The problem in today’s fast paced economy is that a large number of students are not receiving the financial literacy necessary to be successful. Also most students especially graduating students nowadays are not suitable in terms of managing their finance. As defined by (The American Institute of Certified Public Accountants, 2003) financial literacy is the ability to effectively evaluate and manage one’s finances in order to make frugal decisions in order to reach life goals and achieve financial well-being.
In today’s economy one of the national concerns is the low level of awareness of college students in financial literacy .In the study of (Chair, Allen and Hayhoe, 2007) shows an average personal financial scores of college students are declining near to the failing grade. Identified by (Newton and Palm 2010); (Capuano and Ramsay 2011), Governments around the globe have expressed concerns about the low level of financial literacy amongst their nationals. Major issue such as the improper managing of finances which the citizen fall into can generally be attributed to their inadequate or lack of knowledge in financial issues. As per Standard ; Poor’s (S&P) Ratings Services survey last year, only 25% of Filipinos are financially literate. That means there are about 75 million Filipinos who have no idea about inflation, risk diversification, insurance, compound interest and even the idea of having a savings account in a bank. (Olo, 2016) believe that the said 25% consists of the wealthy (upper 10% of the population) while the 15% is distributed to the educated, working and middle classes who are frequent users of basic financial services offered by banks, insurance companies and other financial institutions.
College students need broader knowledge about their personal finances and the economy due to an increasingly complex marketplace. The past generation’s financial decisions create habits difficult to affect students’ ability to become financially secure adults (Chair, Allen and Hayhoe, 2007). College students are at a crucial time in their lives wherein from being financially dependent to their parents they will be financially independent as they go along with their lives. For most of students, the freshmen (1st year college students) viewed as a significant transitional point in which parental supervision and oversight are being minimized and students begin to attain some point of financial autonomy. When students go into college they are face with financial duties such as paying bills, creating a budget, starting to save, and using credit for the first time. Coping with these challenges that they will face in the point of their lives will depend on the financial knowledge and behaviors they acquired prior to arriving at college. (Lyons, Scherpf, and Roberts, 2006).
It is valuable for College students to know the value of money, for them to understand how it performs and how to manage it wisely. Every student must gain financial knowledge while they were still young for them to manage their finances efficiently. This knowledge obtained by the students will help them make decisions on how they suppose to handle and use money to their daily life. Being aware to your finances is one of the best decisions to assure and to keep your finances. Spending, saving, & budgeting are some example on how to manage your money or finances. But in today’s economy, it is slight impossible to spend, to save, and to budget your money because of inflation. We are living in a place where the prices in the market are getting higher. So, education and knowledge about financial literacy is a big help on how to use your money effectively. As a student you must understand the concept of financial literacy, so that you can make wise decision on how to manage your money. This skill is very important because some individuals do not know this basic knowledge and they are unable to meet their financial expenses (
Financial literacy is essential than ever in today’s world. It perceived as a very beneficial tool to see how a particular person copes with financial problems. Being aware of money management, budget, borrowing, saving, spending and financing can prepare today’s generation with knowledge to take charge of their finances. If the individuals are confident with financial literacy, they might handle the financial problems better ( It is important that educators and parents begin to train young individuals with the knowledge and skills they needed to succeed as consumers in today’s global economy. Governments provide attention to financial literacy of their society in order to constitute policies, and solve the financial problems of the society. Also by using financial literacy it can help assess the information from different countries, in that way it is possible to make comparisons. Every country can learn from different countries if the financial literacy levels between these countries similar or differ to each other (
It is important to focus on improving the financial management skills, attitudes and behaviors right from the start of the college experience as financial issues and the need to work are often cited as the number one reason why students drop out of college (Ross, et al., 2012).
Although the concept of financial literacy has been defined in various contexts in the literature, the definitions however differ in relation to what the definition seeks to achieve. This implies that there is no specific definition for financial literacy or there is few generally-accepted definitions and conceptual framework of personal finance. According to (Noctor, Stoney, and Stradling; 1992), financial literacy is the ability to make sound decisions regarding the use and management of money. Thus, effective decisions taken in relation to the use and control of money (Schagen and Lines 1996).Defining the concept in this context suggests that the definition is narrowed as emphasis is placed on management of money.
The concept can also be looked at from a broader perspective as OECD (Organization of Economic Co-operation and Development) (2005) defines financial literacy as “the process by which individuals improve their thought about financial concepts through communication and instruction to make individuals confident and aware of financial risks and opportunities so as to achieve financial well-being. Remund (2010) tries to conceptualize the definition of personal financial literacy into five categories which include; knowledge of financial concepts, ability to communicate about financial concepts, aptitude in managing personal finances, and skill in making appropriate financial decisions, and confidence in planning effectively for future financial needs. This implies that financial literacy goes beyond the effective use and management of money and considers other important areas in finance. U.S. Financial Literacy and Education Commission (2007) have also defined financial literacy as the capacity to apply ideas and skills to effectively manage financial resources in order to achieve a long lasting financial soundness. Thus, the ability to manage individuals? finances efficiently so as to make prudent financial decisions in an attempt to achieve financial well-being (American Institute of Certified Public Accountants, 2003).The definitions given by the institutions reiterate that financial literacy makes individuals focused and directs them towards the attainment of financial autonomy. Garman and Forgue (2000) defined financial literacy as significant information and terminology required in managing individuals? personal finances successfully.
For the purpose of this study, financial literacy is defined as the combination of awareness, understanding, knowledge and use of financial concepts to make sound financial decisions. Also in this study we’re going to find out what are the influences that affect the level of awareness of the SBME’s students about financial literacy.