Assessment of financial literacy personal financial management practice in case of wolkite

university student

WOLKITE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

BY:
BETELIHEM DAWIT

ADVISOR:
Ms. LAKECH E. (MSc)

WOLKITE, ETHIOPIA
August ,2021
Assessment of financial literacy on personal financial management practice in case of
wolkite university students

A SENIOR ESSAY SUNMITTED TO ACCOUNTING AND FINANCE PROGRAM OF

WOLKITE UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OFARTS IN ACCOUNTING AND FINANCE.

BY: ID NO.

BETELIHEM DAWIT 104/11

WOLKITE ,ETHIOPIA

AUGUST, 2021
 WOLKITE UNIVERSITY

COLLAGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Assessment of financial literacy personal financial management practice in case of wolkite

university students

BY: ID NO.

BETELIHEM DAWIT 104/11

APPROVED BY THE COMMITTEE OF EXAMINERS

Advisor Name Signature

______________ _______________

Examiner Name Signature______________

________________

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ACKNOWLEDGMENT
First of all I would like to thank my almighty God for everything for all my success. Next my
advisor Mrs. Lakech E. (Msc) that she provides me constructive and professional guidance
advice and comment from the initial bingeing up-to the end of my research works. Then I wish to
thank and appreciate all Wolkite university Accounting staffs and lecturers those provide me
business knowledge and professional skill that is useful in the rest of my life. I also wish to
appreciate all my friends and students of Wolkite University those participate to respond and fill
my questionnaires, the basic imputes for my research paper. The last but not the list is all my
families, specially my mother Sisay Wodajo I never forget her effort for the success of my life.
Long live MOM!!!

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Declaration

I declare that this study senior essay work entitle: “Financial literacy on personal financial
management: Case study on wolkite university students “submitted by me the degree of BA in
Accounting and Finance to The department of Accounting and Finance of wolkite University is
my original work and has not been presented for the award of any degree, diploma or
fellowship or other similar purpose to any University or Institution. Any work of other Authors
used is dully acknowledged.

Signature --------------------------
Betelihem Dawit...........................
Date..........................................

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Certification
This is to certify that the senor easy Prepared by Betelihem Dawit Entitled: Financial literacy
personal financial management practices In Case of Study on wolkite university and submitted
in partial fulfillment of the requirements for BA degree in Accounting and Finance Complies
with The regulation of the University and meets the accepted standards with respect to
originality and quality.

Place: wolkite, Ethiopia Lakech E (MSc)

June, 2017 Signature:
Date
Examiner
Name Signature: Date
Advisor Signature: Date
Head of Department Accounting and Finance

Demelash G

Signature:-------------------------

Date :------------------------------

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Contents
ACKNOWLEDGMENT....................................................................................................................................i
Declaration..................................................................................................................................................ii
Certification................................................................................................................................................iii
LIST OF TABLE.............................................................................................................................................1
INTRODUCTION.......................................................................................................................................4
1 Background of the study.......................................................................................................................4
1.2 Statements of the problem.................................................................................................................5
1.3 Research Question.............................................................................................................................7
1.4. Objectives of the Study.................................................................................................................7
1.4.1. General objective.......................................................................................................................7
1.4.2 Specific objective........................................................................................................................7
1.5. Significance of the study..................................................................................................................8
1.6. Scope of the study.............................................................................................................................8
1.8 Organization of the paper.................................................................................................................9
CHAPTER TWO...........................................................................................................................................10
LITRATURE REVIEW...................................................................................................................................10
Introduction...............................................................................................................................................10
2.1 Theoretical Review..........................................................................................................................10
2.1.1 Financial literacy.......................................................................................................................12
2.1.2 Significant of financial literacy..................................................................................................13

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 2.1.3 Personal Financial Management...............................................................................................14
2.2 Empirical Review..............................................................................................................................16
CHAPTER THREE...................................................................................................................................20
Research Methodology..............................................................................................................................20
3.1. Research design..............................................................................................................................20
3.2 Research approach..........................................................................................................................21
3.3 Source of Data Collection instrument.............................................................................................21
3.4. Target Population...........................................................................................................................22
3.5 Sampling Technique and sample size...........................................................................................22
3.5. Method of Data processing............................................................................................................23
3.6 Ethical Consideration.......................................................................................................................23
CHAPTER FOUR..........................................................................................................................................25
DATA ANALYSIS DISCUSSION AND PRESENTATION................................................................................25
4.1 RESPONDENTS PERSONAL INFORMATION.......................................................................................25
2 GENERAL INFORMATION OF THE REASEARCH....................................................................................27
4.3 GENERAL KNOWHOW OF RESPONDENTS ABOUT FINANCIAL LETERACYON PERSONAL FINANCIAL
MANAGEMENTS....................................................................................................................................34
CHPTER FIVE..............................................................................................................................................35
CONCLUSSION AND RECOMENDATION.................................................................................................35
5.1 CONCLUSSION.................................................................................................................................35
5.2 RECOMMENDATION........................................................................................................................37
REFERENCE............................................................................................................................................38

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LIST OF TABLE

TABLE 1........................................................................................................................................................................24
TABLE 2........................................................................................................................................................................25
TABLE 3........................................................................................................................................................................26
TABLE 4........................................................................................................................................................................27
TABLE 5........................................................................................................................................................................27
TABLE 6........................................................................................................................................................................28
TABLE 7........................................................................................................................................................................29
TABLE 8........................................................................................................................................................................29
TABLE 9........................................................................................................................................................................30
TABLE 10......................................................................................................................................................................31
TABLE 11......................................................................................................................................................................32

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 ABSTRACT
The main objective of this research paper was to assess the effect of financial literacy on
personal financial management practice in case of Wolkite University regular students. The
study encompasses sources income, saving practice, ways of expenditure and debt management.
In order to gather the required data for the study the researcher select 375 respondents out of
total number of 5975 regular students in the year of 2013/21 .These respondents are selected by
using random sampling techniques. Primary source of data is employed to gather the required
data. Questionnaires distributed randomly and carefully filled by respondents in university. Then
the collected data are carefully counted, classified, edited and percentage is given. Then this data
are arranged in table format and measured in central tendency. The researcher employed a
descriptive method of data processing and analyzing. So both statistical and non-statistical data
are described quantitatively and qualitatively. Finally the finding of the study is investigated.
According to the finding of the study, the effect of financial literacy on personal financial
management practice in Wolkite University. So poor personal financial management was highly
seen. Regular students of Wolkite University are exercised unplanned and excessive financial
expenditure and their habit of saving is also very poor. Carelessness and peer pressures are main
factors. Based on these finding the researcher recommended that. All regular students shall be
visionary and exercised habit of saving. The university should aware students to reduce un
planned expenditure, by inviting banks so as to create awareness and increase habit of saving

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 CHAPTER ONE

INTRODUCTION
1 Background of the study
Financial literacy is broadly defined as the ability to make informed judgments and to take
effective decisions regarding the use and management of money; this was largely evaluated
through an assessment of people’s financial knowledge and numeracy. The concept of financial
literacy has evolved somewhat so that it takes more account of people’s financial attitudes,
behavior and experiences as well as their financial knowledge and numeracy. Financial
knowledge is defined as understanding of key financial terms and concepts needed to function
daily in the society’ (Bowen, 2003).

