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Chapter 1

THE PROBLEM

Financial literacy is the ability to understand how money works, how someone

makes, manages and invests it, and also donates it in a form of charity to help others.

Financial practices like saving, investment, spending and managing financial risk are

some benefits of financial education which can influence individuals’ behavior and

attitude on how to handle finances. Having a better understanding and knowledge about

money management will not only give a sound financial decision making to individuals

but also give confidence as well. But a lot of people don’t give too much attention to it

that is why mostly are still financial illiterate, they don’t know how to budget and save

their money. Hence, it becomes one of the most concerned issues in the developed

countries in recent years especially after the economic crisis of 2008 since the effects of

personal finance are significant to societies. 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.

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

insurance firm, Pru Life UK, the Hong Kong-based regional headquarters Prudential

Corporation Asia (PCA) has intensified its campaign in educating Filipino children to be

more responsive when it comes to money matters (Horario, 2013). Financial education

can benefit consumers of all ages and income levels. For young adults just beginning

their working lives, it can provide basic tools for budgeting and saving so that expenses

and debt can be kept controlled. Financial education can help families acquire the
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discipline to save for their own home and/or for their children’s education. It can help

older workers ensure that they have enough savings for a comfortable retirement by

providing them with the information and skills to make wise investment choices with

their individual pension and savings plans. 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 Fin Scope 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).

The researchers will conduct this study to provide the status of financial literacy

among college students and working professionals 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. This study

was based on the behavioral theories that emphasize certain conditions to achieve desired

behavior, in this case, financial knowledge to ensure wise personal and household

financial management.

Financial training as a strategy can influence peoples’ financial literacy and the

participation in financial market. It is far better that young people will be exposed to

financial education because people with training course tend to affect level of financial

literacy. Learning is the important element of strategic management of the company. The
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more people trained well the more they can make better decision. Moreover, helping

young people by understanding their financial issues is quite important, as younger

generations are likely to face ever increasingly complex financial products and services.

They are also more likely to bear more financial risks in adulthood than their parents,

especially in saving, planning for retirement and covering their healthcare needs (OECD,

2011). The need of financial literacy has become increasingly significant with the

deregulation of financial markets and the easier access to credit, the ready issue of credit

cards and the rapid growth in marketing financial products. Recognizing the importance

of financial literacy, a growing number of countries have developed and implemented

national strategies for financial education in order to improve the financial literacy of

their populations in general, often with a particular focus on younger generations (Grifoni

& Messy, 2012).

Theoretical Framework

This study is anchored by three theories and concepts namely: Planned Behavior

Theory by Schuchardt et al., 2009, Social Learning Theory by Bandura 1986, and Family

Resource Management Theory by McGregor 2001.

These theories are believed to be significant in building up the contention of this

paper. Theoretical foundation for this study was based on the human behavior theories.

Specifically, behavioral theories such as planned behavior theory (PBT) and the

combined social learning theory by Bandura (1986) and family resource management

theory in a way that considers environmental influences that shape where a person
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currently is in regards to their knowledge, attitudes, and personal characteristics.

Planned Behavior Theory

The planned behavior theory and self-determination theory were employed

together to provide insight into the behavior and motivation needed to instill positive

attitudes toward money matters. Any attempt to encourage financial behavior change in

individuals and households requires a better understanding of behavior formation and the

processes needed for assisting consumers in changing their undesirable financial

behaviors for positive ones (Schuchardt et al., 2009). Positive financial behavior may

include, but is not limited to, money management, debt control, and saving behaviors.

Figure 1 Planned Behavior Theory

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The figure shows (Path analysis results on the effect of attitude towards saving,

subjective norm and perceived behavioral control on intention towards saving and saving

behavior.)

Social Learning Theory

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).

Social Learning Theory defines four requirements for learning and modeling behavior:

Attention to the modeling events in the environment and the characteristics of the

observer to attend to those events (emotional, perceptual set, arousal level).

Retention, which is the cognitive component involving remembering what one

observed, coding, organizing and rehearsing it at the cognitive level.

Reproduction or the ability to reproduce or copy the behavior which includes

observing the self-reproducing the behavior and feedback of the accuracy of that

reproduction.

Motivation or behavioral consequence that justifies wanting to adopt the behavior

which includes self-reinforcement.

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Figure 2 Social Learning Theory

Family Resource Management Theory.

