FINANCIAL KNOWLEDGE AND FINANCIAL DECISION 1

Introduction

Lack of enough information or knowledge about a certain thing is a huge factor

that affects one’s decision. Deciding without sufficient basis or data to support the

decision might have an effect or may result to a trouble. On the other hand, some

consumers choose precise ways in gaining information, but many are lacking with the

financial literacy to sufficiently appraise financial products (Lusardi & Mitchell, 2014).

According to Taleb (2007), there are moments in life which are known to be outlier that

cannot be prophesied by the rule of thumb and after being fed with a well-run

information, few people deny the real reason that they originally believed before. Nobody

can predict the actual outcome of an event. However, a person can choose what he/she

thinks will have a good outcome in the end. In this study, the researchers would like to

know about how financial knowledge relates with the students’ financial decision for this

will educate the students on how they should manage their finances well for it will affect

their future.

Baliuag University is one of the private university in the Philippines. It is the first

school granted full autonomy in Central Luzon by the Commission on Higher Education.

Baliuag University stand firm to its vision, mission, and guiding philosophy which acts as

a significant role in making the university as one of the leading academic institutions in

the region. One of the university’s mission is to realize the aspirations and also society’s

greater good. The researchers chose Baliuag University as the research site because most

of the students are known to be a “millennial” whom they considered as the new

generation of learners. Millennial students are most likely exposed to the newest trend in

the society because of their engagement with technology that enables them to see a wide
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variety of products in the market and after that, there is a tendency that they will feel the

eagerness to buy that specific product even if they do not necessary need it.

According to Kenton (2010), financial knowledge deals with the information

someone knows which is related to money such as spending, saving, and investing. By

this matter, it also influences one’s personal financial decisions like investing money into

a venture or business, paying for school, and budgeting or saving money. Financial

decisions can have long-term consequences on the consumers’ life and welfare and also

the following decisions he/she will be choosing. Everyone makes financial decisions,

some could be simple, consequential, and some could be complex. People decides when

to spend or save money, when to invest, when to deposit it in the bank, and how much

should he/she spend, save, invest, and deposit. Financial decisions are exclusive because

it has major effect or consequence when mistaken but will surely teach a lesson

(Greenberg and Hershfield, 2018).

At its intensity, as per Standards & Poor’s (S&P) Ratings services conducted a

survey in 2018, the results show that only 25% of Filipinos are knowledgeable about

financial matters. On the other side of this, 75% of Filipinos have no idea about the

pricing of products and seasonal inflation, life or car or any insurance, and even the idea

of putting or depositing money in the secured and trusted bank. In the year 2014, World

Bank study stated that estimated 20 million Filipinos know and did save money but only

half of this population had bank accounts. Based on the news article that the researchers

have read, the Filipinos were still uneducated on how they will handle their finances (Go,

2017). The researchers wanted to pursue this case since more than 80% of the working,

middle class have no formal financial plan hereupon they want to lend a hand to the
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students for them to be financial literate so that when time comes, they would not be

included in the said 80% of the working population with no fiscal financial plan. For this

reason, it urges the researchers to conduct a study concerning to have financial

knowledge which influences the students’ insights about spending money.

At the present times, buying and deciding what to buy is one of the hardest

decisions to make. Sometimes, a person cannot decide whether he/she is going to buy the

thing that he/she wants because he/she is lacking of information about how money really

works for a person. The researchers want to know if the students have enough knowledge

about money. They also want to determine the relationship of financial knowledge and

financial decisions of a student.

This study will help the students to have the guts to know and might encourage

them to dig information about financial matters and how it might improve their decision-

making skills which they can apply it in their everyday lives. This might help them to

wake themselves up and start saving money for investments and future purposes. This

study will serve as an indication to them that it is already time to be knowledgeable not

only in financial matters or money, but in every single thing that this world has. One

mistake will result to various effects.

Significance of the Study

The outcome of the study will greatly benefit the following:

Students. The study will help them assess their financial knowledge and to know

what points that need improvement to enhance their financial management. They will be

aware of their unnoticed financial knowledge that they put less attention which may
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cause unreasonable financial decisions. Also, this might help them to prove that good

financial knowledge practices could help them to make sound financial decisions.

Parents. This study will be a significant endeavour in knowing how their children

manage their allowances and how parents can deal with it. They will be aware of the

financial attitude of their children, so they will be able to help their children to improve

their financial knowledge that will lead them to sound financial decisions.

School. They will be aware of the financial knowledge of the students,

correspondingly they will be able to guide them to have a better knowledge for their

financial management. The result of the study can help the school on proposing different

activities in developing the financial management of the students.

Teachers. This study will help the teachers to be determined to encourage their

students to spend their money wisely and to know only when to buy something. They

could help the students to realize that it should always be needs over wants. The outcome

of the study can give them a guide on how they are going to impart knowledge on how

students can imbue value in spending their money.

Future researchers. The study will serve as their guide and reference with the

use of the findings that the researchers of this study conducted. They could rely on the

content of this research paper on their own research studies for further elaboration of their

study. This study will help them distinguish the important parts to improve and various

parts and variables that can contribute on the development of their study.

Statement of the Problem

This study intends to determine the relationship between financial knowledge and

financial literacy.
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Explicitly, this study wants to find the answers to the following questions:

1. What is the demographic profile of the respondents in terms of:

a. Age;

b. Sex; and

c. Daily allowance

2. How may the respondents’ perceived financial knowledge be described?

3. How may the respondents’ financial decision be described?

4. Is there a significant relationship between perceived financial knowledge and

financing decisions?

Hypothesis

Ha: There is a significant relationship between perceived financial knowledge and

financial decisions.

Scope and Limitation

The study involved students’ perceived financial knowledge in relation to their

financial decisions. The study was conducted in Baliuag University, which is considered

as the research locale of the study. Baliuag University is one of the colleges in Region III

that offers complete, kindergarten up to doctoral degree, and great quality of education

that pushed the researchers to conduct their study in Baliuag Uniersity. The Senior High

School Students are the respondents for this study. The students’ demographic profile

such as name, strand and gender are necessary but it must be kept confidential and

intended for research purposes only as per Data Privacy Act. Daily allowances of the

students were also gathered by the researchers as basis of the study. The researchers’

main focus is to find the relationship between the student’s financial knowledge and
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financial decision. The false statement and information were disregarded in this study for

it will not give benefits to the researchers. This study was conducted in this school year

2019-2020.

Review of Related Literature

The literature review emphasized and expounded the variables chuchubanes

Financial Knowledge and its Significance

Theoretical Framework

Lifecycle Theory of Consumption

Theory of Consumption was developed in the early 1950s by Franco Modigliani

and Richard Brumber to explain how perceived financial knowledge be connected with

the financial decisions that will be made for future use. This theory is based on the idea

that people make smart choices about how much they want to spend at every age,

(especially the youth) constrained only by the resources available across their lives. It is

an economic theory that pertains to the spending and saving habits of people over the

course of a lifetime. The main goal of this theory is to inform the individuals to plan in every

spending that they will make. It also states that a certain individual must plan ahead before

establishing a concrete financial decision.

Chen and Volpe (1998) tested the level of financial literacy among college students and

the level of knowledge. The results showed that majority business students are more

knowledgeable than non-business major.

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