STRATEGIES IN BUDGET MANAGEMENT OF ST.

MICHAELS COLLEGE
STUDENTS

A Research Paper
Presented to
Accountancy, Business and Management
Senior High School
Basic Education Department

In Partial Fulfillment of the Requirements for

PRACTICAL RESEARCH
Second Semester, AY 2017-2018

ELOIZA MEA B. ALFECHE

DHIALICA D. DAGONDON
APIRAN M. MACAGAAN
JAOHARI O. SARIP

March, 2018
 TABLE OF CONTENTS

Page

INTRODUCTION

Background of the Study ………………………………………………………. 3

Theoretical Framework …………………………………………………........... 5

Conceptual Framework …………………………………………………...…….6

Statement of the Problem …………………………………………….…………8

Significance of the Study ………………………………………….…….…..…..9

Scope and Limitations ……………………………………………………….…10

Definition of Terms ………………………………………………………….….12

REVIEW OF RELATED LITERATURE AND STUDIES

Review of Related Literature ………………………………………………..13

i. Effect of Financial Management on Saving Behaviour

ii. Allowances
iii. Purpose of Savings
iv. Review of Related Studies
v. Factors Influencing Students to Save
vi. Income and Saving Behaviour
vii. Money Management

METHODOLOGY ……………………………………………………………17

REFERENCES
 CHAPTER 1

INTRODUCTION

1.1 Background of the Study

College students are not receiving the financial knowledge necessary to be successful

in today's faced economy due to an increasingly complex market place. College students

need greater knowledge about their personal finances and the economy (Jorgensen,

2007). Many college students have a lot of expenses. The cost of food, transportation,

books, computers and other items are the most predictable college expenses. Due to this,

they face the challenge of budgeting. Tuition, textbooks and transportation are not the

only things they need to worry about, there are the housing, food and supplies together

with socializing. With their young age and lack of experience, it might be hard for

college students to budget their allowance on their own (De Guzman & Gaston, 2007) .

Money plays a vital role in every person's life. It is the medium used for exchange,

unit of account and store of value. Money is a fundamental and indispensible tool to live

in a materialistic world. Businessmen are people who use their money only when it is

necessary. However, they also know when to invest a lot of money unto something they

know will be useful in the future. In fact, all people in different fields have their own

ways to spend and save their money. This is why it is very important to spend it wisely.

Still, using money doesn't end from spending, it is also very essential to save wealth for

future use and plans (Resnera, 2006).

Students on the other hand, learn to save their allowance as they grow and meet

different requirements in school as well as things they want to buy for their own.
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Budgeting is one of the practical skills that come in useful for them. However, with

escalating responsibilities and opportunities as they go towards higher level of education,

particularly in college, it becomes very challenging for students to manage their money

(Inamac, 2008). It helps them to attain a better understanding of financial matters that

would become handful in their future. Budgeting management is considered as one of

factors that could affect the financial literacy level and its impact to achieve financial

success.

The study will be conducted at St. Michael's College of Iligan City, a Catholic

institution of higher learning here in Iligan Main Campus. College students are not

receiving the financial knowledge necessary to be successful in todays faced economy

due to an increasingly complex market place.

With the above mentioned scenarios and situations the main objective of the

researcher is to illustrate attributes of the students towards financial matters. This study

investigates and seeks for effective strategies for the college students to have their

financial goals. Therefore this study aims to know how much allowance are given to

college students from different departments and courses, on how they allocate their

weekly allowance, the challenges that the student faces in budgeting and the strategies

they use in saving.

The general objective of the study is to assess how the budgeting process helps

college students in achieving its financial goals. The purpose of this study will analyze

the financial literacy of college students that affects their behavior in budgeting and

allocating their allowance to aim financial goals. Considering that money is an essential
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commodity that helps a person to run his or her life, mentioned by Sangria Kathlene of

Santo Tomas University.

1.2 Theoretical Framework

This section gives recognition to the concepts and theories of budgeting and

managing allowances from books and references which the researchers will use to

provide supplementary information. However, there has also been very limited research

on the relationship between strategies of budget management of college students while

also account for existing economic theories of spending, which this study aims to

address.

Self Control Theory by Hopwood in 1976, explains that this is down to student’s

behavior but this can be helped by a suitable system of rewards, e.g. performance related

pay. The object is to keep costs under control and, if possible, complete the project under

budget. The thought of this theory is in order for the students to know on how to control

their self on not spending their money or allowances to unnecessary stuff.

Motivational Theory by Kay Hofstede in 1967, explains that in order for the students

to save or budget their allowances they must be motivated. The theory also explained that

in saving, it’s a must to set a particular goal that will motivate you to achieve your

budgeting plan.

