THE IMPACT OF FINANCIAL LITERACY ON HOUSEHOLD DECISION-

MAKING

CHAPTER 1

INTRODUCTION

1.1 Background of the Problem

Financial literacy is a core life skill for participating in modern society. It implies the ability
to understand and use various financial skills, including personal financial management,
budgeting, and investing. Yet, financial illiteracy is a widespread issue globally, even in
developed economies with highly sophisticated financial markets. This is a significant
concern, as financial illiteracy can have far-reaching implications for individuals and
societies (Lusardi, 2007). The lack of financial literacy can lead to poor financial decisions,
inadequate savings for retirement, and lower levels of wealth accumulation. This is
particularly concerning given the increasing complexity of financial markets and the growing
responsibility placed on individuals to manage their own financial affairs.

In the context of Indonesia financial status, Indonesia monetary authority (“OJK”) has
conducted a survey as following, The Indonesian public financial literacy index in 2019
stood at 38.03%, which means that out of every 100 people there were around 38 well literate
people. This represented a consecutive rise from the corresponding figures in the previous
surveys, of 21.8% in 2013 and 29.7% in 2016. Despite these increases, the data shows that
there are still many Indonesian people who are not yet well literate. If the 2019 financial
literacy index data is inversed, out of every 100 people there are around 62 people who do not
have the proper knowledge, confidence, skills, attitudes, and behavior with regard to financial
services institutions and formal financial products and services.

Figure 1.1: Indonesia’s Financial Literacy Index 2013 - 2019, OJK (2020)
In the context of household decision-making, financial literacy plays an important role in
determining the economic stability and financial health of the family. It affects a wide range
of decisions from basic budgeting to complex financial decisions. Among these, the decisions
on savings, investment, and retirement planning are central to long-term financial security.
These decisions are not only important for individual households but also have broader
implications for economic stability and growth (Frydman & Camerer, 2016).

Supported by Sethi and Ascharya (2018), financial literacy and inclusion have a positive
impact on the economy and people’s well-being (improving living standards and alleviating
poverty levels), as illustrated in the following figure

Figure 1.2: Relationship between financial inclusion and public well-being, OJK (2022)
1.2 Problem Statement

This study seeks to analyze the implications of a pervasive lack of understanding, financial
inclusion, and literacy on household decision-making processes in Indonesia, particularly
those concerning savings, investments, and retirement. The inadequacy of financial literacy
forms a significant barrier to the adoption of sound financial practices, which in turn, impacts
the overall economic health of the country.

The repercussions of limited financial literacy manifest themselves noticeably in retirement

savings decisions. The absence of a clear understanding of financial concepts often results in
the selection of default or suboptimal savings options that might not align with the financial
goals and requirements of individuals.

In terms of investment decisions, a higher degree of financial literacy tends to correlate with
more active participation in stock markets and a diversified asset portfolio. Yet, the
intricacies of this relationship, in the Indonesian context, influenced by factors such as
income, education, and cultural traits, are under-researched and hence, necessitate further
investigation.

Additionally, planning for retirement, another area significantly influenced by financial

literacy, is not thoroughly understood. Current literature highlights that individuals with
better financial literacy usually achieve higher wealth levels. However, the mechanisms
through which financial literacy impacts retirement planning in Indonesia remain unclear.

The lack of a comprehensive understanding of how financial literacy influences these key
areas prevents the development of effective financial education programs and policy
interventions in Indonesia. This study, therefore, aims to fill this gap by investigating the
complex relationship between financial literacy and household financial decisions, aiding the
design of improved financial education initiatives, policy reforms, and ultimately, promoting
economic stability.

1.3 Research Questions

This study addresses the following research questions:

 1) What is the effectiveness of existing governance efforts in enhancing financial
literacy in Indonesia?
2) How does financial literacy influence household decisions regarding savings,
investment, and retirement planning in Indonesia?
3) What improvements can be implemented to augment financial literacy in Indonesia,
thereby influencing household economic decisions positively?

By addressing these questions, the study aims to shed light on the critical role of financial
literacy in major household financial decisions, thereby providing a valuable framework for
policy interventions, financial education programs, and individual decision-making in the
Indonesian context.

