Financial behavior, confidence, risk preferences and financial literacy of university students

Calvin Mudzingiri,Jacobus Nicolaas Keyser,John W Muteba Mwamba,Wai Ching Poon

doi:10.1080/23322039.2018.1512366

Calvin Mudzingiri, Jacobus Nicolaas Keyser + Show 2 more

Open Access

https://doi.org/10.1080/23322039.2018.1512366

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Abstract

AbstractThis study investigates determinants of financial behavior (FB) of university students at a university in South Africa. It examines whether financial behavior, confidence, time preferences, risk preferences and financial literacy perceptions of university students differ by financial literacy level. Data were gathered via a questionnaire that included personal information, FB, financial perceptions and financial knowledge responses as well as a multiple price list (MPL) risk preferences and time preferences experiment tasks. A convenient total sample of 191 students (females = 53%) participated in the study. A t-test analysis showed that FB, risk preferences, confidence levels, time preferences and financial literacy perceptions of university students significantly differed by financial literacy level. Our results show that university students with low financial literacy levels are more overconfident, risk loving and impatient; such FB is synonymous with major causes of financial crises across the...

Highlights

Financial behavior (FB) can play a pivotal role in influencing the welfare of individuals in a household, society, nation and the world at large
Analysis using t-test by financial literacy level We investigated whether there is significant difference in FB across financial literacy level using responses from savings and investment, personal finance and debt behavior responses (Table 1)
Results from the OLS regression analysis show that FB of university students is mainly influenced by risk preferences, confidence and financial literacy perceptions

Summary

Introduction

Financial behavior (FB) can play a pivotal role in influencing the welfare of individuals in a household, society, nation and the world at large. A set of observable financial activities by economic agents best describes FB. Such evident behavior is mainly influenced by one’s identity, wants, knowledge, performance, achievement, personal characteristics, significance and psychological factors (Bergner, 2011; García, 2013). Individuals who exhibit financial knowledge and can execute financial activity to improve their welfare are known to be financially literate. Economics literature suggests that when agents make decisions, they tap into all available information to make choices that maximize their utility, profit and wellbeing. Behavioral economics contends that making decisions in such an environment is susceptible to “cognitive biases” and “bounded rationality” (García, 2013)

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