1.

INTRODUCTION

INTRODUCTION
The Organization for Economic Co-operation and Development (OECD)
defines financial literacy as “a combination of knowledge, attitude, behavior
and skill necessary to make sound financial decisions and ultimately achieve
individual well-being”. Financial literacy refers to making informed judgments
and takeing apt decisions with respect to the management of money (Nocotor et
al.1992). People with awareness of Finance decide about their money and
minimize their chances of being misled on financial matters (Beal and
Delpachitra, 2003).
Financial literacy guides individuals to improve know how on financial matters
which in turn enables them to process such information to decide aptly on their
own money situations so as to bring a positive change to the beings. Previous
studies reveals whose who lack knowledge faced difficulties in spending,
owning cash related plans for future benefits including savings and post work
plans.

Financial literacy is directly correlated with behavior on money while paying

bills and loan installments, savings before spending and useaof a credit card
judiciously. People who possess financial litracy understand the importance for
self- planning of their finances. They exhibit a favorable attitude towards
money-related matters and display positive behavior. Such literate individuals
are able to participate in financial markets, thus helping themselves to expand
and operate most efficiently.
Knowledge of finance not only improves the quality of life for oneself but also
impacts the quality of financial markets. Aware customers can help the
governance with appropriate challenges and also ensure providers of such
services become efficient in delivery. Financial literacy further helps in
improving the quality of financial services there by contributing to the
economic growth and stability of a country.

Enhanced financial literacy among market participants complements the

financial markets to establish the primary function to mobilize and allocate the
savings in an effective manner. The prevalence of a huge number of such
literate participants, investors, and borrowers stabilizes the efficiency of
financial intermediation by letting them know both about risk pooling and risk
sharing opportunities in an effective way. An observation at the level of
financial literacy in specific economy showcases the economic growth and
development prospects.
In the past few years owing to the developments in the financial market in
Independent India, the significance of financial literacy has been growing. In
the growing countries allocation towards financial literacy can be taken as the
first step to alleviate the poverty and development. In India, though it is more
important owing to a larger section of the population, particularly in the country
side who are deprived of such established setups. This has the world’s best
financial markets with respect to technological systems and its regulations. On
the other hand, step towards empowering with financial literacy helps towards
reduction of poverty, enhancing the life style and increases the financial
stability of an economy. Worldwide initiatives are taken by the OECD to
address the issue of being money wise by establishing the ‘International
Gateway for Financial Education’ in March 2008. This serves as a
clearinghouse for education and awareness, providing information on financial
education programs to more than 90 countries.

1.1 Global initiatives of Financial Literacy

Across the world, many governments and institutions have taken a lead in

imparting financial education to their population.

1.1.1 Financial literacy Initiatives by the United States of America

The United States of America, the office of financial education was established
in 2002 by the US Treasury. The primary purpose of establishing this office is
to promote financial literacy among residents of US to enable them to make
informed choices in the areas of personal finance such as savings, home
ownership, planning, credit management and so on and so forth. In 2003, the
US Congress passed the Financial Literacy and Education Improvement Act
which laid the foundation of the Financial Literacy and Education
Commission(FLEC). The main aim of FLEC was to improve the financial
literacy and education of living entities of the United States of America by
initating a state strategy to promote the financial literacy and awareness. The
Federal Reserve's website for promotion of financial education is named as
"FederalReserveEducation.org". The purpose of this website is to share data that
is of help to the general public. It also furnishes material that is specially made
and created for teachers, high school and college students. The website also
contains materials to create awareness with respect to financial management
along with an assessment of one's own financial position.
1.1.2.Financial literacy Initiatives by the United Kingdom
Financial Services Authority (FSA) in the United Kingdom had launched a

large scale campaign so as to improve the financial skills of the population. The

aim of giving education on financial options to understand risk and return

aspects of these instruments.The U.K Department for International

Development has created the "Financial Education Fund" to improve financial

literacy among the poverty class. The main aim of allocating this fund was to

ensure financial education to all who are financially the most vulnerable. The

fund can bring improvement in the financial literacy of under privileged end

users and businesses in Africa.

1.2. Initiatives were taken by Reserve Bank of India

In India, the Reserve Bank of India launched an initiative in 2007 to establish

Financial Literacy and Credit Counseling Centers across the nation to offer free
financial education and counselling to the urban as well as rural populations.
Some banks have taken initiatives to start some centers in rural / semi-urban
areas, which give financial knowledge along with credit counselling services.
The aim of these centers is to enable people on gaining access to the financial
system including banks, creating awareness among the public about financial
management, counselling people who are facing challenges to meet their
repayment obligations and guide them resolve their problems of indebtedness,
aiding in the rehabilitation of borrowers in distress, etc. Few of these Credit
Counselling Centers (also known as Knowledge Centers) even train farmers/
women groups to support them to start their own income generating activities to
earn a reasonable livelihood.
1.2.1 Initiatives by SEBI

The governing body of stock market India provides protection to the investors
in the stock market through rules. SEBI offers several programs to the youths
about the knowledge in stock markets which covers the complete know how of
different products. SEBI is conducting a financial awareness test for school
level students and rewards for the top positions in the forthcoming months of
the year, information and application forms are made available on its website.
1.3 Financial Literacy Initiatives in Tamil Nadu