The discipline was originally called home management with an emphasis on work

simplification and household efficiency, but since the postmodern period (beginning in

the 1960s) the emphasis has been on viewing the family as a social system and resource

management as one of the many functions of that system (Knoll 1963; Maloch and

Deacon 1966; McGregor 2001). In recent years the most widely used term to describe the

field is family resource management or more simply management, which will be a term

used in the remainder of the entry. Although the family is recognized as the fundamental

societal unit, it is recognized that management principles and techniques apply to singles

as well as to families. Family resource management differs from the way management is

taught in business schools. In colleges of business, the application is mostly to employer/

employee relationships in nonprofit and for-profit organizations. The fields are alike in
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that both are concerned with productivity and decision making but in family resource

management the examples are more likely to be of a personal, home-based or family

nature.

Figure 3 Family Resource Management Theory

Conceptual Framework

Concepts to be applied in this study are shown in Figure 4. There will be two sets

of variables, the Independent and the Dependent variable. The Independent variable

consist of the Socio-Demographic Profile of the Graduating College Working Students

and of the Working Professionals. The Dependent variable will consist of the Practices,

Attitude and Knowledge of Graduating College Working Students and Working

Professionals.
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Socio-Demographic Profile Perception of Financial Literacy

Graduating College Working Students: Graduating College Working Students:

Age Practices
Gender Attitude
Civil Status Knowledge
Income

Working Professionals:
Working Professionals:
Practices
Age
Attitude
Gender
Knowledge
Civil Status
Income

Interventions /Recommendations

Figure 4 Schematic paradigm showing the Interplay of variables in the study.

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STATEMENT OF THE PROBLEM

This study aims to test the significant difference of financial literacy among the

graduating college working students for the academic year 2019-2020 and the working

professionals in Iligan City, Lanao Del Norte.

The specific queries that this study will seek to answer are the following:

1. What is the socio-demographic profile of graduating college working students in

terms of:

1.1 Age,

1.2 Gender,

1.3 Civil Status

1.4 Income?

2. What is the socio-demographic profile of working professionals in terms of:

2.1 Age,

2.2 Gender,

2.3 Civil Status

2.4 Income?

3. What is the graduating college working student’s perception about financial

literacy in terms of :

3.1 Practices

3.2 Attitude

3.3 Knowledge?

4. What is the working professional’s perception about financial literacy in terms of:

4.1 Practices
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4.2 Attitude

4.3 Knowledge?

5. Is there a significant difference between the graduating college working students

and the employed professionals towards financial literacy?

6. What strategies and recommendations can be drawn based on the results of the

study?

HYPOTHESIS

Ho: There is a significant difference between the graduating college working students

and the employed professionals towards financial literacy because working professionals

have higher propensity in making sound financial decision-making.

SIGNIFICANCE OF THE STUDY

The findings of this study will be a great help not solely to the educational sectors

but also to the entire economy. The results of this study will provide information and

valuable insights to the following:

To the School Administrator. The administrator may use the findings of this

study to enhance the education they offer to the students by increasing the level of

programs and seminars conducted to the school.

To the students. This study will aware the students to the need of financial

literacy concepts like money management, budget and the importance of it in financial

decision making. This study therefore aims to inform, enlighten and create understanding
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of the need of personal finance to prevent students and employees to engage in deceitful

transactions.

To the Employees. Findings of the study will enlighten employees to practice

wise financial decisions. Employees who gives information to students may it be any

courses must update themselves with information and knowledge on financial literacy to

avoid unsuccessful and unnecessary decisions.

To the Future Researchers. Findings of this study may serve as a point of

reference for further research which be grateful opportunity to address financial literacy

issues.

SCOPE AND LIMITATION

This study will only focus on observing if there is a significant difference between

the graduating college working students and the employed professionals towards

financial literacy. The researchers limit the conduct of the study to sixty (60) respondents

of graduating college working students and employed professionals in local areas of

Iligan City

DEFINITION OF TERMS

Attitude. Attitude influences an individual's choice of action, and responses to

challenges, incentives, and rewards. It is a settled way of thinking or feeling about

someone or something. In this study, A person’s financial attitude, value or beliefs can

influence their financial stability and goal setting, and be an indicator of financial
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management practices such as savings, spending, loan delinquency, and credit card debt

(Chien and Devaney, 2001; Parotta and Johnson, 1998).

Financial Decision. Financial decisions are the decisions concerning the

financing. Financing is the process of deciding the source, use and measures to control

the funds in any kind of business and to see to it that the funds are put to its best.

