An Exploratory Study To Determine The Level of Financial Literacy in Indian Households

AN EXPLORATORY STUDY TO DETERMINE THE LEVEL OF
FINANCIAL LITERACY IN INDIAN HOUSEHOLDS

DISSERTATION
Submitted to CHRIST (Deemed to be University) in partial
fulfilment of the requirements for the award of the degree of
Bachelor of Business Administration

(Honors)
By
Vibhor Jain
Reg. No. 1823169
Under the guidance of

Dr. Anand Patil
Associate Professor
School of Business Studies and Social Sciences
SCHOOL OF BUSINESS STUDIES AND SOCIAL SCIENCES

CHRIST (DEEMED TO BE UNIVERSITY)
BGR CAMPUS
BANNERGHATTA ROAD, HULIMAVU
BENGALURU - 76
2020 - 2021
AN EXPLORATORY STUDY TO DETERMINE THE LEVEL OF
FINANCIAL LITERACY IN INDIAN HOUSEHOLDS
DISSERTATION
Submitted to CHRIST (Deemed to be University) in partial
fulfilment of the requirements for the award of the degree of
Bachelor of Business Administration

(Honors)
By
Vibhor Jain
Reg. No. 1823169
Under the guidance of

Dr. Anand Patil
Associate Professor
SCHOOL OF BUSINESS STUDIES AND SOCIAL SCIENCES

CHRIST (DEEMED TO BE UNIVERSITY)
BGR CAMPUS
BANNERGHATTA ROAD, HULIMAVU
BENGALURU - 76
2020 - 2021
DECLARATION
I, Vibhor Jain (Reg. No. 1823169), hereby declare that this project report titled “An
Exploratory Study to Determine the Level of Financial Literacy in Indian Households”,
submitted to CHRIST (Deemed to be University), Bengaluru in partial fulfilment of the
requirements for the award of the degree of Bachelor of Business Administration (Honors) is a
record of original work carried out by me during the academic year 2020-21 under the guidance
of Dr. Anand Patil, Associate Professor, School of Business Studies and Social Sciences,
CHRIST (Deemed to be University), Bengaluru has not been previously formed the basis for
the award of any Degree, Diploma or any other similar title of recognition to any candidate of
this or any other University or Institution.
Place: Bengaluru Vibhor Jain

Date: Reg. No. 1823169
CERTIFICATE BY GUIDE
This is to certify that this project report titled “An exploratory study to determine the level of
financial literacy in Indian households”, submitted to Christ (Deemed to be University),
Bengaluru in partial fulfilment of the requirements for the award of the degree of Bachelor of
Business Administration (Honors) is a record of original work carried out by Vibhor Jain
(Reg. No. 1823169) during the academic year 2020-21 under my guidance and it has not been
previously formed the basis for the award of any Degree, Diploma or any other similar title of
recognition to any candidate of this or any other University or Institution.
Place: Bengaluru Dr. Anand Patil
Associate Professor
Date:
Christ (Deemed to be University)

CERTIFICATE
This is to certify that this project report titled “An exploratory study to determine the level of
financial literacy in Indian households”, submitted to Christ (Deemed to be University),
Bengaluru in partial fulfilment of the requirements for the award of the degree of Bachelor of
Business Administration (Honors) is a record of original work carried out by Vibhor Jain
(Reg. No. 1823169) during the academic year 2018-19 under the guidance of Dr. Anand Patil,
Associate Professor, School of Business Studies and Social Sciences, CHRIST (Deemed to
be University), Bengaluru and it has not been previously formed the basis for the award of any
Degree, Diploma or any other similar title of recognition to any candidate of this or any other
University or Institution.
Place: Bengaluru Dr. Joby Thomas

Date: Academic Coordinator
CHRIST (Deemed to be University)
BGR Campus, Bengaluru
ACKNOWLEDGEMENTS
I express my special thanks to Dr. Anand Patil, Associate Professor, School of Business
Studies and Social Sciences, Christ (Deemed to be University), Bengaluru for taking time to
guide and mentor me from the stage of selecting the topic till the submission of the research. His
expert advice and constant motivation helped me to conduct the study in a systematic and orderly
manner.
I would also like to thank Dr. (Fr) Abraham V M, Vice Chancellor, CHRIST (Deemed to be
University), Bengaluru, for having provided an opportunity to carry out a research as a part of
my curriculum of Bachelor of Business Administration (Finance and International Business).
I would like to convey my gratitude to Dr. Joby Thomas, Coordinator, School of Business
Studies and Social Sciences, Christ (Deemed to be University), Bengaluru for providing me
the opportunity and the support to carry out such a research in the area of human resources. This
was instrumental in my journey of studying and understanding the concept of perceived
organizational support and organizational commitment, especially in the steel manufacturing
sector.
I thank Dr. Jyothi Kumar, Associate Dean, School of Business Studies and Social Sciences,
Christ (Deemed to be University), Bengaluru for always being a source of Inspiration and a
Guiding light in all the academic learning and activities organized in Bannerghatta Road
Campus.
I would like to also sincerely thank all the students, and employees who were very much
instrumental in conducting this research. Their time and valuable responses was extremely
helpful in providing the required information in order to carry out this study.
Finally, I would like to thank my parents, my brother and friends for their constant help and
support. Their motivation and advice was very helpful in enabling me to conduct the research
and bring it to completion.
John Joe Thomas

Table of Contents
1 Introduction..............................................................................................................................................1
1.1 Need for this Study............................................................................................................................1
1.2 Statement of Problem.......................................................................................................................7
1.3 Scope of Study...................................................................................................................................7
1.4 Objectives of the Study......................................................................................................................7
2 Literature Reviews....................................................................................................................................9
2.1 Primary Papers..................................................................................................................................9
2.2 Secondary Papers............................................................................................................................15
3 Research Methodology...........................................................................................................................18
3.1 Introduction.....................................................................................................................................18
3.2 Operational Definitions....................................................................................................................20
3.3 Sampling Size and Technique...........................................................................................................21
3.4 Data Collection and Sources............................................................................................................21
3.5 Methods of Data Collection.............................................................................................................24
3.6 Techniques used in Analysis of Data................................................................................................24
Data Analysis and Interpretation...............................................................................................................28
Findings, Suggestions and Conclusion.......................................................................................................47
5.1 Findings............................................................................................................................................47
5.2 Suggestions......................................................................................................................................48
5.3 Conclusion.......................................................................................................................................50
5.4 Future Scope of this Study...............................................................................................................51
5.5 Limitations of the Study...................................................................................................................51
References.................................................................................................................................................52
Appendix...................................................................................................................................................56
Questionnaire........................................................................................................................................56
Table Number Table Name Page Number
4.1 Distribution of respondents based on Age 29
4.2 Distribution of respondents based on Gender 30
4.3 Distribution of respondents based on Profession 31
4.4 Distribution of respondents based on Education 32
4.5 Decision maker in respondent’s family 34
4.6 Financial literacy level on basis of Age 35
4.7 Financial literacy level on basis of Education 36
4.8 Level of Financial Literacy and Profession 37
4.9 Level of Financial Literacy and Formal Financial 38

Education
4.10 Level of Financial Literacy and Responsibility of 39

financial decisions
4.11 Mean scores, percentages and ANOVA F values 40
4.12 Sources Used 43
4.13 Tax Saving 44

CHAPTER 1-
INTRODUCTION
1 Introduction
The big problem faced by all countries globally is financial literacy. The combination of one's
knowledge, ability and attitude towards financial matters is financial literacy. This helps to make
educated decisions about an individual's well-being. The need for financial literacy is predictable
in today's world, which has a market for complicated goods. The government is in a position to
increase the level of financial literacy in countries such as India, which has a large young
population. Via financial education services, the government and other private institutions have
taken the lead. Financial literacy goes beyond offering information and guidance on financial
matters. It is the ability to understand, monitor and use financial sources effectively to improve
an individual's welfare and economic refuge, his family, and his business.
Financial literacy deficiencies can have an effect on a person's or a family's day-to-day money
management and willingness to save for long-term goals like purchasing a house, going to
college, or supporting retirement. Ineffective management of money can also lead to habits that
make customers prone to major financial crises.
1.1 Need for this Study