1.3.1 National Bank for Agriculture and Rural Development (NABARD)

In order to spread awareness of financial literacy in rural pockets of TamilNadu,

NABARD launched a campaign across 200 villages in Tamilnadu. Financial
literacy center creates awareness among the rural population on the loans being
extended by the banks at the lowest rate of interest and the related information
that helps to start a savings account and avail loans etc.
1.3.2 State Bank of Travancore (SBT)

The SBT is actively pursuing initiatives to improve financial literacy and

financial inclusion. In Tamil Nadu 14 villages and in Kerala 29 villages have

been allocated to the bank for financial inclusion. The Bank has set up customer

service points and commenced enrolments in 18 villages. The products offered

under financial inclusion- “SBT-SAHAYA HASTHAM” – ambit consists of a

SB Account (Zero balance), a Recurring Deposit account and an Overdraft

(General Credit Card) for Maximum of Rs. 10,000/- for the rural poor.

1.4. Scope for the study

 Financial literacy is an essential part of everyday life. It has been

experiential that financial knowledge India is very low.

 People with additional income could save, invest in bank deposits and put

insurance policy, especially among urban people. But it is not so with

rural household.

 The wellbeing of such part of people is very important for the regulators

and policymakers to formulate plans in order to bring them the real

 situation of financial literacy and financial management practice on a

common platform.

 Apart from the other factor financial literacy is the only factor can bring

hundred percent reults in financial inclusion.

 This study ascertains the level of financial literacy of rural households in

Tamilnadu regions.

 The proposed study is first of its kind in TamilNadu which would attempt

to measure the relationship between financial literacy, financial

management practice and financial inclusion of rural households in

TamilNadu region.

2. Review of literature

Danes and Hira (1987) survey examined money management knowledge of 323

college students from Iowa State University. The study measured college

student’s knowledge of personal loans, record keeping, credit cards and overall

financial management. The study found that males, upperclassman, and married

students know more than others. Their overall finding was that college students

have a low level of financial knowledge.

Markovich and DeVaney (1997) analyzed to measure the financial knowledge

and behavior of 236 undergraduate seniors at Purdue University. The study only

measured the level of students the financial knowledge and financial behavior,
but no attempt being made to determine whether knowledge correlated with

behavior.

Haiyang Chen and Ronald p.volpe(1998) They studied personal financial

literacy among 924 college students in the USA. The study covered major

aspects of personal finance. The study found that each area of personal finance

like savings and investments, borrowings and insurance mean score was not

above 65 percent. The result showed that non-business major, students in the

class ranks, women and little work experience have a lower level of financial

knowledge. A lesser amount of financial knowledge students tend to have

wrong opinions and make an incorrect decision. Moreover, college students

were not knowledgeable about personal finance. The low level of financial

knowledge leads to limit their ability to make an informed decision.

Dorjana Nano and Shkelqim Cani (2013) The paper examined the financial

literacy and financial education of 607 university students in Albanian. The

objective of the studies is measuring the financial knowledge, behavior, and

attitude. The study found that the students who had taken a personal finance

course were showed more knowledgeable and financial literate than others. The

evidence showed that attended a personal financial or money management

course would help students more financial knowledgeable and literate.

Annamaria Lusardi and Carlo de Bassa (2013) Examined that financial literacy

and high-cost methods of borrowing of 26,000 respondent in the US. They

found that one in four Americans had used in a payday loan, pawn shops, refund

anticipation, and rent-to-own shops. Furthermore many young adults engage in

high cost-borrowing:34% of the young respondent(18-34) and 43% young

respondent with a high school degree had used one of this method. Moreover,

the study found that those who are more financially literate are less likely to

engage in high-cost borrowing. Also, their study showed that it was not only the

financial crisis or the structure of the financial system but the level of financial

literacy plays a role why many individuals used high-cost borrowing.

Sobesh Kumar Agarwalla et al., (2013) study investigated the influence of

various socio-demographic factors on a different dimension such as Financial

knowledge, Financial behavior and financial attitude of financial literacy among

the working young in urban India. The study found that gender, education, joint

family, consultative decision, and income are found to significantly influence

financial knowledge. Also, the reports revealed that the young respondents

accompanied with poor financial behavior which leads to absences of self-

control in money management skill.

Atakora.A (2013) surveyed measuring the effectiveness of financial literacy

programs of 235 petty traders in Ghana. The paper found that work experience,

age, mothers education were positively correlated with financial literacy. Also,

the study found that traders with a high level of education displayed higher

financial level than non-educated. There was a huge financial literacy gap

between educated traders and uneducated counterparts. The report suggested

that policymakers should make sure that customers get easily get access to the

bank activities related to financial education.

Elisabeth Beckmann (2013) analyzed how financial literacy was related to

household savings behavior of 1000 Romania individuals. The study found that

less than 5% of respondent were able to correctly answer the financial literacy

questions. Financial literacy levels differed between regions across rural and

urban areas. Furthermore, the study found that older and less educated

individuals were performed worst on the financial literacy questions. Also, the

study found that financial literacy was positively and significantly related to

savings and investment behavior. The study suggested that financial education

may help to promote demand for financial services such as savings and limit

mistakes for borrowing.