Financial education. Financial education, according to Hogarth, (2006), has been

conceptualized to include: (i) “being knowledgeable, educated, and informed on the

issues of managing money and assets, banking, investments, credit, insurance, and taxes;”

(ii) “understanding the basic concept underlying the management of money and assets,”

and (iii) “using that knowledge and understanding to plan, implement, and evaluate

financial decisions.” To Norman, “Financial education refers to knowledge or an

understanding on the importance of money and the use of money, it answers the question,

why spend on this as opposed to that.” (Norman, 2010, p. 200).

Financially Educated Person. “Is a person who is financially literate and is able

to allocate finances objectively or wisely” (Norman, 2010).

Financial literacy. “Financial literacy refers to the set of skills and knowledge

that allows an individual to make informed and effective decisions through their

understanding of finances.” (Norman, 2010, p. 200). The Government Accountability

Office (GAO) also defines financial literacy as “the ability to make informed judgments

and take effective actions regarding the current and future use and management of

money” (Harnisch, 2010).

Financial Practices. Refers to the actual application or use of an idea, belief, or

method, as opposed to theories relating to it. The term “financial practices” refers to the
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set of common methods or standard operating procedures you develop for carrying out

accounting, financial reporting, budgeting and other activities related to business

finances.

Knowledge. This refers to the fact or condition of knowing something with

familiarity gained through experience or association. It is also the sum of what is

known, the body of truth, information, and principles acquired by humankind (Merriam-

Webster). In this study, it refers to the ideas, information and learnings of graduating

working students of Iligan City and the employed professionals on financial literacy.

Working Professionals. Professional means relating to a person's work,

especially work that requires special training. You use professional to describe people

who do a particular thing to earn money rather than as a hobby.

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Chapter 2

REVIEW OF RELATED LITERATURE AND RELATED STUDIES

This chapter covers several findings of both foreign and local studies related to

the topic selected by the researchers. . Those that are included in this chapter helps in

familiarizing information that are relevant and similar to the present study.

Related Literature

Financial Literacy

Financial literacy is a combination of awareness, knowledge, skill, attitude, and

behavior necessary to make sound financial decision and ultimately achieve individual

financing wellbeing (Organization of Economic Co-operation and Development).

Other definition by President Advisory Council on Financial literacy, financial

literacy consist of ability to use knowledge and skill to manage financial resources

effective for lifetime (Pailella, 2016).

Financial literacy has been linked to several learning theories including but not

limited to motivational, contextual teaching and learning, and social learning (Baron-

Donavan, Wiener, Gross, & Block-Lieb, 2005; Engelbrecht, 2008; Jorgensen & Savlaj,

2010). Xiao (2008) explains financial literacy as knowledge based while financial

behavior is behavior based. He states that although an individual’s financial literacy may

be high, behaviors may or may not be based on knowledge. Although many know risks of

credit, high costs of interest, and penalties associated with not adhering to repayment

terms, behaviors may not indicate such knowledge. Thus, choosing theories to support

both financial literacy and financial behavior are important as the foundation for this
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study. Two of the most discussed theories on financial behavior include the theory of

planned behavior (TPB) and the transtheoretical model of behavior change (TTM) (Xiao,

2008).

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). Jump Start(2009) noted and argued that students who took up financial literacy

courses were not better off than those who did not.

According to Huston (2010), definition of financial literacy has evolved from

merely being knowledgeable on financial matters to the ability to make use of such

literacy on day to day financial decisions. However, the terms financial literacy,

knowledge and financial education have been used interchangeably in the literature. For

instance, Fernandes, Lynch Jr and Netemeyer (2014) used financial literacy and financial

knowledge interchangeably. Huston (2010); Potrich et al. (2016) argued both these terms

are conceptually different and warned future researchers the dangers of using them

interchangeably. Huston (2010, p. 306) defined financial literacy as “measuring how well

an individual can understand and use personal finance-related information”.

Financial literacy is low even in advanced economies with well-developed

financial markets. On average, about one third of the global population has familiarity

with the basic concepts that underlie everyday financial decisions (Lusardi and

Mitchell, 2011c).
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Graduating College Students

In the college-age population, the top reason (mentioned by 37.58%) for not going

to college or university was the high cost of higher education; moreover, about 16.0% of

those who opted not to pursue higher education report that they did so in order to look for

work to earn money for their families (Reyes et al., 2015).

Some colleges have even taken steps to educate young people to improve their

financial literacy. The Take Charge America Institute (TCAI) located at the University of

Arizona does just that. Through an elective course that focuses on personal finance and

American culture, and through a group of students called “Credit-Wise Cats” who serve

as financial ambassadors presenting financial seminars, the TCAI is reaching many

students to make informed financial choices. At the Institute, one of the programs that

reaches the most students is the Family Economics and Financial Education (FEFE),

which involves free materials for teachers containing curriculum for high school students

(University of Arizona, 2008).