1.4 Outline of the research

Chapter 1

This chapter will provide a basic background basis for the whole research activity, to help us
to consider the research problem from a certain subject's intention. In this chapter, it will be
mentioned that this study focuses on the impact and changes of household decision making
based on their financial literacy understanding

Chapter 2 Literature Review

The main content of this chapter is to describe the research direction and theoretical
framework of this study, to better understand the problems mentioned in the first chapter,
analyze these problems, and understand more about the background, reasons, and conditions
of this type of problems. In addition, this chapter will also conduct a hypothetical analysis of
the research to build a theoretical foundation, and then understand the current research gap by
comparing other existing research literature.

Chapter 3 Research Methods

This chapter contains the specific methods used in this study, including research design,
sampling plan, business definition, research tools, data collection and analysis methods and
other practical research and analysis methods.

Chapter 4 Analysis and discussion of finding

This chapter focuses on the analysis and discussion of research data and obtains the specific
letter of relevant content from the data results of multiple testsresearch objectives can be
achieved to provide a reasonable basis.

Chapter 5 Conclusion

presents the conclusion of the study, summarising the key findings, proposing
recommendations.

CHAPTER 2
 LITERATURE REVIEW

2.1 Literature review

2.1.1 Saving decision

The impact of financial literacy on saving decisions has been a topic of significant research.
A. Lusardi, in the paper "Financial Literacy: An Essential Tool for Informed Consumer
Choice?", highlights the prevalence of financial illiteracy in the U.S., particularly among
certain demographic groups such as those with low education, women, African-Americans,
and Hispanics. The study underscores the importance of financial literacy in making
informed financial decisions, including retirement planning, stock market participation, and
borrowing behavior. The lack of financial literacy is linked to poor decision-making in these
areas, indicating the need for improved financial education.

In their joint work, "Financial Literacy and Economic Outcomes: Evidence and Policy
Implications", O. Mitchell and A. Lusardi provide a comprehensive review of the role of
financial literacy in global financial decision-making over the past decade. Their findings
reinforce the importance of financial literacy in navigating the complex world of finance and
its impact on economic outcomes.

The paper "Financial Literacy Externalities" by Michael Haliassos, T. Jansson, and Yigitcan
Karabulut takes a unique approach by examining the influence of financially literate
neighbors on individuals' financial behavior. Using a quasi-field experiment in Sweden, they
found that exposure to financially literate individuals promotes saving behavior, particularly
when the neighbors have an economics or business education. This suggests that financial
literacy can have a broader societal impact beyond the individual level.

Lastly, the paper "Financial Literacy and Investment Behaviour of IT Professional in India"
by M. Shaik, M. Kethan, T. Jaggaiah, and Mohammed Khizerulla explores the factors
contributing to increased investing activities among young professionals in India. The study
underscores the role of financial literacy in shaping the investment behavior of IT
professionals, further emphasizing the importance of financial education in promoting sound
investment decisions.

In summary, these studies collectively highlight the critical role of financial literacy in
influencing saving and investment decisions. They underscore the need for improved
financial education and awareness, particularly among vulnerable demographic groups, and
suggest that financial literacy can have broader societal impacts. The findings also indicate
that financial literacy can shape the investment behavior of specific professional groups, such
as IT professionals in India.

2.1.2 Investment decision

The influence of financial literacy on investment decisions has been extensively studied and
documented. In the paper "How financial literacy moderate the association between
behaviour biases and investment decision?" by M. Adil, Y. Singh, and Mohd Shamim Ansari,
the authors delve into the impact of behavioural biases, such as overconfidence, risk-
aversion, herding and disposition, on investment decisions. The study reveals that financial
literacy significantly influences investment decisions among both male and female investors.
Interestingly, the study also found that overconfidence positively influences investment
decisions among male investors, indicating the complex interplay between behavioural biases
and financial literacy.

In "The Effect of Financial Literacy Level and Demographic Factors on Investment

Decision" by Deavicris Ari Senda, Caecilia Wahyu Estining Rahayu, and Christina Heti Tri
Rahmawati, the researchers explore the influence of financial literacy and demographic
factors on investment decisions among government employees in Indonesia. The study found
that age, income, and investment experience significantly affect investment decisions, but
financial literacy does not. This suggests that while financial literacy is crucial, other
demographic factors also play a significant role in shaping investment decisions.