Financial literacy is a basic knowledge that people need in order to survive in a modern society.
Personal financial literacy is the ability to read, analyze, manage and communicate about the
personal financial conditions that affect material wellbeing. It includes the ability to discern
financial choices, discuss money and financial issues without (or despite) discomfort, plan for
the future and respond competently to life events that affect every day financial decisions,
including events in the general economy’ (Vitt, 2000).Financially literate consumers are those
consumers who have the ability to make informed judgments and to take effective actions
regarding the current and future use and management of their money (Basu, 2005).

The influence of financial education on retirement goals and the impact of enhanced financial
education on the likelihood of achieving the necessary savings to reach these goals have gone
virtually unexplored. Financial literacy can mean that one is literate in the issues of managing
money (including saving, budgeting, investing, credit, insurance, and taxes), and utilizes that
knowledge to gain personal welfare through financial security. The simple relationship between
financial decisions and education levels omits many other important factors, such as ability or
family background that likely influence the decisions. Years of schooling increases the
probability that an individual reports earning any asset income (OECD, 2005; Lusardi&
Mitchell, 2005).
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Financial literacy includes the ability to understand financial choices. For example the ability to
compare offers before applying for a credit card, having a current and savings accounts, having a
book keeping system, planning for the future like saving or investing for long term goals like
education, home, vacation etc. Financial literacy also calls for wise spending. This means
preparing budgets, tracking expenditures, paying bills on time, and ensuring that credit card
balances are paid in full each month. Financial literacy affects financial decision making.
Ignorance about basic financial concepts can be linked to lack of retirement planning, lack of
participation in the stock market and poor borrowing behavior (Lusardi, 2008).

Monyoncho (2007) clearly states that financial literacy is not a subject taught in schools. He
further infers that issues of finance will not be automatically understood. Having money alone
does not mean that one is financially educated. Most of these financial matters are learnt through
experience.He states that the real tragedy in life is the lack of early financial education which has
created risks faced by average middle class people.The level of financial literacy tends to vary
according to education and income levels, but evidence shows that highly educated consumers
with high incomes can just be as ignorant about financial issues as less educated lower income
consumers.

So, this study aims to assessing in depth that the financial literacy and saving culture of students
and its level of effect on personal financial management in the study area found to be important,
in order to help the student in particular and the site in general.

1.2 Statements of the problem

Financial understanding is important to all people, but especially to groups like students who are
more economically oppressed and vulnerable due to existing and historical environments.
Individual financial managements has considerably affected by several factors. These include
financial problems from behavior such as over indebtedness, overspending, unwise or poor credit
habits, poor spending decision and lack of sufficient money to meet ends meet (Kim and
German, 2004).

Emotional biases can make it difficult for people to make rational financial choices, even if they
have adequate knowledge to do so. Some issues include intangible transaction costs like negative
feelings during the process, overwhelming information and choices, high financial and emotional
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stakes, discomforting thoughts like dealing with aging and death, and uncertainty about the
future. Other issues include decision makers opting to only partially evaluate a financial decision
by focusing on the part that is the easiest to understand, and overcoming inertia and passivity to
being to work on financial planning (Willis, 2008).

Many families use informal mental budgets rather than written budgets; use short term budgets
(that is budgets covering one month or less); and prefer techniques that require little mental
energy (for example, automatic bill-paying or envelop accounting) (Davis & Carr, 1992;
Muske& Winter, 1999,2001). Numerous studies show that more than half of households do not
have adequate emergency funds (Chang, Hanna and Fan, 1997: Wolff, 2000). A study by Lusardi
(2008) indicated that financially illiterate individuals could not perform simple economic
calculation and lack of knowledge of basic concepts such as working interest compounding, the
difference between normal and real values and the 24 basic risk diversification.

Akben-Selcuk (2015) investigated the factors influencing college students' financial behavior in
Turkey by using a crosssectional national survey of the students. The study found a low financial
knowledge among the study participants. The results also showed a significant positive effect of
financial knowledge on financial behavior and suggested the need for enhancing the financial
literacy of students.

Many academicians and practitioners residing in the standard finance camp, however, are yet to
apprehend the effect of human emotions and cognitive errors on the decision making behavior of
individuals (Michael 2006). For these reasons, researches in behavioral finance are scarce. The
financial literature has, for long, been narrowly concerned on the standard finance topics, to the
neglect of behavioral finance (Edwin and Sunit 2013; Tesi 2013).

Assefa and Rao (2018) concluded that age, occupation, Income level, type of family, attitude and
behavior towards investment avenues are significant factors affecting the levels of financial
literacy. Norman et al. (2019), also conducted a study to examine the demographic determinants
of financial literacy, and concluded that education, gender, and geographic location were
significant determinants of financial literacy, while age and income level were not significant
determinants.

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According to Hailekiros(2019), Financial literacy as dependent variable, expressed in terms of
binary outcomes, was conducted on predictor variables of Age, Gender, Income level, Work
experience, Field of study, Marital status, Field of study, Access to financial news, and
dependents in household. In this study education level, income level, Access to financial news,
and presence of dependents on household were found to have a significant effect on financial
literacy level of respondents. Whereas the variables age, work experience, religion, marital
status, Gender, Field of study were found to have no statistically significant relationship with
financial literacy. Thus, the existing gap in behavioral finance literature reveals a need for further
investigations on the issue.

Extensive researches have been done mostly in out of the country on personal financial
management practices, this area of research is fairly new in our country as the researcher is not
aware of any related study on this topic that has been carried out on financial education literacy.
To address the above problem, this study is therefore aimed to provide a holistic view of the
effect of financial literacy on personal financial management practice in case of WKU student
through comprehensive review of literature and empirical study available on the area.

1.3 Research Question

 What are the financial knowledge level of Wolkite university students?
 Does attitude toward saving have effect on practicing personal financial management?
 What are the source of income level on personal financial management of WKU student?
 What are the interactions between financial literacy and personal financial management
practices in WKU student?

1.4. Objectives of the Study

1.4.1. General objective
The general objective of the study was to assess financial literacy on personal financial
management practice in case of WKU student.

1.4.2 Specific objective

The specific objectives relating to the study is show below:
 To assess the financial knowledge on personal financial management of Wolkite
university students.
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  To assess the attitude toward saving on practicing personal financial management.
 To investigate the source of income level on personal financial management of WKU
student.
 To observe the relationship between financial literacy and personal financial management
practices in WKU student.

1.5. Significance of the study

This study was aimed to investigate the effect of financial literacy on personal financial
management practice in case of WKU student in order to provide meaningful insight and
contribute to efforts aimed at expanding personal financial understanding of wolkite university
students. Therefore, it is believed that the study is performing the result of strengthening the
relationship between financial literacy and financial management and the factor by specifically
identifying their main objectives. This study will significant in the sense that: for all students,
specifically college student, for poliy maker and the finding is also helpful in building the
literature about effects of financial literacy on personal financial management practice in the
area.

