THE IMPACT OF FINANCIAL LITERACY ON BUDGETING MANAGEMENT AMONG

ABM STUDENTS AT PIGKAWAYAN NATIONAL HIGH SCHOOL

INTRODUCTION

It is extremely important to understand

why people need to save and invest. However
saving needs to be done the right way and that
is by investing money in the market via stocks,
bonds, debentures, insurances and mutual
funds. An investment in the stock market gives
money the right direction and much higher
returns compared to the banks savings account.
Investing in the market does expose money to
risk however does help attain financial goals
faster by putting money to work and not laze
around in lockers or bank account. Investments
will help not just for the people but also the
government and the nation to grow.

INTRODUCTION

It is extremely important to understand

why people need to save and invest. However
saving needs to be done the right way and that
is by investing money in the market via stocks,
bonds, debentures, insurances and mutual
funds. An investment in the stock market gives
money the right direction and much higher
returns compared to the banks savings account.
Investing in the market does expose money to
risk however does help attain financial goals
faster by putting money to work and not laze
around in lockers or bank account. Investments
will help not just for the people but also the
government and the nation to grow.

INTRODUCTION
It is extremely important to understand
why people need to save and invest. However
saving needs to be done the right way and that
is by investing money in the market via stocks,
bonds, debentures, insurances and mutual
funds. An investment in the stock market gives
money the right direction and much higher
returns compared to the banks savings account.
Investing in the market does expose money to
risk however does help attain financial goals
faster by putting money to work and not laze
around in lockers or bank account. Investments
will help not just for the people but also the
government and the nation to grow.
INTRODUCTION

Background of the Study

The purchasing power of the youth today is said to be higher than any other generation

before, this goes to show that the said generation has an influence that will continue

affecting the world’s economies (Honigman, 2013). As early as a child can be he or she

must be exposed to the area of financial management. The reason is that financial habits

that people learn during adolescence persist through adulthood (Seuntjens, Van De Ven,

Zeelenberg, & Van De Schors, A. 2016). The spending conduct of youth and their

constrained comprehension of cash administration strengthen tendencies that can

potentially result in costly budgetary errors today and later on (Bona, 2017).

As a child grows, their needs grow along with them. The ability to be able to avail

certain products like food or project materials is not the same for every child. Teenagers

have different costs regarding school and personal expenditures. Most teenagers have

financial support from their parents (Seriña-de La Paz & Que, 2013). In line with the

previous statement, the youth tend to forget the difficulty of obtaining money. The way

teenagers spend has many factors; such as habits, upbringing, lifestyle, economic status,

and many more. However, when it comes to budgeting money, many fall short as the
majority of the youth in the United States have less than one thousand dollars in their

savings account (Elkins, 2017).

Teens in the United States allocate around 40% of their spending to clothing,

accessories, and footwear, with another fifth going to food, according to the latest

biannual Taking Stock with Teens Survey from Piper Jaffray last 2017. A report from

Charles Schwab says millennials spend more than other generations on comforts and

convenience (2017). Additionally, a recent survey done in Europe shows that the factor

that had a visible difference in spending when compared according to age groups was

the goods used for hygiene and beauty (Peachey, 2018).

In India, the spending and savings of youth have changed drastically over the past

few years because of Westernization and higher spending power (Birari, & Patil, 2014).

A study has shown that youth spend more money on shopping especially on branded

items. (Hasan, Subhani, & Osman. 2012).

Recent research found that compulsive buying behavior affects 5% of the adult

population in developed countries (Schofield, 2018). The disorder has a lifetime

prevalence of about 6% of the U.S. population can be said to have compulsive buying

behavior with 80% of compulsive buyers being women (Heshmat, 2018). It is on the rise

with around 14% of the human population having a mild form of this condition. In the

Philippines, compulsive buying has caused students today to have the best gadgets but

are not up-to-date with their tuition payments (Rios, 2017). Obsessive spending

behavior, also called compulsive buying, is an addiction that triggers pleasure receptors

in the brain, much like drugs (Kagan, 2018). Dissimilar, however, in that this behavior,

centers on the use of money. To put it simply, compulsive buying is a mental disorder
that makes one spend far beyond what is necessary (Young, 2016). New research even

suggests that spending money can make humans happier, as long as the money spent on

is oneself (Nield, 2017).

Students learning to manage their money is a significant process during their

maturing stage. The practical skill of budgeting has become essential among human

beings to maintain and improve one's place in society. One of the reasons why students

waste their money is because they do not have the correct priorities in mind. It is an

expense many college students choose not to forego. The ability to budget reflects the

spending and saving habits of a person. Where and what they spend also says a lot about

the identity of an individual. In the US, it is noted that each year, college students pay

about $5.5 billion for alcohol, mostly beer (Collegescholarships.org, 2019). The spending

and saving habits of a person also mirror how financially literate he or she is. This

research hypothesizes that there is a significant relationship between financial literacy

and the financial behavior of students.