The paper "What explains the investment decision-making behaviour The role of financial
literacy and financial risk tolerance" by D. F. Abdullah, Zaheer Ahmed, Umara Noreen, and
S. Ramakrishnan investigates the impact of financial literacy on investment decision-making
behaviour, with a focus on the mediating role of financial risk tolerance. The study found a
positive and significant impact of financial literacy on investment decision-making behaviour
and financial risk tolerance among individual equity investors. This suggests that financial
literacy not only directly influences investment decisions but also shapes individuals'
tolerance for financial risk, which in turn affects their investment behaviour.

Finally, "The Impact of Financial Literacy on the Investment Decision of Non-Donation-

Based Crowdfunding in Indonesia" by Jihan Nadra Arifah and Z. Dalimunthe examines the
heterogeneity of financial literacy levels between backers and non-backers of non-donation-
based crowdfunding in Indonesia. The study found that individuals with lower incomes are
more likely to invest in non-donation crowdfunding, despite the lack of difference in financial
literacy between them. This suggests that financial literacy may not always be the primary
driver of investment decisions, particularly in the context of emerging investment platforms
like crowdfunding.

In summary, these studies collectively highlight the significant role of financial literacy in
shaping investment decisions. They underscore the complex interplay between financial
literacy, behavioural biases, risk tolerance, and demographic factors in influencing
investment behaviour. The findings also suggest that the impact of financial literacy on
investment decisions may vary depending on the specific investment context, such as
traditional investment avenues versus emerging platforms like crowdfunding.

2.1.3 Retirement decision

The role of financial literacy in retirement decision-making has been a focal point of
numerous studies. In "Financial Literacy and Stock Market Participation" by Maarten van
Rooij, A. Lusardi, and R. Alessie, the authors explore the relationship between financial
literacy and individuals' participation in the stock market, which is a crucial aspect of
retirement planning. The study found that individuals with low financial literacy are
significantly less likely to invest in stocks, indicating that financial literacy can influence the
diversification of retirement portfolios and, consequently, retirement outcomes.

The paper "How Ordinary Consumers Make Complex Economic Decisions: Financial
Literacy and Retirement Readiness" by A. Lusardi and O. Mitchell delves into the
relationship between financial literacy and efforts to plan for retirement. The authors found
that those with more advanced financial knowledge are more likely to be retirement-ready,
highlighting the importance of financial literacy in preparing for retirement.

In "Financial Literacy: An Essential Tool for Informed Consumer Choice?" by A. Lusardi,

the author demonstrates the widespread financial illiteracy among the U.S. population,
particularly among specific demographic groups. The study links this lack of financial
literacy to poor retirement planning, among other financial decision-making failures,
underscoring the need for improved financial education.
The paper "Precautionary Savings, Retirement Planning and Misperceptions of Financial
Literacy" by A. Anderson, F. Baker, and D. Robinson measures financial literacy among
LinkedIn members and finds a positive correlation between financial literacy, precautionary
savings, and retirement planning. However, the study also found that this correlation is
mostly driven by perceived, not actual, literacy, indicating that self-perceptions of financial
literacy can significantly influence retirement planning decisions.

In summary, these studies collectively highlight the critical role of financial literacy in
retirement decision-making. They underscore the importance of both actual and perceived
financial literacy in retirement planning and the need for improved financial education to
enhance retirement readiness. The findings also suggest that financial literacy can influence
retirement outcomes through its impact on stock market participation and precautionary
savings.

2.1.4 Define financial literacy

The understanding and definition of financial literacy have been explored in various studies.
In the paper "Defining and Measuring Financial Literacy. New Evidence from Romanian’
Students of the Master in Finance" by Dumitru-Cristian Oanea and A. Dornean, the authors
aim at defining and measuring financial literacy by reviewing the literature and finding the
definition of the concepts "financial" and "literacy". The study found that male students have
a higher level of literacy related to personal finance than female students. Also, the survey
shows that 75% of economist students from Romania have a medium to high level of
financial literacy, but only 48.8% have a high level of financial literacy.

In "Understanding the Gender Gap in Financial Literacy: Evidence from Australia" by A.

Preston and R. Wright, the authors examine the determinants of the gender gap in financial
literacy. The study found that human capital variables, such as age and education, are not
significant in explaining the gender gap in financial literacy. Instead, labor market variables,
such as sector, occupation, industry, union membership, and labor market status, are
important and explain around 16% of the gap.

The paper "PISA 2018 Financial Literacy Framework" provides a working definition for
financial literacy and organises the domain around the content, processes and contexts that
are relevant for the assessment of 15-year-old students. Content areas described by the
framework include money and transactions, planning and managing finances, risk and reward
and financial landscape.

