MALAYSIAN JOURNAL OF CONSUMER AND FAMILY ECONOMICS Vol 25, 2020

Factors Affecting Financial Management Behaviour

among University Students

Soo-Cheng Chuah1, Juliana Noor Kamaruddin1, JS Keshminder

Singh1
1
Faculty of Business and Management, University Teknologi MARA
Cawangan Selangor, Puncak Alam Campus, Selangor, Malaysia

Abstract
Youth financial management practices have received growing consideration
among various parties such as government agencies, community
organisations, and education bodies as the age group is considered as a high-
risk group for being involved in financial difficulties. This study examined the
effects of money attitude, financial knowledge, financial self-efficacy, and
locus of control on financial management behaviour among university
students. All data were collected via a convenient sampling method by using
self-administered questionnaire given to a sample size of 272 respondents.
Following this, the data were analysed using structural equation modelling–
partial least square (SEM-PLS) method. The results obtained in this study
indicated that money attitude, financial knowledge, and financial self-efficacy
positively and significantly influenced financial management behaviour
among university students. As such, this study could serve as a useful
reference for the purpose of higher education curriculum development in
order to nurture good financial management.

Keywords: Financial management behaviour, financial knowledge, money

attitude, locus of control, financial self-efficacy

Introduction
Financial management is one of the crucial factors in
determining an individual’s financial well-being (Garman & Forgue,
2006; Joo, 2008; Xiao et al., 2009). Contextually, personal financial
management involves the application of various activities to plan,
manage, and control one’s finances. Positive financial behaviour is
thus reflected by a good attitude in managing income, loans, and
investments (Layli, 2013). Theoretically, financial management
behaviour refers to the actions in determining, acquiring, allocating,

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and utilizing financial resources to achieve a planned financial goal

(Weston & Brigham, 1981).
The youth, specifically college students, and their financial
management ability and behaviour have received much attention from
different scholars (e.g. Goldsmith & Goldsmith, 2006; Gutter et al.,
2010; Joo, 2008; Norvilitis et al., 2006; Falahati & Paim, 2011; Herawati
et al., 2018). College students are considered as a high-risk group
associated with financial instability due to their high propensity towards
borrowing to fund their education. Therefore, this group ends up
bearing an extensive amount of debt upon graduation before entering
the job market (Leach et al., 1999; Falahati & Paim, 2011). Empirical
evidence further shows that the youth exhibits poor performance in
managing their finances especially when it comes to budgeting and
planning long-term savings (Jorgensen & Savla, 2010).
In general, college students learn how to manage their finances
from peers and family members which occurs mainly throughout their
early childhood life and onwards (Danes & Hira, 1990; Hira & Mugenda,
2000; Watchravesringkan, 2008). Therefore, the transition from
teenagehood to adulthood requires young adults to be equipped with
the appropriate financial knowledge, skills, values, and attitudes on
personal financial management (Shim et al., 2010). Furthermore, one’s
financial behaviour may be influenced by their financial literacy. Here,
financial literacy is defined as a measure of how well an individual can
understand and use personal finance-related information (Huston,
2010, p. 306). Definition-wise, it is thus comprised of the knowledge,
attitude, behaviour, and ability to make financial decisions. Accordingly,
Lusardi (2012) has asserted that financial literacy underlines an
individual’s sources or inputs that outline their financial behaviour.
Thus, better financial knowledge and risk management leads to greater
financial decision-making (OECD, 2014; 2017) as good financial
practice leads to better financial health in the future (Husniyah et al.,
2017).
Moreover, scholars believe that positive financial attitudes
contribute to favorable financial behaviour (Joo & Grable, 2004) which
further leads to a better management plan (Roberts & Jones, 2001).
Therefore, money attitude can predict one’s financial habits. Past
studies have found a significant relationship between money attitudes
and the level of financial problems (e.g. Dowling et al., 2009; Hayheo
et al., 2000; Lim et al., 2003; Falahati & Paim, 2011) where the money