1.6. Scope of the study

The scope of this study is limited across the assessment of financial literacy on personal financial
management practice in case of WKU student. Based on the researcher knowledge, time and
financial capacities, the study is limited to the only wolkite university students, that to identify
their financial understandings and their practice in expanding the day to day and the long term
financial usage.

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1.7 Limitation of the study

There is carelessness in responding some questions

Unwillingness of respondents on filling questions since most of them is busy with their work

Also the limitation of reduce the sample size of evaluation on which the researcher depends for
the study compromise the detail study for the paper.

The lack of internet access during data collect

1.8 Organization of the paper

The research paper was structured in five chapters. Chapter one: an introduction part
includes background of the study, statement of the problems, objectives of the study,
research question, significant of the study, scope and limitation of the study. Chapter two:
is literature review. It includes: Theoretical literaturee review, empirical literature review
and research gap. Chapter three is about research methodology it consists Research
Design, Data Type and Source, Methods of Collection, population and sample Design,
Methods of Data Analysis and description of the variable and chapter four data analysis and
interpretation and also chapter five summary conclusion and recommendation.

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CHAPTER TWO

LITRATURE REVIEW

Introduction
This chapter reviews works on the effect of financial literacy in personal financial management
in Ethiopia and other countries in general and Wolkite University in particular. Works on the
significance and relationship of financial knowledge and management will also reviewed. This is
of help to understand the state of personal financial management and its determinants of the

9
performance. This chapter have three main sections. These are theoretical Review as over view
in Ethiopia and in the world, related empirical studies and the conceptual framework.

2.1 Theoretical Review

Financial literacy can mean that one is literate in the issues of managing money (including
saving, budgeting, investing, credit, insurance, and taxes), and utilizes that knowledge to gain
personal welfare through financial security. Personal Finance itself concerns the flow of money
from one place to another, and your personal finances concern your money and what you plan to
do with it as it flows in and out of your possession. Essentially, then, personal finance is the
application of financial principles to the monetary decisions that you make either for your
individual benefit or for that of your family. As we suggested earlier, monetary decisions work
out much more beneficially when they’re planned rather than improvised. Thus our emphasis on
financial planning the ongoing process of managing your personal finances in order to meet
goals that you’ve set for yourself or your family (Emily Starbuck Gerson and Jeremy M. Simon
(2016).

Until you’re on your own and working, you’re probably living on your parents’ wealth right
now. In our hypothetical life cycle, financial planning begins in the individual’s early twenties. If
that seems like rushing things, consider a basic fact of life: this is the age at which you’ll be
choosing your career not only the sort of work you want to do during your prime income-
generating years, but also the kind of lifestyle you want to live. What about college, of course
have decided to go to college. If you haven’t yet decided, you need to know that college is an
extremely good investment of both money and time. A quick review shows that people who
graduate from high school can expect to enjoy average annual earnings about 28 percent higher
than those of people who don’t, and those who go on to finish college can expect to generate 76
percent more annual income than high school graduates who didn’t attend college. Over the
course of the financial life cycle, families headed by those college graduates will earn about $1.6
million more10 than families headed by high school graduates. (http://hdl.handle.net/10919/70961)

You have also encountered the principle of the time value of money the principle whereby a
dollar received in the present is worth more than a dollar received in the future. If there’s one
thing that we’ve stressed so far, it’s the fact that most people prefer to consume now rather than

10
in the future. If you borrow money from me, it’s because you can’t otherwise buy something that
you want at the present time. If I lend it to you, I must forego my opportunity to purchase
something I want at the present time. I will do so only if I can get some compensation for making
that sacrifice, and that’s why I’m going to charge you interest. And you’re going to pay the
interest because you need the money to buy what you want to buy now. How much interest
should we agree on? In theory, it could be just enough to cover the cost of my lost opportunity,
but there are, of course, other factors. Inflation, for example, will have eroded the value of my
money by the time I get it back from you (Colin Robertson 2015).

Suppose you want to save or invest, do you know how or where to do so? You probably know
that your branch bank can open a savings account for you, but interest rates on such accounts can
be pretty unattractive. Investing in individual stocks or bonds can be risky, and usually require a
level of funds available that most students don’t have. In those cases, mutual funds can be quite
interesting. A mutual fund is a professionally managed investment program in which
shareholders buy into a group of diversified holdings, such as stocks and bonds(Cynthia
Ramnarace (2013).

2.1.1 Financial literacy

Financial literacy is the ongoing process of managing your personal finances in order to meet
your goals, which vary by stage of life. Financial literacy has got an increasing interest in
developed countries. Especially, the financial crises offered a lesson on how personal financial
decisions in the mortgage market contributed to the crises and ability of individuals to withstand
the shocks resulting from crises, which triggered renewed interest on financial literacy (Miller et
al., 2009).

Lusardi and Mitchell (2013) succinctly alluded that financial literacy is peoples ‘ability to
process economic information and make informed decisions about financial planning, wealth
accumulation, debt, and pensions which become increasingly important to enable individual and
household to cope with the ever growing complexity of products and service in financial market.
Financial literacy as an active process with two sequential outcomes. First, financial literacy
imparts knowledge and skills that enable consumers to make financial decision to improve
financial wellbeing. Consumer with financial knowledge and attitude to implement lesson

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learned from financial education will choose financial services and products that are at their best
interest.

According to Trivedi (2008), the barriers to access in the formal banking sector have been
identified as relating to culture, education (especially financial literacy), gender, income and
assets, proof of identity and remoteness of residence and role of government. The evidence from
around the world has also shown that cultural norms, age and gender are important determinants
of access to finance (Ramji, 2007).

The concept of financial literacy suggests that financial literacy is a useful life skill in the
modern financial world where people are responsible in their short term and long term financial
decisions. It can also be viewed as a process where financial literacy acquired from formal and
informal sources implanted in personal financial decision making process for optimal financial
outcomes. The observation on Xu and Zia (2012) also revealed recent modest recognition of
financial literacy in developing countries, which showed promising outcomes of financial
education and other interventions so far implemented. Nonetheless, few have been known about
financial literacy level and financial education programs in least developing countries

Age and geographical location/place of living have also been identified in literature as important
factors in identifying those at risk of banking exclusion (Kempson, 2006).The very young and
very old are more likely to be unbanked than the general population, just as the people living in
rural areas are. According to RBI (2008), financial service providers usually target the middle of
the economically active population, often overlooking to design appropriate products for older or
younger potential customers. Similarly, factors like density of population, rural and remote areas,
mobility of the population (i.e., highly mobile people with no fixed or formal address),
insurgency in a location, etc. also affect access to financial services.

Financial literacy implies a persons’ minimal knowledge about financial terms such as money,
inflation, interest rate, credit and others, but besides this the abilities and skills of that person to
use all this information in personal life, being aware about the consequences of its financial
actions (Onea and Dornean, 2012: p. 116). Financial capability is gaining greater importance
because of the fact it is a broad concept and assumed translation of knowledge into behavior and
practices. Financial literacy is a relative term and difficult to quantify for the fact that it depends
12
on the financial system in which individuals and communities operate (Brascoupé and
Weatherdon, 2013).

