THE INFLUENCE OF FINANCIAL LITERACY, FINANCIAL

BEHAVIOR AND INCOME ON INVESTMENT DECISION

Abstract

This research aims to analyze and measure the influence of financial literacy, financial
behavior and income on investment decisions. The type of research used is quantitative
research descriptive method. Types and data sources used are primary data that is data
collected and processed by the researcher himself from the object. The amount of
population in this research is 29.231 student and the sample technique used is random
sampling by using slovin formula. Data were collected by using questionnaire method
from 100 student become sample in this research. Data analysis techniques used in this
research are descriptive statistical analysis, data quality test, classical assumption test,
multiple linear regression test, F test, t test and coefficient of determination with the help
of software program SPSS version 22. The results of this research indicate that financial
literacy no significant effect on investment decisions, while financial and income
behavior have a significant effect on investment decisions.

Keywords : Financial Literacy, Financial Behavior, Income and Investment

Decisions

1. INTRODUCTION

Monetary Literacy (Financial Literacy) is an absolute necessity for each person to

maintain a strategic distance from money related issues since people are frequently
looked with a tradeoff circumstance where one must forfeit one enthusiasm for different
premiums. As indicated by Robb and Woodyard (2011) adequate money related
proficiency will give a constructive impact on the monetary conduct of an individual,
for example, set or apportion funds fittingly.

Commercialization frame of mind that turned into a propensity as of now make

individuals less have a culture of putting something aside for instance as far as
contributing. There are as yet numerous individuals who have not understood the
significance of having money related administration in their own lives since individuals
still feel that individual monetary speculation arranging is just done by individuals who
have high salary as it were. However, then again, there are likewise people who have
high wages yet have no venture anticipating their own funds (Pritazahara, 2015).

As indicated by Masassya (2006) states that the majority of the designation of assets
focused on a few things to be specific, venture, sparing and utilization. Among the
three, the most useful kind of portion later on is speculation. Arranging interest in close
to home fund is significant, on the grounds that it is an autonomous learning procedure
to oversee funds in the present and future (Pritazahara, 2015).

Speculation is a penance made these days with the point of increasing more
prominent advantages later on (Haming and Basalamah, 2010). One of the variables
expected to make a speculation is capital or assets. Wellsprings of assets can emerge out
of advances or individual assets. Notwithstanding information on money, pay and
involvement with contributing additionally influence speculation choices, the more pay
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an individual has in dealing with the funds, the better the method for dealing with his
accounts for the future by considering the dangers that will happen and enduring those
dangers (Nababan and Sadalia, 2013).

In light of the World Bank overview, it shows that Indonesia's money related
education rate is just 20%. This is lower contrasted with ASEAN nations, for example,
filipino 27%, Malaysia 66% Thailand 73% and Singapore 98%. In this manner it is
required Financial Literacy in improving the economy. Understudies as youngsters
won't just face the expanding intricacy in money related items, administrations and
markets, however they are bound to confront monetary dangers later on. (Lusardi and
Mitchell, 2007). The issue in this examination is the low budgetary proficiency and
monetary conduct that happens among the understudies, this is seen during introductory
perception in certain understudies of the Faculty of Economics, Pamulang of University
said that it is as yet not ready to deal with their very own way of life and example due to
the significant level of wasteful that makes them unreasonable in purchasing their needs,
other than likewise in dealing with the cash they get from guardians or researchers, they
looked with an assortment of complex money related alternatives, including paying
educational cost, paying rent or lease, reimbursing credits, planning, sparing, after
protection and in any event, working so they need to adjust their lives both in the
working environment, school and life social. This reality is the thing that supports the
improvement of the hypothesis of money related conduct (monetary conduct
hypothesis) which is the use of brain research in the order of budgetary science.
Budgetary conduct is instrumental in settling on venture choices. The venture leader
don't generally carry on in a way reliable with the suspicions made by the discernment
and comprehension of the data got (Christanti and Mahastanti, 2011).