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attitude that makes people more powerful often lands them in financial
problems (Falahati & Paim, 2011).
A study conducted to examine the financial literacy among
Malaysians has found that as a whole, their financial literacy rate is low
compared to other countries (Yong et al., 2018). The Standard and
Poor (S&P) Global Literacy Financial survey has further reported that
the Malaysian population’s financial literacy rate is approximately only
36% compared to 59% in developed countries. Such a low rate is thus
deemed as one of the factors that contribute to high debts and alarming
bankruptcy problems among the youths in Malaysia (“Lim: Young
Malaysians”, 2019). Besides, a survey by the Youth and Sports Ministry
Malaysia has underlined insufficient financial knowledge and low
financial literacy level as the main factors contributing to poor financial
planning among a majority of Malaysian youths. To design and
implement effective financial education programs, it is important to
understand the underlying factors influencing university student’s
financial management behaviour. Therefore, this study incorporates
the elements of financial knowledge, money attitude, financial self-
efficacy, and locus of control in the study model to generate a deeper
understanding of financial behaviour.

Literature Review
2.1 Financial Management Behaviour
Financial behaviour is described as the capability to understand
the overall impacts of financial decisions on one’s (i.e. person, family,
community, or country) circumstances and to make the right decisions
related to cash management and the precautions and opportunities of
budget planning (Tezel, 2015). Therefore, financial management
behaviour is the attainment, allocation, and utilization of financial
resources oriented towards a target set by an individual.
The Family Resource Management and Behavioural Life-cycle
(BLC) hypothesis are the main theories underpinning this study. In
particular, the family resources management model developed by
Deacon and Firebauge (1988) shows that “decision-making includes
connected sequences started by inputs and continued by throughput,
output, and the feedback linking back to the input” (Mien & Thao, 2015,
p. 3). Following this, Parrotta and Johnson (1998) have offered a
modified model by expressing financial knowledge as the input and

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financial attitude and financial management behaviour as the outputs

from the throughput process.
Furthermore, the BLC hypothesis formalized by Shefrin and
Thaler (1988) states that people’s financial behavior in life is
determined by their ability to control impulses and the costs connected
to existing exercise such as self-control. It has been applied by
researchers in investigating the association between self-control and
financial behaviour in making a financial decision as people with low
self-control are likely to be involved with credit problem and
indebtedness problem (Strömbäck et al., 2017). In the study, self-
control is represented by the locus of control and self-efficacy
accounting for significant variance in actions.

2.2 Money Attitude

In consumer studies, the attitude towards money varies across
individuals and have a considerable substance on financial behaviour
(Prince, 1991) thus rendering such an attitude to shape financial
behaviour accordingly (Potrich, Vieira et al., 2016; Henchoz et al.,
2019). Furthermore, a study by Castra-González et al. (2020) has
shown that Spanish people’s attitude towards money influences their
actual financial behaviour. Meanwhile, Shim et al. (2010) have also
revealed that an adolescent’s attitude towards money is an important
factor in predicting their financial behaviour. Amagir et al. (2018) found
two subscales of money attitudes namely “think before acting” and
“power/prestige” were significantly related to responsible financial
behaviour. Similarly, Akben-Selcuk (2015) has indicated that the
attitude towards money affects college students’ financial behaviour,
whereby those with a positive attitude show a higher ability to detail out
their monthly bill payments to be within their budget and adequately
manage their future savings. Therefore, this study proposes the
following hypothesis:

H1: Money attitude has positive effects on financial behaviour

among university students.

2.3 Financial Knowledge

Hilgert et al. (2013) state that financial knowledge is ultimately
one’s understanding of finance. Theoretically, it refers to an individual’s
knowledge about financial literacy and their ability to perform financial

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transactions in daily life by using the financial knowledge attained

