence their financial decision.

Financial literacy is an arrangement of somebody's mindfulness, information, ability,

state of mind, and conduct to settle on legitimate budgetary choices and achieve his or her

monetary prosperity. Somebody can be characterized as financially educated on the off chance

that he or she is equipped and ready to settle on appropriate financial choices dependent on

his/her back learning. The more an individual is fiscally educated, the more he or she turns out

to be financially complex and equipped. Be that as it may, a great number of people are lacking

as budgetary training and information on financial literacy (Jensen, 1978).

The ordinary microeconomic way to deal with saving and spending choices places that

a completely levelheaded and all around educated individual will expend not as much as his

pay in the midst of high profit, hence saving to help utilization when salary falls. Though,

students might not have their own income, except for working students. Beginning with

Modigliani and Brumberg (1954) and Friedman (1957), the buyer is placed to orchestrate his

ideal saving and spending examples to cover negligible utility up his lifetime.

There is a significant theoretical and exact assortment of work on the financial aspects

of education, five far less consideration has been dedicated to the topic of how individuals

attain and transmit financial literacy. Over the most recent couple of years, be that as it may, a
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couple of papers have started to look at the choice to gain financial education and to consider

the links between financial knowledge, saving, and spending (Delavande, Rohwedder, and

Willis 2008; Jappelli and Padula 2013; Hsu 2011; and Lusardi, Michaud, and Mitchell 2013).

It is inferred that budgetary training projects ought not to produce expansive

behavioural changes for the least educated. This is on the grounds that it may not be

advantageous for the least educated to acquire learning investment costs, given that their

utilization needs are better safeguarded by transfer programs.12 The finding is reliable with

(Jappelli and Padula's, 2011) proposal that less monetarily educated people will be found in

nations with more liberal Social Security benefits.

The study by Delavande, Rohwedder, and Willis (2008) presents a straightforward two-

period model of customer sparing and portfolio allocation over safe bonds and risky stocks,

taking into account the securing of human capital as financial knowledge (à la Ben-Porath,

1967, and Becker, 1975). This work places that people will ideally choose to put resources into

financial knowledge to access higher-return resources: this preparation helps them recognize

better-performing assets and additionally procure financial consultants who can decrease

investment expenses.

Notwithstanding the fact that a few people will normally invest a little or nothing in

financial learning, it is in any case intriguing to take note of that regardless that it can be

socially ideal to raise financial information for everybody in early life, for example, by

implementing financial literacy in high school. This is on the grounds that even if whether the

financially illiterate never invest again and let their knowledge endowment devalue, they can

still will win higher profits for their saving, which produces a considerable welfare support.
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For instance, giving pre-work market financial knowledge to the least educated group enhances

their prosperity by a sum proportional to 82 percent of their initial wealth (Lusardi, Michaud,

and Mitchell 2011).

The theoretical construct predominantly used when studying student’s financial

decision. Here are some factors that affect students’ application on financial literacy; age,

gender, strand, and basic financial knowledge. It is confirmed that financial literacy is, truth

be told, most minimal among the young and the old. There is a widespread lack of financial

and economic knowledge among high school students (Markow and Bagnaschi 2005; Mandell

1997, 2008). College and young adults additionally show low learning, affirming that many

begin their working profession with low levels of financial literacy (Chen and Volpe 1998;

Lusardi, Mitchell, and Curto 2010). According to a study in St. Norbert College, women were

much better budgeters and planners than males. When it comes to students' financial decisions,

gender has an important difference. In terms of awareness on financial knowledge, women

appear to be more aware than men (Carlo Alberto. Org, 2015). Former Chairman of the U.S.

Federal Reserve (Fed) Alan Greenspan, believed that the one of the most common problem in

today's generation and the economy is the lack of basic financial literacy.
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Statement of the Problem

The study attempts to identify the influence of Financial Literacy among Grade – 12

Senior High School Students of Liceo de Cagayan University, Paseo del Rio Campus.