Budgeting Planning Phase Theory by David Carnis in 2017, says that the overall

budget planning phase differs from the costing phase in that the budget planner takes a

broader view. You must identify specific resources -- such a labor availability or sources

of financing -- that are necessary for each phase of a project. A budget planner also looks
 6

at cost elements for various aspects of a project and identifies how they interrelate. This

can help discover potential bottlenecks and redundancies.

1.3 Conceptual Framework

Budgeting, having an expense, and savings is a cycle pattern. The cycle is a step by

step procedure. This theory may not be true to all, but mostly of it as you can observe.

First you need to have a financial goal. In that you will be inspired to save your money.

Second, you need to budget your expenses. Allocate your allowance for a certain

expense. Better, if you have a list of your expenses, with that you can monitor your

expenses. Then, after meeting the budget dispense the allocated budget for the certain

expense. Lastly, excess money that was budgeted for the expense will become the

savings. It will be your choice where you will put your savings. Right after saving every

day you will achieve your financial goals. And that financial goal will become again your

budget. In this study the researchers will find effective strategies in having a savings.
 7

Parent’s Income

Student’s Allowance

Financial Goals

Savings Budget
Management

Expenses

Figure 1. The Schematic Diagram of the Study

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1.4 Statement of the Problem

The key to financial success is to be well aware of how you are spending your

money. Know that there is a certain line between being cheap and having spending savvy.

There is nothing wrong with living within your means, rather than beyond them. (Caole

Vila, 2014) In order to achieve a quality life as a working adults, money management

skill play an important role because students spending habits in campus will influence the

way they manage money throughout their lives (Ibrahim, 2014). Students were found

lacking of money management skill due to the lacking of financial literacy . In the

freshman year, there are 32% of college students doubted about their capability of

managing their money in campus. Besides, there are around 20% of college students

claims that they have a better way to manage their money on campus. (Inamac, 2008)

Budgeting management is considered as one of factors that could affect the financial

literacy level and its impact to achieve financial success.

The purpose of this research study is to describe the financial literacy of college

students that affects their behavior in budgeting and allocating their allowance to aim

financial goals. The study seek to answer the following questions:

1. Personal Profile of the Student

a) Name

b) Age

c) Year & Course

2. What are the average weekly expenditure of college students on

a) school supplies or other related

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b) food

c) transportation

d) personal

3. What are the strategies to achieve financial goals?

4. Based on results, what is the relationship of budgeting behavior in achieving

financial goals?

1.5 Significance of the Study

The information generated from this research study can provide the respondent,

the parents of the students, the teacher/ professors, school faculties and the school

canteen. Furthermore, this research could also be a useful reference for further researches

in the future.

Respondent (College Students of SMC). The result of this study would serve as

reference and source of information for the students on how to properly allocate their

limited income or allowance. The findings would benefits students to achieve financial

success.

Parents/Guardian. It would also be useful to the parents or guardians. In a sense

that the it can provide insights and information about how much allowance is accurate for

their children to use it for their needs in their chosen course.

Professors/ Teacher. The study can also serve as a tool for teachers and

professors on how to deal with their student’s capabilities regarding with any financial

problems. It could help them comprehend the problem and seek for alternative solutions

to implement inexpensive requirements and contributions involving money.

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School Faculties. This study seeks to inform and enlighten the requirements of

the course affect the students spend their allowance. This can enlighten them to be more

considerate and sensitive towards the students' needs and concerns. Furthermore, this

study can give the department a deeper understanding on how to respond with these

concerns.

School Canteen . The result could also give ideas to the school canteen

regarding the expenditure items and foods products of the students so they would know

what kind of goods/services they would provide to students.

1.6 Scope and Limitations

The study concentrated mainly on the determination and analysis of the

relationship of financial literacy and budgeting management in fulfilling financial goals

of a college student. The coverage of this research study will be conducted only at St.

Michael's College, respondents comes from different department and are third year and

fourth year students of academic year 2017 – 2018 aging18 – 21 years old . There are 8

college departments in the school. The researchers planned to survey only 5 students in

every department.

This research study, however, does not include students partaking scholarship of

the said school for some of their expenses are supplemented by the school's general

budget.

1.6 Definition of Terms

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The following terms are defined conceptually for the better understanding of the

study:

Financial literacy. The ability to use knowledge and skills to manage

one's financial resources effectively for lifetime financial security (Caole Vila, 2014).

The ability of the students to understand how money works: how a student budget and

manages their allowances.

Financial Goal. An objective which is expressed in or based upon money. (Donaldson,

1985) It is a matter of setting smart goals and having a good plan to follow with your

allowances.