Finally, "The Correlation between Education Level and Understanding of Financial Literacy
and its Effect on Investment Decisions in Capital Markets" by Mochammad Rizaldy Insan
Baihaqqy, Disman, Nugraha, and M. Sari, investigates how the educational level of investors
influences their understanding of financial literacy and its effect on investment decision-
making in capital markets. The study found a significant correlation between the investor
education level and their understanding of financial literacy, thus influencing investors in the
financial decisions they make.

In summary, these studies collectively highlight the significant role of socio-demographic

factors, education level, and cultural factors in shaping the understanding of financial
literacy. They underscore the importance of targeted financial education initiatives to
improve financial literacy among different demographic groups. The findings also suggest
that the understanding of financial literacy can significantly influence investment decisions.

2.2 Hypothesis development

Hypothesis 1 (H1): Financial literacy positively impacts the savings, investment, and
retirement planning decisions of households.

Hypothesis 2 (H2): Demographic factors, such as age, gender, and education level,
significantly influence the level of financial literacy.

Hypothesis 3 (H3): Economic factors, including income and employment status, substantially
affect the level of financial literacy.

Hypothesis 4 (H4): The interaction of financial literacy, demographic factors, and economic
factors uniquely shapes the savings, investment, and retirement planning decisions of
households.

2.3 Previous research

Title Author / Year Variables Result

Financial Literacy: A. Lusardi (2008) Financial Literacy, Making

An Essential Tool Identified
for Informed Demographics. widespread financial
Consumer Choice? illiteracy,
Financial Decision-
particularly among
Making
specific
demographic groups.
Financial literacy
impacts financial
decision-making.

Financial Literacy O. Mitchell and A. Financial Literacy, Reviewed the

and Economic Lusardi (2015) relationship between
Economic Outcomes
Outcomes: Evidence financial literacy and
and Policy financial decision
Implications making around the
world.

Financial Literacy Michael Haliassos, Financial Literacy, Estimated medium-

Externalities T. Jansson, Yigitcan Financial Behavior and longer-run
Karabulut (2020) effects of peoples’
exposure to
financially literate
neighbors on their
financial behavior.

Financial Literacy M. Shaik, M. Financial Literacy, Identified factors

and Investment Kethan, T. Jaggaiah, Financial behaviour accountable for
Behaviour of IT Mohammed increased investing
Professional in India Khizerulla (2019) activities among
young professionals.

How financial M. Adil, Y. Singh, Financial Literacy, Examined the impact

literacy moderate the Mohd Shamim Behaviour Biases, of behavioural biases
association between on investment
behaviour biases and Ansari (2020) Investment Decision decisions amongst
investment decision? gender.

The Effect of Deavicris Ari Senda, Financial Literacy, Found out the effect
Financial Literacy Caecilia Wahyu Demographic of financial literacy
Level and Estining Rahayu, Factors, Investment level and
Demographic Christina Heti Tri Decision demographic factors
Factors on Rahmawati (2020) on investment
Investment Decision decision.

What explains the D. F. Abdullah, Financial Literacy, Investigated the

investment decision- Zaheer Ahmed, Financial Risk impact of financial
making behaviour Umara Noreen, S. Tolerance, literacy on
The role of financial Ramakrishnan Investment investment decision-
literacy and financial (2020) Decision-making making behaviour by
risk tolerance Behaviour taking mediating role
of financial risk
tolerance.

The Impact of Jihan Nadra Arifah, Financial Investigated the

Financial Literacy on Z. Dalimunthe Literacy,Investment heterogeneity of the
the Investment (2021) Decision, financial literacy
Decision of Non- Crowdfunding level between
Donation-Based backers and
Crowdfunding in nonbackers of non-
Indonesia donation-based
crowdfunding in
Indonesia.

Financial Literacy Maarten van Rooij, Financial Literacy, Explored who is

and Stock Market A. Lusardi, R. Stock Market financially literate,
Participation Alessie (2007) Participation whether people
accurately perceive
 their own economic
decision-making
skills, and where
these skills come
from.