In showing the fact, Xu and Zia (2012) on their paper, review of financial literacy across the
globe, quoted survey results in sub-Saharan Africa that indicated that, “a large proportion of the
population in countries such as Mozambique, Malawi, and Nigeria lack awareness of basic
financial products and concepts such as saving accounts, interest on savings, insurance, and
loans. This shows the fact that low level of financial literacy is correlated with low level of
financial inclusion in Africa. Financial education and other policy interventions in developed and
high income countries; however, the case in developing countries (Holzman, 2010), including
Africa (Kefela, 2011) has gained inadequate policy responses albeit surging number of empirical
evidences.

2.1.2 Significant of financial literacy

Financial literacy creates awareness in common man regarding the financial products and
services, thereby generating demand for the same. It makes them to understand the needs and
benefits of the products and services offered by the banks and accelerate the pace of financial
inclusion (RBI, 2013; Gupta and Kaur, 2014: p.64).

The roles that financial literacy is having in poverty reduction, financial inclusion, and financial
sector stability in the context of developing countries.Ramsey (2011) categorized various
benefits of financial literacy into three main categories of beneficiaries: individuals, financial
system and the community. With respect to individuals, financial literacy has the flowing
specific benefits:

 Increased savings and retirement planning

 More realistic assessments of financial knowledge by consumers
 Life skills and bargaining power
 Financial efficiency and Active debt management
 Greater competition, innovation and quality products
 Self-funding of retirement etc.

Studies on behavioral finance, economics and psychology are suggesting that well designed
financial education programs do not only impart financial literacy, but also contribute to
13
improving financial behavior, such as enhancing self-control, preventing impulse purchasing and
over borrowing on one hand, and improving financial planning and budgeting capability and
saving habits. Subha and Priya (2014) also pronounced that, financial literacy improves
understanding of investment options which could reduce risk and optimize earning from meager
financial resource of the poor in developing countries. Enhanced money and finance
management capability also contribute to wealth accumulation (see for example: Caskey (2006),
Behrman & et.al (2012)

2.1.3 Personal Financial Management

Financial management capability enables people to save for income and consumption smoothing
in developing countries where people face various risk, including but not limited to price
volatility of agricultural products, illness, death of bread winner, loss of jobs, retirement, posing
significant income shocks for many. Financial literacy and its outcome on personal saving
behavior also contribute to availability of investment fund at household and national level
(Miller et al., 2009; Subha and Priya, 2014).

One of the main reasons trainings or some kind of awareness programs are organized by state or
those concerned is to enable those who participate to develop an awareness as to the importance
financial management or develop the skill of effectively managing one’s own money properly.
As a result, they are unlikely to achieve an optimal balance between current consumption while
working and future consumption in retirement. In addition, a lack of information concerning the
risk-return distribution of various investments might lead them to misallocate their retirement
portfolios. Bernheim (1998) presents evidence that questions whether the typical household has
enough financial literacy to make appropriate savings decisions in their employer-provided
pension plans.

FDIC (2007) attests that a money smart financial education course has measurable effects on
household savings. Good financial literacy training programs involving basic mathematics skills
such as addition, subtraction and interest compounding. Trainings provided to student or other
segments of the society improve financial literacy which in turn influences ones saving behavior.
Saving is important for many reasons. For the household, saving facilitates asset accumulation
and consumption smoothing, with potentially significant effects on welfare. For the financial

14
system as a whole, the depth and breadth of saving and financial participation are important
determinants of the equity premium and the volatility of markets, and household expenditure.

Goodman (2009) asserts that an additional year of math in high school education significantly
increases earnings for black men and women. These math skills correlate strongly with good
savings behavior, but the causal relationship is not clear. Individuals with better math skills are
likely to come from better family backgrounds, have more education and work in different
occupations than individuals with poorer math ability.

While financial knowledge may not always lead to better financial behavior, there is evidence
that a linkage between the two does exist. At the same time, there may also be some emotional
and psychological barriers that mute the relationship. But nevertheless, it seems evident that
financial knowledge can provide the opportunity for better financial decisions, and similarly, low
financial literacy has been shown to lead to less positive financial decisions. Because this
relationship has been established in a number of studies, an examination of how to create
financial programs that lead to improved financial knowledge is critical.

Social interaction may affect financial decisions as people receive and process information
through interacting with others. In a US 401(k) pension plan participation study, Duflo&Saez
(2002) found that peer effects influenced retirement savings decisions because many people had
not carefully thought through the advantages and disadvantages of particular plans for
themselves. Many employees used information from peers when deciding on participation as
they may lack their own reasoned information for making sound retirement investment decisions.
Moreover, beliefs about social norms will additionally influence employee decisions due to a
desire to behave similarly to those in their social group (Berkowitz, 2003).

The personal financial management demands made on individuals in the 21st century however
are far more complex than those of even 30 years ago, let alone 100 years ago (Wilson, 1999).
The institutions, markets, services, financial instruments, and products created by an increasingly
sophisticated financial system and supported by an equally increasingly sophisticated
information technology are a long way along the evolutionary development of money from when
it only existed in physical forms. The recent OECD \ Report (2005) on financial education notes
that ‘'financial market developments and demographic, economic and policy changes” (OECD,
15
2005:27) are demanding more sophisticated financial literacy of people in order to manage their
own personal finances effectively.

According to the Survey of Consumer Finances (SCF), 11 percent of all the families in the US
had debt-to-income ratios greater than 40 percent. These percentages \ were higher for lower-
income families (Aizcorbe et al., 2003). Another study found that 3percent of college student
credit card accounts showed at least one payment at least 90 days late, compared with 2 percent
of other non-student young adults and 1 percent of the non-student older students (Staten &
Barron, 2002).

2.2 Empirical Review

A study on financial literacy by van Rooij et al. (2007) found the profile of basic literacy to be
negatively skewed with regards to age. Literacy level is low among the young, highest among
middle-age respondents (particularly 40 to 60), and declines slightly at an advanced age of 61 or
over. Similar findings are reported in the Australian context with the youngest (18-24) and the
oldest (70 & over) age groups displaying the lowest financial literacy scores (ANZ, 2008). Level
of education is positively correlated with financial literacy. Studies have consistently shown that
individuals with higher levels of education are the most likely to be financially literate. Those
individuals who completed university or college degree are more likely to be financially
knowledgeable than those with low education level (Cole et al. (2008).

Ansong and Gyensare (2012) assesed financial literacy in 250 randomly selected undergraduate
and post graduate students of Ghana and concluded age, work exprince and mother’s educational
level as positive predictors of the variations in financial literacy level. In that study, however,
level of study, work location, father’s level of education, access to media, and source of
education on money affairs were to have an insignificant relationship with financial literacy.
Bhushan and Medury (2013) conducted a survey on 516 salaried indviduals of the Himachal
Pradesh district of India and found that gender, education, income, nature of employment and
place of work have significant influence on financial literacy levels of salaried individuals, while
age and geographic region have no significant effect on financial literacy.