When settling on venture choices, people are moderately overwhelmed by

the normal utility hypothesis. Expected utility hypothesis is a dangerous choice and
means to accomplish most extreme outcomes (Tversky and Kahneman, 1981). This
hypothesis accept that people who settle on choices are sound, yet frequently leaders are
not normal at their preferred hour (Robison, Shupp, and Myers, 2010). Kahneman and
Tversky (1979) censure the utility hypothesis utilized in settling on venture choices
particularly when hazardous conditions depend on human mental elements. At that point
the utility hypothesis was created and prospect hypothesis was conceived. Human
conduct in settling on choices depends on mental variables, settling on a hazardous
choice can be translated as a decision or bet. Manurung (2012) states that people in
contributing not just utilize evaluations of the possibilities of their venture instruments,
yet mental factors likewise have a major job in deciding basic leadership. Figure out
how mental components are passionate can influence monetary choices, and budgetary
markets communicated by Nofsinger (2001) by characterizing the hypothesis of money
related conduct is the investigation of how people really carry on in money related
choices. Social money (conduct account) is a methodology that clarifies how individuals
make ventures or exercises identified with fund is impacted by mental variables.

The issues in this exploration are additionally communicated by Welly's (2016)

study which shows that parts of monetary education, for example, general information
on close to home fund, reserve funds and advances, protection, and speculation at the
same time (entire) impact speaker's venture choice, workers, and understudies at STIE
Multi Data Palembang. Furthermore, this examination is likewise fitting directed by Ni
Made Dwiyana Rasuma Putri et al (2017) said that budgetary proficiency has the best
impact in deciding the conduct of individual speculation choices contrasted and
sociodemographic factors. Then, as indicated by examine Musdhalifa (2016) shows that
the noteworthy impact where locus of control, budgetary information and pay
emphatically influence the choice to put resources into the network of Makassar.

2
Theoretical Framework
Here is a conceptual framework image of the variables to be studied as follows:

Financial Literacy (X1)

Investment
Financial Behavior Decision
(X2) (Y)

Income (X3)

Figure 1. Conceptual Framework

Hypothesis
Based on the description and framework that has been described, the researcher formulates the
research hypothesis as follows:
H1: There is the influence of financial literacy on investment decisions
H2: There is influence of financial behavior to investment decision
H3: There is an influence of income level on investment decisions
H4: There is the influence of financial literacy, financial behavior and income level
collectively to investment decisions

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2. LITERATURE REVIEW

2.1. Financial Literacy

Financial literacy and skills in managing personal finance are essential in everyday life. Krishna,
Rofaida, and Sari (2010) explain that financial literacy helps individuals to avoid financial
problems. Financial Literacy according to the Financial Services Authority (2013) is a series of
processes or activities to increase the knowledge, confidence and skill of consumers and the
wider community so that they are able to manage finances better.
According to Kim (2001) in Sabri (2011) financial literacy is the basic knowledge that people
need to survive in modern society. This basic knowledge involves knowing and understanding
the complex principles of spending, saving, and investing. Meanwhile, according to Lusardi &
Mitchell (2007) describes financial literacy is the knowledge that someone has about financial
instruments, including, one's knowledge about savings or saving, insurance or insurance,
investment and other financial instruments. Financial Literacy can be interpreted as financial
knowledge, with the aim of achieving prosperity.
From the above understanding, it can be concluded that financial literacy is a person's ability
to know finance in general, where the knowledge includes savings, investments, debt,
insurance and other financial instruments.

2.2. Financial Behavior

Financial Behavior is a conduct identified with Financial applications.

As indicated by Ricciardi (2000), money related conduct is an order of science wherein the innate
connection of controls of science and ceaselessly coordinate with the goal that the exchange isn't
done segregation. An individual who needs to learn money related conduct must have a
comprehension of the mental, sociological, and Financial angles. Shefrin (2000) characterizes
money related conduct as an investigation of how mental wonders influence their Financial
conduct. Nofsinger (2001) characterizes the Financial conduct of figuring out how people really
carry on in a money related setting. Specifically, figure out how brain science impacts money
related, corporate and Financial market choices. Populace in this examination is all understudy’s
dynamic in the odd semester of scholarly year 2016/2017 at the Faculty of Economics, University
of Pamulang, adding up to 29,231 understudies. The example system utilized is straightforward
arbitrary inspecting strategy. To decide the size of the example is done through a factual
methodology by utilizing the Slovin recipe (Sugiyono, 2016).