The lack of financial literacy is notable for complex financial goods, bad awareness and lack of
knowledge of financial matters. Financial awareness varies from person to person. The degree of
financial literacy also plays an important role in assessing gender disparity. The choice or
relationship between a woman and money is often dictated by the perspective of her personal
life. In a woman's life feeling, money and family are connected. The lack of reliable access to
informed decision-making information contributes to poor confidence and a low degree of
financial literacy.
There are different ways people can produce and dispose of their profits. Since the people have
inconsistent wages and a longer life, they have to manage their pension, their wellbeing and their
benefits soundly that needs the know-how required to make an acceptable financial decision to
ensure their own financial well-being and managing circumstances. Development is essential in
equipping customers with financial knowledge of different financially accessible goods and in
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enhancing financial choices. For those that are underserved by our financial system, this is highly
relevant.
In terms of financial inclusion and consumer security, financial literacy also plays an important
role. Financial inclusion requires people's access to financial resources. It also provides
consideration of financial difficulties. Financial integration is not a matter of concern in
developing countries. But in developed countries such as India, there is a lack of knowledge of
financial goods and markets of the formal financial system itself. Therefore, access and
understanding are essential for our nation all facets of financial inclusion. More and more people
must be made aware of financing-related problems and have access to bank services and the
capital markets. Financial literacy allows individuals to consider and support financially prudent
choices about the cost and return involved with financial goods. This allows individuals to
determine risks pertaining to specific financial items. Financial informative, financially educated
people are not trapped in a debt bind, are not fooled by salesmen who market financial products
and know their rights as customers of financial products. Financial literacy thus also functions as
a mechanism to protect customers. To win confidence of the unbanked people and to resolve
their apprehensions about joining them, which may seem to be a dynamic and unfriendly
financial market, is necessary awareness of an efficient complaint process.
Components of financial Literacy
Lack of financial capability can make it hard to make important financial decisions like
preparing for retirement, opening the right kinds of bank accounts, and paying off personal debts
from student loans or credit cards. When it comes to learning about a subject as vast as finance
for common person with the least amount of interaction with the subject while in school, it’s
important for the subject matter to be divided into different components based on the difference
of interaction.
Earn: Understanding your paycheck-
Before spending or investing the amount, it’s very important for everyone to understand how
much they earn, not in a qualitative, but in a quantitative terms. If a person earns money on a
salaried basis, it is easier for them to understand how much they earn by understanding their
paycheck. A paycheck usually contains following components:
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 Gross Pay is the amount without any deduction.
 Net Pay is the amount paid after taking all the deductions into consideration.
 Employee Tax Details contains information about tax levied and deductions made based
on the money decisions of the individual.
Benefits, Deductions & Allowances
 Health Insurance
 Life Insurance
 Short-Term & Long-Term Disability
 Dependent Life Insurance
 HRA
 Travel and Food Allowance
 Accidental Death & Dismemberment
 401(k) / Registered Retirement Savings Plan
 Profit-Sharing
 Garnishments
For a person not sure of his/her regular income can also understand the amount of money he/she
earns by analyzing there income in previous months and trying to get a figure which they are
usually able to achieve in a month.
Spend: Creating a personal budget
After gaining a good amount of insight into the money you earn, the next obvious step is to
spend that money, but spending it without any planning can be very dangerous as there can be
situations where you are in a desperate need of money but due to no budgeting, you tend to
overspend which ultimately causes a misbalance. Budgeting or planning how to spend is very
important to reach your financial goals. A budget will show you how much money you plan to
bring in, as well as your necessary expenditures (like rent and insurance) and discretionary
spending (like entertainment or dining out). Rather than seeing a budget as a hindrance, think of
it as a method for achieving your financial objectives. The following are steps for budgeting.
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1. Calculate your Income
2. List down all the monthly expenses which are required for ones living-
 House rent
 Electricity, Maintenance, Water
 Food
 Personal care
 Loan installment repayment
 Petrol or daily commute
 Entertainment and recreation
 Savings
3. Distribute all the expense into Fixed and variable expense
Based on this classification, it will be very easy for an individual to cut down costs and
save more.
4. After this, you will be able to understand where all you spend, where is cost cutting easy,
how much to save, how much to increase your savings etc.
Save: Determining your financial goals
Everyone have some long term financial goal which can only be achieved when someone puts
his/her efforts in saving. Following are the reasons why a person should save:
 Retirement Planning
 Saving for any emergency
 Saving for a huge expense (A House or A Car)
 Pay off debts
Cutting down costs from daily expenses is not the only way to save money, there are ample of
avenues which can help you save more money like saving tax. India, a person earning above 2.5
LPA is liable to pay tax ranging from 5% to 30%. There are methods which can be used to save
taxes in India:
 By creating 5 years Fixed Deposit

 By investing in Public Provident Fund
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 National Pension Scheme
 ELSS
 National Savings Certificate
 By opting for a Health Insurance
Borrow: Credit cards, loans, and your credit score
 Borrowing is an important component of financial literacy. There are going to be times

when an individual needs to borrow some money as loan to meet his/her goals, like
buying a house or a car.
 One borrows some part of amount instead of investing whole capital on its own to avoid
short term risks. Perhaps you borrowed money in college and are now saddled with
student loans or credit card debt.
 Borrowing isn't really a bad thing if you know how to compare loans and keep your
credit score in good condition.
Protect: Preventing fraud and buying insurance
Once you are done with finalizing your budget, expenses, Borrowed amount, it’s very important
for an individual to keep their money safe from phishing scams, online frauds and fraud chit
funds. This also covers the requirement for a person to buy a good insurance policy for any
mishap. The following are the things to look at before buying any kind of insurance policy.
 Lump Sum to be paid

 Premium both Monthly and annually
 Tax saving benefits if any
 Circumstances under which insurance should not be paid
Importance of Financial Literacy
It is important to understand why it is important for everyone to be financial literate. Financial

markets are changing at a very high pace with a constantly changing environment
1. Complex Saving and Investing Options
5
Customers must also select from a range of investment and savings choices. They are
complex more than in the past, meaning that customers have to make choices that do not
sufficiently advise themselves between the various alternatives that offer different interest
rates and maturities. A customer is allowed to purchase a house, to finance an education
or to spare for the pension fund, adding to the decision-making burden, by making
decisions between complicated financial instruments with a wide variety of choices.
2. Dynamic Financial Environment
There is a very diverse financial world. There are many more industry players and many
more variables that can affect the market now a global location. As technical
advancement such as electronically traded technology has increasingly evolved, the
capital markets became even more quickly and unpredictable. Recently everyone has
started investing in Bitcoin which has bought a new wave of change in financial markets
and investment avenues. Taken together, these variables will trigger opposing views and
difficulties in the formulation, development and implementation of a financial path.
3. Millions of financial products to choose from
There are so many things to choose from and make decisions starting from bank account,
Broker, Mutual fund, credit card companies, insurance, and tax saving policies, mortgage
companies, and financial planners.
Financial Knowledge
Financial literacy requires financial information, which is required for activities such as keeping
up with economic and financial news, comparing financial products and services, and making
relevant, well-informed financial decisions. Consumers with a clear understanding of financial
principles and the ability to apply numeracy skills in a financial context may act independently to
handle their financial affairs and respond to news and events that can impact their financial well-
being.
Impact of Financial Literacy
In general, financial literacy impacts all and has consequences for both people and the public,
from day-to-day to long-term financial choices. Ineffective expenditure and financial
preparation, risky borrowing and debt management compete with low levels of literacy across
6
continents. This low levels of global financial literacy and their broad consequences call for
urgent efforts. Financial analphabetism not only has repercussions for people's actions it it also
has implications for culture. The rapid growth and lack of financial literacy of mobile payment
technology and alternative financial services will intensify inequities in income.
Initiatives by Government of India
1. RBI
A project called 'Project Financial Literacy' has been initiated by the Reserve Bank of
India The project aims to spread central bank and general banking knowledge to different
target groups, including school and university students, the women, rural and urban poor,
security and senior citizens. It is distributed through seminars, brochures, pamphlets,
films and RBI's website, to the target community with the assistance of banks, municipal
equipment, schools and colleges.
2. SEBI
The Indian Stock Exchange Board has initiated a national initiative in financial
education. SEBI has empanelled resource persons in India to conduct financial education
to different sectors, such as schoolchildren, college students, executives, middle-income
classes, housekeepers, pensioners, self-help groups. The SEBI Certified Resource
Individuals organise seminars in the diverse fields of investments, finance, planning,
accounting, insurance, pension planning, etc.
3. Insurance Regulatory and Development Authority
Several steps in the field of financial literacy were taken by the Insurance Regulatory and
Growth Authority. Information programmes were transmitted on television and radio and
through ongoing promotions in English, Hindi and 11 other Indian languages, clear
messages were distributed about the rights and responsibilities of policyholders,
platforms available for conflict resolution, etc.
1.2 Statement of Problem

This research is driven by the fact that things are not as certain as people think. As the world is
developing towards a different kind of society, it is also providing ground for newer threats that
7
can make the whole world stop and economies to crash. And so to survive and sustain such
dynamic environment, individual should be prepared against these uncertainty. Situations like
global economic meltdown, wars between countries, newer viruses and diseases are bound to
happen some day or the other and it’s better to be financially equipped to sustain these disasters
and that is why financial literacy is so important in today’s world. This research hence tries to
understand the current levels of financial literacy on a scale of Low, Medium and High to get a
picture of what more should be improved.
1.3 Scope of Study