Many households have very low levels of wealth accumulation (Montalto, 2002). Numerous
studies show that more than half of households do not have adequate emergency funds (Chang,
16
Hanna and Fan, 1997: Wolff, 2000). One of the most common financial management principles
is to save regularly, generally by setting aside some amount of savings before paying for
expenses (O’Neill, 2002). The SCF asks two questions about “saving habits:” whether
households spend less than their income and whether they save regularly. In 1998, 42 percent of
SCF respondents indicated that they spent less than their income (Hogarth &Anguelov, 2002).
While 39 percent of the respondents said they saved regularly, 23 percent said they didn't save,
and 33 percent said they saved whether was left at the end of the month (Montalto, 2002).

Worthington (2006, 2008) in Australia observed that financial literacy scores are typically higher
amongst individuals’ who are in professional and managerial occupations. Similarly, occupation
type/field is also associated with individuals’ financial literacy levels. A survey of United Arab
Emirates investors found that individuals’ who worked in the field of finance/banking or
investment, generally display higher levels of financial knowledge than those in other
occupations fields Financial literacy scores have been found to be generally associated with
personal income levels. Higher financial literacy scores are likely to be displayed by individuals
with higher levels of personal income and lower scores by those with lower incomes (ANZ,
2008). In addition to that, Mattausch& Jonas (2011) found that the relationship between financial
literacy levels and saving is moderated by the income levels. They found that income levels have
a positive association with saving behavior.

Lusardi (1999, 2000) uses data from the Health and Retirement Survey to examine the role of
planning and the lack of financial literacy in retirement savings. She finds that individuals who
do not plan for retirement have lower net wealth and are less likely to invest in assets with higher
expected returns such as equities. Extensive information is needed to plan adequately for
retirement and that financial education programs are important to the planning process. Muller
(2000) also estimates the effect of financial education seminars on the allocation of investments
in defined contribution plans using the Health and Retirement Survey.

Ansong and Gyensare (2012) assesed financial literacy in 250 randomly selected undergraduate
and post graduate students of Ghana and concluded age, work exprince and mother’s educational
level as positive predictors of the variations in financial literacy level. In that study, however,
level of study, work location, father’s level of education, access to media, and source of

17
education on money affairs were to have an insignificant relationship with financial literacy.
Bhushan and Medury (2013) conducted a survey on 516 salaried indviduals of the Himachal
Pradesh district of India and found that gender, education, income, nature of employment and
place of work have significant influence on financial literacy levels of salaried individuals, while
age and geographic region have no significant effect on financial literacy.

In their review of financial literacy literatures, Laxmi and Maheshwary (2018) concluded that
age, occupation, Income level, type of family, attitude and behavior towards investment avenues
are significant factors affecting the levels of financial literacy. Norman et al. (2019), also
conducted a study to examine the demographic determinants of financial literacy, and concluded
that education, gender, and geographic location were significant determinants of financial
literacy, while age and income level were not significant determinants. It should, therefore, be
noted that selection of explanatory variables used in this study is primarily motivated by previous
empirical findings.

According to Kim (2001) in Sabri (2011) financial literacy is the basic knowledge that people
need to survive in modern society. This basic knowledge involves knowing and understanding
the complex principles of spending, saving, and investing. Meanwhile, according to Lusardi&
Mitchell (2007) describes financial literacy is the knowledge that someone has about financial
instruments, including, one's knowledge about savings or saving, insurance or insurance,
investment and other financial instruments. Financial Literacy can be interpreted as financial
knowledge, with the aim of achieving prosperity.

Factors such as gender, age, marital status income level, education level, work experience,
religion, place of residence, dependents, and field of study are among the mostly cited
determinants of financial literacy. Moreover, access to financial information is also considered to
have significant implication for financial literacy level of individuals (Karaa and Kuğu 2016;
Mbarire and Ali 2014).

Leyla Jemal (2018), investigated the effect of financial literacy variables such as Budgeting
literacy, Debt management literacy, Accounting literacy and saving literacy on financial
management. The financial management measurement used in this study was Return on asset.
The researcher used both primary data which were collected using a questionnaire and secondary
18
data obtained from the financial statement. The result of the study has shown that budgeting
literacy, debt management literacy, accounting literacy and saving literacy has positive and
significant effect on financial management.

2.3 Knowledge gap

The empirical studies depicted the fact that financial literacy has direct link with personal
financial management practices. The concepts under study, both financial literacy and personal
financial management practices, are multidimensional constructs.These studies indicate that
financial literacy plays a critical role when it comes to financial management. Decisions made by
individuals or households will be pegged on how financially literate these individuals and
households are. It is also clear that limited financial knowledge leads to financial difficulties
owing to spending their income on costly goods such as branded clothes, mobile phones mainly
for the purpose of fitting into the society. As we have observed above many researcher have
concerned on study that have on work or at least some source of income by their own
employment operation. Like on government employee, on women, on private employee etc. But
this study is differ from the above by concerning assessment of financial literacy level on
personal financial management practice in WKU student in the fact that most of them are
financially dependent on their family and relatives.

19
20
CHAPTER THREE

Research Methodology

This chapter discusses the overall procedures and activities under taken, focusing on namely the
study’s research design, research approach, questionnaire design, data collection, target
population, sampling strategy, data processing and analysis and instrument development.
Besides, the section deals with a discussion on the ethical issues.

3.1. Research design

Research design is a master plan that specifies the methods and procedures for collecting and
analyzing the needed information. As well, research design provides a framework or plan of
action for the research (Zikmund& Griffin 2009). There are three types of research design; these
are descriptive, explanatory and exploratory type of design. Based on the nature and objective of
the study,descriptive research design would be used to carry out this study with the survey
design. The reason for the adoption of this design includes; to describe the influential factor,
financial literacy that affect the personal financial management in wolkite university student to
make generalization about a population.

3.2 Research approach

In order to achieve the objective stated in the preceding section considering the nature of the
problem and the research perspective this study would be used mixed research approach. A
mixed research approach is chosen as it increases the likelihood that research generates more
accurate results than the case single methods are used. As noted in Creswell, 2009, mixed
research is an approach that combines or associates both qualitative and quantitative research
methods. It is also more than simply collecting and analyzing single kinds of data. It is involved

21
the use of both approaches. So that, the overall strength of studies is greater than either
qualitative or quantitative researchapproach. As a result, mixed methods provide a more accurate
picture of the phenomena.

3.3 Source of Data Collection instrument

The study would be used primary sources of data. The primary source of data for this study was
to be collect from Wolkite university student in different colleges and departments. By the nature
of the study secondary source of data is appropriate. Because secondary data, like books, reports,
articles and written documentsthat have related to the financial literacy of Wolkite University
students have available.The questionnaires would be developed to get reliable data about the
concerned topics from the respondents and/or other concerned body, questions related to the
effect of financial literacy on personal financial management practice. Survey questionnaires
willuses to generate quantitative data relevant to the demographic, social and economic
characteristics of the sample respondents. For this purpose, the questionnaire is designed having
both open-ended and close-ended questions. Both open andclose ended questions would be used
to know about the background of the respondents and to collect basic data respectively in order
to meet the objective of the study. The likert scale structured questionnaires enabled the
respondent expression and show their attitude as well as it dealt with the personal financial
management practice.