How Ordinary A. Lusardi, O. Financial Literacy, Explored the

Consumers Make Mitchell (2017) Retirement relationship between
Complex Economic Readiness financial literacy and
Decisions: Financial efforts to plan for
Literacy and retirement.
Retirement
Readiness

Precautionary A. Anderson, F. Financial Literacy, Measured financial

Savings, Retirement Baker, D. Robinson Retirement Planning literacy among
Planning and (2015) LinkedIn members,
Misperceptions of complementing
Financial Literacy standard questions
with additional
questions that allow
us to gauge self-
perceptions of
financial literacy.

Defining and Dumitru-Cristian Financial Literacy, Aimed at defining

Measuring Financial Oanea and A. Definition, and measuring
Literacy. New Dornean (2019) Measurement financial literacy by
Evidence from reviewing the
Romanian’ Students literature and finding
of the Master in the definition of the
Finance concepts "financial"
 and "literacy".

Understanding the A. Preston and R. Financial Literacy, Examined the

Gender Gap in Wright (2019) Gender Gap determinants of the
Financial Literacy: gender gap in
Evidence from financial literacy.
Australia

PISA 2018 Financial PISA (2018) Financial Literacy, Provided a working

Literacy Framework Definition, definition for
Framework financial literacy and
organised the
domain around the
content, processes
and contexts that are
relevant for the
assessment of 15-
year-old students.

The Correlation Mochammad Financial Literacy, Investigated how the

between Education Rizaldy Insan Education Level, educational level of
Level and Baihaqqy, Disman, Investment investors influences
Understanding of Nugraha, and M. Decisions their understanding
Financial Literacy Sari (2020) of financial literacy
and its Effect on and its effect on
Investment investment decision-
Decisions in Capital making in capital
Markets markets.

2.4 Theoretical Framework

2.5 Research Gap

The existing body of literature on the impact of financial literacy on household decision-
making has provided valuable insights. However, it also reveals several gaps that warrant
further investigation. One of the most significant gaps is the demographic focus of many
studies. A considerable portion of the research has been concentrated on specific
demographic groups such as students, IT professionals, or specific ethnic or gender groups.
While these studies have contributed to our understanding of how financial literacy affects
these particular groups, they leave a gap in our knowledge about the broader population. The
impact of financial literacy on household decision-making across a more diverse
demographic spectrum remains underexplored. This includes households of varying sizes,
income levels, and compositions. A more comprehensive demographic focus would provide a
more nuanced understanding of the role of financial literacy in household decision-making.

Another notable gap in the literature is the geographical limitation of many studies. Much of
the research has been conducted within specific countries or regions, which may not fully
capture the global impact of financial literacy on household decision-making. Cultural,
economic, and regulatory differences across countries can significantly influence both
financial literacy levels and household financial decisions. Therefore, there is a need for more
research that investigates these phenomena in various geographical and cultural contexts.
Furthermore, while some studies have examined the impact of financial literacy on specific
types of financial decisions such as investment or retirement planning, there is a gap in
research that provides a comprehensive view of how financial literacy impacts a range of
household financial decisions. This includes not only savings, investment, and retirement
planning but also other financial decisions such as insurance, debt management, and estate
planning. A more holistic understanding of the impact of financial literacy on household
decision-making would provide valuable insights for policymakers, educators, and financial
advisors.

CHAPTER 3

RESEARCH METHODOLOGY

3.1 Research Method

According to Syamsuddin and Damaianti (2007: p. 14), the research method refers to a well-
planned technique of study. Its purpose is to uncover facts and data in order to comprehend a
given situation. Researchers employ this method systematically, carefully, patiently, and
precisely. For this particular study, a qualitative approach was chosen. The qualitative
method was utilized as it involved the subjective collection of data through qualitative
research methodologies. This approach necessitated an in-depth investigation, including
group discussions and observations, in order to gather comprehensive information. The
objective was to document the thoughts, feelings, and opinions of the participants before the
researcher arrived at any conclusions. Cresswell (2012) supports this method as a means of
discovering and analyzing the significance that different individuals or groups attribute to
social human problems

In this study, we will employ descriptive qualitative research methods to delve into the
influence of financial literacy on household decision-making. Descriptive qualitative research
methods provide a platform for a profound understanding of the phenomena under
investigation by concentrating on the experiences, attitudes, and beliefs of the study
participants (Neuman, 2014).

3.1.1 Type of research method:

Survey: We will design a survey to gather data from households regarding their level of
financial literacy and its impact on their decision-making processes. The survey will
incorporate both open-ended and closed-ended questions to capture a comprehensive
understanding of the participants' experiences and opinions. The data collected from the
surveys will be analyzed using qualitative data analysis techniques such as coding and
thematic analysis (Neuman, 2014).