Mahdzan N.S,&Tabiani, S. (2013) The study examined the influence of

financial literacy on individual savings behavior of 200 individuals in Klang

Valley Malaysia market context. The Result found that the level of financial

literacy has a significant, positive impact on individual savings. Moreover

savings regularity, educational level, income and gender influenced the chance

of savings positively. That study suggested that it was important for

policymakers to increase the financial literacy of the household by

implementing various education programmes, to further influenced savings

rates at the national level

Tariq Saeed mian (2014) The paper examined that financial literacy and impact

on financial decision making of 300 respondents in Saudi Arabia. The study

consist of two section questions on financial knowledge and financial behavior.

The study confirmed that significant impact from gender and age on financial

literacy. Males were more financial literate than females, and older people

showed a higher of financial literacy compared with younger people. There was

no significant impact from educational level and current work situation on

financial literacy. Also, financial literacy was measured with retirement

planning. People with a higher level of financial literacy had a greater urge to

engaged in retirement planning

Levi-D’Ancona, Emily (2014) The study examined financial literacy and

financial inclusion of 2500 rural women in Rajasthan. The study conducted

financial literacy training consists of financial services, financial concepts, and

financial practices of rural SHGs. The study found that lack of financial literacy

among borrowers was one of the factors leading to financial exclusion for an

understanding of finances was necessary to the utilization of financial services.

Moreover, financial literacy contributes to financial inclusion among the rural

and tribal women.

Mohamad Fazil Sabri et al. (2015) Examined the role of financial management

practice on financial literacy and retirement confidence of 626 working women

in Malaysia. The research consists of financial literacy and financial

management practices questions such as savings, credit management, risk

management, cash management, debt and Islamic banking. The study found that

significant relations between financial literacy, financial management practices,

and retirement confidence. Moreover, the study revealed that the relationship

between financial literacy and retirement confidence were spurious, the relation

was fully mediated by financial management practices. The study suggested that

financial literacy training and actual cases of healthy financial management

practice should be given to the participants for building retirement confidence.

Girum Abebe et.al. (2016) owe that impact on financial literacy training and the

remainder were changing the saving and investment behavior of 426 small-

medium enterprises in Ethiopia. They offered four –hour financial literacy

training and periodic SMS reminders for three months to selected groups of

micro-entrepreneurs. The study found that the entrepreneurs who received SMS

reminder increased Savings by reduced daily expenses on food and house rent.

Furthermore, they found that entrepreneurs who received both financial literacy

training and SMS reminders increased their savings by making use of bank

accounts.

Ivana Bujan et al., (2016) Examined determinants of financial literacy among

259 individuals of Republic of Croatia. They set four fundamental questions of

financial literacy like present value of money, the future value of money,
inflation and investment as a dependent variable. Results showed that age, level

of education and income levels significantly influence the financial literacy.

Bozena Fraczek et al., (2017) analyzed the level of financial literacy and

financial inclusion among 1201 economic students in Visegrad group countries.

The survey examined the financial knowledge and financial inclusion of

banking, savings, and borrowings. The research found that financial literacy and

financial inclusion were to be lower in comparison to the western Europen

countries. Furthermore results found that very lower level of financial literacy

and financial inclusion of young future economists in 4V countries. Therefore

the effective way to improve the financial literacy and financial inclusion

among students as well as research to be focused on financial knowledge and

financial inclusion in future.

3. RESEARCH METHODOLOGY

This section dealt with the main objectives, statement of the problem, and

hypotheses of the study.

3.1.STATEMENT OF PROBLEM
The worldwide financial literacy survey was conducted by the World Bank in

2009. In this study it is found that rural India is having a lack of financial

literacy at around 66 percent. Also National Institute of Securities Market in

India conducted financial literacy and financial inclusion study in 2014; in that
study it was found that 85% of rural population was financially illiterate.

Lower financial literacy is linked to lower household savings as well as over

debt and spending. Individuals with lower levels of financial literacy transact in

higher-cost manners and report to excessive debt loads. Moreover greater

susceptibility to fraud and abuse, lack of financial literacy could lead to

borrower behavior that increases financial fragility. Furthermore, this appears to

be particularly severe for women, less educated, low income, and rural

respondents. Financial literacy is linked to economic development. The urbans

are better than the rural counterparts and this is due to the lesser inclusion with

respect to financial products unlike cities. The research found that financial

literacy education substantially increases the demand for banking services.

(Leora Klapper and Bilal Husnain Zia, 2009).

3.2. OBJECTIVES OF THE STUDY

 1. To analyze the level of financial literacy, among rural household in Tamil Nadu.

 2. To study the existing financial management practices of the rural

household people in Tamil Nadu.