Further advances were discussed by Bernheim, Garrett, and Maki (1997) to

emphasize both the positive and negative aspects of state mandates to school systems. A

positive aspect of the mandated curriculum allowed learners an opportunity to practice

financial literacy after learning about the topic. A negative consideration included the

pressure for academic success on both students and instructors of the program. In many

states, the “mandated” programs were not defined. The broad terms used in these

mandates such as financial capacity for daily life left much room for individual

interpretations by all stakeholders. Without detailed information to be taught, students

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failed to see the relevance and importance of the topic and huge variations in course

content emerged (Bernheim, Garrett, & Maki, 1997).

Several organizations also have demonstrated an interest in improving the

financial literacy of college students, which is important for a number of reasons.

Obviously, the financial decisions students make in college have an important influence

on their financial situation after college. In addition, their financial situation in college

can affect their academic performance. Lyons (2003) found that one in three students

reported his/her financial situation was “likely” or “somewhat likely” to affect the ability

to complete a college degree. Bodvarsson and Walker (2004) reported that, after

controlling for a wide variety of factors that affect college performance, students

receiving at least partial coverage from their parents for tuition and books were more

likely than self-financed students to fail courses, to be placed on academic probation, and

to earn lower GPAs.

One of first educational acts that helped establish the importance of financial

literacy was the Financial Literacy and Education Improvement Act. It was part of the

Fair and Accurate Credit Transactions (FACT) Act of 2003 which was to improve

financial literacy and education in the United States. It named the Secretary of the

Treasury as the head of the Financial Literacy and Education Commission. It also

mandated that 19 other federal agencies and bureaus, including the Commission, would

organize the promotion of financial literacy between the public and the private sectors

(United States Department of the Treasury, 2002). With this act, there were many

strategies developed, one of which was the Treasury Department and Midwestern

University Collaborate to Develop Money-Based Math Curriculum. In 2001, the U.S.

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Department of the Treasury, working with Midwestern University, developed Money

Math: Lessons for Life. It is a curriculum that uses real-world personal financial

scenarios to teach mathematical concepts and basic finance to students in grades seven

through nine (Financial Literacy and Education Commission, page 108). This endeavor

shows education and government working hand in hand to provide training and guidance

to help students learn basic financial ideas.

During the 1950s, the issues of financial management, income and expenditure,

security and retirement, housing, budgeting, saving, and marital adjustment comprised

fifty percent of the research that was done in the field of home economics (Israelson,

1991). These subject areas were gaining in importance. Our country was becoming aware

of how each of these areas was an essential part of education.

In the 1990s, organizations began to realize that financial education was necessary for

the youth of today in order to make consumer decisions in their future. To determine the

financial literacy level of high school seniors, the Jump$tart Coalition for Personal

Financial Literacy has been performing surveys since 1997. The average score of high

school seniors later in 2005 was a 52%-a failing score on most United States grading

scales. It was also found that only 16% of the respondents had taken an entire course in

Personal Finance in high school (Duguay, 2006). This survey provides evidence that

students have not had the training or the knowledge to make wise decisions about their

economic future or their financial well being. The financial education programs were

divided into three major categories (Jump$tart, 2009). The first was aimed at broad

personal finance topics including budgeting, saving, and credit management. The second

was targeted toward specific training for retirement and savings and was generally
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offered by employers. The third category addressed home buying and home ownership.

The first category, broad financial literacy education, has been the most evident in

secondary education. The Jump$tart coalition for Personal Financial Literacy was the

largest organization in the U.S. assisting with financial education. The mission of the

coalition was to advance personal financial education in schools, particularly through

promoting the use of standards for grades K-12 (Jump$tart Coalition, 2011d).

In addition to the JumpStart Coalition, the Department of the Treasury has been a

leader in encouraging the development of financial education. Through their efforts, the

Office of Financial Education was developed in May of 2002. Part of their mission is to

help Americans make better choices in managing their finances especially in areas as

saving, home ownership, retirement planning, and credit management. Through the

Department of the Treasury, the Financial Literacy and Education Commission has been

working to develop financial education for all people in the United States (United States

Department of the Treasury, 2009). This agency is very aware of the amount of debt in

our country and how the conventional means of the past have caused a negative economic

outlook. It is through these efforts that progress can continue to be made to reverse the

current trend in our spending consumerism.

