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Spending Behavior

Teenagers in today's marketplace have a tremendous amount of spending power (Pippidis,

2004). Over 10 billion dollars were spent by teenagers on food and snacks for themselves in 2000

(Pippidis, 2004). Author Michael Wood is the Vice President of Teenage Research Unlimited, an

organization which has tracked teenager consumer behavior and attitudes for over twenty years

(Wood, 2001). A survey conducted by this organization on teenage spending behaviors was

administered to over 2,000 respondents, ages 12 to 19 years old (Wood, 2001). In sum, teenagers

in 2002 spent 155 billion dollars which is up from 153 billion dollars in 1998 (Wood, 2001). On

average, teenagers spent $84 per week in 2000 (Wood, 2001). The manner in which students

manage their money is based on several factors such as age, personality traits, and knowledge

(Norvilitis, et al., 2006.). Also, students are in a unique situation because they have restricted

incomes and high expenses; therefore, they manage money differently (Micomonaco, 2003.).

According to the NDSU Extension Service, fifty-six percent of teenagers consider

themselves "spenders" rather than "savers”. In terms of spending habits, 63% of Filipino children

spent their money on food and snacks, followed by toys, school supplies and clothes. The research

was conducted to know the spending pattern of the students in different categories like shopping,

movies, fast food, alcohol, etc. It was found that youth spend majority of their money on shopping,

fast food and mobiles. Balint & Horvathne, 2013 conducted a survey among the college students

of Aurangabad city as their sample. This shows little concern for saving and investment among

the young population. The majority of students also use their own money for spending cash (80

percent), clothing (71 percent) and to and from school travel expenses (59 percent).

Although many students practice irresponsible spending habits some students seem to be

financially responsible. One report showed that 56% of undergraduates pay off their balances each
month, as opposed to the general population, of which only 43% pay off their debt each month

(Hoover 2001). The downside to this study was that a credit card company sponsored it so it may

have been biased (Hoover 2001). Even if these results are biased, other studies have shown that

financial education can be valuable to students. High school and college students taking financial

education courses were shown to have higher savings rates (Robb and Sharpe 2009).

Those who study financial literacy generally agree that many, if not most, consumers lack

the financial literacy necessary to make important financial decisions in their own best interests

(Perry 2008; Braunstein & Welch 2002). Concerns about financial preparedness are documented

in recent studies demonstrating that both young and older adults lack the basic knowledge needed

to make good financial choices. These concerns were heightened in a 2005 report by the

Organization for Economic Co-operation and Development (OECD) indicating that financial

illiteracy is widespread across age groups and geographical areas. Most teens usually have one or

two sources of income, either allowance from their parents or from their job (Felipe, 2007.). The

manner in which students manage their money is based on several factors such as age, personality

traits, and knowledge (Norvilitis, et al., 2006.). Also, students are in a unique situation because

they have restricted incomes and high expenses; therefore, they manage money differently

(Micomonaco, 2003.). The more knowledge students have about their financial responsibility and

status the less likely they are to be in debt (Norvilitis, et al., 2006.). Robb and Sharpe (2009) write

that, “a higher level of financial knowledge is negatively related to whether one carries a revolving

balance…among those with a revolving balance a higher level of financial knowledge is associated

with a lower reported balance”. In general, Pinto, Parente, and Mansfield (2005) write that,

“middle school and high school administrators need to be aware that children are getting credit

cards at ever younger ages”,


Saving Behavior

Saving in a simple definition is ‘the excess of income over all expenditure’, where the

expenditures are also mentioned as consumption, which is life contributions and insurance (if any),

and the saving behaviour is the money keeping activity after they use it for their own wealth

(Denton, Fretz, & Spencer, 2011). ‘Saving’ this word was clarified by Keynes (1936) as the excess

of income over what is spent on consumption. In details, saving also can be defining as a portion

of disposal income which excess after consumption of consumer goods.

