The Importance of Proper Money Management Behavior for Students

In this chapter, we would like to make the discussion about review of literature. In the review, it presented the definition of money management behavior and the dependent and independent variable. The importance of money management for students is also showed in the essay as there is a relation between student money management behavior and how independent variable effect the student behaviour. 

Dependent Variable: Student Money Management Behavior

The dependent variable in this research is student money management behavior. Money management may be defined as the process of budgeting, saving, investing, spending, or otherwise monitoring the use of personal cash. This management can bring a number of advantage if the student have a behavior that can manage the money efficiently. Effective money management behavior express that individuals have the capacity to manage and control their own finances. If individual can manage the money in a right way, they will more space to meet the their own requirements. Besides the word, effective money management technique cultivate student have prudent financial decisions and possess safer, responsible financial behavior. Management money in successfully is an important learning skill for individuals, as financial resources and financial situations affect their quality of life and social relationships.

During student in the university life period, student will face various of situation and all of these situation will influence their standard of behavior, attitude and concept. This means that undergraduates develop the ability to navigate changes in economic conditions and social relationships that often occur during the course of a degree. For example, as they progress on their degree, they will reduce their dependence on their parents and change the accommodation because they will move out from home, start to establish friendship groups in the university area, receive job training and get some part time jobs. Student also need to learn how to manage the money they have such as pay living cost, education fees and social cost. Furthermore, their risky spending behaviors may lead student to have a longer working hours and consequently cause student have poor performance result in their academic and may affect their long-term employability. Besides that, irresponsible and risky consumption behavior will affect undergraduate students academic performance, social relations and physical and mental health. Therefore, the understanding of student money management behavior is the most paramount importance issue in this current society.

Independent Variables: Financial Literacy

Financial literacy is the ability of cognitive, attitudinal, and behavioral elements that lead individual to manage the money. It refers to a person with the appropriate financial literacy, short-term decisions and healthy, long-term financial planning to understand the key financial concept, and has the ability to manage personal finance and confidence level. In other words, financial literacy can also be defined as the ability to read, analyze, manage, and communicate personal financial situations that affect material well-being. It also involve the knowledge and skill which are budgeting, saving, investing and insuring necessary within a person. These kind of skill and knowledge will effect the people mindset how to use and how to source the money and they will use a plenty of time to think about how to management the money if they required. These kind of mindset will let people start and develop a financial habit.

Based on the result that show in the journal, the student in the collage will know how to avoid the negative financial behavior if student provide with positive financial behavior. The positive financial behavior is relate to the student always do the positive financial activity such as manage the money efficiently. On the contrary, student with negative financial behavior have a low intention to manage the money because some of them lack of relevant financial knowledge.

In the collage, student can choose any type program that collage provide and their prefer to be a part of their course. Therefore, they can choose and study some elective programs relate to the financial literacy to develop their money management behavior and capacity. Student also can improve their financial knowledge and promote the skill that can make student have the better decision making about the money within the financial literacy program. In the result of, the student with the high standard of financial literacy can lead them to have a clearly mindset to understand their financial responsibilities and investment priorities. Financial responsibilities can make them understand what they need about level of income and how much spend on expenses. They learn how to prioritize and limit the benefits of spending, different ways of payment and the safety pin. So, they can manage their spending, maintain their favorite way of life. As a result, students are often described as the person of strict budgeting and has a strong professional ethics.

However, there also have a part of students who are perceived as poor financial managers because they mainly focused on short-term goals without the long-term goals. This kind of student focused in the short-term goals are belong in the group that focus on their hobby such as gym and sport. Gym and sport is an exercise that need to spend a lot of money because the people of taking gym and athlete require to buy some expensive equipment to train themselves.

In the nutshell, there have a lot of different in the money management approaches between the higher education level of financial literacy and lower education level of financial literacy of undergraduates.

Parents and Friends Role in Student Money Management

Parent, a relative who plays the role that provide a good example. It have an important place in their children's hearts, no matter where they are. In the money management behavior, parent are an important source of social influence who will give some advice and material support to their children. These advice and material support can bring a lot of benefits and convenience to their children which undergraduate student in the collage. As an example of children money management behavior, parents can teach their children smart and healthy habits. For example, the study found that compared with no parents support of college students, higher levels of parental support and counseling of college students are more likely to take cautious and desirable financial management practices. Parents will use their past experiences as teaching materials to teach their children as excellent person who positive in the money management behavior and give some instruction to avoid the bad financial situation. No parents would want their children don’t know how to manage and control their money and get into the financial problems.

On the other hand, parents also may inadvertently teach their children reckless money management behavior, such as always overuse credit card to buy somethings without thoroughly considered and computation consequences. This kind of negative money management behavior will lead the undergraduate need to maintain excessive credit card balances instead unable to continue study smoothly during the university life. As a result there is a huge different of debt level between credit debt of student pay by their parent and credit debt of student cover by themselves. Credit debt of student pay by their parent is tend to have a higher level of debt than the credit debt of student cover by themselves because they consider credit debt are not belong in their expenses. This kind of student need to have a mind concept that they have to pay for everything they spend even on education or entertainment. Besides the word, parent need to as a correct money management behavior example because belonging will influences and susceptible credit driven culture of undergraduate.