According to the literature reviews and discussion with the Mentor, the following were the gaps
which were needed to be addressed.
 Know the financial literacy level of an Indian household

 Financial literacy parity between males and females in an Indian household
 Education and financial literacy
1.4 Objectives of the Study

 To measure the financial literacy of a mixed group.
 To study the relationship between gender and the level of financial literacy.
 To study the relationship between Prior financial knowledge and current level of
knowledge.
 To study the initiative taken by different organizations to increase financial literacy.
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CHAPTER 2-
LITERATURE REVIEWS
9
2 Literature Reviews
2.1 Primary Papers

According to study, Saravanan & MuthuLakshmi (2017), the most appropriate and common
tax saving method used to save taxes and also to analyze the amount saved by using that method.
Over all the results, it is discovered that the most adopted tax saving instrument is the Provident
Fund, which obtained first place in this report, and the Life Insurance scheme is the second most
adopted tax saving instrument.
The study paper Arora, Monika (2019) refers to the responsive and personal economic
implications of individual income tax assessors. The researcher shall conduct analytical research
on the subject in order to determine the factors that affect the investments of the individual
assesses in tax-saving schemes and in the scope for further investment. A rise in the amount of
investing avenues open to investors has been seen, based on their risk appetite.
Arora Garg (2019) explains that higher education teachers are well aware of the different
exemptions, reliefs, and rebates available under the Indian Income Tax Act. They choose
investing opportunities that have low cost, high returns, and maximum tax advantages. The aim
of this study was to see the perception of Higher Education teachers regarding the Tax saving
instruments available in India. With a complete sample collection of 347 respondents, it was an
exploratory analysis. Descriptive statistics is used to present the data which includes frequency
and percentage. The study found that most of the respondents were in the opinion of the
respondents, the tax system is difficult and that they are taking advantage of the experts to file
their income tax return.
P.Singh(2011) reported that mobile banking is a trend driven by mobile communication

technology, which is one of the world’s fastest growing industries. As for all emerging
technology, obstacles to the implementation of mobile banking services remain. This research
explores the topics that all mobile banking users consider to be important for mobile banking
acceptance and non-users. The study found several issues linked to banks, mobile phones and
telecommunication operators. Mobile phone operability, security / privacy, service
standardization, customization, download & installation of applications and telecom service
10
quality. For this, a descriptive design was adopted to empirically analyze the selected concerns.
Research reveals that the critical issues from the point of view of consumers are cell phone
operability, security / privacy and service standardization.
Elavarasi (2014) reported that younger generation use electronic banking services because
of modern developments in information technology and their level of adoption is high in e-
banking, relative to older generations. The purpose of this research was to review and define the
information required to solve the issue, to pick or create information gathering tools, to
identify the target population and to decide the sampling procedure, to plan the information
gathering procedure, to collect information, to analyze information, to generalize and/or to
forecast. With a survey of 200 respondents, this was a quantitative analysis. The knowledge was
collected by using a formal questionnaire and by sampling ease. The study was carried out using
the method of association, percentage and Chi-square test. From the customer's point of view,
private banks provide superior services than public banks, but most respondents would
choose public banks for secured transactions.
H.A.Asfaw (2015) clarified that the use of mobile phones for inclusive finance is very relevant
for countries where most of the population is unbanked or under banked. The study attempted
to identify the main obstacles and opportunities for mobile banking development in
Ethiopia. An exploratory research method is used which involves a better understanding of the
situation as the area of the analysis is fresh. The analysis reveals that there is no organizational
challenges to the booming development of m-banking in Ethiopia to date. The main problems
listed in the report, however, were the lack of timely approval by the regulatory body of
new goods, the lack of an interoperability process and the absence of aggregators between
content providers and retail agents.
Tifaany (2018) explains that there is no important link between the form of bank and
Anywhere, Anywhere Facilities, there is no important link between the respondents'
marital status and the waiting time. The aim of the analysis was to identify the numerous
sources of knowledge on mobile banking services, to identify the reasons for the use of mobile
banking services and to identify the factors that affect the use of mobile banking services. With
a complete sample collection of 50 respondents, it was an exploratory analysis. The data
was represented and evaluated using the arithmetic mean, percentage analysis and Chi-
11
Square test. The study found that most of the respondents were concerned about the lack of
technological skills, most of the respondents used money transfer mobile banking systems,
and the respondents were mostly made aware of colleagues, relatives and bank officials.
P.Singh(2011) reported that mobile banking is a trend driven by mobile communication

technology, which is one of the world’s fastest growing industries. As for all emerging
technology, obstacles to the implementation of mobile banking services remain. This
research explores the topics that all mobile banking users consider to be important for
mobile banking acceptance and non-users. The study found several issues linked to banks,
mobile phones and telecommunication operators. Mobile phone operability, security
/ privacy, service standardization, customization, download & installation of applications and
telecom service quality. For this, a descriptive design was adopted to empirically analyze the
selected concerns. Research reveals that the critical issues from the point of view of
consumers are cell phone operability, security / privacy and service standardization.
Tandon, Goel, Bishnoi (2016) stressed that, in contrast to public sector banks, the level
of understanding and expertise was greater in the case of respondents from private and
international sector banks. The purpose of the analysis was to evaluate the level of understanding
and knowledge of different facets of internet banking, the use of internet banking facilities,
the relevance of elements relevant to internet banking website assessment, and the degree of
problems experienced during internet banking. With a sample of 450 respondents who were
residents of Delhi and the NCR area, they conducted a descriptive and exploratory analysis.
With the aid of descriptive statistics and mean values, the data was analysed. In order to test the
hypotheses and differences in mean values, they have run F tests on the results. They concluded
that the average performance of banks in the private and international sectors is higher than that
of public sector banks
Nirmala Dorasamy (2011) in her study propounded the personal income tax administration
reforms as a tool to increase collection of revenue on the one hand and provision of more pool of
fund for welfare of the people on the other. She has observed that the individual is empowered
by a robust tax strategy to conform to tax laws in such ways that they follow unequal means to
mitigate their tax burden.
12
Ankita Gupta (2009) researched the main developments in the taxation of personal income in
India after the tax reforms introduced in the liberalization period. Tax changes have been seen to
have a positive effect on personal income tax growth. The study concluded that the
simplification of the tax rate and the expansion of the tax base are significant reforms for
reforming and increasing the responsiveness of the tax system.
A.Kumar, B.Samir, J.Joshy, J.Varma (2012) conducted a 3,000-person study and found that
Indian financial awareness is very low than international standards. But it appears to be
beneficial for the financial conduct and mindset of workers and retirees. The financial knowledge
of women is slightly greater than that of men. The financial behaviour of young workers has
been impacted by greater access to consumption credits.
A study conducted by Ansong and Gyensare (2012) among 250 Cape Coast UG and PG
University students reveals that "age and job experience are positively linked to financial
literacy." The schooling of mothers is also positively associated with the financial literacy of
respondents. However, the degree of research, the workplace, the schooling of fathers, access to
the media and the source of money education have little impact on financial literacy.
Elliehausen and Lindquist (2002) claim that students who have been engaged in credit
counselling have decreased debt and have a stronger understanding of the management of credit
cards that allow them to continue to minimise their debt. You can use this source without taking
note of the debts you may accrue, as we well know, without telling the students of potential
consequences of the use of credit cards. It is, thus, the responsibility of the school to interfere to
teach these youth how to use credit cards correctly and to remind them of their debts.
Danes and Hira (1987) analysed the knowledge of credit cards, insurance, personal loans,
record keeping and total financial control of college students in 323 college students from Iowa
State University using a survey of 51 products. Their results reveal that in most industries men
know more than women, married students know more than students who have been single, and
high-ranking men know more than lower-class men. Their ultimate result was the poor financial
literacy of college students.
Volpe, Chen and Pavlicko (1996), 454 undergraduate students from only one university were
surveyed using a tool of 23 objects that focused mainly on investment awareness. The results of
13
this research indicate that 44% of people with a low average literacy are better educated about
investments than people with a high profile in enterprise.
To test financial knowledge and behaviour, Markovich and DeVaney (1997) surveyed 236
randomly selected senior undergraduate students from the University of Purdue using a 34-part
instrument. It just assessed the extent of financial and financial literacy of the students without
attempting to assess the effect or relation of knowledge to behaviour.
Cole, Sampson and Zia (2008) evaluated financial literacy levels and predictors and their
relation to financial services demand in India and Indonesia. They noticed good financial literacy
relationships in a financial behaviour. Survey data from India and Indonesia indicate that
financial literacy is a major correlation of financial activity and well-being in households.
Palmer (2001) calculated 1500 high-school senior's financial awareness by founding that the
students accurately measured just 57.3% of the 31 things, including money, income, credit, and
saving and expenditure. 10.2 percent of students have earned a C or a better grade, which
indicates that the young people are financially literate.
Hogarth and Hilgert (2002) analysed the financial literacy of adults in the USA by means of 28
true-to-false questions on personal finance issues. The study showed that, in general, less
financially aware people, relatively untraditional, relatively low incomes, minority and young or
old are more likely.
The correlation between Swedish adults' financial literacy and retirement plans was checked by
Almenberg and Soderbergh (2011) In financial literacy between planners and non-planners
they find a major gap. Older citizens, women and those with poor qualifications or earnings have
found lower levels of financial literacy.
The gender variability studied in financial risk tolerance by Jasim (2008). The effects of
awareness and practice on financial risk tolerance have also been examined. The students of
UMEA were the example of their analysis. The implications of these studies suggest that females
are usually less tolerant of danger than males, since females are less tolerant to financial risk than
males. Furthermore, they find that financial risk tolerance has an effect on both financial
expertise and understanding.
14
Davar and Gill (2009) researched in selecting various household investment paths the
underlying aspects. In all the investment avenues for households, the findings of the study
highlighted familiarity, pleasure, opinion and demographic dimensions. For all investment
pathways the study results showed a focus on familiarity, happiness, opinion and population
dimensions.
The characteristics of the respondents' lifestyle and their effect on investments choice were
studied by Nagpal and Bodla (2008). The study concludes that the lifestyle of investors
primarily influences the probability of investors taking capacity. The survey revealed that
although the security market is in fantastic growth, the investors prefer less risky investment
including insurance policies, federal financial statements, banks and postal services, NPS, NSC
and the PPF.
The action of the Indians on investment priorities was analysed by Geetha and Ramesh (2011).
Data were collected for their analysis using the questionnaire and a total of 210 respondents. The
data were collected. The efforts of demographic variables on investment priorities were analysed.
The study showed that people were unaware of all the available investment options and lacked
knowledge of securities.
The investments choice of individuals in urban Orrisa was studied by Girdhari and Satya
(2011). Via philosophy, investor choices and risk tolerance depend on age, ethnicity, wealth,
marital status, education, family history and job. In contrast with female investors, it was also
found that male investors became more risk hunters.
In his research, Palil (2010) focuses on the awareness and impacts of the tax enforcement level
on the compliance of individual malaysia taxpayers with a new method of self-asses. The
findings of this study showed that tax awareness has an important effect on tax enforcement.
Furthermore, there seems to be a substantial and constructive correlation between perception of
employment income, knowledge of criminal penalties and fines, accountability and rights for
taxpayers, child relief and rebate and compliance with taxation behaviour.
Lusardi and Mitchell (2007) found that financial literacy is a challenging and potentially
expensive activity, and further research is needed to find out when and how financial literacy can
be developed most effectively. If customers want to do better in handling the financial challenges
15
of the modern world, they need to develop financial literacy. In reality, people are very early
faced with the ability, from mutual funds to stocks to tax plans, to use credit cards, take out loans
to buy properties. As a result, retirement saving has become increasingly difficult and necessary,
requiring ever-increasing financial complexity. Clearly, successful interventions should be
tailored urgently for those who can put the financial skills needed to work.
2.2 Secondary Papers

