Factors affecting personal financial well being of young adults in viet nam

TABLE OF CONTENTS ACKNOWLEDGEMENT TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES ABSTRACT CHAPTER INTRODUCTION 1.1 Background to the Research 1.2 Statement of the Problem 1.3 Research Objective and Research Questions 1.4 Scope of the Research 1.5 Significance of the Research 1.6 Thesis Structure CHAPTER LITERATURE REVIEW 2.1 Theoretical Framework 2.2 Development of Research Hypotheses 11 2.2.1 Financial well-being 11 2.2.2 Financial behaviors 12 2.2.3 Financial literacy 14 2.2.4 Financial socialization 17 2.3 Theoretical Model 19 2.4 Chapter Summary 20 CHAPTER RESEARCH METHODOLOGY 21 3.1 Research Design 21 3.2 Measurement Scales 22 3.3 Draft Questionnaire 25 3.4 Pilot Study 26 3.5 Main Study 29 3.5.1 Sampling method 29 3.5.2 Sample size 29 3.5.3 Data collection method 30 3.5.4 Data analysis techniques 30 3.5.4.1 Cronbach’s alpha 30 3.5.4.2 Exploratory factor analysis 31 3.5.4.3 Confirmatory factor analysis 31 3.5.4.4 Structural equation model 32 3.6 Chapter Summary 32 CHAPTER DATA ANALYSIS AND RESULTS 33 4.1 Descriptive Analysis 33 4.2 Cronbach’s Alpha 34 4.3 Exploratory Factor Analysis (EFA) 36 4.4 Confirmatory Factor Analysis (CFA) 38 4.4.1 Financial behaviors 39 4.4.2 Saturated model 40 4.5 Structural Model 42 4.6 Discussion of the Results 45 4.7 Chapter Summary 46 CHAPTER CONCLUSIONS 48 5.1 Conclusions 48 5.2 Implications 50 5.3 Limitations and Recommendations for Further Research 52 REFERENCES 53 APPENDIX LIST OF TABLES Table 3.1 Measurement scale 23 Table 3.2 Findings of qualitative research 27 Table 4.1 Gender 34 Table 4.2 Age 34 Table 4.3 Career 34 Table 4.4 Cronbach’s Alpha coefficients 35 Table 4.5 KMO and Bartlett’s Test 37 Table 4.6 EFA for all variables 38 Table 4.7 Relationship between constructs 42 Table 4.8 Result of hypothesis testing 43 LIST OF FIGURES Figure 2.1 Deacon and Firebaugh’s Family Resource Management Model (1988) 10 Figure 2.2 Theoretical model 19 Figure 3.1 Research design 21 Figure 4.1 CFA for financial behavior 39 Figure 4.2 Saturated model 41 Figure 4.3 Structural model result 44 ABSTRACT Recognizing the negative influences of low personal financial well-being on life satisfaction, personal health, and even on their family and their organization, there have been more and more studies on financial well-being, especially among young adults who associate with the most financial problems and financial distress This research examines the factors affecting personal financial well-being of young adults in the Vietnamese context; among them are financial behaviors, financial literacy and financial socialization The research model was developed based on the Family Resource Management System Model developed by Deacon and Firebaugh (1988) and the Social Learning Theory developed by Bandura (1986) The refined questionnaire through the pilot study was distributed to target respondents aged 22 to 30 living in Ho Chi Minh City The data from 264 valid completed questionnaires then were used to test the measurement scale by Cronbach’s alpha, exploratory factor analysis and confirmatory factor analysis before used to test the theoretical model and hypotheses by the structural equation modeling The research indicated that all hypotheses were supported The direct effect of financial behaviors; the both direct and indirect effect of financial literacy, where indirect effect was mediated by financial behaviors; and the indirect effect of financial socialization with the mediating role of financial behaviors and financial literacy on financial well-being were all supported in this study These findings are matching the previous researches The recommendation for individuals, family, managers, education institutions and government agencies are thereby suggested to improve personal financial well-being of young adults However, the future research should consider the limitations of the current study about the data collection method and the measurement scales to improve the results and findings CHAPTER INTRODUCTION 1.1 Background to the Research Even in the United States, one of the most advanced countries, three quarters of the population are stressed about financial problems and a quarter face with intense ones (CNBC, 2015) This reality was also confirmed in O'Neill, Sorhaindo, Xiao & Garman (2005) that personal financial issues affect millions of U.S households These issues have become the biggest concern because of what they bring about Financial distress or low financial well-being has great effect not only on personal health but also on their family and organization (Prawitz et al., 2006) Personal finances and health are proved to be interrelated in various