previously. Here, financial knowledge can be obtained through formal
education, informal sources, and real-life experiences. Individuals with
higher financial knowledge regarding personal finance are likely to
behave more responsibly in dealing with financial issues such as
savings and investment (Perry, 2008). This knowledge allows them to
make better financial decisions in life (Hilgert et al., 2003; Howlett et al.
2008; Lusardi & Mitchell, 2007; Mansfield & Pinto, 2008). However,
empirical findings have revealed that the effects of financial knowledge
on financial behaviour are mixed in nature. Certain scholars have
particularly found a positive relationship between financial knowledge
and financial behaviour (Hilgert et al., 2003; Shim et al., 2010; Serido
et al. 2013; Yong et al., 2018; Amagir et al., 2018; Adiputra & Patricia,
2020).
Conversely, other studies have highlighted an insignificant
relationship between financial knowledge and financial behaviour
(Jones, 2005; Borden et al., 2008). Borden et al. (2008) have also
noted an insignificant relationship between financial knowledge and
effective financial behaviour, indicating that higher financial knowledge
may improve students’ intention towards more responsible behaviour.
However, they may not execute their financial plans according to their
intention, thereby technically suggesting that they are not using the
knowledge that they have obtained. This is further supported by
another study by Jones (2005) in which an insignificant relation has
been found between financial knowledge and credit card debt.
However, a large volume of literature has indicated a positive
relationship between financial knowledge and the financial behaviour
of college students. For example, Amagir et al. (2018) have found a
positive relationship between financial knowledge and financial
behaviour among high school students in the Netherlands, similar to
findings obtained by Loke (2015) and Yong et al. (2018) in the context
of Malaysia. Collectively, this implies that those with higher financial
knowledge are more likely to display better financial behaviour. Parallel
to this, Sohn et al. (2012) have also found a significant relationship
between financial knowledge and financial management behaviour
among Korean high school students. Thus, this study proposes the
following hypothesis:

H2: Money attitude has positive effects on financial behaviour

among university students.

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2.4 Locus of Control

Locus of control is a psychological concept regarding an
individual’s belief about the events that they are experiencing which
occurred within their control (Hillrigel et al. 2010). Conceptually, it
measures the generalised expectancies for internal versus external
control of reinforcement. Therefore, an internal locus of control refers
to an individual’s belief that their own actions determines the reward
they obtain, whereas the external locus of control indicates one’s belief
that their own behaviour does not matter much and any rewards in life
are out of their control (Rotter, 1966). Accordingly, those with an
external locus of control generally attribute the outcomes of their lives
to external factors (e.g. fate, luck, other people, etc.), while those with
an internal locus of control believe that much of what happens in life
stems from their own actions (Gatz & Karel, 1993). In this regard, Perry
and Morris (2005) have found that the external locus of control is
negatively associated with financial management behaviour. Similarly,
Dessart and Kuylen (1986) have noted that those with a high external
locus of control are more likely to face financial difficulties. Locus of
control was found significantly related to financial well-being among
employees in Malaysia (Mokhtar & Abd Rahim, 2016). Thus, the
following hypothesis is proposed:

H3: Locus of control has positive effects on financial behaviour

among university students.

2.5 Financial Self-efficacy

Financial self-efficacy is a psychological aspect that reflects an
individual’s sense of confidence in their ability to manage their finances
well and achieve targeted financial goals (Rizkiawati & Asandimitra,
2018). The higher the level of efficacy one has in carrying out the
financial management, the more responsible they are in managing their
finances.
In line with this notion, research by Qamar et al. (2016) has
shown that financial self-efficacy has a positive and significant effect
on financial management behaviour along with a positive moderating
impact on the relationship between money attitudes and personal
financial management behaviour. This is also supported by research
works of various other scholars (e.g. Lown et al., 2015; Asandimitra &
Kautsar, 2017; Mayasari & Sijabat, 2017, Herawati et al., 2020).

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Furthermore, several studies have underlined that a higher

financial self-efficacy is linked to more productive financial behaviours
and greater well-being (Amatucci & Crawley, 2011; Danes &
Haberman, 2007; Engelberg, 2007). Following this, Farrell et al. (2016)
have thus examined the significance of an individual’s financial self-
efficacy in explaining their financial behaviour through the application
of a psychometric instrument. By administering a 2013 survey to a
sample of Australian women, financial self-efficacy has emerged as
one of the strongest predictors regarding the type and number of
financial products that a woman holds. Specifically, the analysis
reveals that women with higher financial self-efficacy are more likely to
hold investment and savings products and are less likely to hold debt-
related products. Therefore, the hypothesis is as follow:

H4: Financial self-efficacy has positive effects on financial behaviour

among university students.

Research Methodology
3.1 Survey and data collection
This study aimed to determine the factors affecting financial
management behaviour among the undergraduate students of
Universiti Teknologi MARA Puncak Alam Campus, Malaysia. Here, the
underlying factors were financial ethic, financial knowledge, financial
self-efficacy, and locus of control. Accordingly, this study was
conducted using the quantitative research approach using self-
administered questionnaire (Appendix A) as the research instrument.
Moreover, convenience sampling method was employed in the data
collection process.