In his Thesis Bryce L. Jorgensen (2007) argued that parents had a major impact on the financial
awareness, behaviours and actions of their children from the report. Students at college appear to
demonstrate little financial awareness, behaviour and attitudes they will be more likely to
mismanage their money now and in the future without an adequate knowledge of their personal
finances and add to the low financial results mirrored in today's society.
The differential effect of the personal financial management courses completed one to four years
ago on 79 students of high school Mandell and Klein (2009). The research used a matched
sample design based on scholarly records to classify students who had and had not taken a
personal financial management course. It has been found to be financially less educated than
those who have taken the course. Furthermore, it was found that the students did not measure
themselves as saving-oriented and did not seem to have improved financial conduct than those
who did not take the course. Conclusions taken from the paper suggest that the inefficacy of
these classes may be attributed to students of virtually any age or secondary school. It is fair to
conclude that classes taken over the seniors' years would be more important and interessant if a
student had reached or was about to reach a legal adult's age or took on financial obligations than
if a student were 15 or 16 years old. The study raises serious concerns regarding the longer-term
quality of secondary education courses.
Lusardi, Mitchell, Curto (2010) found that young people have a low level of financial literacy,
and less than one third of young adults have basic interest rate knowledge, inflation and risk
diversification knowledge. The socio-demographical and financial maturity of the family have a
clear correlation in financial literacy. In particular, an educated husband who has stocks and
retirement savings in parents is around 50% more likely than a woman with a lower level of
education in high school whose parents were not rich to know about risk diversification.
16
The findings show that there are definite financial education need in our school systems and
curricula today. Candice Arrington Tchache (2009) asked teachers, administrators, parents,
business owners and community members. The exposure to financial education has gradually
improved, making things even better for the future. With the implementation of a high school
customised finance class, today's young people are able to understand and handle financial
matters and to be aware of financial principles in their day-to-day lives. This concept of financial
literacy is endorsed by agencies, States and mandates. Most significant, the importance of the
content of this kind of education, as well as the content, is the value of the teachers,
administrators, parents, business owners and the Community members of Bozeman. In the longer
term, how well we educate our young people today will shape the vitality and health of our
economy.
Boon, Yee and Ting (2011) found that financially informed people concentrated on personal
financial planning in order to avoid negative effects on their lives that bad financial planning
may have. Persons who intend to opt for financial well-being and to plan their ways must
become more aware of the many areas of personal financial planning and be prepared for the
financial information needed but that can only be accomplished if the level of education reached
is so high. Financial literacy is a valuable predictor of the financial planning decision of an
individual. Efficient financial planning helps us improve our country's economic prosperity, by
reducing poverty and crime.
Annamaria Lusardi (2012) studied number of numerates among the population of the United
States and other countries. Results from the paper indicate that the numeracy rate of certain
marginalized groups in the community, such as elderly people, women and those who have
inadequate schooling, is very small and particularly high. Due to the increasingly high degree of
obligation to save, invest in and borrow people from numeracy, as many governments and
employers around the World, it is important to develop numeracy and teach mathematical skills
in schools and amongst young people. It is a matter of making financial decisions. In taking
crucial life choices and higher education, students are more likely to face multiple economic
implications including a car, mobile phone, bank account, and debit or credit card. They are
more likely to take important decisions about themselves and their lives. Numeracy and literacy
17
are lifelong skills that all people require to survive and work in a complex economic world
today.
18
CHAPTER 3-
RESEARCH
METHEDOLOGY
19
3 Research Methodology
3.1 Introduction
After a worldwide pandemic like COVID 19, everyone realized that things are not as certain as
they think. As the world is developing towards a different kind of society, it is also providing
ground for newer threats that can make the whole world stop and economies to crash. And so to
survive and sustain such dynamic environment, individual should be prepared against these
uncertainty. Situations like global economic meltdown, wars between countries, newer viruses
and diseases are bound to happen some day or the other and it’s better to be financially equipped
to sustain these disasters and that is why financial literacy is so important in today’s world. This
a scope of this research.
Methodology is a system of broad principles or directives that can be used, by specialized

approaches or techniques, to clarify or address multiple issues in one particular discipline.
Methodology is a number of practices rather than a formula. Data were obtained and analyzed
for the purposes of the study, from various ages. The study was based on field evidence. This
basic data is collected in many ways. Data were collected during the survey process for this
study. Survey is a research technique in which a questionnaire or an interview with a group of
people gathers knowledge.
A strong structure and architecture makes the researchers' pathways seamless by explaining the
challenges involved in research and solving them in depth, so that anyone can conveniently
check the route map of research. The chapter on the research methodology here includes project
goals, relevance of the study, research design, data collection methods, sampling design, tools for
research and tools for research and technology.
This chapter is divided into following parts:
 Operational Definition/ terms