3.4. Target Population

In research methods, population is the entire aggregation of items from which samples can be
drawn (Yahiya, 2011).The population under this study (targeted population) is regular degree
students who have been registered in under Wolkite University. Since the study is intended to
assess the financial literacy and personal financial management, the regular degree students
population in the university with different age groups, education and wealth status (without prior
isolation of some groups based on the above differences) will considered as the frame of the
study population. The researcher aims to include all regularstudent, in all colleges and the all
year students as a target population and take a sample from these population.

22
3.5 Sampling Technique and sample size
According to Catherine Dawson (2009:54), the correct sample size in a study was dependent on
the nature of the population and the purpose of the study. In this study simple random sampling
wouldl be used to get information from different students. This technique is preferred because it
is used to assist in minimizing bias when dealing with the population. With this technique, the
sampling frame can be organized into relatively homogeneous groups before selecting elements
for the sample. Like the whole students divided in to college, it would be also minimizing in to
each department. After classifying the population in to these different department then the
researcher will select the sample randomly. According to Janet (2006:94), this step increases the
probability that the final sample will be representative in terms of the population groups. The
clusters are all the colleges that have currently available in Wolkite University.

In this study to select sample size, a list of the student formally registered in Wolkite University
at this time is 5975 WKU Student dean (2021). Thenthe following finite population correction
factorformula would be used for the calculation of the sample size since it is relevant to studies
where a probability sampling method is used (Watson, 2001:5).

n=N/1+N(e)2 n=375

n= 5975

1+5975(0.05)2 So the sample of this study is 375 respondents.

3.5. Method of Data processing

According to Sekaran (2000:401), descriptive analysis is used to reduce the data in to a summary
format by tabulation (the data arranged in a table format) and measure of central tendency (mean
and standard deviation). The reason for using descriptive statistics is to describe the different
factors. In the data processing procedure; editing, coding, classification, percentile and tabulation
would be used from the collected data.The method of data processing in this study would used
manual and computerized system.

23
3.6 Ethical Consideration
Regarding the right to privacy of the respondents, the study maintained the confidentiality of the
identity of each participant. In all cases, names are kept confidential thus collective names like
‘respondents’ would be used. All the research participants included in this studies are
appropriately informed about the purpose of the research and their willingness and consent is
secured before the commencement of distributing questionnaire and asking interview questions.

Their participation is entirely voluntary and the questionnaire is completely anonymous. Finally,
I confirm that the information that the respondents share me would be kept confidential and only
used for the academic purpose. No individual’s responses would be identified as such and the
identity of persons responding would not be published or released to anyone. All information
would be used for academic purposes only.

24
25
CHAPTER FOUR
DATA ANALYSIS DISCUSSION AND PRESENTATION
This chapter mainly focus on the analyzing the gathered data from the target
population i.e. the respondents. Based on the data and responses obtained from
the respondents the analysis discussion and interpretation of data presented in
consecutive tables for each item. The information collected through questioners
are carefully counted, tabulated, give percentage and discussed qualitatively
described in words in order to give answer for basic research questions set in this
study. A total sample of the students was 375 wolkite university regular students
in the year of 2013E.Cout of total number 5975 Wolkite University students
Thus, based on the responses has gotten from the sample respondents, the
analysis and interpretation of data is discussed and presented below. Then the
finding of the study was concluded and the suggested recommendation was given
based on the finding of the study

4.1 RESPONDENTS PERSONAL INFORMATION

Table 1

Respondents by sex
Sex No of respondents Percentage
1 Male 225 60%
2 Female 150 40%
3 Total 375 100%
Source: questionnaire 2021

Table 1.1.1 Shows the respondents sexual characteristic in wolkite university As it

26
observed from the table from the total sample of 375 students 225 respondents
(60%) of them are male and the rest 150 respondents (40%) of them are female
Thus as the researcher distributes the questioner in the campus the number of
male respondents are exceed the number of female respondents by 75 male
respondents i.e. by 20%.

Table 2

Respondents by Age
Roll No Age Range Amount Percentage
1 15-----20 120 32%
2 21-----25 240 64%
3 Above 25 15 4%
Total 375 100%
Source: questionnaire 2021

As shown on table 4.2 the age divisions of respondents are among the total
respondents of 375 students 120 respondents or 32% of them are below 20 years
240respondents or 64% of them are between 21 and 250 years old. The
remaining 15 respondents i.e. 4% are above 25 years. This data indicate that most
of wolkite university students are between the age of 20 and 25. This means they
are not teen agers and not enough matured. It is possible to say most of wolkite
university students are young.

Discussion:4.1 Respondents by department and batch

This section of the discussion presented respondents department and their batch.
The research mainly focused on all regular students of wolkite University in the
year of 2013 /21. Wolkite University has a total of 5975 regular students. This

27
figure excludes freshman students from this total population the researcher
randomly select 375 respondents by using simple random sampling technique. So
in order to gather the required data the researcher randomly distrusted the
questionnaires in the school compound. Unfortunately all batches from year
two---year five students are actively participated to respond the questionnaire. As
it collected from the questionnaire, more than 72% of respondents are GC
students. Regarding departments of respondents, the researcher prefer to explain
them by school / colleges. Therefore from all colleges of wolkite University are
participated most of respondents are from colleges of business and economics,
college of health and engineering and technology within their perspective
departments.

2 GENERAL INFORMATION OF THE REASEARCH

Table 3

The amount of money they owe per a month

R. No How much money you No .of respondents Percentage
owe per a month
1 Less than 500 51 13.6%
2 500----1000 85 21.33%
3 1000----2000 190 50.66%
4 More than 2000 49 13.06%
Total 375 100%
Source: questionnaire 2021

Table 4.2.1 Shows that the amount of money that they owe per month. So

Among the sample taken 375 respondents 51 (13.6%)respondents get less than
500 birr per month. 85 respondents (32.33%)of respondents owe from 500---1000
birr per month and 190 of them i.e. (50.66%) respondents earn 1000---2000 birr
the remain 49 or (13.06%) respondents said that they owe more than 2000 (two
thousand birr) per month. When we see the above stated amount of money
majority of Wolkite University students owe more than enough money for
university regular students .Because regular university students are assumed as
they don’t have extra costs for their academic purpose and also other basic need
28
The University will cover all necessities for each regular student.
Table 4

RESPONDENTS SOURCE OF THEIR INCOME

R. No Who send you this No. of Respondents Percentage

amount?
1 My self 15 4%
2 My family 310 82.66%
3 Other 50 13.33%
Total 375 100%

Source: questionnaire 2021

The above table 4.1.2 shows that the sources of income of students at Wolkite
University. As it shown on the table,out of 375 total respondents 15 of them or
4% are help themselves to cover their academic and nonacademic expenses in the
school campus. On the other hand large numbers of respondents i.e. 310
respondents (82.66%) are receive their monthly income from their family. It
means their family directly sends for them accordingly. The rest 50 respondents
13.33% of them are receive their means of income from other directions. Those
respondents stated these sources are from their local governments as support,
from different aid organization and from their neighbor.