3.2 Sample Size

The minimum sample size for this study was calculated using
G*Power version 3.1 (Faul et al., 2007). Based on Cohen’s (1992)
recommendation, a minimum statistical power of 80% and effect size
of 0.15 are required for behavioural science research. Therefore, the
G*Power analysis showed that the minimum sample size required was
50, with four predictors. A total of 272 questionnaires was thus
collected, which exceeded the minimum requirement.

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3.3 Construct Measures

The construct measures applied in the current study were
adopted from earlier studies. For example, the constructs of money
attitude is measured using the 12 items of financial ethics scale
developed by Tang (1995), whereas five items to measure financial
knowledge were adapted from the works of Perry and Morries (2005)
and Danes and Haberman (2007). Meanwhile, seven items measuring
locus of control were adapted from Rotter (1966), whereas six items
measuring financial self-efficacy were adapted from Lown (2011).
Finally, financial management behaviour was measured with eight
items adapted from Dew and Xiao (2011) with some modifications to
make them applicable in the context of a university student’s financial
situation. To this end, a 5-point Likert scale (1 = strongly agree to 5 =
strongly disagree) was utilised to measure each item in the
questionnaire.

3.4 Multivariate Normality

Web-Power online tool was applied to examine the element of
multivariate normality in this study. The analysis showed that the p-
value of Mardia’s multivariate skewness and kurtosis coefficient was
less than 0.05, thus indicating the existence of multivariate non-
normality.

3.5 Data Analysis Method

The current study applied structural equation modelling-partial
least square (PLS-SEM) to analyse the research model designed,
namely by using the Smart PLS 3.2.8 software (Ringlee et al., 2015).
The PLS-SEM analysis typically consists of the measurement model
(i.e. validity and reliability) and structural model.

DATA ANALYSIS
4.1 Respondent’s Characteristics
Questionnaire responses were collected from a sample size of
272 undergraduate students. The respondent characteristics are
presented accordingly in Table 1. Almost three-fourth of the
respondents were female (69.12%), while more than half of them came
from families within the M40 income bracket where their parents’
monthly incomes were within the range of RM3000–RM4999 (29.41%)

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and RM5000–RM9999 (24.63%). Approximately 64% of the

respondents were recipients of financial aids in the form of scholarships
or study loans from Perbandanan Tabung Pendidikan Tinggi Nasional
(PTPTN). In contrast, the remaining 36% did not receive any financial
aids during the course of their study.

Table 1 : Respondent Characteristics

Characteristics Frequency Percentage (%)
Gender
Male 84 30.88
Female 188 69.12
Age
18–20 years old 55 20.22
21–23 years old 160 58.82
24–26 years old 56 50.59
27 years old and above 1 0.37
Parents Monthly Income
Less than RM3000 103 37.87
RM3000–RM4999 80 29.41
RM5000–RM9999 67 24.63
RM10000 and above 22 8.09
Financial Aids Received
Scholarship 60 22.06
Loan 113 41.54
None 99 36.40

4.2 Measurement Model

For the PLS-SEM analysis, the measurement model typically
examines the convergent validity and discriminate validity of the
constructs tested (Hair et al., 2017). In particular, factor loadings,
average variance extracted (AVE), and composite reliability (CR) were
thus utilised to assess the measures of convergent validity (Hair et al.,
2017). As shown in Table 2, all items loadings were found to be higher
than 0.6, the AVE values exceeded 0.5, and the CR values were
greater than 0.7. Therefore, this revealed that the measures were valid
and reliable. However, a total of nine items were dropped due to low
factor loadings (i.e. FA7, FA10, FA11, FA12, LC3, LC4, LC5, FE5,
FE6).