 3. To study the relationship between financial literacy and financial management

practices

 4. To study the relationship between financial management practices and financial

inclusion
  5. To ascertain the impact of financial literacy and financial management practice on

financial inclusion

 6. To suggest suitable measures to improve the financial literacy among rural

household in Tamilnadu

3.3 HYPOTHESES USED FOR THE STUDY

1. Null hypothesis H0 1 : There is no significant influence of (a) age (b) gender

(c) marital status (d) Education (e) Occupation (f) monthly income (g) family
type on financial literacy among respondents in rural areas of Tamilnadu

2. Null hypothesis H0 2 : There is no significant influence of age on (a) Money

management practice (b) Savings practice (c) Borrowing practice (d) Banking
practice among respondents in rural areas of Tamilnadu

3. Null hypothesis H03 : There is no significant influence of gender on (a)

Money management practice (b) Savings practice (c) Borrowing practice (d)
Banking practice among respondents in rural areas of Tamilnadu

4. Null hypothesis H04 : There is no significant influence of marital status on (a)

Money management practice (b) Savings practice (c) Borrowing practice (d)
Banking practice among respondents in rural areas of Tamilnadu

5. Null hypothesis H05 : There is no significant influence of education on (a)

Money management practice (b) Savings practice (c) Borrowing practice (d)
Banking practice among respondents in rural areas of Tamilnadu

6. Null hypothesis H0 6 : There is no significant influence of occupation on (a)

Money management practice (b) Savings practice (c) Borrowing practice (d)
Banking practice among respondents in rural areas of Tamilnadu
7. Null hypothesis H0 7: There is no significant influence of monthly income on
(a) Money management practice (b) Savings practice (c) Borrowing practice
(d) Banking practice among respondents in rural areas of Tamilnadu

8. Null hypothesis H0 8: There is no significant influence of family type on (a)

Money management practice (b) Savings practice (c) Borrowing practice (d)
Banking practice among respondents in rural areas of Tamilnadu

9. Null Hypothesis H09: There is no significant relationship between financial

attitude and (a) Money management practice (b) savings pattern (c) Borrowings
practice (d) Banking practice

10. Null Hypothesis H010: There is no significant relationship between financial

behaviour and (a) Money management practice (b) savings pattern (c)
Borrowings practice (d) Banking practice

11. Null Hypothesis H011: There is no significant relationship between financial

knowledge and (a) Money management practice (b) savings pattern (c)
Borrowings practice (d) Banking practice

12. Null hypothesis H0 12 : There is no significant influence of (a) age (b)

gender (c) marital status (d) Education (e) Occupation (f) monthly income (g)
family type on financial inclusion among respondents in rural areas of
Tamilnadu

13. Null Hypothesis H013: There is no significant relationship between (a)

Money management practice (b) savings pattern (c) Borrowings practice (d)
Banking practice and Financial inclusion

14. Null Hypothesis H014: There is no significant impact of financial

management practices and financial literacy on financial inclusion
15. Null Hypothesis H015: The model fit for financial inclusion of rural
population in Tamilnadu is good.
3.4. SELECTION OF THE DISTRICT AND SAMPLING DESIGN

According to the survey of CRSIL 2015 report (Financial Inclusion Index),

Tamil Nadu holds III rank among the various states in all over India and the

researcher also belongs to Tamil Nadu state. With this background, the Tamil

Nadu state has been selected for this study. According to survey CRISIL 2015

report four districts in financial inclusion Viz, Dharmapuri, Thiruvannamalai,

Villupuram, and Thiruvallur have earned above-average financial inclusion

have shown the significantly low compared to other districts in TamilNadu.

Hence the research has selected 4 districts VIZ, Dharmapuri, Thiruvannamalai,

Villupuram, and Thiruvallur based on the CRISIL report for the present study.

For the current study, a non-probability convenient sampling technique is

chosen. In convenient sampling technique, the researcher chooses the sampling

units as per his/her convenience.

3.5 SAMPLE SIZE DETERMINATION

Sample size of the study is determined using the formula as below:

Sample size n = (ZS/E)2

Z = 1.96 (Standardized value corresponding to95% confidence interval)

S = Sample standard deviation from pilot study = 0.62

E = Acceptable error = 0.05 (5%)

Sample size (n ) = (ZS/E)2

= (1.96*0.62/0.05)2
 = 562.45

~ 563

Interview schedule was conducted with 563 respondents, the data

collected was recorded through questionnaire and it is converted to electronic
format to proceed for analysis.

3.6 STRUCTURE OF THE QUESTIONNAIRE

Primary data required for the research were collected by conducting a survey

among the sample rural household respondend. For conducting survey a

structured questionnaire was prepared. The questionnaire consists of three

parts, Part A deals with a profile of the individuals on various demographic.

Part B deals with various financial management practices and financial

inclusion. Part C deals with various dimensions of financial literacy .The

questionnaire consists of multiple choice and five-point scales are used to

measure respective variables.

3.7 PILOT SURVEY AND RELIABILITY TEST

Pilot study was conducted with 65 respondents of the sample unit form

Dharmapuri distrcits and the number of items listed in the questionnaire was 57

items.The reliability coefficient computed using Corn Bach’s Alpha was 0.81

which showed that the instrument was reliable.

TOOLS AND TECHNIQUES USED FOR ANALYSIS

The analysis part of the present thesis is made by using the various parametric

and non-parametric statistical test namely, percentage Analysis, Descriptive

statistics, One way ANOVA, Exploratory Factor analysis, Confirmatory Factor

analysis , Bi-variate correlation, Multiple regression analysis, Structural

equation modeling

3.9 LIMITATION OF THE STUDY

1. The study carried out in four of the above average financial inclusion

district only.