From the above discussion we can understand that most of wolkite University
students are receive their income from their family and they expect as they owe it
each month from family and others. So these students don’t have more care
about money because they receive it continuously. Having uncontrolled income
led them to spend carelessly

Table 5

Respondents skill and knowledge on personal financial management

R. No Do you have skill and knowledge of No of Percentage

29
 personal financial management? respondents
1 Yes 115 30.66%
2 No 260 69.33%
Total 375 100%
Source: questionnaire 2021

Table 4.1.3 Tried to investigate skill and knowledge of students on personal

financial management on their financial literacy. And out of 375 total respondents
115 (30.33) of them have skill and knowledge personal financial management. But
the large number of respondents i.e. 260 (69.33) respondents never have basic
skill and knowledge of personal financial. Therefore regarding financial literacy
most of Wolkite university students does not have skill and knowledge of
personal financial management So they are poor on their on balancing their
income and expense and saving from their income.

Table 6

Respondents thinking about saving

R No Do you think that saving is No.of respondents Percentage

important?
1 Yes 350 93.33%
2 No 25 6.66%
Total 375 100%
Source: questionnaire 2021

Regarding the importance of saving respondents were asked to give their thinking
So as stated on table 4.2.3 large number of respondents that is 350 or (93.33) of
respondents believe saving is important, but regarding how to save and how to
balance their income and expense they don’t have strong and matured ideas.
They know only the phrase saving is important. Only 25% of respondents are not
believed the important of saving. They simply use what they earn without
30
considering the future.
Table 7

Respondents habit of saving

R No Do you have habit saving? No of respondents Percentage

1 Yes 20 5.33%
2 No 355 94.66%
Total 375 100%
Source: questionnaire 2021

To investigate the financial literacy of wolkite University students on their

personal financial management, the researcher asked the respondents whether
they have habit of saving or not? Accordingly out of total number of 375
respondents only 20 of them (5.33%) have the habit of saving. Because they know
the importance of saving. These students tried to save from their income by
reducing excessive expenditure and manage their income and expense well. But
large number of respondents doesn’t have the habit of saving. The researcher
tried to understand why they don’t have the habit of saving. Most respondents
suggests their idea in such a way that, the life of the university is enjoyed only
once throughout their life and the money they collect is not from their effort, that
means their family and other third party send for them. Peer pressure is also
other factor that makes them extravagant and costly not to save

Table 8

Respondents preference where to save money

R No Where do you prefer to save Noof Percentage

money? respondents
1 At bank 56 14.93%
2 At home 130 34.66%
3 In my pocket 189 50.4%
Total 375 100%
Source: questionnaire 2021

31
Table 4.2.5shows respondents where they prefer to save their money

out of 375 respondents 56 (14.93%) of them are prefer to save at bank and 130
respondents 34.66% respondents like to keep their money at home. Large
number of respondents i.e. 189 (50.4%) of them simply save their money in their
money. In modern World, Bank is the modern financial institution to save money.
But very small number of respondents i.e. only about 15% of them prefers to save
at bank. While 85% respondentsprefer to save at their home and in their pocket.
From these discussion students dislike to save at bank and prefer their home and
pocket is that to use the money they have excessively without plan carelessly.

The researcher also asked respondents to know their attitudes and knowledge
about the important of saving, then. Then most respondents explain as saving is
important for future use and consumption, for future investment and they know
that saving is important during retirement. But some respondents does not have
the idea regarding the important of saving and they don’t think and try to save.
Such people are not visionary and they are careless. Accordingly the researcher
presented question to investigate regarding their experienced of saving.

So most respondents know why saving is important, but they don’t have the habit
and experience of saving. The reason why they does not exercise saving is
discussed in other section.

Table 9

Respondents response about their expense

R Is there excessive expenditure on your day to No of Percentage

No day life? respondents
32
1 Yes 235 62.66%
2 No 140 37.33%
Total 375 100%
Source: questionnaire 2021

Table 4.2.6 Presented regarding their day to day expenditure, out of 375 total
respondents 235 respondents or 62.66% of them that is large number of students
have excessive expenditure on their day to day life. The rest 140 or 37.33% of
respondents not have excessive cost on their day to day life. From this data we
can understand that most of wolkite university regular students have high
amount of expenditure on their day to day life. The detail of their expenses is
discussed on table 4.2.9 below.
Table 10

Respondents response where they spend large amount of money

R No Where do you spend large No of Percentage

amount of money? respondents
1 For academics purpose 120 32%
2 For none academics purpose 255 68%
Total 375 100%
Source: questionnaire 2021

The researcher asked respondents as which type of cos take the line share? Out of
the total respondents 32% of them said that they spend large amount of money
for academic purpose Academic materials will take the line share of their cost like
photocopy, printing and other stationary material. Whereas 68% of respondents
responded that they spend large amount of their money for nonacademic
purpose This shows that most of Wolkite University regular students spend big
amount of their money for nonacademic purpose.

The researcher also asked the respondents the details of their big costs. Most of
respondents stated that they live unplanned life in the school compound
regarding their income and expense. As most male respondents explain they
spend their luxury time at recreation area like hotels, game zone and places
where drugs are exercised. Such areas are demand extra costs and expenditure.
33
On the other hand some female respondents incur most of their income by
purchasing luxury cosmetics and other personal hygiene materials. Buying
modern clothes and shoes are also other factors that make them to incur extra
costs The other one is dining outside of school café is also other variable that
make wolkite university students very costly.
Table 11

Respondents habit whether they keep records of their income and expense

R No Do you keep a record of your No of respondents Percentage

income and expense?
1 Yes 16 4.26%
2 No 359 95.73%
Total 375 100%
Source: questionnaire 2021

The above table extracted respondents whether they keep record of their income
and expense, but out of 375 total respondents 16 of them or4.26% of
respondents keep record of their income and expense and the large number of
respondents i,e. 359 (95.73%) respondents never keep record of their income and
expense. We know that keeping record of one’s own income and expense is one
of the ways of personal financial management. Such habit make the people to
know their income and balance with their expense and save from extra
expenditure by providing more thinking about personal financial management.

The researcher requested respondents the importance of keeping record one’s

own income and expense most respondents believe as keeping record of one’s
own income and expense is important but they dislike to keep record. Because
they spend more of their money for irregular expenses especially for non-
academic purpose. So most of respondents stated spend their money carelessly
and they don’t want to remember how and where they spend their money. They
prefer to spend it carelessly.

34
4.3 GENERAL KNOWHOW OF RESPONDENTS ABOUT FINANCIAL LETERACYON
PERSONAL FINANCIAL MANAGEMENTS
Finally the researcher asked the respondents by using open ended questionnaire
to investigate the general know how of students about their personal financial
management in wolkite University. Most of respondents explain their skill and
knowledge their personal financial management as follow.

A financially literate person will always have an idea of the amount of money they
can afford to spend on a purchase, cost effective commodities even if higher
income individuals by doing costand benefit analysis to be effective and efficient.

Financial literacy also requires organizational skills in order that individuals meet
their financial Commitments and thus avoid problems such as reduced access to
have luxury materials.