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Table 2 : Measurement Model

Construct Item Loading CR AVE
Financial Ethic FA1 0.742 0.895 0.520
Scale (Money FA2 0.811
Attitude) FA3 0.853
FA4 0.730
FA5 0.714
FA6 0.659
FA8 0.642
FA9 0.578
Financial FK1 0.788 0.891 0.623
Knowledge FK2 0.874
FK3 0.785
FK4 0.789
FK5 0.700
Locus of Control LC1 0.700 0.856 0.600
LC2 0.754
LC6 0.809
LC7 0.828
Financial Efficacy FE1 0.765 0.805 0.512
FE2 0.838
FE3 0.613
FE4 0.620
Financial FB1 0.746 0.894 0.517
Management FB2 0.704
Behaviour FB3 0.746
FB4 0.785
FB5 0.535
FB6 0.789
FB7 0.814
FB8 0.582
Abbreviations: AVE, average variance extract; CR, composite reliability

Next, discriminant validity was tested by using the heterotrait-

monotrait ratio of correlations (HTMT) criterion (Henseler et al., 2015).
The HTMT values for all constructs were noted to be below the
threshold level of 0.85 (Kline, 2011), therefore indicating that the
discriminant validity was confirmed (Table 3).

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Table 3 : Discriminant Validity (HTMT criterion)

Construct 1 2 3 4 5
Financial Ethic Scale
Financial Knowledge 0.346
Locus of Control 0.314 0.302
Financial Efficacy 0.419 0.290 0.467
Financial Management Behaviour 0.491 0.612 0.300 0.454

4.3 Structural Model

Upon examining the values of variance inflation factor (VIF), it
was found that there were no collinearity problems for the predictor
latent variables. This is due to the fact that VIF values are less than 5.
The research model was then tested using a bootstrapping
procedure with 5000 re-sampling to attain its t-values, p-values, and
bootstrapped confidence intervals. The structural model results are
shown in Table 4 below.

Table 4 : Structural Model

Hypothesis relationship Standard SD t- p- BCI BCI Decision
beta, b value value LL UL
H1: financial ethic scale 0.311 0.037 8.303 p<0.01 0.252 0.374 Supported
financial behaviour
H2: financial knowledge 0.385 0.040 9.604 p<0.01 0.311 0.444 Supported
financial behaviour
H3: locus of control 0.017 0.044 0.396 p>0.01 -0.057 0.085 Not
financial behaviour Supported
H4: financial self-efficacy 0.166 0.045 3.667 p<0.01 0.085 0.234 Supported
financial behaviour

Accordingly, three hypotheses designed for this study were

found to be sufficiently supported. In particular, financial ethic scale (b
= 0.0311, p < 0.01), financial knowledge (b = 0.385, p < 0.01), and
financial self-efficacy (b = 0.166, p < 0.00) all posed a significant and
positive effect on financial management behaviour respectively. Thus,
H1, H2, and H4 were supported. In contrast, locus of control was found
to yield no significant effect on financial management behaviour among
university students. Thus, H3 was not supported.

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Table 5 : The R2, f2 and Q2 values

Hypothesis relationship R2 f2 Q2
H1: financial ethic scale financial behaviour 0.427 0.135 0.207
H2: financial knowledge financial behaviour 0.525
H3: locus of control financial behaviour 0.000
H4: financial self-efficacy financial behaviour 0.039

As shown in Table 6, the R2 value is 0.427 which indicates that

42.7% of the variance in financial management behaviour can be
explained by the constructs (i.e. financial ethic scale, locus of control,
and financial efficacy) in the model. This outcome exceeded the value
of 0.26 as proposed by Cohen (1988) thus indicating the presence of
substantial predictive accuracy within the research model of this study.
Next, the change in R2 value to examine the effect size, f2 was
suggested by Hair et al. (2017). The results of f2 shown in Table 6
reveal an acceptable effect size for the supported hypotheses as per
Cohen’s (1988) guideline. Moreover, the predictive relevance of the
model was assessed through the blindfolding procedure as
recommended by Hair et al. (2017). As shown in Table 6, the Q2 values
for financial management behaviour (Q2 = 0.207) is greater than 0
(Fornell & Cha, 1994) thereby suggesting that the model has sufficient
predictive relevance.