Document Analysis: We will analyze pertinent literature and reports on financial literacy and
household decision-making to gather information on the current understanding and trends in
the field. This will help provide context and background information for the study (Neuman,
2014).

The data collected from these methods will be analyzed using thematic analysis, which
involves identifying, analyzing, and reporting patterns or themes within the data (Braun &
Clarke, 2006). The findings from the qualitative data will be presented in a narrative form,
supported by quotes and excerpts from the survey responses and document analysis. This
approach will allow for a richer understanding of the impact of financial literacy on
household decision-making.

3.2 Setting of Research

Adopting an experimental approach, this study will evolve from specific instances to broader
themes, encompassing data analysis, interpretation, and the development of questions and
processes. Data will often be collected in the natural settings of the participants. The structure
of the final report will be flexible, reflecting the dynamic nature of the research process. This
type of research embraces a methodology that values qualitative reasoning, emphasizing
personal meaning, and the importance of accurately representing the complexity of a
situation.

The author has chosen a qualitative method for this study on the impact of financial literacy
on household decision-making because of the desire to gain a deep understanding of the
subject. A qualitative method allows for the extraction of detailed information and
perspectives from key individuals related to the topic, making it highly effective in
addressing the real issues discovered through this method.

Furthermore, qualitative research is about capturing the perceptions, opinions, and ideas of
the people studied. It is not about measuring with numbers but about understanding the
nuances of people's experiences and actions. In the context of this study, it will provide a
rich, detailed understanding of how financial literacy influences the decision-making
processes within households.

3.3 Time of the research

The research was conducted during the month of June 2023. This time period was chosen
strategically to ensure that the study was up-to-date and reflected the most recent
developments and trends in the chosen field of investigation.

3.4 Data Collection

In completing this research, the data collection process must be panned and done effectively.
Before collecting the data, the researcher defined the data sources of this research. Data
sources are places where information on people, events, behaviours, documents, files, and
other things can be foound (Maryadi, et all, 2011: p.13) Furthermore Sukandarmudi (2006: p.
44) said that data sources for qualitative research must be of high quality because they’re
objective reather than subjective therefore

3.5 Data Collection Techniques

To facilitate the data collection process in this study, researchers will employ methods
suitable for gathering qualitative data. The techniques used in collecting the data are:

Primary Data Sources

A primary data source is obtained directly from the research site, observing the behavior and
perspectives of individuals. The primary data source for this research will be a selection of
households, chosen based on the researcher's considerations.

In this thesis, a simple and relevant data analysis design is developed using thematic analysis.
Thematic analysis is a widely used qualitative method that helps identify, analyze, and report
patterns or themes within the data. It is a flexible approach that can be applied to various
research topics, including the impact of financial literacy on household decision-making.

The data analysis process for this thesis using thematic analysis can be outlined in the
following steps:
Familiarization with the data: The researcher will carefully read through the collected survey
responses to gain an in-depth understanding of the data. This step involves taking initial notes
and highlighting interesting or relevant responses that might contribute to the identification of
themes.

Generating initial codes: The researcher will systematically code the data by assigning labels
to segments of text that represent meaningful units related to the research questions and
hypotheses. The codes can be either descriptive (summarizing the content) or interpretive
(highlighting underlying meanings).

Searching for themes: After coding the entire dataset, the researcher will review the codes to
identify patterns and relationships among them. This process involves grouping related codes
together to form potential themes.

Reviewing themes: The identified themes will be reviewed to ensure their relevance and
coherence. This step might involve refining, merging, or splitting themes to better represent
the data. The researcher may also revisit the raw data to verify if the themes accurately
capture the participants' perspectives.

Defining and naming themes: Each theme will be given a clear and concise name that reflects
its essence. The researcher will also provide a detailed description of the theme and illustrate
its meaning with representative quotes from the data.

Producing the report: The final step involves writing a report that summarizes the findings of
the thematic analysis. This report will include an overview of the identified themes, a
discussion of their relevance to the research questions and hypotheses, and an interpretation
of their implications for household decision-making.

By employing thematic analysis, this study will provide valuable insights into the relationship
between financial literacy and household decision-making. The findings will help inform the
development of effective financial education strategies and policies.

3.6 Data collection tools

Questionnaire

Section 1: Demographic and Economic Information

 1) Can you tell me about your age, gender, education level, employment status, and
income level?