In October of 2002, the Treasury Department released The Treasury Department

White Paper —Integrating Financial Education into School Curricula. This White Paper

was the result of a panel consisting of key national youth education groups, and was

spotlighting the advantages of adding financial education to math and reading curriculum

in a standards-based education system. In this report, there were five areas to bring
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financial education to schools called access points. They were through textbooks, testing,

financial education materials, state standards for education, and teacher training. The

Treasury Department indicated that this report could serve as a guiding force in helping

to develop financial education (United States Department of Treasury, Integrating

Financial Education into School Curricula). This is again providing us with another way

13 the United States Treasury has been instrumental in helping to create a movement to

remedy a sticky financial predicament.

Working Professionals

The identification and classification of employees' desire for financial education

according to their demographic characteristics and financial behavior is extremely useful

to employers. Employers should assess their population and appropriately tailor

workplace financial education to meet the desires of the majority. Furthermore, the

recognition that many employees may be unwillingly to pay for financial education

should be a consideration when seeking out the potential sources of information.

According to Garman, Leech, and Grable, there is a strong link between financial

stress and lost employee productivity. In fact, results from the 1998 Stressful Life Events

National Survey confirm the link between personal financial difficulties and stress

(Hobson, Delunas, & Kesic ). Of the top-20 most stressful events rated by respondents,

financial and economic issues were one in a series of five recurring themes. Furthermore,

of these five recurring themes, financial and economic issues were the only ones found to

have a direct relationship to work.

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Financial Attitude

College students are now making more independent decisions including choices

related to their finances. Using a national online survey of currently enrolled college

students ages 18 and over a study estimates the effects of students’ financial behaviors

and financial well-being controlling for demographics, financial characteristics, and

financial 21 education (in high school and in the community) (Gutter and Copur, 2011).

College students who took a course in high school were more likely than those who

took a course through the community, to make positive financial behaviors. The

community financial education course may not have gone in as much depth as the high

school course which may explain the lack of statistical significance.

According to Shahrabani (2012), Laily (2013), and Sundarasen, et al. (2016) that

financial literacy has a significant positive effect on financial management behavior. The

higher the level of financial literacy, the behavior of personal financial management will

also be better. Conversely, if the lower level of student financial literacy, then the level of

personal financial management behavior is also getting worse.

In social environments, students interact with parents, peers, friends and

employers. Researchers have shown that social environments can have an effect on

individuals‘ behaviors. Clarke et al. (2005) found that the financial role takes place most

often from parents. From the early days, it was found that, parents play a key role in the

socialization of their children. Hence, researchers (e.g., Sabri, 2011; Jorgensen, 2007)

found that parents play a significant role in influencing their children`s financial

behavior. Calamato (2010) stated that 87% students learn how to manage money from

their parents and added that nearly all teenagers learn about.
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Financial Knowledge

In the realm of financial education, the skills and knowledge that students need

can make or break families financially. Topics that are needed to develop understanding

in the development of personal economics are credit, real estate ownership, retirement

planning, taxation and investing (Shaker, 2001). There are many issues that financial

educators face especially in the area of knowing what the key factors are that need to be

addressed. In reviewing professional issues for financial educators, it is noted that the

following concepts are used: economics, finance, consumer behavior, science, history,

sociology, and family science. As educators, skills are developed in various financial

topics ranging from budgeting to retirement plans (Schuchardt, Bagwell, Bailey,

DeVaney, Grable, Leech, Lown, Sharpe, & Xiao, 2007). Those concepts along with

many others in financial education can be topics that can add to the knowledge and

skills of high school students, college students, and most importantly the consumer.

Today’s citizens need that information to make wise decisions on money and the

management of it. The higher level of one's financial literacy the better the behavior of

financial management of people.

The effects of low levels of financial literacy can also manifest in financial stress

and lower productivity at work as a result of poor financial behaviors in employees’

personal lives (Joo & Garman, 1998; Garman, Leech, & Grable, 1996). These negative

personal financial effects are seen throughout the workplace and have negative financial

consequences for employers as well. Employees use work time to contact creditors, seek

out additional credit sources, and talk with co-workers and their supervisors about

financial problems (Garman, 147 1997). The associated costs incurred by employers from
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these negative work-time behaviors include lower productivity, increased absenteeism,

frequent tardiness, accidents from increased risk taking, increased health care costs for

financial stress-related illnesses, employee theft, time lost on the job dealing with

personal finance matters, and increased employee turnover (Garman, 1997).

Financial education programs can be better positioned to help improve the levels

of financial literacy among Americans and address the negative associated behavioral

effects of a lack thereof, such as lack of planning and under saving for retirement. For

financial educators who are interested in developing and facilitating comprehensive

financial education programs for employee or other groups due to the broader nature of

comprehensive financial education program development, finding the proper balance of

both breadth and depth of program modules is required.