 Sampling Size and sampling technique
 Methods of data collection
 The various techniques used in analysis of data
20
Scheme of Chapterisation
Chapter 1- Introduction: Will contain the basic information about the research, Objective,
Limitations, Methods etc.
Chapter 2- Literature Reviews: Will contain literature reviews of previous works by researchers
on topics with similar broad line.
Chapter 3- Research Methodology: Contains information about the way a particular research is
conducted.
Chapter 4- Data Analysis: This chapter will have the analysis of collected data and the tools used
to do it.
Chapter 5- Result and Conclusion: This chapter will have the final result, discussion and
conclusion about the research and its findings.
Period of the Study
This research will be conducted within a span of 6 months from 10th October, 2020 to 25th
March, 2021. The following is the timeline of the research.
Topic Selection and Synopsis Presentation- 15th November 2020
Data Collection- 1st Dec 2020- 20th Feb 2021
Chapter 1- 1st Jan- 15th Jan 2021
Chapter 2- 20th Nov 2020- 1st March
Chapter 3- 21st Feb- 15th March
Chapter 4- 1st March- 15th March
Chapter 5- 15th March- 21st March
21
3.2 Operational Definitions
Finance- Management, creation and study of money and investments
Financial Literacy- Capacity to appreciate and use different financial skills, including personal
financial management, budgeting and saving, is financial literacy.
Inflation- Increase in price levels of goods in an economy within a course of time.
Tax- A tax is the compulsory financial tax or other levy levied by a public organisation on a
resident to finance budget spending and public expense.
Tax Knowledge- having knowledge about basics of tax system of your country like slab rates,
deduction, saving schemes etc.
Diversification- Diversification is a technique for risk management that combines a broad range
of assets in a portfolio. In order to minimise the exposure to a particular property or risk, a
complex portfolio includes a combination of different asset classes and investment vehicles. A
portfolio made up of various types of assets can generate on average higher long-term returns
and lower the cost of any holding or security.
Risk- In financial terms, risk is characterised as a probability that the performance or real returns
of an investment will vary from the predicted result or return. Risk involves the opportunity to
lose an initial investment, part or all of it.
ELSS- It is Equity Linked Savings Scheme; it’s a category of mutual fund which helps in saving
taxes.
EPF- The Employee Provident Fund (EPF) is a pension plan in which an organization's
employers contribute a limited part of its basic monthly salary. In the same way, the employer
often pays a certain fee to the plan on its behalf.
PPF- Introduced by the National Savings Institute of the Department of Finance in 1968, the
Collective Provident Fund is a tax saving tool for savings in India.
22
3.3 Sampling Size and Technique
Sampling Size
This questionnaire was filled by 306 respondents. But due to errors in the responses, the final
sample size was 285 respondents after eliminating all the wrong and mis interpreted responses
which can hamper the result.
Sampling Technique
This analysis used simple random sampling. A randomly selected subgroup of a population is a
mere random sample. - The chances for selecting a member of the population is precisely the
same. This approach is the simplest of all probability analysis methods, because it only
encompasses a random sample and does not require advanced knowledge of the population.
3.4 Data Collection and Sources

The following will be the methods used to collect data,
 Secondary data
Various methods of analysis Study has been carried out through books, foreign and
national studies, international and national research journals, numerous blogs, and papers
in the media, finance institution reports and organisations.
 Primary Data
It was collected from 306 respondents, through a well-structured Questionnaire,
circulated personally as well as online as a Google Form.
Responses and Questionnaire Type

Some introductory questions related to demographics such as age, occupation, sex began with
the questionnaire. The fundamental knowledge about respondents is given by these questions.
These types of questions make it easy for respondents to respond to the research. Then the
financial knowledge was tested in section 2 of questionnaire.
23
Questionnaire Design
Following an in depth study of comprehensive studies in global and national literature, such as
the OECD toolkit for measuring financial literacy, FINRA reports and other research articles, the
questionnaire was designed. For global reference, large parts have been retained for calculating
financial literacy. While certain questions have already been used in their original form, some
questions have been created and updated to answer relevant topics for further research.
Questionnaire is divided into 2 sections namely Demographic Profile and Financial Literacy.
Questionnaire was administered to English and Hindi (Verbally) for the convenience of the
respondents. First part, Demographic profile of respondents include profile of respondents on
different parameters on Gender, Age, marital status, education level and occupation.
Second part, Financial Literacy has been designed in such a way that every question intended to
measure the basic level of knowledge of an individual respondent in a topic. The questionnaire
consists of questions regarding knowledge of different financial avenues, financial terms, risk
and return perception of respondents associated with different investment avenues. Questions
were broadly based on following underlying concepts:
 Interest
 Tax saving
 Inflation
 Risk and Return
 Diversification
 Loan
24
Question Topic Correct Answer
Imagine that four friends are given a gift of 250

Rs1,000. If your friends have to share the money
equally how much does each one get? (Answer
without 'Rs')
Now imagine that those friends have to wait for Inflation Less than they
one year to get their share of the Rs1,000 and could buy today
inflation stays at X percent. In one year’s time
will they be able to buy
You lend Rs2500 to a friend one evening and he Interest and Loan 0
gives you Rs2500 back the next day. How much
interest has he paid on this loan?
Suppose you put Rs100 into a savings account Bank Interest 102
with a guaranteed interest rate of 2% per year.
You don’t make any further payments into this
account and you don’t withdraw any money. How
much would be in the account at the end of the
first year, once the interest payment is made?
If someone offers you the chance to make a lot of Risk and Return True
money there is also a chance that you will lose a
lot of money.
It is less likely that you will lose all of your Diversification True
money if you save it in more than one place
Tax cannot be saved by investing in some kind of Tax Saving False

financial instrument or product.
Which of the following combination of Risk and Return Stock in a single

investments is most risky? company
Which amongst the following are known to you Tax Saving PPF
25
as a tax saving method. ELSS
EPS
NPS
Life Insurance
Premium
Bill-paying record
The MOST important factors that lender use Loan
and income
when deciding whether to approve a loan are
Research Instrument
Information was gathered through the system of the online survey questionnaire supported by
Google forms and through various secondary media. For multiple respondents, the questionnaire
comprises many questions.
3.5 Methods of Data Collection

Primary Data
Using a questionnaire, the primary data was obtained. A self-administered questionnaire was
distributed to respondents in order to gather primary data.
Secondary Data
Secondary data is past data gathered for a particular reason, to explain discrepancies in the
available literature is very helpful in literature review. Secondary data refers to the data intended
to bring findings or responses other than the actual questions to the researcher's pending
questions.
Period of Data Collection

The data was collected in a span of 1 month from 15th January till 15th February 2021 with the
help of an online questionnaire form.
26
Accuracy of data
The researcher himself made every possible attempt to ensure that the respondents' detailed
descriptions were collected. The nature of the survey promotes fast and cost-effective research.
To collect information related to the report, the whole academic aim was clearly explained and
clarified by the respondents. For the exactness and durability of the data gathered, it was checked
and verified.
3.6 Techniques used in Analysis of Data
Sampling Technique
The sampling population for the study will not be confined demographically or geographically,
the on-line questionnaire will be circulated to persons across the world so that reliable primary
information can be identified depending on which the paper can be inferred. The projected
sample size is 285.
Tools for Analysis
As collected, the dully completed questionnaires were screened data, edited to form a final
review and coding method to measure the qualitative aspects for all queries. Following the
questionnaires processed, information was inserted for further statistical analysis, into a master
data from which different tables, charts and graphs as required were integrated in the report. The
following will be the tools used to conduct the research,
• ANOVA
• Pivot Table
• Descriptive Statistics
Coding Scheme
Variable Type Coding