2. The Sample size is restricted to 563

3. The respondents may be in bias views it can’t be ignored

4. The Time period took for the study

4. ANALYSIS AND INTERPRETATION

1.Personal profile of the respondents

Table 4.1

Personal profile of the respondents

Number of
Percentag
Classification Respondent
e
s
20-40 years 121 21.4
Age 41-60 years 364 64.6
Above 60 years 78 13.9
Male 367 65.3
Gender
Female 196 34.8
Single 175 31.1
Marital Status
Married 388 68.9
Up to Primary school 81 14.3
Education High school-Higher secondary 356 63.2
Graduate and above 126 21.3
 Organized sector 185 32.8
Occupation
Un-Organized sector 378 67.2
Nuclear 378 67.1
Type of family
Joint 185 32.9
Two 93 16.5
Household size Three 199 35.3
of the family Four 185 32.9
Above Four 86 15.4
One 85 15.1
Number of
Two 195 34.6
dependents in
the family Three 130 23.1
Four and above 153 27.2
Source: Primary data

In the selected 563 respondents, 64.6% of the respondents belong to 41-60 years age
group, 21.4% of them falls in the age group of 21-40 years and 13.9% of the respondents are
more than 60 years age group.

Table 4.1 portray 65.3% of the chosen respondents are male and the remaining 34.8%
of the respondents are female. It show that most of the selected rural area respondents
(65.3%) are male. 68.9% of the selected respondents are married and 31.1% of them are
living as single.

In the above table 4.1, 63.2% of the selected respondents are having higher secondary
level education, 21.3% of them possessing graduation and other higher education, 14.3% of
the respondents are boast primary education.

In the selected rural area respondents, 67.2% of them working in un-organized sectors
and the remaining 32.8% of the respondents employed in organized sectors. It is observed
that most of the rural area respondents are working in un-organized sectors.

32.9% of the rural area respondents are living in the family type of joint setup and
67.1% of the respondents are living as nuclear family.

35.3% of the rural area respondents are living in families with three members,
whereas 32.9% of the respondents possessing four household in their family, another 16.5%
of them having two members and 15.4% of the respondents possessing more than four
households in their family. In the above table 4.1, 34.6% of the rural area respondents are
having two dependents in their family, 27.2% of them has four and above members as
dependents, 23.1% of the respondent’s dependents are three and 15.1% of the respondent’s
dependents are only one person.

2. Socio economic profile of the respondents

Table 4.2

Socio economic profile of the respondents

Number of
Classification Percentage
Respondents
Up to Rs.10000 169 30.1
Monthly income Rs. 10001-30000 267 47.4
Above Rs.30000 127 22.5
One 196 34.8
Number of income Two 273 48.5
earner in the family Three 73 13.0
More than Three 21 3.7
Head 255 45.3
Status in the family
Member 308 54.7
Own 152 27.0
Financial decision Spouse 75 13.3
made in the family Both 209 37.1
Others 127 22.6
Source: Primary data

In the above table 4.2, 47.4% of the selected respondents were earning Rs.10,001-
30,000 as their monthly income, whereas 30.1% of them has a monthly income of less than
Rs.10,000 and 22.5% of the respondents are earning more than Rs.30,000 per month.

48.5% of the respondents said that two members in their family are earning, 34.8% of
the family members are running with single persons earning, three members earning in 13%
of the family and 3.7% of the respondents family are having more than three persons as
earning members.

Table 4.2 describes 54.7% of the selected respondents are members of the family and
the remaining 45.3% of the respondents are head of the family. In 37.1% of the
respondent’s family financial decision was taken by both husband and wife, in 27% of the
families husband acts as financial decision maker, 22.6% of the respondent’s family said
other persons are involved in taking financial decision and in 13.3% of the respondents’
family, spouse are decision makers. It is observed that most of the family both husband and
wife (37.1%) are collectively taking financial decision.

3. Factors influencing the Financial literacy of Rural population of Tamilnadu

Table 4.3

Factor scores for Financial Literacy

Factor
Factor Components
Scores

Dealing with money is overwhelming 0.815

Factor 1: Money is important to me for happy in Life 0.763
Financial
Attitude Money is just a means to buy Things 0.636

I don’t worry about the future, I like to live for today 0.527

Thinking about my financial future makes me feel

0.811
comfortable
I spend a lot of time thinking about financial
Factor 2: 0.698
information before I make a financial decision
Financial
Money decisions create relief in my household 0.617
Behavior
Dealing with money is interesting to me 0.553

I try to stay informed about money matters and

0.515
finances
Risk of losing money will get reduce when the money
0.797
invest in different assets
The longer education loan is due the greater cost of
0.741
Factor 3: financing it

Financial The increase the price of goods will reduce buying

0.624
power
Knowledge
The value of money can double after 10 years 0.548

Compound interest is addition of interest to the

0.511
principal sum of deposits or loan

From the table 4.3 it is inferred that factor 1 is a combination of four variables such as
“Dealing with money is overwhelming”, “Money is important to me for happy in Life”,
“Money is just a means to buy Things” and “I don’t worry about the future, I like to live for
today” which is named as Financial Attitude factor.

