REVIEWS OF RELATED LITERATURE

This chapter does a review on relevant literature from articles, journals, books and publications

on financial literacy among students; forms the general and theoretical basis upon which the

study is conducted. The chapter therefore considers the academic theories and the various views

expressed by scholars on the topic.

In the research literature, financial literacy can be defined narrowly or broadly. When financial

literacy is narrowly defined, it means financial knowledge; and when it is broadly defined, it

means consumer ability to manage their financial resources effectively (Lusardi & Mitchell,

2014). According to Garcia (2020), financial literacy is the awareness, knowledge, skill, attitude,

and behavior to make financial decisions in their interests, short and long term at its best. Several

variables have been found to be linked to a persons’ financial literacy and these factors include

socio-demographic variables (Potrich et al., 2018). This includes the understanding of basic

economic and financial concepts. Therefore, applying mathematical ability, financial

instruments, and financial theory to manage resources effectively for the individuals’ wellbeing

(Garcia, 2020). Given the financially driven world that people are living in today, each and

every person’s life depends on one’s capacity to be able to manage their own financial affairs

effectively and efficiently. Moreover, this alone emphasizes that one must be financially literate

to be able to allocate their own resources financially (Pecson et al., 2019).

Financial literacy plays a crucial role in individuals’ decision-making process. Existing studies

have shown that lower level of financial literacy led to irrational financial decision on

investments, pension funds as well as savings and debts. In lieu to this, financially literate

individuals have a better understanding of the returns and risks of financial products and would
most likely spend less which helps on making better investment decisions (Li, 2020). Empirical

research has found that financial literacy is associated with short and long-term financial

behavior. Individuals with high levels of financial literacy are more likely to make good choices

regarding savings and low indebtedness levels (Bongini et al., 2019). Which is also in line to the

study based on the 2015 National Financial Capability Study reports that people who received

any financial education are likely to have higher financial literacy scores compared to those

without financial education (Wagner, 2019); suggesting that financial education is significant to

the people in this demography.

Also, it must be noted that possessing knowledge does not always translate into proper financial

behavior, besides financial knowledge, a significant role should be assigned to the environment

in which the youth was brought up (Swiecka et al. 2020).

Garg and Singh (2018) indicated that financial literacy among most young people worldwide is

still low and is a cause for concern. This finding is in line with the study by Yakoboski et al.,

(2019) which provided evidence that individuals with high levels of financial literacy are more

likely to have the capacity to handle financial shocks, are more likely to regularly save for

retirement, and are less likely to be in debt.

Students are one of the components of society, which is quite large and will provide a major

influence in the economy because in the future the students will enter the workforce and begin

independently included in financial management (Homan, 2015). Effective financial education,

especially in high school, is important for improving financial literacy among young people. The

Council for Economic Education reported in their 2018 findings of the state of financial and

economic education in the schools in the United States that only 17 states required students to
take a course in personal finance and 22 states required students to take a course in economics

before high school graduation (Jayamaran, 2018). In Hongkong, the Investor Education Centre

(2015) found that the secondary high school students did not have adequate financial capacity

and mostly that knowledge is adopted from the media or from peers rather than the school. A

study was conducted to aid students in broadening their knowledge about the factors that would

affect financial literacy. As a result, data showed that the higher the level the students in the said

university are in, the more they are aware and knowledgeable about financial literacy. Stella et

al. (2020) showed data on the efficacy of enrolling into financial education programs based on a

set of financial literacy questions; the results being those who finished the aforementioned

program types scored higher than those who did not, which suggests joining financial education

programs during basic education and higher education show practical effect on a person's

financial literacy in the future. To further prove the conclusion, a person's participation during

different time periods was compared, showing how receiving financial education during higher

education leaves much more impact on the person than when they receive it during basic

education.

However, Montalbo et al. (2017) conducted a study on the financial literacy of professional and

pre-service teachers in the Philippines. As a result, the data showed that both professional and

pre-service teachers exhibited very low basic and sophisticated financial literacy skills. Hence,

this shows that financial illiteracy is evident among teachers nowadays, and as a result, students

who undergo them also show a low level of financial literacy skills.

The study of Pang (2019) unveils the findings that a systematic use of the pattern of “contrast-

fusion-generalization” to deal with the individual core economic concepts identified can help

students lay a solid conceptual foundation for developing financial literacy; students can make
effective use of the core economic concepts learned and transform them organically into one’s

analytical framework through complex everyday financial problems or situations which

transcend its specific concepts.