Statement of the Problem

This study aims to know the impact of financial literacy on budgeting management
among ABM students at Pigkawayan National High School
1.

2.

3.
Significance of the Study

The result of this study will serve as an additional source of reference for other

researchers and students whose studies relate to the topic under discussion. It will also

add to the already existing knowledge on the contributions of the insights of the

respondents to know the impact of financial literacy on budgeting management. It will

also serve as an additional source of reference for other researchers and students whose

studies relate to the topic under discussion

Scope and Delimitation

The scope of this study is limited to the impact of financial literacy on budgeting

management among ABM students l. It is limited to the selected ABM students of

Pigkawayan National High School because of the need to reach the widest range within

the shortest time available. This study will involve the administration of questionnaires

and interviews.
 CHAPTER II

REVIEW OF RELATED LITERATURE

Factors Affecting Financial Behavior and Financial Literacy

The financial behavior of individuals is essential but difficult to understand, define, and

measure. There are many ways the spending habits of students may vary. It can vary due

to personal demographics and school environment. Even in today’s web-driven

shopping environment, the old norm that women love shopping more than men still

applies (Karr, 2012). Spending habits may also differ in terms of an individual's family

and personal income. Low-income Americans spend a significantly more significant

proportion of their money on housing, whereas high-income Americans spend a much

higher portion on insurance and retirement expenses (Morrell & Kiersz, 2017).

A similar research by Samantha Villanueva (2017) namely An Analysis of the

Factors Affecting the Spending and Saving Habits of College Students takes into

account the variables of class year, gender, and ethnicity in one model, the Permanent

Income Hypothesis and Hyperbolic Discounting in a separate model, to examine the

spending and saving behaviors among college students. Although it states that the
previously mentioned variables have primarily influenced financial behavior, there has

been little to no action done to examine the role of the different theories stated.

A study was done last 2017 namely; Effect of Demographic Factors on Consumer

Behavior: Age, sex, Income and Education by Abhijeet Pratap concludes that the factors

sex, age, income, and education directly affect the consumer behavior of an individual. It

states that while preferences change with age and level of education, sex, and income

also affect product choices and decision-making patterns.

A study conducted in Malaysia by Muhammad Albeerdy and Behrooz Gharleghi

(2015) concluded that the factors of education, financial socialization agents and money

attitude have a direct influence on financial literacy rates among Malaysian students.

Furthermore, based on their results it was education that proved to be the most

influential factor among the three.

Spending Habits and Saving Habits

Managing personal costs is shown to be a growing issue especially among

students today. Current literature explores the factors that influence both financial

habits and financial literacy of students. This research will focus mainly on the

expenditures and spending habits among senior high school students to shed light in a

different population as most researches in this field are conducted with college students

as their participants. (Villanueva, 2017).

There have been many articles, studies, and researches about the said topic

among students all over the world, an example would be Atie Nadome’s research about

the “Spending Habits among Malaysian University Students.” In this study, Atie

Nadome (2014) explained that spending behavior has never been stable, especially
among university students because many of them are experiencing independence for the

first time. Although in the Philippines most children are likely to still live with their

parents during senior high school and college years, their needs have drastically

increased compared to before. As of today, laptops, cellphones, internet connection, and

even personal vehicles have become essentials to students in attending and finishing

their studies. Thus, the spending habits of students today are bound to be significantly

different from the spending habits of students in the past.

A study by Dr. Rekta Attri last 2012 namely Spending and Saving Habits of

Youth in the City of Indore addressed the question of why, where and how the youth

spend. The youths referred to here are of the age group fourteen to thirty (14-30) years

old. Despite being financially dependent on the parents until the age of 25-26 years old,

there is a big difference observed in the spending behavior of the youth in India. The

study concludes that there is a massive influence of peer group in the youth below

nineteen years while making purchase decisions. With the maturity of the participants,

this influence of friends and family decreases and he or she relies more on evaluating

product or service's features and characteristics and hence makes an independent

decision. A difference in the purchase behavior and their saving habits is also observed

genderwise. To summarize, this study showed that the spending and saving habits of the

youth in India are much affected by age and sex and the influential factors as to why

there are differences.