Sometime, it got some high school graduate will choose the University far from home such as they live in Johor but they willing go to Kuala Lumpur to continue their education life. When young high school graduate leave from home, their spending will increases and their money management behavior will also becomes more complicated. At this moment, as a key participants in social groups besides to the parents, peer group also become an important role in the development of undergraduate students money management behavior. In other words, when they interact with friends and peers, the money management behavior and characteristics they learn from their parents are shaped. The money management view and behavior of the peer person will influence other people money management view and behavior easily.

When the undergraduate participate in some social activities, social activities will lead undergraduate make some interactions with peers person that influence the social activities types and frequency of undergraduate. For example, decisions about where to eat, what activities to attend and how much to drink also might be influenced by peers. Peer person can also influence cloth purchase habit of undergraduate for example as buy cheap or famous brands and the type of technological possessions such as blindly pursuing the latest version of the phone. All of these element will influence the their financial characteristic and money management behavior. If they not properly controlled, they may face increased reliance on debt and credit. This situation may lead undergraduate need to work for long period to earn money to pay off the debts.

In conclusion, parents and peer person are important key element that will determining undergraduates money management behavior. Parent and friend money management behavior, perceptions of the credit, expectations, financial practices and decisions will influence the undergraduate financing behavior and money manage practice.

Psychological Influence

Psychological influences also will affect individuals money management behavior. This is because human psychology focuses on how people process through their internal thinking to understand and participate in the world. Based on the research from, it show that individual money management behavior and their financial decision making will influenced by internal thinking process. The internal human thinking process is an extremely large and complex system. Self-identity construction, emotion, personality, risk taking and impulsiveness all belong to the influence of individual psychology on money management behavior. Based on the result of psychological influences, undergraduate will focus on positive rather than negative consequences of their money management behaviors. In following subsection, it will briefly discusses the several psychological impact on money management behavior.

In this subsection, it will explain how the self concept or self identify influence the undergraduate money management behavior. Self concept or self identify can also defined as who am I. Some people argue that self concept or identity is according to the way that how individual define or be identified which that will reflected in their life and behavior. Self identify is a consciousness that have ability to influence how the individual to manage themselves for example the ability to take responsibility for their own practice and behavior. So, Pinto et al. point out that money is a means that can help people have the ability to design the lifestyle they look forward thus money also can define as a method to reflect people manage their self identify. Therefore, this situation confirms that it have a strongly relationship between the people's self-identity and their money management behavior.

Besides that, according to the Dwyer et al., credit seems to be an important component of the lives of most consumers in today society. In the research of Sallie Mae in U.S., she figure out that 84 percent of college students will hold at least one credit card in their hand. Therefore, credit cards have become an indispensable part of the daily lives of many college students in western society nowadays. In particular, those who want to be recognized as luxury youth will be free to obtain credit, while students who consider themselves to be ordinary youth may carefully manage their money and credit card balances. This again proves that they use money to express their own concept.

Emotion is also one of the psychological factors that influence money management behavior. When a person has a positive emotion, positive emotion will help the individual to make the right and sound decision to influence its life. For example, happiness can influence individual to reduce the appetite for taking risks, and enhance decisions more carefully such as planning and expenditure control. Besides that, happiness and well-being receive from the undergraduate financial satisfaction and money management behavior will thereby eventually improve their academic performance and motivation to study.

On the contrast, when individual fall in negative emotions, such as feeling financially out of control, it will lead individual increase the level of stress, nervous and anxiety thus affect their money management behavior. The research on Kzendzova et al., had again proved that on the relationship between psychological influence, emotion such as happy, anxieties and neuroses and money management behavior. For example, Students who are in negative emotion tend to adopt unscrupulous money management behavior, such as overspending and feel free to spend money to vent and restore positive emotions.

Personality also is the important factor that will influence undergraduate money management behavior such as the magnitude of impulsive spending and overuse credit card when fall in stress. Personality can define as thought standard with stable and unique, behavior and emotional reaction style that characteristics an individual adapting to the surrounding environment. Individuals with a conscientious and emotional stable personality will not have negative money management behavior such as over spending and focus on the financial short term goal. Conversely, those who are neurotic often borrow money from others and will seek enjoyment in insane purchases. For example, people who have emotionally unstable, anxious and hypersensitive personalities inclined to think that they lack control over their personal situations.

Final Conclusions

Besides that, undergraduate with express overconfidence usually will buying new financial products because they feel that all of them can handle their financial situation thus undergraduate will impulsive buying. Undergraduate students who are easily tempted by material can also do the impulsive decisions relating to money management. Consequently, these undergraduate student are more likely to adopt risky decisions to solve the financial situation they have met. All of these conditions will cause the undergraduate student not to control their money management in well. 

References

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