Age Ratio 0=(15-20),1=(21-30)
2=(31-40), 3=(41-50)
4=(51-60), 5=(61-70)
6=(71-80)
27
Gender Nominal 0= Female, 1= Male, 2=
Prefer not to say
Occupation Ordinal Employed= 0
Self Employed= 1
STUDENT= 2
Home maker= 3
Retired= 4
Looking for job= 5
Highest Education Ordinal Completed graduation= 0
Post graduate= 1
Class 12= 2
Diploma= 3
Class 10= 4
Primary school= 5
No formal education= 6
Formal Financial Education Nominal Yes= 0
No= 1
Financial Decision Making Ordinal You= 0
Your partner= 1
You and your partner=2
You and another family
member= 3
Other family member= 4
Nobody= 5
Source of Financial Influence Ordinal Parents= 0
Friends=1
Television= 2
The internet=3
Magazine= 4
Teachers= 5
Financial Knowledge Nominal Correct Answer= 1
Questions Wrong Answer= 0
Tax Saving Schemes Ordinal NPS= 0
28
LIFE INSURANCE=1
EPF= 2
ELSS= 3
PPF= 4
CHAPTER 4 – DATA
ANALYSIS AND
INTERPRETATION
29
Data Analysis and Interpretation
Introduction
After collection of data and thorough study of subject matter literature, it’s important to analyse
the primary data and extract, interpret meaningful conclusion. The study of the population
characteristics of selected respondents is addressed in the first part of that chapter. The second
part describes the analysis of various objectives such as the examination of financial literacy
among respondents, the influence on financial literacy of demographic and socio-economic
factors, the assessment of the perceptions of respondents as whole and investors about various
attributes of investment related to various investment avenues.
Demographic analysis of respondents
The analysis has been explained using frequency distributions, tables, charts, demographic
details including their age, gender, Profession, Education, Financial Education, Decision maker
and family income.
Following is the demographic analysis to understand the sample space and get an idea of the
deviation which the result is going to have on the results arrived.
30
Age
Table 4.1: Distribution of respondents based on Age
AGE NO.
15-20 115
21-30 65
31-40 11
41-50 48
51-60 24
61-70 0
71-80 22
Chart 4.1: Age distribution chart
The
above
given is the
pie chart
indicating the distribution of Age amongst the respondents. This questionnaire was administered
to 300 respondents but only 285 out of 300 were valid as other 15 responses had some data
missing with some inappropriate answers. The maximum respondents were from the age group
of 15-20. And then the 21-30 year olds.
31
Gender
Table 4.2: Distribution of respondents based on Gender
GENDER NO.
MALE 182
FEMALE 95
PREFER NOT TO SAY 8
Chart 4.2: Gender distribution chart
As we can see there were 182 male respondents almost double the female respondents. This
shows that the result will be more male focused as 64% were male respondents.
32
Profession
Table 4.3: Distribution of respondents based on Profession
PROFESSION NO.
EMPLOYED 63
SELF EMPLOYED 25
STUDENT 136
HOME MAKER 19
RETIRED 20
LOOKING FOR JOB 22
33
Chart 4.3: Profession distribution chart
As we can see in the chart, almost half of the respondents were from student community from
High school, graduation and post-graduation. The second highest population is of the employed
respondents. An interesting thing is that we have 7% representation from the respondents who
have retired. This is very important as it is very important for them and working population to
plan their retirement which can only be done with the help of financial literacy.
Education
Table 4.4: Distribution of respondents based on Education
34
EDUCATION NO.
COMPLETED GRADUATION 112
POST GRADUATE 68
PASSED CLASS 12 98
DIPLOMA 2
NO FORMAL EDUCATION 5
Chart 4.4: Education distribution chart
In the above chart and table, it can be concluded that we saw close to equal participation from
Graduates, Post graduates and Class 12th pass outs. This will help us get a clear picture and result
of these respondents.
35
Financial Education
Chart 4.5: Financial Education Background distribution
The above chart tells the respondents who have studied subjects related to finance formally in
school, college or PG. Here, we have a very good advantage as we have around 70%
participation from the people who haven’t formally studied subjects related to finance. This can
help us derive a conclusion on the effect of financial education on financial literacy.
36
Responsible for Financial Decisions
Table 4.5: Decision maker in respondent’s family
DECISION MAKER NO.

YOU 70
YOUR PARTNER 19
YOU AND YOUR PARTNER 44
YOU AND ANOTHER FAMILY MEMBER 85
OTHER FAMILY MEMBER 62
NOBODY 5
37
Chart 4.6 Decision maker chart
So this table and chart tells about if our respondent is in usual touch with decisions related to
money. This will also help us understand the level of financial literacy which decision makers
have.
Age Vs Financial literacy level
Table 4.6: Financial literacy level on basis of Age
38
Row Labels HIGH LOW MEDIUM Grand Total
15-20 53 25 37 115
21-30 46 4 15 65
31-40 6 5 11
41-50 27 1 20 48
51-60 14 10 24
71-80 11 1 10 22
Grand Total 157 31 97 285
Chart 4.7: Financial Literacy level Vs. Age
The above given chart tells the amount of financial literacy based on the age groups of
respondents. We can clearly analyse that in age group of 15-20, only 46% of population have
high financial literacy, 32% medium and 21% have low levels of financial literacy. Within 21-30
age group, most of them have high level of financial literacy with a 70% of respondents being
highly literate, 23% of medium literacy and only 7% have low levels of literacy.
39
One interpretation which can be derived from this graph is that as the age increases, the level of
financial literacy also increase. This means that financial knowledge can be gained as the person
keeps on getting in touch with money matters as there age increases.
Highest Education VS Financial literacy
Table 4.7: Financial literacy level on basis of Education

0 59 10 43 112
1 45 8 15 68
2 51 8 39 98
3 2 2
6 5 5
Chart 4.8: Financial Literacy level Vs. Education
Here in this chart, we can clearly see a person holding no formal education have low level of
financial literacy. We also see a contrast that respondents with low financial literacy are equally
distributed amongst every group. The reason for this could be sheer disinterest of a particular
population and ignorance in learning finance. 52% of graduates have high level of financial
literacy, and this is pattern seen in Graduates, Post graduates and class 12 th pass. We can also see
that Post graduates have less percentage of medium and low level of financial literacy. It can be
40
interpreted that respondents with Post-graduate degrees had high levels of financial literacy with
very less respondents being in medium and low level of financial literacy. It can also be
concluded that basic formal education is required to understand basics of personal finance.
Profession and Financial Literacy
Table 4.8: Level of Financial Literacy and Profession

0 40 23 63
1 15 10 25
2 72 23 41 136
3 2 2 15 19
4 11 1 8 20
5 17 5 22
Chart 4.9: Financial Literacy level Vs. Profession
The purpose of this chart and table was to understand the relationship between the profession of
person and the level of financial literacy. We can clearly see that Employed and Self- Employed
respondents have only High and medium financial literacy, and doesn’t carry any respondent
with low financial literacy. This is because they are in constant touch with income and money
matters. Student community still possess a high population with low financial literacy compared
to employed and self-employed. Home makers have a good amount of people with medium level
of financial literacy. They may have knowledge about bank procedures etc., but may have less
41
knowledge about markets. Retired respondents also was similar to employed and self-employed
and one respondents with low level can be because of general old age problems.
Formal Financial Education and Level of Financial literacy
Table 4.9: Level of Financial Literacy and Formal Financial Education

0 67 8 23 98
1 90 23 74 187
Chart 4.10: Financial Literacy level Vs. Formal Financial Education
There were 98 respondents who have had formal education in subjects related to finance. Rest
187 were respondents without any background of financial education. 68% of respondents who
were formally educated in subject matter had high financial literacy, 23% had medium level of
financial literacy but on the other hand, respondents with no formal financial education had 48%
with high level of literacy and 39% with medium level of literacy. But there wasn’t much
difference between the percentages of respondents with low level of financial literacy with 9%
and 13% of respondents from financial and non-financial education background
42
43
Financial Decision Making and Level of Financial literacy
Table 4.10: Level of Financial Literacy and Responsibility of financial decisions

Respondent 47 7 16 70
Respondents Partner 5 1 13 19
Both 26 18 44
Respondent and other family member 52 10 23 85
Other family Member 27 8 27 62
Nobody 5 5
Chart 4.11: Financial Literacy level Vs. Responsibility of financial decisions
It can be observed from Table 4.10 that respondents who were involved in the process of
financial decision making clearly had better score than those who weren’t involved in it. This can
be seen where respondent’s partner was making financial decision. The respondents who had no
one from their family making financial decision had low levels of financial literacy.
44
Descriptive Statistics and ANOVA table
Table 4.11: Mean scores, percentages and ANOVA F values
Mean Score Percentage F Value