Discussion
This study assessed the relationship between money attitude,
financial knowledge, locus of control, and financial self-efficacy with
financial management behaviour respectively. The results obtained
thus supported the hypothesis for the factors of money attitude,
financial knowledge, and financial self-efficacy, which positively
influenced financial management behaviour. Therefore they were
consistent with the underpinning theory, except for hypothesis H3 (i.e.
locus of control financial à management behaviour, b = 0.017, p >
0.05), which was found to be insignificant. As the students were yet to
experience complex financial problems, external locus of control did
not significantly impact their financial management.
In general, the results obtained show that money attitude which
positively and significantly influence financial management behaviour
are consistent with the study by Shim et al. (2009) which have found
that it is a significant predictor of such behaviour. Furthermore, Mitchell

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and Mickel (1999) have asserted that money plays a symbolic role in
which it is expressed as a recognition of one’s achievement, status and
respect, and power. According to these scholars, it also influences
human sentiment and behaviour as some people perceive it as good
and valuable, while others view it as evil, shameful, and useless.
Therefore, students with positive attitudes towards money exhibit good
financial behaviour in planning their finances and a high propensity to
save (Akben-Selcuk, 2015). Moreover, those who treat money as
“power/prestige” and are equipped with good financial planning are
likely to display responsible financial behaviour (Amagir et al., 2018).
Thus, parents and educators need to nurture a positive attitude towards
money among these students by displaying a favourable attitude
towards it.
Meanwhile, financial knowledge is found to be one of the
significant antecedents of financial management behaviour and this is
consistent with previous studies conducted in the context of Malaysia
(Loke, 2015; Yong et al., 2018). This suggests that university students
with good financial knowledge make better financial decisions leading
to better financial management behaviour. Having sound financial
knowledge allows one to properly manage their personal finances such
as budgeting, investing, saving, and deciding on matters regarding
insurance (Herawati et al., 2018). Most Malaysian youths are weak
financial planners and spend beyond their financial capability (Yong et
al., 2016) thus rendering education on personal financial management
necessary for these students. As such, UiTM is tasked with ensuring
that their students across all faculties are exposed to courses on
personal financial management.
Besides, financial self-efficacy has been found to positively and
significantly influence the financial management behaviour among
students (Qamar et al., 2016; Lown et al., 2015; Danes & Haberman,
2007; Engelberg, 2007; Herawati, et al., 2018). These findings show
that individuals with higher self-belief or self-confidence are likely to
perform a task successfully. Financial self-efficacy among students can
further enhance their financial behaviour in a better direction (Danes &
Haberman, 2007) and potentially influence their future financial
behaviour (Herawati et al., 2018). Collectively, this leads to a better
financial position and less irrational debt-seeking behaviour (Danes &
Haberman, 2007). Similarly, those with higher financial self-efficacy
tend to have more investments and savings and are less likely to have
loans and credit card debts (Farrell, et al., 2016).

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Conclusion
This study assessed the relationship between money attitude,
financial knowledge, and financial self-efficacy on the personal
financial management behaviour of university students accordingly.
First, attitude towards money was measured using the financial ethic
scale and money attitude significantly influenced the students’ financial
behaviour. Financial knowledge also positively impacted their financial
behaviour as well. Therefore, the results indicate that students with a
higher level of self-efficacy are more likely to perform good financial
management behaviour.
The study findings and implications are thus highly applicable to
university students. For example, the findings obtained emphasise the
need for better financial knowledge among students. This may be
achieved by introducing personal financial planning into the university
curriculum to enhance their knowledge towards finance and risk
management. This will allow students to possess good financial
behaviour by planning their finances properly via budgeting, wise
expenditure, expense monitoring, and saving habits. Additionally, their
families and educational institutes need to instil a positive perception
of money in them as well by providing advice.
The significance of financial self-efficacy in influencing financial
management behaviour implies that self-confidence is a major element
in one’s ability to manage finances well in order to achieve targeted
financial goals. This indicates that self-confidence in one’s financial
ability influences their financial behaviour. Accordingly, the study
contributes to the theoretical implication of the BLC hypothesis that
self-control or self-confidence is a major factor in influencing financial
management behaviour and contributes to the financial wellbeing of an
individual. Thus, it is important to enhance university students’ financial
literacy through financial education to provide them with strong self-
confidence on how to plan their finances in the future.
In terms of limitations, the study could not include all possible
factors of financial management behaviour. The magnitude of financial
literacy and financial socialization could be included to explore other
factors that underlie patterns of financial management behaviour
among university students. Future research could also explore whether
an individual’s socio-economic characteristics and childhood financial
experience moderate the university student’s financial management
behaviour.

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Acknowledgement

This study was supported by the internal faculty grant endowed by the
Faculty of Business Management, Universiti Teknologi MARA, Puncak
Alam Campus.

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