Section 2: Financial Literacy Understanding

1) Can you describe your understanding of basic financial concepts such as interest rates,
inflation, and diversification?

2) Have you ever taken any courses or training on personal finance or money
management? If yes, can you share what you learned?

3) How confident are you in making financial decisions? Can you provide an example?

Section 3: Saving Decisions

1) Can you describe how you typically make decisions about saving money?

2) How do you decide how much money to save each month?

3) Can you share a specific strategy or method you use to determine how much to save
from each paycheck/month?

Section 4: Investment Decisions

1) Can you describe your process for making investment decisions?

2) How do you decide which investments are right for you?

3) Can you share a specific instance where you decided to invest in a particular asset or
financial product? What factors influenced your decision?

Section 5: Retirement Decisions

1) Can you describe how you are planning for your retirement?

2) How did you decide on your retirement plan?

3) Can you share a specific step you've taken towards preparing for your retirement?

3.7 Sampling technique

This study employs a descriptive qualitative research design to collect primary data from
participants using a survey. The target population consists of individuals with varying levels
of financial literacy. The sampling technique used in this study is purposive sampling to
ensure a diverse representation of the target population while focusing on participants with
relevant experiences and insights.

The researcher used a purposive sampling technique. Purposive sampling is a technique

where the researcher chooses a group of people as the sample of the research based on the
initial objectives (Kothari, 2004). This research used purposive sampling technique because
the researcher focused in depth on specific samples. Purposive sampling technique was used
with the aim of analyzing the issues, individuals, and opinions, and to answer the research
questions.

The sample in this research must match the following criteria:

● Indonesian or Chinese students studying in the researcher's university

● Young professionals

● Senior professionals

These groups were chosen to ensure a diverse range of perspectives on financial literacy and
household decision-making. This approach aims to get comprehensive answers from different
levels of financial literacy and professional experience, helping the researcher conclude the
best result from the analysis.

In making the decision, the researcher used data saturation. This method refers to the point
where new data no longer provides any additional insights related to the topic and it begins to
repeat so that further data collection is redundant (Francis et al., 2010). If the researcher
reaches this point, then the data collection must be finished. This is the time when the
researcher eventually gets the right sample size for the research. In conclusion, data
saturation helps the researcher reaching the quality and richness of the information collected
instead of a specific number of respondents.

3.7.1 Sample Size

Considering the qualitative nature of this study, a smaller sample size is appropriate. The
study will include 5 participants, ensuring that rich and diverse data is collected while
maintaining the manageability of the research process.

3.8 Data Validity

If there was no difference between what the researcher reported and what was true,
conclusions or data from qualitative research could be considered genuine. It was crucial to
recognize that reality's truth was necessary. The term "research" is plural, not singular, and
relies on the context, claims qualitative research. The creation of a person's human
construction as a unique individual from a variety of backgrounds happen as a result of the
mentality process. To make the data valid, the researcher used triangulation of the data source
and technique of collecting data. The study's data sources were interviews. The goal of
interviewing an informant was to collect data as well as consult this title and the data sources
that had been identified as relevant.

3.9 Data Analysis Technique

According to Miles and Hubberman (in Sugiyono, 2007: P. 204), the steps are: collecting
data, reduction of data, presentation of data and the last step, conclusion.

The Techniques are as follows:

a) Data reduction

Data reduction was a simplification through selection that focuses raw validity data into
meaningful information, making it simple to draw conclusions. In this research, the
researcher use thematic analysis as this approach is to find out about consumer perspective by
analyzing the interview result which was shown in the interview transcript. The reason of
using thematic analysis is because this approach is more appropriate with the research
question where the questions are more exploratory, seeking to gain insight into the
perspective and experiences of the informants. Meanwhile, content analysis tends to be more
quantitative as it aims to describe and quantify the content of the data

b) Data Presentation
The presentation of data often used with qualitative data is a narrative. Presentations of data
contain a collection of information that is arranged systematically and is easy to understand.

a. Conclusion

The final step in data analysis was conclusion; the researcher must look at the result of data
reduction and keep referring to problem identification for the purpose to be accomplished.
Data had been organized and compared to arrive at a conclusion as an answer to the problem.

Figure 3.1 Technique of analysis data qualitative according to

Milesand Hubermen (Sugiyono, 2007: p. 333 - 345)