A study made by Dr. Saravanan and Devakinandini (2014) namely ‘A study on

Perception of College Students about Spending of Pocket Money With Reference To

Students Studying in Arts and Science Colleges in Coimbatore’ examines how the socio-

economic status can influence the expenditure of pocket money. Most of the young
people get attracted by the society, and they are spending their valuable money in the

wrong means. They should know the value of money and the right way of handling it.

According to Crystal Paine in her book “The Money Saving Mom’s Budget" (2012),

young adults should be taught on how to save and prioritize what is essential. The book

shows that people should learn how to say ‘no' when it is not crucial. To be able to save

efficiently, one must learn how to weigh what is essential versus what is irrelevant or not

needed.

As the youth set out for college, many of these students are trusted money, and

one of the challenges they face is budgeting as they are on their own for the first time.

When it comes to students, money management is very unfamiliar. Financial

independence would be difficult to achieve and maintain for youths and others in society

(Ajide, 2015).

Financial Literacy

The Wisconsin Hope Lab recently released a report last 2018 that looked at

43,000 students from 66 colleges, universities and community colleges from 20 states

and the District of Columbia. The survey found that 36 percent of university students

don't have enough money for enough food

– and 42 percent of community college students are hungry or not getting a balanced

diet (Goldrick-Rab, Richardson, Schneider, Hernandez, & Clare, 2018). Learning

financial literacy is a promising way to improve the financial capacity of today’s young

people (Duquette, 2018).

Students tend not to know what to value first, and they tend to spend it on things that

are not important. That is why, it becomes inevitable for people to overspend when they
buy things because they do not know how to prioritize the significant ones (Paine, 2012).

Not knowing what to prioritize is the time when financial planning comes in. Based on

the book "Financial Management” by Ferdinand L. Timbang (2015), financial planning

is useful for both short-range and long-range plans. Financial planning serves as a basis

of the operations or the allocation of funds the person has to undergo. Financial

planning summarized in one word: ‘budgeting.'

‘Financial literacy is both an important life skill and a critical intellectual competency'
and

'an essential component of a college degree.' (Kezar, & Yang, 2015). It is not mandatory
to be a professional to be a financially literate, but one needs to be a person who can
maximize present money to gain financial stability. Logically speaking, it is necessary
that students learn how to handle money as they are expected to earn at a later stage in
their lives.
A study by Acheampong, Kyei-Baffour, Hanson-Cobbinah, & Osei, (2015), about

the Assessment of Financial Literacy among University Students, found out that almost

half of the population surveyed is financially illiterate. One reason for the low level of

knowledge is the systematic lack of personal finance education in the college curricula.

Given the lack of financial education, it is not surprising that the results show that

university students have inadequate knowledge of personal finance.

Another research paper by Mohd Rahim Ariffin and Zunaidah Sulong (2017)

studies specifically about the financial literacy level and students' perception towards

the saving behavior of a population, showed that saving behavior, parental socialization

and peer influence had a positive correlation with financial literacy, whereas self-control

showed a negative correlation with financial literacy. In the Philippine economy, prices

of commodities become higher, and money has gained more value today. Additionally,

there are little to no objects left that cannot be bought by money. It is why it is essential
to spend it wisely and to do so; one must have sufficient knowledge about budgeting (De

Guzman et al., 2012).

A namely last 2013 namely: The Relation between Financial Literacy, Financial

Wellbeing and Financial Concerns that was done by a group of researchers concluded

that a positive relationship between the age and variables of financial well-being and

financial literacy, marital status and sex and financial literacy variable, and education

level and financial well-being variable and financial literacy. It has also been stated that

a higher level of financial well-being follows financial literacy (Kalantarie-Taft, Zardeini-

Hosein, & Mehrizi, 2013).

Financial illiteracy is a growing concern in both society and the economy. College

students, with the amount of money entrusted to them, are the main subjects of unwise

use of funds. To satisfy or solve the problem of financial illiteracy among students,

exposure to sessions, training, and workshops is necessary. They should be able to gain

internet access for it was found out that the internet is where most students get their

basis, knowledge, and understanding. A study done by The Money Advice Service in

2017 said that: managing money is seen to be part of growing up, and young adults are

both excited and daunted by this. One in five young adults (22%) of the said study say

that they are not confident in managing their money.

Financial knowledge can start at home. A book entitled “The Money Smart

Family System” shows how parents can teach their children how to save money. It also

talks about how each child differs from one to another. The book states that some

children love to spend freely, but some people would rather watch as their savings grow.

Despite the unique traits of each child, the book states that it is possible to educate them

with financial knowledge (Economides & Economides, 2012). The study on financial
literacy has continued to gain attention in the field of education and beyond, in today's

society financial knowledge has become an instrument in ensuring a financially healthy

society (Odek, 2015).