2.3. Income
Income is one indicator to measure the welfare of a person or society, so that the income of
this society reflects the economic progress of a society (Luminatang, 2013). According Sukirno
(2006), income is the amount of income received by the population on their work performance
during a certain period, whether daily, weekly, monthly or yearly. A person's income is
fundamentally dependent on work in the field of services or production, as well as the time
spent on work, the level of income per hour received (Luminatang, 2013).

2.4. Investment Decision

According to Rusdin (2006) the decision to invest is individual and depends entirely on a
free person. Therefore, before arriving at an investment decision, first consider carefully.
According to Christanti & Mahastanti (2011), an individual's investment decisions during these
two sides are a) the extent to which decisions can maximize the wealth (economic), b)
Behavioral motivation (investment decision based on investor psychological aspect).

4
3. RESEARCH METHOD

The type of research used is quantitative descriptive method. Based on the

calculation of slovin formula, the sample obtained as much as 99.65 rounded to 100. Type
and source of data used is the primary data of the students active odd semester academic year
2016/2017 Faculty of Economics at the University of Pamulang. Data collection
techniques in this study are 1) Observation, 2) Library Studies, 3) Questionnaire. Data analysis
technique used in this research is statistical analysis method by using SPSS
application program version 22 for windows.

5
4. RESULT AND DISSCUSION

4.1. Descriptive Statistics Analysis

Table 1. Descriptive Statistic Result

N Min Max Mean Std. Dev.

FL (X1) 100 50 96 77.00 7.439
FB(X2) 100 22 61 46.90 5.902
Income (X3) 100 19 35 26.97 3.605
ID (Y) 100 20 38 29.63 3.784
Valid N (listwise) 100

Based on table 1 above shows that the number of respondents (N) as many as 100
students. The minimum value indicates the respondent's answer at least and
maximum is the highest answer.

4.2. Data Quality Test

To know the value of r table, it is known the number of respondents as much as 100 respondents,
then the free degrees that have the equation df = n-k or df = 100-4 at the level of significance
0.05, t h e n g o t t h e r table n u m b e r o f 0.195. So, it can be concluded that all statement
items of the variables in this study is valid. While the results of testing data obtained from each
item statement on the independent and bounded variables have the value of Cronbach’s alpha is
greater than the reliability standard value of 0.60. So, it can be said that the instrument in this
research is reliable and feasible to use.

4.3. Classical Assumption Test Results

4.3.1. Normality Test

Table 2. Normality Test

Result

Unstandardized Residual
N 100
Normal Mean .0000000
a,b
Parameters Std. Dev. 2.52598534
Most Extreme Absolute .045
Differences Positive .042
Negative -.045
Test Statistic .045
c,d
Asymp. Sig. (2-tailed) .200

6
Based on table 2 above that the value of significance shows the figure of 0.200> 0.05. So, it
can be said that the data u s e d i n t h i s s t u d y i s n o r m a l l y distributed.

4.4. Hypothesis Test

4.4.1. Multiple Linear Regression Test

Table
C 5. Multiple Linear Regression Test
a
oefficients
Standardize
Unstandardized d
Coefficients Coefficients

Model B Std. Beta T Sig

Constant .952 Error
3.092 .308 .75
FL .074 .040 .145 1.830 .07
FB .125 .052 .195 2.400 .01
Income .635 .075 .605 8.494 .00

From table 5 above shows that the result of multiple linear regression equation that is formed is
Y = 0.952 + 0.074X1 – 0.125X2 + 0.635X3 + e.
4.4.2. Coefficient of Determination Test (R2)

Table 6. Coefficient of Determination Test Result

Model R R Adjusted SEE

Square R Square
a
1 .745 .554 .540 2.565

Based on table 6 above that the value of adjusted R square is 0,540. This shows the results
of variables Decisions Invest can be explained by the three variables of Financial Literacy,
Financial Behavior and Revenue of 54%. The Standard Error of the Estimate (SEE)
value is 2,565. The smaller the level of SEE will make the regression model more accurate
in predicting the dependent variable.