Related Studies

Lusardi and Mitchell (2007) suggest that the less financially literate may be more

likely to unknowingly commit financial mistakes, less likely to engage in recommended

financial practices, and less likely to be able to cope with sudden economic shocks. They

also pointed out that these decisions are far from simple, requiring consumers to gather,

process, and project data on compound interest, risk diversification, inflation, and the

asset universe. Furthermore, large discrepancies in measured financial literacy exist,

potentially placing some economically vulnerable groups (the poor, the less-educated,

and minority households) at further disadvantage.

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

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Companies communications manager Aileen Gajo, this activity falls under their NCCC

Cares program to educate the public on basic financial management. 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 recordkeeping, 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.

In a survey conducted at the University of Hawaii in Monoa, students indicated

that they were interested in knowledge about investing in their future, getting ahead

financially after graduation, avoiding credit problems, and budgeting income and expense

(Masuo, Kutara, Wall, & Cheang, 2007). In a study of 7432 college students at University of

Missouri-Columbia, there is a growing concern with credit debt and compulsive buying

behavior. At the conclusion of the study it was suggested that financial education programs

could be offered on campus and that it would be a fruitful discussion to offer a Personal

Finance course for college students (Norum, 2008).

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Family educational programs are rare. EvenStart is a family-oriented financial

literacy program focusing on family involvement and discussion of consumer issues of

savings, credit and debt, and money management (Chodkiewicz, Johnston, & Yasukawa,

2005). A positive impact has been found based on studies with parent and children

involvement (Lyons, 2008). Financial educators find it challenging to isolate financial

counseling from education (Todd, 2002). Although most financial education is provided

in the school setting, a majority of educational efforts have been aimed at low-income

families (Braunstein & Weich, 2002). While all of these factors are issues to be noted,

actual data for delivery method, time spent on instruction, and type of instruction are

often not reported in studies (Bernheim, Garrett, & Maki, 2001). The need for detailed

instruction during the course delivery has been shown to help classify programs as

successful or unsuccessful. Future research to determine best methods for follow-up,

delivery, long-term retention of information, and application of materials would yield

useful information (Duflo & Saez, 2003; Braunstein & Welch, 2002; Hopley, 2003).

Some research drew questions from previously created financial literacy tests,

including the Jump$tart Coalition questionnaire (Mandell & Klein, 2009; Bongini,

Trivellato, & Zenga, 2012). Huston (2010) suggests using the four finance content areas

that already exist in literature and asking between 12 and 20 questions per Kim and

Mueller’s (1978) rule of thumb that the minimum number of items having meaningful

loadings on a domain factor varies between three and five. Most surveys include

questions regarding demographic data, and some include questions associated with

financial behaviors There is also a wide range of audiences that researchers target,

including both student and adult subjects, international and local subjects, and subjects
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within different ethnic groups (Bongini, Trivellato, & Zenga, 2012; Mandell & Klein,

2009; Nicolini, Cude, & Chatterjee, 2013; Knoll & Houts, 2012).

The National Longitudinal Survey of Youth asks people between the ages of 23 and

28 three questions about financial literacy (Lusardi, Mitchell, and Curto, 2010). Only 29

percent of those surveyed answered all three questions correctly and a large portion of

people answered “do not know” to the questions suggesting that there are generally low

levels of financial literacy among young people. Those who went to college were more

financially knowledgeable on the three topics and were 4-15 percentage points more likely

to answer each of the three questions correctly even after controlling for other demographic

characteristics, time preference, and parent education.

Whether influenced by the absence of a universal definition or not, the methods

used in research to measure financial literacy also lack uniformity. Some research pulled

secondary data from previously administered surveys such as the Health and Retirement

Study (Murphy, 2013) and other research collected primary data by administering

surveys (Mandell & Klein, 2009) created specifically for the study or conducting

interviews (Bongini, Trivellato, & Zenga, 2012). Regarding the surveys that are created

for a study, there is no consistency pertaining to the number of questions asked, with the

minimum amount being 3 and the maximum 68 (Huston, 2010). However, all research

generally used one or more of the following content areas on which the questions are

based: money basics, investing, borrowing, and protecting resources (Huston, 2010).