Male 6.74175824 74.9084249
Female 5.92631579 65.8479532
Gender Prefer not to say 5.25 58.3333333 7.074896
15-20 5.88695652 65.410628
21-30 7.12307692 79.1452991
31-40 5.81818182 64.6464646
41-50 6.66666667 74.0740741
51-60 6.75 75
Age 71-80 6.36363636 70.7070707 4.338968
Employed 6.96825397 77.4250441
Self Employed 6.8 75.5555556
Student 6.27205882 69.6895425
Home Maker 5.05263158 56.1403509
Retired 6.5 72.2222222
Profession Looking for Job 6.45454545 71.7171717 3.308275
Completed Graduation 6.30357143 70.0396825
Post Graduate 6.86764706 76.3071895
Class 12 6.40816327 71.2018141
Diploma 6 66.6666667
Highest Education No formal education 3.4 37.7777778 4.151844
Yes 6.79591837 75.5102041
Formal Financial Education No 6.22459893 69.1622103 5.538293
45
Association between Gender and test score-
Male seemed to have more scored more than female respondents. F value is 7.0748 which means
that there was moderate to high difference between the scores of males and females, and less
difference within males or females. By this, we can draw a conclusion that there is a significant
difference between male and female respondents in their knowledge about finance.
Association between Age and test score-
From Table 4.10, it can clearly be observed that as age increases, the test scores improved with a
visible constant increase from 15-20 range to 71-80. There is an inconsistency for 31-40 range
and the reason for that can be the error of random sampling which is inevitable in random
sampling. F value being 4.33 states that there is less difference between the groups than within
the groups.
Association between Profession and test score-
According to Table 4.10, Employed and self-employed have got the highest score with 77 and
75% respectively. Respondents coming under students, retired and Looking for job has scored
around 70% of score, but the least was scored by the category of Home Maker with just 56%.
This is also coincidental with the result of Female financial literacy score. F Value being 3.308
denotes that there is less difference between the groups than within the groups.
Association of Highest Education and test score-
After observing Table 4.10, it is visible that as the education level increased, the financial
literacy also increased. Post Graduates scored 76% and was the maximum amongst all other
respondent groups. Class 12th and graduates scored almost same and were second highest.
Diploma holder scored 66% which was less than Class 12th, graduates and post graduates. The
least was scored by the group of respondents who didn’t receive any formal education.
Association of Formal financial education and test scores-
Respondents with formal financial education scored more than those respondents who didn’t
attain any formal education in subjects related to finance. But there didn’t seem to be much
difference between the score as F value 5.5 is less to moderate, which means that there were low
46
to moderated difference between these 2 groups, but there was a significant difference within
groups.
47
Sources of Financial information
Generally, there are broadly 5 avenues of getting information about daily finance. To understand
the source of information for our respondents, the question was directed with following options
- Friends
- The Internet
- Parents/ Guardian
- Magazines
- Television or Radio
- Teachers
The following chart shows the percentage of respondents using different number of sources of
information to get financial updates, tips, suggestions and recommendations on topics like
savings, investments, tax savings etc. What we could observe from Chart 4.12, almost half of the
respondents follow any one source of information. Around 125 respondents use 2-3 sources of
information.
Chart 4.12
From Chart 4.13, it is clearly visible that many respondents get financial tips, suggestions and
information from their parents and guardian because around 180 respondents were from age
48
group of 15-30 years. Internet and friends are also some sources where the respondents discuss
their financial doubts and get more information and awareness about financial decisions.
Chart 4.12: Sources Used
49
Chart 4.14: Tax saving schemes
Chart 4.13: Tax saving
Tax Saving Schemes
To understand the awareness about the tax saving schemes available in India, the questionnaire
had a question about where the respondents have to select all the schemes know about.
Following were the schemes mentioned
50
- National Pension Scheme (NPS
- Life insurance premium
- EPF (Employee Provident Fund)
- ELSS (Tax Saving Mutual fund)
- PPF (Public Provident Fund)
From Chart 4.14, it can be observed that almost 43% of respondents knew about 4-5 tax saving
schemes. Exactly 50% respondents were aware only about 1-2 schemes. It can be observed in
Chart 4.15 that those who knew about tax saving, were aware about most of these schemes.
However, very less respondents knew that NPS is also a tax saving scheme.
51
CHAPTER 5- FINDINGS,
SUGGESTIONS AND
CONCLUSION
52
Findings, Suggestions and Conclusion
5.1 Findings
1. The average score of this sample space was 6.421 out of 9. This score is on the border
line of Medium and High level of financial literacy. This is a fair score for a middle class
normal households.
2. It was also found that as the age increases, the level of financial literacy also increase.
This means that financial knowledge can be gained as the person keeps on getting in
touch with money matters as there age increases.
3. Males had average of 6.74, and females had an average score of 5.92. This clearly
indicates that Males were more financially literate than females. Similar result was also
arrived by Annamaria Lusardi (2012).
4. Post-graduate degree holders had high levels of financial literacy. It can also be
concluded that basic formal education is required to understand basics of personal finance
as the respondents without any formal knowledge had 3.4 as the average score.
5. Amongst the work of respondents, Home Makers who overlaps with female in this
sample had less average score. This again points out the gap of financial literacy between
males and females.
6. There was slight difference in the average score of respondents who received formal
education in finance to those who didn’t receive any formal education with subjects
related to finance. So, it can be concluded that taking up a formal education in finance
related subjects doesn’t guarantee a near to perfect score in a basic financial literacy test.
7. Respondents who were not involved in the process of financial decision making have
very less financial literacy. In contrast to those respondents who are usually involved in
this decision making had good score with high level of financial literacy.
8. Parents and Guardians are first source of information for respondents on finance related
topics. Respondents also rely on Internet and friends for financial information,
recommendations and tips.
53
5.2 Suggestions
Banks and financial institutions need to take action to teach people on the advantages of a sound
financial attitude such as due payments and emphasis on adequate repayment of loans. Financial
education related to the banking activities should consist of details on various types of deposits
available on different lending options and measurement of interest rates. Fixed and floating
credit rates etc should be specifically outlined to the individuals, since one fifth of the
respondents do not know even the simple estimates of interest rates.
Commercial banks will visit and advise their clients regularly by publishing brochures, brochures
and printing materials on current updates, plans and services. Individuals today have a wide
range of financial tools/mobile apps that can help measure EMIs, calculate taxes, calculate
returns on given interest rate and risk thresholds and provide advice. In financial calculations,
individuals can make use of these instruments and applications.
It is good for financial practitioners to seek expert advice, particularly prior to taking a long-term
financial decision, since they are largely permanent and can be a costly error if the financial
result is insufficient by design. A government must provide a lingual, toll-free assistance system
where an investor / customer / customer could call and receive free, simple banking and
insurance support services. This will inspire people to take investment advice.
Both students irrespective of the branch or field of study have to be taught financial literacy in
high school and colleges. It is the duty of educational institutions to help young people launch
their financial life on the right foot. Financial preparation of this era will assist young people in
taking up and paying student loans, reducing interest on the credit card, understanding potential
wage elements and developing a good habit of investing. Students will have to learn basic
interest calculations and the compounding principle
Financial literacy workshops should be attended daily. A fresh report on the current financial
plan is provided with it every day. Consequently, financial education must be an ongoing, age-
free mechanism to avoid studying. Removal must not be up to date on financial problems, nor
from jobs.
The study showed that women are less financially educated than men and have less knowledge,
compared to men. More awareness campaigns particularly for women should therefore be
54
created. Vernacular or local financial education can allow women to quickly monitor and
comprehend the details supplied. When debating and deciding financial issues in a household,
gender inequality must be avoided.
In consultation with women, money-related problems and family financial decisions must be
made. The financial status of the family and the present financial portfolio should also be told to
women. Women ought to learn fundamental financial terms such as basic interest, joint values,
growth and economies. They should keep their expenses tracked and expended responsibly in
their financial journal. Women's education and the hour is required.
Family-centered schooling is another requirement; where fundamental financial values and

values are revealed in the whole household. In the local post offices, RBI and other regulatory
authorities are able to establish links with the postal offices and routine financial training
sessions. The great number of uneducated citizens in Indian geographical places will be useful in
these workshops. Financial training is also essential to ensure that you are protected and secure
from scams, frauds to ponzi and prevent misappropriations. People ought to be out of fake
businesses, unregulated banking systems, property theft and credit card scams.
Different financial regulators in India have made multiple attempts. With the goal of financial
inclusion and financial training in India, the RBI has implemented the "Project Financial
Literacy" on a wide scale. RBI has distributed volumes of literature in different regional
languages to increase awareness of financial goods, services and protection of consumers. For
investor education, SEBI has developed different modules at different stages. These modules are
planned for students, adults, seniors, women, low- and medium-sized groups and so on on
different topics such as savings, retirement, financial markets, etc. IRDA routinely carries out
awareness campaigns and workshops and publishes "Politicians' Manuals." Investor knowledge
and awareness campaigns are routinely initiated by other commercial banks. The role of NGOs
in fostering financial literacy is also commendable.
55
5.3 Conclusion
The results and findings of this study suggests that the level of financial literacy is moderate in
the sample group. There is sufficient amount of understanding in topics like savings and interest
rate, but concepts like inflation rate, tax saving, risk-return and diversification. The problem is
that all these concepts are essential for them to understand basics of personal financing.
Financial literacy score, which is obtained by a questionnaire to check financial knowledge based
on demographic factors was moderate. Lower level of financial literacy is exhibited by females,
home makers, lesser educated respondents and lower aged respondents. Desirable financial
attitude and positive financial behavior may not adequate in itself, when individuals have to deal
with complex financial markets and volatile economy in order to achieve their financial
wellbeing, where adequate financial knowledge could be a decisive factors.
Taking about earning money, and being money minded has always been considered a vice in
Indian society. There is a huge communication gap within Indian families on matters related to
money and it’s usually considered to be the job of head male of the family to take financial
decisions. This has resulted in low financial literacy amongst Females and teens. There is no way
a student passing his/her class 12th from stream other than commerce to know anything about
saving, investing and personal budgeting. This lack of awareness was clearly visible in the scores
of Class12 pass outs.
There are lots of taboos around discussing money in Indian households especially when it comes
to discussing the total earnings of the family, planning a proper budget, planning investments and
tax saving plans. Most of the respondents were aware about savings and bank interest rates, but
had very less knowledge on risk-return, diversification and inflation, as these things do need
some focused study, to get hold of the basic concept and forms the crux of investing.
Lack of financial knowledge leads to bad personal financial decisions, loss of potential earnings
and growth in wealth and a downside of all this is the slow economic growth of the country.
India’s population is around 136 Cr out of which only 5 Cr are the people active in the stock
exchange. If a good amount of population would have been financial literate, then there would
have been increase in the number of retail interest also.
56
5.4 Future Scope of this Study
Government policy actions to enhance financial literacy are urgently needed. Fortunately, it is
quicker to fix awareness deficiencies than personality and behaviour issues. The Indians' relative
good conduct and attitudes offer a solid foundation for building a financial literacy initiative
aimed at increasing awareness.
Furthermore, regulatory mechanisms to enhance financial markets and financial counselling