Most respondents also believe that keeping records of one’s own income and
expense will enable them to know their basic needs for their live and encourage
them to save the remaining for future use by using modern saving institutes like
bank.But in case of Wolkite University regular students. Such behaviors are not
observed regularly rather they prefer to spend their income approximately
without considering the future, simply spending what they owe to make
themselves happier temporarily. Such behaviors are regularly observed on GC
Students.

35
CHPTER FIVE
CONCLUSSION AND RECOMENDATION
Financial literacy is a basic knowledge that people need in order to survive in a
modern society. Personal financial literacy is the ability to read, analyze, manage
and communicate about the personal financial conditions that affect material
wellbeing. It includes the ability to discern financial choices, discuss money and
financial issues without (or despite) discomfort, plan for the future and respond
competently to life events that affect every day financial decisions, including
events in the general economy’ (Vitt, 2000).Financially literate consumers are
those consumers who have the ability to make informed judgments and to take
effective actions regarding the current and future use and management of their
money (Basu, 2005).

5.1 CONCLUSSION
The concept of financial literacy suggests that financial literacy is a useful life skill
in the modern financial world where people are responsible in their short term
and long term financial decisions. It can also be viewed as a process where
financial literacy acquired from formal and informal sources implanted in personal

36
financial decision making process for optimal financial

According to Kim (2001) in Sabri (2011) financial literacy is the basic knowledge
that people need to survive in modern society. This basic knowledge involves
knowing and understanding the complex principles of spending, saving, and
investing. Meanwhile, according to Lusardi& Mitchell (2007) describes financial
literacy is the knowledge that someone has about financial instruments, including,
one's knowledge about savings or saving, insurance or insurance, investment and
other financial instruments. Financial Literacy can be interpreted as financial
knowledge, with the aim of achieving prosperity.

This research paper identified basic problems of Wolkite University regular

students about the effect of financial literacy on personal financial management
by employing 375 sample respondents. Finally the investigated problems are
listed below

 Poor financial literacy on personal financial management practices is

highly observed in wolkite university students

 Students prefer saving their money at their home and pocket rather than
saving at bank, this lead them extravagant

 Peer pressure is one of the factor that led students to spend their money
without plan which expose them un planned expenditure

 The wrongly thought regarding campus life misled students not to save
and extra enjoyment in the university is also considered as the factor that
enable them costly
37
  Poor saving habit is the main problems of students in wolkite university
by spending big amount of money for nonacademic purpose and
spending it to purchase luxury materials and also dining outside of school
café is also the main factors

 Some families also send an amount of money which is more than

importance which is not from their effort exposethem for unplanned
expenditure

5.2 RECOMMENDATION
Based on the finding of the study and main problems investigated from the
research, the researcher forwarded the following suggested recommendations

 Awareness about financial literacy on personal financial management shall

be given in the campus for all students. Such program has to be prepared
by the community of the university.
 Using modern financial institutions for saving has to be exercised by
students. For this the university shall invite banks to create awareness for
students about the importance of using bank
 Students shall be reduced extra costs and exercises keeping records of their
income and expense so as to know and make balance their income and
expense and save the remaining.
 Students shall be optimist and visionary to think about the future life and
future investment, then reduced todays extra cost and save for tomorrow.

38
  The students of the university must not be influenced by peer pressure to
live unplanned life incur unwanted costs without plan;dining in the school
café shall be exercised.
 Limit has to be made for recreation and purchasing luxury items.
 Finally families of students shall make limitation the money they send for
their children schedule and plan must be exist to send money. All families
and relatives should communicate while they send money not to send once
from different directions.

REFERENCE
Kane-berman ,J.&Tempest ,J.(Eds).2007.south Africa Survey 2006/2007 .Johannes burg :south
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Lusardi, A. (2008). Financial Literacy: An Essential Tool for Informed Consumer Choice? Joint
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Lusardi A. & Oliver, M., (2006): Financial Literacy and Planning; Implications for retirement
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Lucey, T. A. (2002). The personal financial literacy of fourth grade students. (Unpublished
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Lyons, A. C., & Hunt, J. L. (2003). The credit practices and financial education needs of
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Monyoncho, K. (2007). How to save money for Investment: Practical Principles towards your
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Moore, D. (2003). Survey of Financial Literacy in Washington State; Knowledge, Behavior

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Moschis, G. P. (1985). The role of family communication in consumer socialization of children

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Muske, G. & Winter, M. (1999). Cash-Flow Management: A Framework of Daily Family

Activities,” Financial Counseling and Planning, Vol. 10. No.l. pp. 353-72.

Muske, G. & Winter, M. (2001). An In-Depth Look at Family Cash-Flow Management

Practices,” Journal of Family and Economic Issues, Vol. 22. pp. 353-72.

Muske, G. & Winter, M. (2004). Personal Financial Management Education; An Alternative

Paradigm: Association of Financial Counseling and Planning Education pp 79-88.

Milligan, E. (1998). How Employee Assistance Counselors Can Become Mor Comfortable
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40
 WOKITE UNIVERSITY
College of Business and Economics Department
of Accounting and Finance

RESEARCH QUESTION
DEAR RESPONDENTS: I am going to conduct a research paper on the tittle of Assessment of
Financial Literacy on personal Financial Management practice in case of wolkite University
student.
So you are kindly requested to respond accordingly.
THANK YOU FOR YOUR COOPERATION IN ADVANCE.

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 PART 1 PERSONAL INFORMATION

1 Sex A/ Male B/ Female

2 Age A/ 15-20 B/ 20-25 C/25 and above

3 Batches: A/ year 1 B/year2 2 C/ Year 3 D Year4

E/ Year 5 F/ Year 6

4 Department:____________________________

PART 2 GENERAL INFORMATIN

5 How much money you owe/get per a month in average

A/ less than 500 B/ 500-1000 C/ 1000-2000 D/ More

than 2000

6 Who send you this amount?

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 A/ Myself B/ My family C/ Other
7 For question No 6 if your answer is C please specify your
source of income

8 Do you have a knowledge and skill of financial management

A/ Yes B/ No
9 What do you mean by personal financial management?
Please try to explain it
____________________________________________________
____________________________________________________
______________________________________________
10 Do you think that saving is important?
A/ Yes B/ No
11 Do you have habit of saving
A/ yes B/ No
12 For question No 11 if your answer is yes What is the
important of saving
A/ It is for future use
B/ It used during retirement
C/ It’s simply for accumulation of wealth

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 D/ I don’t know
13 Where do you prefer to save your money
A/ at bank B/ at home C /in pocket D /I don’t know
14 Is there excessive expenditure of money on your day to day
life?
A/ Yes B/ No
15 For which purpose you spend big amount money
A For academic purpose
B For non-academic purpose
16 For question No 15 your answer is B Please list the type
and nature of costs

____________________________________________________
________________________________
17 Do you keep record of your income and expense
A/ Yes B/ No
18 Do you think that keeping a record one’s own income and
expense important?
A/ yes B/ No
19 What is the importance of keeping record ones income and
expense please explain it
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____________________________________________________
____________________________________________________
____________________________________________________
__________________________________________
20 How can you manage your income and expense?
____________________________________________________
____________________________________________________
____________________________________________________
___________________________________________

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