Factor 2 is a combination of five variables such as “Thinking about my financial

future makes me feel comfortable”, “I spend a lot of time thinking about financial
information before I make a financial decision”, “Money decisions create relief in my
household “, “Dealing with money is interesting to me “and “I try to stay informed about
money matters and finances” which is named as Financial Behavior factor.

Factor 3 is a combination of five variables such as “Risk of losing money will get
reduce when the money invest in different assets”, “The longer education loan is due the
greater cost of financing it”, “The increase the price of goods will reduce buying power”,
“The value of money can double after 10 years” and “Compound interest is addition of
interest to the principal sum of deposits or loan” which is named as Financial Knowledge
factor.

Dealing with money is overwhelming, thought about financial future and Risk of
losing money will get reduce when the money invest in different assets are the highlights of
financial literacy among the rural respondents.

4.Influence of demographic variables on Financial Literacy

Table 4.4

Influence of demographic variables on Financial Literacy

Variables Category N Mean SD F-value

20-40 years 121 3.52 0.516
0.100
Age 41-60 years 364 3.51 0.508
(p=.960)
Above 60 years 78 3.49 0.493
Male 367 3.63 0.498 3.889*
Gender
Female 196 3.39 0.522 (p=.034)
Single 175 3.51 0.481 0.134
Marital status
Married 388 3.52 0.52 (p=.715)
Primary school 81 3.33 0.501
4.850**
Education High –Higher secondary 356 3.52 0.514 (p=.002)
Graduate and above 126 3.63 0.503
 Organized sector 185 3.67 0.535 3.132*
Occupation
Un-organized sector 378 3.35 0.459 (p=.025)
Below Rs.10000 169 3.44 0.526
4.895**
Monthly income Rs. 10000-30,000 267 3.51 0.509 (p=.021)
Above Rs.30,000 127 3.54 0.458
Nuclear 378 3.52 0.512 0.116
Family type
Joint 185 3.01 0.501 (p=.734)
*Significant at 5% level **Significant at 1% level

H0 1 : There is no significant influence of (a) age (b) gender (c) marital status (d)
Education (e) Occupation (f) monthly income (g) family type on financial literacy
among respondents in rural areas of Tamilnadu

H1 1 : There is significant influence of (a) age (b) gender (c) marital status (d)
Education (e) Occupation (f) monthly income (g) family type on financial literacy
among respondents in rural areas of Tamilnadu

Age

F value 0.100 in Table 4.4 is insignificant at 5% level, null hypothesis H0 1(a) is

accepted. Hence significant influence of age on financial literacy in rural areas of Tamilnadu
is not observed.

Gender

F value 3.889 in Table 4.4 is significant, the null hypothesis H0 1(b) is rejected at 5%
level. Male Respondents have scored highest mean value of 3.63 and respondents of female
scored least mean (3.39). Hence it is inferred that male respondents in rural areas have better
financial literacy than the female respondents.

Marital status

F value 0.134 in Table 4.4 is insignificant at 5% level, null hypothesis H0 1(c) is

accepted. Hence influence of marital status on financial literacy in rural areas of Tamilnadu
is not significantly observed.

Education

F value 4.850 in Table 4.4 is significant, the null hypothesis H0 1(d) is rejected at 1%
level. Respondents with the education of graduation and above have scored highest mean
value of 3.63 and lowest mean was scored by the primary school respondents (3.33). Hence
it is inferred that respondents with graduation and above are having more knowledge in
finance and the respondents of lower education are getting little level of knowledge in
finance.

Occupation

F value 3.132 in Table 4.4 is significant, the null hypothesis H 0 1(e) is rejected at 5%
level. Respondents employed in organizing sectors have scored highest mean value of 3.67
and respondents working in unorganized sector have scored least mean (3.35). Hence it is
inferred that respondents employed in organized sectors having more knowledge in finance
than the respondents working in unorganized sector.

Monthly income

F value 4.895 in Table 4.4 is significant, the null hypothesis H 01(f) is rejected at 1%
level. Respondents earning above Rs.30,000 as their monthly income have scored highest
mean value of 3.54 and respondents with the salary below Rs.10,000 have scored least mean
(3.44). Hence it is inferred that respondents earning above Rs.30,000 are having more
knowledge in finance and the respondents with the salary below Rs.10,000 are having less
knowledge in finance.

Family type

F value 0.116 in Table 4.4 is not significant at 5% level, null hypothesis H 0 1(g) is
accepted. Hence significant influence of family type on financial literacy in rural areas of
Tamilnadu is not observed.