Based on the report found in S&P Global Financial Literacy Survey, the Philippines garnered a

score of 25 which is relatively low from the average financial literacy score of 34 in the

Southeast Asia (Xiao, 2020). The same survey emphasized that a country’s financial literacy rate

has direct correlation with its economic development (Agcaoili, 2022).

Furthermore, the Bangko Sentral ng Pilipinas (BSP) has recently partnered with the Department

of Education (DepEd) institutionalizing financial literacy program accounting to 29 million

learners and 800,000 in the teaching force. Subject to the mandate of the central bank to foster a

community of investors requiring a financially literate public and strong market conduct

reinforced by sound consumer protection mechanisms (Go, 2020). In the article published by the

Philippine Star (2019), through the BDO Foundation- a corporate social responsibility arm of

BDO supported the deployment of the financial education in the National Capital Region (NCR)

by the distribution of USB memory drives containing 10 financial literacy videos on the event.

The financial inclusion program is also launched on selected regions in the Philippines.

Mateo (2017) addressed the inclusion of financial literacy in the basic education curriculum in

the Philippines which is aimed to make the learners understand the value of money; understand

ways on how money is acquired; plan, manage, save and share money and resources; and apply

classroom lessons through financial inclusion mechanisms.

A local study on the Eastern Samar University by Lalosa (2020), gleaned the measure of

financial literacy on the students of the College of Business Management and Accountancy
(CBMA) and stressed that the degree program is considered a contributing factor despite the

considerable number of students possessing inadequate financial knowledge. This study can be

supported by the findings of Duarte (2021) that show the positive impact of the level of the

degree (bachelor’s or master’s degree) received by an individual.

In the paper examination of Tabigne, et al., (2020), it shows a significant relationship between

financial literacy in terms of savings and investment, debt behavior, and money management,

and financial behavior of senior high school STEM students. On the other hand, the integration

of financial skills on the Business Mathematics class of ABM students from Luis Y. Ferrer

Senior High School reported information of high level of financial literacy among the ABM

students (Bodota, 2019). In addition, Hamzah, et al., (2022) analyzes the significant differences

between those centered in the Economic degree program and non-Economic degree program in

terms of the level of financial literacy, however, both are categorized as relatively low. Aside

from traditional classroom learning, public libraries also have a role in terms of (Yap, et al.,

2022) providing financial education and how they can potentially share a role in developing the

economy of a country (specifically, the Philippines) through their collection, web presence,

services, and programs. 

A study by Jayamaran (2018) in India states that students who pursued the commerce/economics

stream of education were found to have higher levels of financial literacy than students pursuing

the science stream. Students, despite having high levels of numeracy, were unable to transfer that

knowledge to do financial computations in relation to understanding the societal and

macroeconomic impact.
According to Hauff et al. (2020) that the increase in financial literacy could be achieved through

policies integrating proper financial education in the different phases of a person’s life;

highlighting the observation that having sufficient knowledge on finance has an effect on how a

person plans their retirement, how they save up for their retirement, and how they manage the

savings they would have in the future.

Different econometric models developed regarding the relationship between financial literacy

and savings include a diverse set of explanatory and/or control variables. These include, among

others, demographic and socioeconomic variables such as gender, age, household size,

qualifications, marital status, income and/or wealth and employment status (Bongini et al. 2019).

Research defines financial literacy, more specifically, as ‘measuring how well an individual can

understand and use personal finance-related information’. This concept is related to individuals’

ability to obtain, understand, and evaluate the information needed to make practical personal

finance decisions (Xue et al. 2019).

Murendo and Mutsonziwa (2017) applied a multivariate approach to measuring financial

literacy, including financial attitude, confidence, and knowledge. The literature concluded that

education levels and academic disciplines are positively associated with the financial literacy

rate.

According to Results in a meta-analysis of 126 impact evaluations by Kaiser and Menkhoff

(2017) showed that financial behaviour impacts financial literacy further reveals that financial

education is less effective for low-income clients as well as in low and lower-middle-income

economies.
Son and Park (2019) analyzed the mediation effects of financial literacy across income classes in

which results concluded that financial literacy works as a mediator between financial education

and sound personal finance in the high-income class and middle-income classes, urging the

policymakers to consider limitations of financial education and financial literacy when

addressing low-income consumers.

For well over a decade, financial literacy has been a primary lens by which researchers approach

financial education. Unfortunately, in most cases, this potentially rich construct is reduced to

mere financial knowledge. This myopic conceptualization hampers the development of the

concept and programs to build financial literacy (Warmath & Zimmerman, 2019). This study

aims to ponder the current construct of financial literacy and bring into a much deeper spectrum

the tenets of financial education in the Philippines.