Bernheim AND Garrett concluded that education is strongly related to

participants' retirement savings behavior. Specifically, participants who work for firms

that offer retirement education were more likely to have higher rates of retirement
 27

savings. Moreover, rates of retirement savings were also found to be higher for

respondents who participated in employer education than for those who did not. Results

also indicated a positive correlation between workplace education and rates of

participation in 401 (k) plans. Over 83 percent of respondents reported that they

participated in 401 (k) plans when education was offered, as compared to 70 percent who

participated in the absence of employer education. Furthermore, 401 (k) participation

rates were higher for those respondents who made use of employer education as

compared to those who did not.

In 1998, Joo and Garman surveyed a different sample of clerical workers to

explore the relationship between employees' financial behavior and their desire to

participate in workplace education. Results showed that employees desire different

finanCial seminars based on their demographic characteristics and current financial

behavior. According to Joo's research, employees who desired education on retirement

planning tended to have higher incomes, lower levels of stress, and fewer poor personal

financial behaviors. Employees who desired general financial education seminars on

topics such as debt management and budgeting, tended to be younger, lower income

individuals.

Joo and Grable (2000) also used regression analysis to study the effects of

financial education on pre-retirees' savings and decisions regarding retirement. Using

existing data from the ninth annual Retirement Confidence Survey, researchers identified

factors associated with a participant's decision to establish a retirement savings program.

A statistically significant correlation was established between the presence of employer

education and a participant's decision to establish a retirement program. According to Joo

 28

and Grable, "those who received some kind of information from their employer were

more likely to have a retirement investment or savings program compared to those who

did not receive any information,". The precise nature .of the information employers

provide is unclear. In this study, an informational brochure was treated as the equivalent

to a series of seminars.

Programs targeted toward home ownership and savings plans have been

successful in raising savings rates as well as home ownership rates by individuals (Duflo

& Saez, 2003). Borrowers who participated in a home ownership course were able to

reduce debt, decrease number of accounts, and improve bank card risk scores

(Elliehausen, Lundquist, & Staten, 2007). Counseled borrowers for home purchases were

found to have 19% fewer 90-day delinquencies than those without counseling prior to

receiving a mortgage (Hirad & Zorn, 2001). These studies contribute to the idea of Just-

In-Time Financial Education. Just-In-Time Financial Education is based on the education

of participants when they need to know the material for a particular financial need

(Mandell, 2006b). Examples of this idea allow home buyers to learn more about home

ownership as they enter the housing market, and individuals purchasing insurance may be

receptive to information regarding risk management as they choose insurance options for

their needs.

Insights

This chapter section is to give an overview of the insights the researchers learned

from the Related Literature and Related Studies.

 29

Insights Learned from Related Literature

The literature reviewed made the researchers understand the effect of financial

literacy in students and as well as to the employees. Financial literacy is very important in

today’s world. Being aware of money management, income, saving, and spending can

equip young people with knowledge to fight fraud and take charge of their finances. In an

age of unprecedented debt and students and employees are destined to face challenging

times financially.

Financial literacy has a significant positive effect on financial management behavior

and social environments can have an effect on individuals‘ behaviors as well. Social

environment which includes family, friends, community and media shapes individuals

into who they today. A person can learn through time in a way of interacting to society

where values, attitudes and knowledge are being understood. Although an individual’s

financial literacy may be high, behaviors may or may not be based on knowledge. People

do not invest or save money because they are knowledgeable about it, their behavior

towards saving money or investing money will vary if they really intended to save or they

are just doing it because it’s the norm. Although many know risks of credit, high costs of

interest, and penalties associated with not adhering to repayment terms, behaviors may

not indicate such knowledge.

Understanding financial literacy one must have a combination of awareness,

knowledge, skill, attitude, and behavior necessary to make sound financial decision.

It provides the necessary knowledge, skills and tools for individuals to make informed

financial decisions with confidence and to manage personal wealth. Being

 30

knowledgeable on financial matters to the ability to make use of such literacy on day to

day financial decisions.

For students, the financial decisions they make in college have an important

influence on their financial situation after college. College students are now making

more independent decisions including choices related to their finances. Social

environments can have an effect on individuals‘ behaviors. In social environments,

students interact with parents, peers, friends and employers.

The effects of low levels of financial literacy can also manifest in financial stress

and lower productivity at work as a result of poor financial behaviors in employees’

personal lives. These negative personal financial effects are seen throughout the

workplace and have negative financial consequences.

Insights Learned from Related Studies

The studies reviewed by the researchers understand the effect of financial literacy to

the graduating college working students and working professionals. A person who is

financially literate is more capable in dealing with money matters and is responsible for

the management of his wealth for the purpose of improving his financial health.

It means having an ability to understand basic financial products people deal with

in their everyday lives that considerably affect their economic situation and welfare.