Specifically, this study will seek answers to the following questions:

1.) What is the profile of the respondents in terms of:

 Age

 Gender

 Strand

2.) How financially literate are the Grade 12 - Senior High School Students in terms

of:

 Budgeting

 Saving

 Spending

3.) Is there a significant difference in participants’ characteristics towards their level

of being financial literate in terms of:

 Age

 Gender

 Strand

4.) Is there a significant difference in the participants’ basic knowledge on financial

literacy in terms of being financially literate?

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Statement of Null Hypothesis

The problems 1 and 2 are hypothesis free. On the basis of problem 3 and 4 it has a null

hypothesis that will be tested at 0.05 level of significance, thus:

H0 3: There is no significant difference in participants’ characteristics towards their

level of being financial literate.

H0 4: There is no significant difference in the participants’ basic knowledge on

financial literacy in terms of being financially literate.

Significance of the Study

The researchers believe that the findings of the study will be beneficial to the following:

Students. Gaining such literacy at an early age will help students envision their

financial goals in life. This research study will make them great decision-makers with wise

financial perspective. Also, it will teach them to project values of money in the future in order

for them to make better financial plans and decisions.

Teachers. They will be able to use the findings of this study on helping the students to

become financially literate individuals. This research study will assist them on teaching the

students well in making economic decisions in the future.

University. This study would benefit the University as she will implement about

teaching financial literacy and will be able to produce financial literate students.

Government. The findings will help them realize the importance of teaching financial

literacy to the different schools and to be able to regulate new methods on teaching financial

literacy.
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Future Researchers. The study will go about as basis or reference for future

researchers. Furthurmore, future researchers can expand and examine the study and associate

it with other topics.

Scope and Delimitations of the Study

The scope and delimitations of this research are focused on the influence of financial

literacy on students’ financial decisions in terms of budgeting, saving and spending. The

research study is only limited to the Grade 12 Senior High School students of Liceo de Cagayan

University, Paseo del Rio Campus for the Academic Year November 2018-March 2019.

Definition of Terms

Budgeting. It is the way towards making an arrangement to spend your cash. Budgeting

enables a person to decide ahead of time whether he will have enough cash to buy the things

he has to buy and might want to buy. It is offsetting expenses with your income.

Financial Decisions. Decisions concerning the budgeting, saving, and spending of an

individual.

Financial Literacy. An ability on make effective economic decisions regarding the use

and managenent of money.

Financially Literate. An individual who has the information, aptitudes, and certainty

to settle on capable financial choices that suits his money related circumstances. He has the

skill on how to properly budget, save, and spend his money.

Financial System. A system that permits the trading of assets between investors,

lenders and borrowers. Financial system works at national and worldwide dimensions.
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Saving. An act of economizing where an individual keeps and saves a money or income

not spent for future purposes.

Spending. Act of giving money for goods and services.

Strand. The different academic courses in senior high school divided into four

categories, which include Accountancy and Business Management (ABM), Science

Technology Engineering Mathematics (STEM), Humanities and Social Science (HUMSS),

Arts and Design (A and D).

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INDEPENDENT VARIABLE DEPENDENT VARIABLE

A. Demographic Profile

 Age

 Gender Students' Financial

 Strand Decisions on:

B. Basic knowledge on:

 Budgeting  Budgeting

 Saving  Saving

 Spending  Spending

Figure 1. The schematic diagram showing the relationship of the independent and

dependent variable of the study

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Liceo de Cagayan University

Senior High School
Paseo del Rio Campus
S. Y. 2018-2019

Financial Literacy: Its Influence towards Students' Financial

Decisions

Group Members:
Francisco, Ella Mae
Birog, Kristine Louise
Miñoza, Litton
Arsenal, Lester
Viñas, Sophia Elah
Epan, Trixie Ann
Morre, Bianca
Santican, Jezri
Dalidig, Wali
Abbu, Danielle Anne