Allowance. Allowance is the amount of something that is permitted, especially within a

set of regulations or for a specified purpose. (Jorgensen, 2007)It refers to the money

given to students that shall be used for their daily needs and expenses; it is given by their

parents or guardian.

Budget. A budget is the amount of money that is available for, required for, or assigned

to a particular purpose. (Donaldson, 1985). It refers to the financial plan and list of all

planned expenses and revenues made by the students in response to their daily and

monthly expenses.

Money Management. The process of budgeting, saving, investing or spending and other uses

of money, otherwise overseeing the capital usage of an individual or group (Charles

Schwab, 2006). It is the ability to balance expenses with the given allowance. It is a common

strategy useful in attaining financial target.

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Salary . A salary is a form of payment from an employer to an employee, which may be

specified in an employment contract. It is contrasted with piece wages, where each job,

hour or other unit is paid separately (Heathfield, 2016). In the study, salary refers to the

amount of income received by the parents.

Strategies. An art and science of planning to solve a problem. long term plan of action

designed to achieve a particular goal or set of goals or objectives. (Nickols, 2012). It

deals on how your budget management should be conducted to achieve the financial

goals.

Expenditure. Payment of cash or cash-equivalent for goods or services, or a charge

against available funds or other such document. An amount of money spent by a student.
 CHAPTER 2

REVIEW OF RELATED LITERATURE AND STUDIES

Review of related literature and studies, local and international will be conducted for

the achievement of the goals and completion of the study. This chapter helps in

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

2.1 Review of Related Literature

2.1.1 Effect of Financial Management on Saving Behaviour and Financial Problem

Financial management refers to a set of behaviours related to cash management,

credit management, financial planning, investments, insurance and retirement and estate

planning (Parotta & Johnson, 1998). Previous studies have found that individual positive

financial management practices have been the single most influential detenninant of

household solvency status and financial satisfaction (Joo & Grable, 2004; Parotta &

Johnson, 1998). Personal financial problem are mostly cited as a caused of workplace

troubles. Low salary, overspending, heavy debts, spending behaviour and lack of

knowledge about money are the main causes of people (employees) financial problems.

In 2004, there were 16,251 consumer bankruptcies were filed, which increased up to 32%

(12,351 in 2003) from the previous year (Malaysian Central Bank, 2005). Sporakowski

(1979) argued that financial problems cause stress and crisis. Not only the poor worried

about the financial problems, but also the middle and high income people are no

exception. It is not the high salary can guarantee people not having the financial problems

but it is their financial management.

 14

2.1.2 Allowances

An allowance should be a specific amount of money, decided by both the student

and parent, and given at a specific time, such as weekly or monthly. As student's age

increase, they will probably have more money under their control and become more

responsible for their personal spending. Also they tend to appreciate more the goods and

services they buy with their own money, especially if they have saved for them 21 over a

period of time. An allowance can help eliminate the problem of parents having to say

uno" when their children ask for money regularly. It is an important tool for teaching

money management skills of how students manage their own money based on their

needs, wants and goals. Students should have control over how the allowances is spent or

saved. Parents can encourage their children to make carefu1 spending decisions and plan

the use of their money. An allowance can help make students independent and give them

confidence and self-discipline in handling money.

2.1.3 Purpose of Savings

Saving money for an emergency fund is important for everyone at all times.

Having a savings account for emergencies can prevent financial disaster in the event of

student's unemployment after graduate. An emergency fund can come in handy any time

students experience a shortage in income or an increase in expenses. An emergency fund

can also help students avoid using their credit cards or incurring debt to pay for

emergencies that arise. Dave Ramsey, an outspoken radio talk show and television show

host who teaches a course called Financial Peace University, suggest on his website Dave

Ramsey.com, that people should have a starter emergency fund of $1000.00. Ramsey
 15

suggests this serve as emergency fund until they have paid off all of their high interest

credit card debt, at which they should begin building a full savings account for

emergencies. There was a survey done by Varcoe (1990) for 934 households in California

regarding methods for meeting unexpected expenses or emergency expenses. He found

that they use regular savings; 22 percent used emergency savings; 14 percent borrowed

money from a financial institution; and 8 percent borrowed from friends or family.

Therefore 22 saving now or saving earlier can certainly be a good starting point and can

help student cope with those minor emergencies that crop up in day-to-day life. Building

an emergency fund for unexpected needs is important.