5.Factors influencing the Money management practice of Rural population of

Tamilnadu

Table 4.5

Factor scores for Money management practice

Factor
Factor Components
Scores
We should Review and assess the Spending every
Factor1: 0.825
month
Financial Planning
Everyone necessary to maintain Income and expenses
0.812
account
It is essential spending money according to the 0.723
budget prepared
 Everyone should track their spending 0.678
It’s necessary to think before spending money 0.815
Factor 2:
Financial It is good to spend money within income 0.702
Control Restricts unnecessary spending is good 0.641
People Should know how to spend money 0.587
Before buy something should carefully consider
0.717
Factor 3: whether can afford it or not
Purchasing
decision It is good to Purchase things in discount sale 0.681
It is best to Compare prices when purchases 0.594
Spending money should be Satisfied 0.787

Factor 4: It never a good thing spend money to impress others 0.643

End Meet Spending money is not the power of the person 0.524
Most of the people have knowledge to manage their
0.502
own finance

From the table 4.5 it is inferred that factor 1 is a combination of four variables such as
“We should Review and assess the Spending every month”, “Everyone necessary to maintain
Income and expenses account”, “It is essential spending money according to the budget
prepared” and “Everyone should track their spending” which is named as Financial
Planning factor.

Factor 2 is a combination of four variables such as “Its necessary to think before

spending money”, “It is good to spend money within income”, “Restricts unnecessary
spending is good” and “People Should know how to spend money” which is named as
Financial Control factor.

Factor 3 is a combination of three variables such as “Before buy something should

carefully consider whether can afford it or not”, “It is good to Purchase things in discount
sale” and “It is best to Compare prices when purchases” which is named as Purchase
Decision factor.

Factor 4 is a combination of four variables such as “Spending money should be

Satisfied”, “It never a good thing spend money to impress others”, “Spending money is not
the power of the person” and “Most of the people have knowledge to manage their own
finance” which is named as End Meet factor.
 Reviewing and assessing spending periodically, necessary to think before spending
money, self checking of affordability before purchasing anything and satisfaction towards
worth spending money are the highlighted aspects of Spending Patten of Rural population.

6.Influence of age on Financial Management practices

Table 4.6

Influence of age on Financial Management practices

Age N Mean S D F-value

20-40 years 121 3.09 0.983
Money management 3.24 0.985 2.779*
41-60 years 364
practice (p=.041)
Above 60 years 78 3.16 0.953
20-40 years 121 3.19 1.101
364 3.48 1.078 3.187*
Savings practice 41-60 years
(p=.027)
Above 60 years 78 3.13 1.063
20-40 years 121 3.12 1.023
3.15 1.009 1.097
Borrowing practice 41-60 years 364
(p=.350)
Above 60 years 78 3.09 1.047
20-40 years 121 3.41 1.054
Banking practice 364 3.47 1.072
41-60 years 3.014*
Above 60 years 78 3.36 1.075 (p=.034)
*Significant at 5% level

H0 1: There is no significant influence of age on (a) Money management practice (b)

Savings practice (c) Borrowing practice (d) Banking practice among respondents in
rural areas of Tamilnadu

H1 1: There is significant influence of age on (a) Money management practice (b)

Savings practice (c) Borrowing practice (d) Banking practice among respondents in
rural areas of Tamilnadu

Money management practice

F value 2.779 in Table 4.6 is significant, the null hypothesis H 0 2(a) is rejected at 5%
level. Respondents in the age group of 41-60 years have scored highest mean value of 4.24
and respondents of 20-40 years have scored least mean (4.09). Hence it is inferred that
respondents of 41-60 years are better in money management practice and 20-40 years are
showing less knowledge in spending.

Savings practice

F value 3.187 in Table 4.6 is significant, the null hypothesis H0 2(b) is rejected at 5%
level. Respondents in the age group of 41-60 years have scored highest mean value of 3.98
and lowest mean scored by respondents of above 60 years (3.63). Hence it is inferred that
respondents of 41-60 years are savings more money and more than 60 years age group have
less knowledge in savings.

Borrowing practice

F value 1.097 in Table 4.6 is insignificant at 5% level, null hypothesis H 02(c) is

accepted. Hence significant influence of age on borrowings in rural areas of Tamilnadu is
not observed.

Banking practice

F value 3.014 in Table 4.6 is significant, the null hypothesis H0 2(d) is rejected at 5%
level. Respondents in the age group of 41-60 years have scored highest mean value of 3.97
and lowest mean scored by respondents of above 60 years (3.86). Hence it is inferred that
respondents of 41-60 years are better in bank and more than 60 years age group rural
respondents are deficient in Bank relations.

Relationship between Financial knowledge and Financial management practices is

studied in this section. To study the relationship between Financial knowledge and Financial
management practices (Money management practice, Savings pattern, Borrowings practice
and Banking practice).

5. FINDINGS

5.1.1 Personal profile of the respondents

 64.6% of the respondents belong to 41-60 years age group, 21.4% of them falls in the
age group of 21-40 years and 13.9% of the respondents are more than 60 years age
group.
 65.3% of the chosen respondents are male and the remaining 34.8% of the
respondents are female.
 68.9% of the selected respondents are married and 31.1% of them are living as single.
  63.2% of the selected respondents are having higher secondary level education, 21.3%
of them possessing graduation and other higher education, 14.3% of the respondents
boast primary education.
 67.2% of them working in un-organized sectors and the remaining 32.8% of the
respondents employed in organized sectors.
 32.9% of the rural area respondents are living in the family type of joint setup and
67.1% of the respondents are living as nuclear family.
 35.3% of the rural area respondents are living in families with three members,
whereas 32.9% of the respondents possessing four household in their family, another
16.5% of them having two members and 15.4% of the respondents possessing more
than four households in their family.
 34.6% of the rural area respondents are having two dependents in their family, 27.2%
of them have four members as dependents, 23.1% of the respondent’s dependents are
three and 15.1% of the respondents’ dependents are only one person.
5.1.2 Socio economic profile of the respondents