4.4.3. T Test
From the result of analysis using SPSS 22.0 contained in tables of multiple
08.
linear regression analysis and also answer the problem formulation contained in
the previous chapter is the first hypothesis, 09indicating that the financial
literacy variable obtained t-count value of 1.830. To determine the distribution of
t is sought at ɑ = 5%: 2 =5%. With a 2-sided test the 0.025 significance of the
results obtained for t table is 1.984. From the above calculation results obtained
Financial literacy (X1) has t-count < t-table is 1.830 <1.984 with a significance
value 0.070 > 0.05. This can be interpreted at the Financial Literacy not positively
significantly influence on the Decision of Investing. Then H1 is rejected. The
second hypothesis, shows the results of the calculation of Financial Behavior (X2)
obtained t-count > t-table is 2.400 > 1.984 with a significance value of 0.018 <
0.05. This shows that Financial Behavior influences investment decisions. Then H2
is accepted and the third hypothesis, shows that the result of calculation of Revenue
value (X3) obtained countable value t-table is 8.494 >1.984 with a significance
value of 0.000 < 0.05. This shows that income has a positive and significant effect
on the Investment Decision. Then H3 accepted.
.
4.4.4. F Test

Table 7. F Test Result

Sum of
Model Df Mean Square F Sig.
Squares
Regression 785.630 3 261.877 39.799 .000
Residual 631.680 96 6.580
Total 1417.31 99

Based on table 7 above obtained value of F-count equal to 39.799 by using confidence level
95% and significant level 0.05. Then it can be concluded that hypothesis four or H4 accepted,
which means that the multiple regression model can be used to measure the level of
investment decisions or simultaneously have a positive and significant impact on the Decision
of Investing.

4.5. Discussion
The discussion in this study indicates that the financial literacy variable has no
significant effect on the investment decision, evidenced by the value of t-count < t-table is 1.830
< 1.984 with a significance value of 0.070 > 0.05. This can be interpreted that the Financial
Literacy not positively and significantly influence on the Decision of Investing. These results
are not in line with the results of research conducted by Welly et al (2016) showed that partially
variable financial literacy in the aspects of savings and loans and investment alone that
significantly affect investment
decisions and these results are also in line with the variable financial literacy in the
insurance aspects indicate that no significant effect on investment decision in STIE Multi Data
Palembang. Then these results are also in line with the results of research conducted by Melisa
(2015) indicates that the Literacy financial investors have no significant effect on investment
decisions.
Variable of Financial Behavior influence on investment decision, evidenced by
value of tcount > ttabel is 2.400 > 1.984 with significance value equal to 0.018 < 0.05. These
results are in line with the results of research conducted by Aminatuzzahra (2014) can
be concluded that there is significant influence between behavioral variable (attitude)
finance to investment decision making. So this research is also in accordance with the
theory of financial
behavior perspective in financial decision making. The better one's attitude or mental
finance then the financial behavior of a person in making better investment decisions.
Income significant effect on investment decisions, evidenced by the value of t-count > t-table is
8.494 > 1.984 with a significance value of 0.000 < 0.05. The results of this study in line
with research conducted by Musdhalifa (2016) showed that income has a significant
effect on investment decisions have an influence. This is also in line with the results of
Kusumawati (2013) research that a person's income has an influence on the management of his
personal finances, the more their income the greater his judgment to make an investment
decision. And this result is not in line with the results of research conducted by Ni Made
Dwiyana and Henny (2017) shows that Revenue does not significantly influence the behavior
of inventory decisions. That is, a person's income level is not a benchmark for making
an individual investment decision. The same thing in Rita and Kusumawati's research (2010)
states that the higher the income a person has, the more a person wants to buy what he
wants beyond what is needed, someone who is like this less understood by the benefits of
saving or investing for the future. While simultaneously, for the variables X1, X2 and X3
together significant effect on Investment Decision, evidenced by the value F-count > F-table
that is 39.799 > 2.70 and the value of significance 0.000 < 0.05.
5. CONCLUSION

Based on the results of multiple linear regression test, shows that the value of constant and
coefficient of variables that have a positive value indicates that the equation has a direct
relationship. Based on T test results, indicating that for financial literacy variable has no
significant effect on investment decisions. Based on the results of research with F test,
it is known that the overall variables of financial literacy, financial behavior and income
together have a significant effect on investment decisions.
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