2.2 Review of Related Studies

2.2.1 Factors Influencing Students to Save

Financial Knowledge One of the articles which has attracted researcher's attention

is a term paper written by Mohamad Fazli Sabri and Maurice MacDonald (2010) entitled

"Savings Behavior and Financial Problems Among College Students: The Role of

Financial Literacy in Malaysia". They demonstrate that students who had higher financial

knowledge were more likely to report savings behaviour and also reported fewer financial

problems. According to them, students with financial knowledge promote better financial

management whether or not they can afford to indulge themselves during the college

years. The study done by Cunningham, 2001; Nellie, 2002 point out those students

entering their university education without ever having been responsible for their own

personal finances. While in the college or university students have to manage their own

expenditures. Student's ability to manage their financial resources is very important for
 16

everyday life activities. Financially educated people are able to make better decision, thus

lead to higher financial security (Hilgert and Hogarth, 2003). Recent studies are mostly

focus on the financial planning of university students because many of them fail to plan

their expenditure and unexpectedly experience financial problems. While many worries

of the importance of financial education, Brennan and Ritters (2004) indicated that,

financial education plays a key role in financial empowerment. Many researchers have

suggested that a lack of financial knowledge and skills results in students' experiencing

financial problems. Norvilities et al. (2006) and Hilgert and Hogart (2003) indicated that,

financial knowledge is one 16 of the strongest predictor of financial behaviour among

university students. Financial education or knowledge should be based on the needs,

interests, and abilities of each student. Clearly, more financial education is needed for

young adults to better the economy.

2.2.2. Income and Saving Behaviour

Saving behaviour occurs when current income exceeds current consumption and

therefore when total resources increase. Not saving is the opposite of saving. Saving

leads to asset accumulation as long as saving is greater than not saving. People might

simply make deposits immediately after receiving income, before making any other

purchases or payments. As the cost of living are getting high, people face with income

instability and people (especially workers' debt) is increasing and it is getting hard to find

employment opportunities, deficient savings increased anxiety among moderate and low-

income household (Cho, 2009). This phenomenon has concerned consumers of the

adequacy of their savings, which could cause their saving rate declined over time. One

study conducted by The Pew Research Center (2007) found that almost 80% of
 17

Americans always try to save; however, 63% responded they do not save enough. While,

Hurd and Zissimopolous (2000) reported that about 70% of respondents saved too little

within the past 20 to 30 years. Low-income people (household) tend to have low saving

rate which could lead to health problems.

2.2.3 Money Management

The key to financial success is to be well aware of how you are spending your

money. Know that there is a certain line between being cheap and having spending savvy

(Caole, 2014). But how will you know your spending too much, if you are financial

illiterate, like a student? A current national concern is the low financial literacy of college

students. College students are not receiving the financial knowledge necessary to be

successful in today's paced economy. Due to an increasingly complex marketplace,

college students need greater knowledge about their personal finances and the economy

(Jorgensen, 2007).Young people today face a very uncertain future as a result of the

double-dip recession, government spending cuts and structural problems such as the high

cost of housing. (Dolphin, 2012). Students were found lacking of money management

skill due to the lacking of financial literacy. In the freshman year, there are 32% of

college students doubted about their capability of managing their money in campus

(Ibrahim et al., 2009). The millennial generation can be aided through financial literacy

programs offered by the financial services industry (The Millennial and Money

Management).
18
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CHAPTER 3

METHODOLOGY

In this chapter, I discuss the research design, area of study, population, sample of

the population, sampling technique, instrument for data collection, validation of the

questionnaire, administration of the instrument and method of data analysis.

The purpose of this is to know the strategies on how the college students save their

money. The researcher conducted a survey to college students from different

departments. Inside the first page of the survey contains the demographic information of

the students. On the second page, it divided by two parts . On the first part there are 10

questions that has choices. This part is aiming to know on what are the students' daily

expenditure. On the second part, there are 3 open ended questions where it is aim to know

how the students budget their allowances

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REFERENCES

Caole Vila, A. (2014). Smart budgeting for College Students.

De Guzman, M. R., & Gaston, F. (2007). Budgeting is one of the practical skills that come in

useful for them. It helps them to attain a better understanding of financial matters that would

become handful in their future.

Dolphin, T. (2012). The Marketing Management Journal

Donaldson, G. (1985). Financial Goals and Strategic Consequences.

Ibrahim, A. (2014). Money Management., 30-34.

Roberts, J. A., & Jones, E. (2001). Money Attitudes, Credit Card Use,

Compulsive Buying among American College Students. Journal of Consumer Affairs, 35(2), 69-

71

Inamac, J. (2008). Teaching Our Children about Money.

Jorgensen, B. L. (2007). Financial Literacy of College Students: Parental and Peer Influences.

Healthfield, V. M. (2006). A Research On Allowance And Budget Of First Year.

Furnham, A. (1999). The Saving and Spending Habits of Young People. Journal of Economic

Psychology, 20(6), 677-697.

Hilgert G.L and Hogart R.D. (2003). Social Learning Opportunities and the Financial Behaviors

of College Students.