According to the Maps World of Finance, saving behavior is defined as an understand on

how people save in a country in order to realize the economic condition of that country. It is normal

facts that if people are saving more, the levels of their personal disposable income are increasing

as well. This also implies that the living standard of people will increase as well. People can save

their money in a few common types like Savings Account, Money Markets, Certificates of Deposit,

Savings Bonds and etc. (Vohwinkle.J.). According to Sun2Surf, Gold investment account is the

fast gaining popularity which contributed 5% of the bank’s new customers. The reasons for buying

vary, but the common fundamental theme is the uncertainty in the global economic environment,

and the consequent pressure come under the US dollar. The continued low interest rate regime

globally has also built prospect of eventual inflation pressures, and gold has always been viewed

as the hedge against inflation. (Kang.S.L. and Eva.Y. (2011).).

The world’s average saving rate has been declining since the first oil shock and through

the early 1990s. (Loayza.N., Lopez.H., Schmidt-Hebel.K., and Serven.L. (1998)). However this

trend conceals a large and increasing dispersion of saving rates, particularly among developing
countries. The large heterogeneity in saving behavior is associated to country and time differences

in levels of development, growth performance, and fiscal and financial policies. (Loayza.N.,

Lopez.H., Schmidt-Hebel.K., and Serven.L., 1998)).

Financial literacy can have positive effects on financial behavior. Increased financial

literacy could help individuals understand their saving situations better, save more, and attain

higher economic status and more economic security (Lusardi et al., 2009; Barcus, 2011).

Financial literacy directs the individuals and households to make the budgeting right and

savings, conduct their assets and debts well, and use their savings in a reasonable way in the

financial market. In another study, Hidajat (2015) analyzed the effect of financial literacy on

savings for a 258 fishermen in Indonesia and revealed that financial literacy was a significant

component of savings. Students who had higher financial knowledge were more likely to report

savings behaviour and also reported fewer financial problems. According to the study entitled,

“Savings Behavior And Financial Problems Among College Students: The Role of Financial

Literacy in Malaysia", students with financial knowledge promote better financial management

whether or not they can afford to indulge themselves during the college years. Jamal et al. (2015)

analyzed the interaction between financial literacy and savings in a sample of 1124 high school

and undergraduate students from Sabah state of Malaysia structural equation modeling and found

that financial literacy was a significant determinant of savings.

Reference:
Reference:

Mandell, L. (2005). Financial literacy- does it matter? Retrieved December 15, 2006 from

http://www.vajumpstart.org/Clearinghouse.cfm.

Peng, T. M., Fox, A. J. J., Bartholomae, S., Cravener, G., Martina, T.-C., Ae, P., Cravener, G. (2007). The
impact of personal finance education delivered in high school and college courses. J Fam Econ Iss, 28, 265–
284.

Jump start Coalition for Personal Financial Literacy (2005). 2004 personal financial survey

of high school seniors' executive summary. Retrieved December 1, 2005 from

http://www.jumpstart.org/download.cfm.

Peng, T. M., Fox, A. J. J., Bartholomae, S., Cravener, G., Martina, T.-C., Ae, P.,

Cravener, G. (2007). The impact of personal finance education delivered in high

school and college courses. J Fam Econ Iss, 28, 265–284.

Pippidis, M (2004). Kids in the marketplace; teens in the marketplace. Cooperative

Extension, University of Delaware College of Agriculture & Natural Resources.

Retrieved January 10, 2006 from http://ag.udel/edu/extension.

Hidajat, T. (2015), An Analysis of Financial Literacy and Household Saving among Fishermen in Indonesia.
Mediterranean Journal of Social Sciences, 6(5), 216-222.

Barış, S. (2016), Finansal Okuryazarlık ve Bütçeleme Davranışı: Üniversite Öğrencileri Üzerine Bir
Araştırma. TESAM Akademi Dergisi, 3(2), 13-38.