Financial literacy is achieved through financial education. Financial education should

enable individuals to develop their decision-making competencies related to money,

dealing with it as well as with the risks of its investment. Financial education includes the

proper management of money, price and budget literacy. This study is conceptualized on
 31

the premise that financial literacy plays important role every individual. The result of the

research can provide evidence of baseline information about financial literacy of the

graduating college working students and working professionals here in Iligan City.
 32

Chapter 3

RESEARCH METHODS

This chapter contains the discussion of the methodology to be used in conducting

this study. It will present a description of the research design, research environment,

respondents and sampling procedure, research instrument and its validity, data gathering

procedures and statistical treatment to be used.

Research Design

This research used descriptive-comparative method. This method allowed the

researchers to compare the differences between two variables. This study will analyze the

similarities and differences between two groups in attempt to having better understanding

on the subject of the study. Comparison lead to new insights and better understanding of

all participants involved (Questionpro, 2019; Retrieved from https://www. questionpro.

com/blog/descriptive-research).

Respondents and Sampling Procedures

The participants for this study will consist of graduating college working students

for the academic year 2019-2020 and will also consist of working professionals in the

local areas of Iligan City. They will be the key informants in response to the goal of this

study. They will serve as the main source of information to assess their practices, attitude

and knowledge towards financial literacy. A total of ninety (60) participants will be

chosen to provide data pertaining to this study. There will be thirty (30) participants will
 33

be graduating college students coming from randomly selected tertiary schools and thirty

(30) participants will be coming from the working professionals employed within the

city.

Research Instrument and Its Validity

This study will use an adopted and modified instrument to measure financial

literacy. The researchers will use the questionnaire of Obago Samwel Onyango (Financial

Literacy on Management of Personal Finances among Employees of Commercial Banks

in Kenya) and will have it checked by the adviser before distribution. The researchers

also will seek for advices from the senior faculties and academicians at St. Peter’s

College, Iligan City for more suggestions and recommendations for the research.

The questionnaire comprises of two major parts. The first part constituted the

socio-demographic profile of the participants in terms of age, gender, civil status and

income. The second part comprised the respondent’s perception of financial literacy in

terms of financial practices, financial attitude and financial knowledge.

Data Gathering Procedure

In gathering the data, the researchers will first ask the permission of the school

dean to conduct the survey. The researchers will make a letter that will be signed and

sealed by the school dean to make things formal. The researchers will then distribute the

letter to each respondent to secure permission from them to participate in the study.

On the day of data gathering additional instructions will be given. The

questionnaires will be distributed which will contain the profiling form attached therein is
 34

a letter for the respondents assuring them of the confidentiality of their data and the

questionnaire statements. The data will be collected and be interpreted by the statistician

to get reliable result. Scores will be indicated on the potential responses which were the

basis for the scoring of the answer.

Scoring System

The scoring procedure will be done according to the instructions given along with

the tool. The response can be scored by judging the every item by the highest rating to

lowest rating. With this said, 1 - Strongly disagree, 2 - Disagree, 3 - Agree, 4- Strongly

Agree. A response containing the basic key elements will receive points indicated in the

given potential responses.

Statistical Treatment

There were three statistical tools used for this study namely: Paired t-test and

Frequency Distribution.

1. Frequency and percentage - This will be used to describe the socio-demographic

profile of respondents.

Formula:

P = f / n ×100

Where:

P = Percentage

f = Frequency
 35

n = Total Number of Respondents

2. Mean and Standard Deviation. This will be employed to get the interacting effect of

the perception of respondents towards financial literacy.

Formula:

𝜮𝒘𝒙
𝑾𝒆𝒊𝒈𝒉𝒕𝒆𝒅 𝑴𝒆𝒂𝒏 =
𝜮𝒘

Where:

Σ = the Sum of

w = the Weights

x = the Values

3. Paired t-test – This will be used to measure the dependent variables. An extremely

powerful test for detecting differences (it is, in fact, the most “sensitive” of all our five

tests). It is usually used for “Before vs. After” type experiments, where the same

individuals are measured before and after the application of some sort of treatment. It

can also be used for “Left vs. Right” experiments, where two sides of an individual are

given two different treatments.

Ho: SB = SA

…where S stands for mean rate of successful attacks (before vs. after)--
 36

4. Chronbachs alpha - Cronbach’s alpha is a measure of internal consistency, that is,

how closely related a set of items are as a group. It is considered to be a measure of

scale reliability.

Formula: α=N¯c¯v+(N−1)¯c

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