must be developed in order to address the current generation's diverse and demanding
requirements. In India, much more research is required on financial literacy. We know very little
about financial literacy in India, considering our own studies and other recent surveys. India has
many languages. India is a large land. There are very wide regional variations in quality of
education and economic growth. This suggests that the most used findings of the survey should
be accompanied by other methods such as focus group interviews, experimentation and
longitudinal trials.
For the population, to have high level of financial literacy, following points are criteria which
should hold true:
a) Understanding main financial goods, including checking deposits, pensions, pension savings
plans and capital market transactions such as stocks, bonds and mutual funds, can be a must for
one's whole life.
b) Comprehension of fundamental financial terms such as compound interest, current and

potential money value, pension benefits, return on investment, risk, security and diversification,
etc.
c) Skills and trust to consider and benefit from financial risks and opportunities.
d) Healthy financial options to save, spend, cover, save, and manage debt in life, for instance,
when you get your degree, start a career, purchase a home, start a family, brace yourself to retire
and live for senior years.
Because of constant developments in the field of technology, it is also changing the financial
structure of the world. Boom in demand and trend of crypto currency with many industries and
57
governments finding more crypto friendly solutions is leading to a new brand of financial
education which is going to be more complex to understand. This can be seen as one of the
future scope of financial literacy.
5.5 Limitations of the Study
This research are going to have following limitations in data collection, formulating the models
and giving a proper structure to study. As the subjects of this research are normal Indian people
 It will be difficult to get them fill the questionnaire due to the conventional mindset of
Indian people where they fear to talk about money.
 Some also might have a sense of shame if they don’t know about tax, so they will avoid
filling the form because of the fear of getting judged.
 Because finance is based on simple mathematical concepts, and the questionnaire

contained questions which can be solved without knowing the underlying financial
concept.
58
References
59
60
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Appendix
64
Appendix
Questionnaire
I, Vibhor Jain, am conducting a study to understand the level of financial literacy of a middle
class Indian household, working and (Deemed to be University) Bangalore. As part of my
dissertation, I am conducting a study to understand the level of financial literacy amongst Indian
Household, working or business class.
Participation in this survey is purely voluntary, and the respondents can withdraw at any moment
he/she feels to do so. All the results of this survey will be used strictly for academic/scholarly
purposes only. The personal Identity of the respondent and all the information will be kept
confidential.
1. Name
2. Age
A. 15-20
B. 21-30
C. 31-40
D. 41-50
E. 51-60
F. 61-70
G. 71-80
3. Gender
A. Female
B. Male
C. Prefer Not to Say
4. Profession
A. Employed
B. Self Employed
C. Student
D. Home Maker
E. Retired
65
F. Looking For Job
5. Highest Education
A. Graduate
B. Post Graduate
C. Completed Higher Secondary (Class 12)
D. Completed Vocational Training (Diploma)
E. Completed Secondary School (Class 10)
F. Primary School
G. No Formal Education
6. Have you ever received a formal financial education? (Finance in Under graduation or
Post Graduation)
A. Yes
B. No
7. Who is responsible for your day to day money related decisions?
A. You
B. Your Partner
C. You and Your Partner
D. You and Another Family Member
E. Other Family member
F. Nobody
8. Where do you get the information you need about money matters (such as spending,
saving, banking, investment)? (Multiple Selects)
A. Parents or Guardians
B. Friends
C. Television or Radio
D. The Internet
E. Magazine
F. Teachers
66
Section 2
Financial Knowledge
9. Imagine that four friends are given a gift of Rs1,000. If your friends have to share the
money equally how much does each one get? (Answer without 'Rs')
_______________
10. Now imagine that those friends have to wait for one year to get their share of the Rs1,000
and inflation stays at X percent. In one year’s time will they be able to buy:
A. More with their share of the money than they could today
B. The same amount
C. Or, less than they could buy today
D. It depends on the types of things that they want to buy
E. Don’t Know
11. You lend Rs2500 to a friend one evening and he gives you Rs2500 back the next day.
How much interest has he paid on this loan?
_______________
12. Suppose you put Rs100 into a savings account with a guaranteed interest rate of 2% per
year. You don’t make any further payments into this account and you don’t withdraw any
money. How much would be in the account at the end of the first year, once the interest
payment is made?
_______________
13. If someone offers you the chance to make a lot of money there is also a chance that you
will lose a lot of money. (High Risk, High Returns)
A. True
B. False
14. It is less likely that you will lose all of your money if you save it in more than one place
A. True
B. False
67
15. Considering all of the sources of income coming into your household each month, would
you say that your household income is regular and reliable?
A. Yes
B. No
C. Maybe
16. Tax cannot be saved by investing in some kind of financial instrument or product.
A. True
B. False
17. Which of the following combination of investments is most risky?
A. A mutual fund containing 80% stocks and 20% bonds
B. A mutual fund containing 80% bonds and 20% stocks
C. An index fund (like the Nifty 50)
D. Stock in a single company
18. Which amongst the following are known to you as a tax saving method. (Multiple
selects)
A. NPS (National Pension Scheme)
B. Life insurance premium
C. EPF (Employee Provident Fund)
D. ELSS (Tax Saving Mutual fund)
E. PPF (Public Provident Fund)
19. The MOST important factors that lender use when deciding whether to approve a loan are
A. Marital status and number of children
B. Education and occupation
C. Age and gender
D. Bill-paying record and income
68
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An Exploratory Study To Determine The Level of Financial Literacy in Indian Households

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AN EXPLORATORY STUDY TO DETERMINE THE LEVEL OF

FINANCIAL LITERACY IN INDIAN HOUSEHOLDS

Bachelor of Business Administration

Under the guidance of

SCHOOL OF BUSINESS STUDIES AND SOCIAL SCIENCES

Bachelor of Business Administration

Under the guidance of

SCHOOL OF BUSINESS STUDIES AND SOCIAL SCIENCES

Place: Bengaluru Vibhor Jain

Place: Bengaluru Dr. Anand Patil

Christ (Deemed to be University)

Place: Bengaluru Dr. Joby Thomas

John Joe Thomas

4.1 Distribution of respondents based on Age 29

4.2 Distribution of respondents based on Gender 30

4.3 Distribution of respondents based on Profession 31

4.4 Distribution of respondents based on Education 32

4.5 Decision maker in respondent’s family 34

4.6 Financial literacy level on basis of Age 35

4.7 Financial literacy level on basis of Education 36

4.8 Level of Financial Literacy and Profession 37

4.9 Level of Financial Literacy and Formal Financial 38

4.10 Level of Financial Literacy and Responsibility of 39

4.11 Mean scores, percentages and ANOVA F values 40

4.12 Sources Used 43

4.13 Tax Saving 44

1.1 Need for this Study

Components of financial Literacy

Earn: Understanding your paycheck-

Benefits, Deductions & Allowances

Spend: Creating a personal budget

Save: Determining your financial goals

 By creating 5 years Fixed Deposit

Borrow: Credit cards, loans, and your credit score

 Borrowing is an important component of financial literacy. There are going to be times

Protect: Preventing fraud and buying insurance

 Lump Sum to be paid

Importance of Financial Literacy

It is important to understand why it is important for everyone to be financial literate. Financial

1. Complex Saving and Investing Options

Impact of Financial Literacy

Initiatives by Government of India

1.2 Statement of Problem

1.3 Scope of Study

 Know the financial literacy level of an Indian household

1.4 Objectives of the Study

2.1 Primary Papers

P.Singh(2011) reported that mobile banking is a trend driven by mobile communication

P.Singh(2011) reported that mobile banking is a trend driven by mobile communication

2.2 Secondary Papers

Methodology is a system of broad principles or directives that can be used, by specialized

This chapter is divided into following parts:

 Operational Definition/ terms

Period of the Study

Topic Selection and Synopsis Presentation- 15th November 2020

Data Collection- 1st Dec 2020- 20th Feb 2021

Chapter 1- 1st Jan- 15th Jan 2021

Chapter 2- 20th Nov 2020- 1st March

Chapter 3- 21st Feb- 15th March

Chapter 4- 1st March- 15th March

Chapter 5- 15th March- 21st March

Inflation- Increase in price levels of goods in an economy within a course of time.

3.4 Data Collection and Sources