 47.4% of the selected respondents were earning Rs.10,001-30,000 as their monthly

income, whereas 30.1% of them has a monthly income of less than Rs.10,000 and
22.5% of the respondents are earning more than Rs.30,000 per month.
 48.5% of the respondents said that two members in their family are earning, 34.8% of
the family members are running with single persons earning, three members earning
in 13% of the family and 3.7% of the respondents family are having more than three
persons as earning members.
 54.7% of the selected respondents are members of the family and the remaining
45.3% of the respondents are head of the family.
 37.1% of the respondents family financial decision was taken by both husband and
wife, in 27% of the families husband acts as financial decision maker, 22.6% of the
respondents family said other persons are involved in taking financial decision and in
13.3% of the respondents family, spouse are decision makers.
Dealing with money is overwhelming, thought about financial future and Risk of losing
money will get reduce when the money invest in different assets are the highlights of
financial literacy among the rural respondents.
  Respondents agreed that dealing with money is overwhelming, money is important for
happy in Life and money is just a means to buy things at the same time the
respondents disagreed that they are not worried about future and like to live for today.
 Information about money related issues and dealing with money is interesting are the
positive aspects of the financial behavior of the rural respondents and spending lot of
time thinking about financial information about financial decision, money decisions
create relief in the household and thinking about financial future makes them feel
comfortable are the negative aspects of financial behavior.
 Rural respondents have relatively less knowledge in financial aspects. It is
understood that the respondents accepted that their money can be doubled in ten years
of time. They have lesser knowledge about risk of losing money will get reduce when
the money invest in different assets, longer education loan is due to greater cost of
financing, the increase the price of goods will reduce buying power and Compound
interest is addition of interest to the principal sum of deposits or loan.
 Influence of gender, education, occupation and monthly income on financial literacy
is observed significantly. Further Male respondents in rural areas have better
financial literacy than the female respondents. Respondents with higher education are
having more knowledge in finance and the respondents of lower education are
getting little level of knowledge in finance. Respondents employed in organized
sectors having more knowledge in finance than the respondents working in un-
organized sectors. Respondents earning above Rs.30,000 are having more
knowledge in finance and the respondents with the salary below Rs.10,000 are
having less knowledge in finance. But influence of age, marital status and family
type on financial literacy is not inferred significantly.
6. CONCLUSION

From the findings of the study a conceptual model is to be framed and analyzed
using Structural Equation Model (SEM Model).

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INTERNATIONAL JOURNAL

1. Jayanthi M and Dr.S.S Rau (2017), “Financial inclusion in India”,

International Journal of Applied Business and Economic Research,

Vol.15,No.22, pp.11-16, ISSN: 0972-7302.(Scopus List)

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financial Literacy in TamilNadu”, International Journal of Economic

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Households in South India”, Journal of Advance in dynamical & control

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financial literacy: Evidence from south India”, Statistical Journal of the

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(Scopus List).

NATIONAL JOURNAL

1. Jayanthi M and Dr.S.S Rau (2017), “An Empirical study on financial

literacy and spending Behavior of rural household in India”, Asian

Journal of Management, Vol. 8, No.4, pp. 1115-1119, ISSN: 2321-

5763.(UGC Approved)

INTERNATIONAL CONFERENCE

1. Jayanthi M and Dr.S.S Rau (2013), “Financial literacy and saving

behavior towards developing countries”, Proceedings of International

Conference on ‘Emerging Markets and Issues in Management’, April

2013, VIT University, Vellore, MAR-112, ISBN: 978-93-5104-831-7.

NATIONAL CONFERENCE
 1. Jayanthi M and Dr.S.S Rau (2014), “Financial literacy – An Adjunct to

Financial inclusion”, Proceedings of National Conference on ‘Strategies

for social and sustainable competitive advantage in globalized Era’,

June 2014, Karnataka State women’s University, Karnataka, pp.137-

139, ISBN: 97893-83192496.

TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE

NO.
1. Introduction
1.1 Global Initiative of financial literacy
1.1.1Financial literacy Initiatives by the United
States of America
1.1.2 Financial literacy Initiatives by the United
 Kingdom
1.2. Initiatives were taken by Reserve Bank Of India
1.2.1 Initiatives by SEBI
1.3. Financial Literacy Initiatives in Tamil Nadu
1.3.1 National Bank for Agriculture and Rural
Development
1.3.2 State Bank of Travancore (SBT)
1.4 Scope of the study
2. Review of literature
3. Research Methodology
3.1. Statement of the problem
3.2. Objective of the Study
3.3. Hypotheses used for the Study
3.4. Selection of the districts and Sampling Design
3.5. Sample Size Determination
3.6. Structure of the questionnaire
3.7. Pilot study and Reliability for Analysis
3.8. Tools and Techniques used for Analysis
3.9 Limitations of the study
4. Analysis and Discussion
5. Findings of the study
6. Conclusion
7. Reference