ways Bagwell (2000), Drentea and Lavrakas (2000), Kim, Garman, and Sorhaindo (2003) found that people with high financial well-being have better health and less physical impairment than others (as cited in O'Neill et al., 2005) Experiencing these problems, people tend to frequently feel disappointed, anxious, and guilty or even encounter difficulty in sleep They could not support their hospital fees and conduct periodic health check as well Moreover, their loved ones are involved in their problems Parents might be angry at their children unreasonably Couples are easy to intensely argue minor issues which they are supposed to talk about and give comments for gently Parrotta and Johnson (1998) stated that dissatisfaction with one’s financial status could lead them to their marital conflicts People who experience financial matters even bring them to work, which does reduce their job effectiveness According to Kim and Garman (2003), financial stress was examined to have positive relationship with absenteeism and make employees less committed to their organizations Both of these problems have been got much attention because they are obviously expensive for the employers Due to these consequences, there have been growing and growing researches about personal financial well-being, especially among young adults Young adults or emerging adults are specified by many researches as the subject attached to the most financial problems as well as followed by financial distress (summarized in Chan, Chau & Chan, 2012) People in this period are who have just started experiencing their independent lives and managing their finances by themselves, therefore also took more responsibility of their financial status According to Peterson and Leffert (1995), young adulthood is highlighted by significant changes in life (as cited in Gutter and Copur, 2011) and associated with more “risk-taking behaviors related to poor financial decision making” (Worthy, Jonkman, & Blinn-pike, 2010, p 161) Financial distress could discourage students from focusing on their learning, workers from focusing on their job Mental health might be affected negatively by this stress The relationship inside family becomes strained and tense when both spouses must always find the ways to solve or be obsessed by their financial problems Employers suffer the decreased labor productivity due to the again and again absence as well as less commitment of their employees Therefore, understanding financial well-being and factors influencing it is extremely considerable According to the World Happiness Report 2013, the well-being level which includes financial well-being of Asians is lower than North Americans, Latin Americans and Western European (Asian Century Institute, 2014) This status makes financial well-being even more worthy to be studied in Vietnam Although there are some researches about financial management, it seems that personal financial wellbeing has been sparsely studied under Vietnamese context At International School of Business, University of Economics, Ho Chi Minh City, there was one 2014 thesis examining factors affecting financial management behaviors To go further, this thesis studies in depth the personal financial well-being and factors affecting it including financial behaviors among Vietnamese young adults 1.2 Statement of the Problem As mentioned, given unexpected impact of financial distress, personal financial well-being has been interested by many researchers around the world A variety of factors have been taken into consideration and determined to have some certain relationship with this satisfaction Emerging among these determinants are financial management behavior, financial literacy, and financial socialization (Chan et al., 2012; Joo and Grable, 2004; Mohamad, Cook and Gundmunson, 2012; Serido, Shim, Mishra and Tang, 2010; Taft, Hosein, Mehrizi, and Roshan, 2013) The first factor which must be relative to financial well-being and must be examined is financial management behavior Financial behavior represents item “throughput” and financial well-being represents item “output” in the Family Resource Management System Model, which explains how people attain what they want from available resources Financial behavior as throughput is the transformation of the model and has a direct impact on the well-being (Gutter and Coper, 2011) According to Kinhte Saigon Online (2014), MasterCard revealed that young Vietnamese (aging from 18 to 29) showed a low level of financial literacy The survey is conducted in 16 countries across Asia Pacific, in which Vietnam is placed at 14th with an overall score of 58 MasterCard recognized the crucial role of financial literacy in obtaining financial well-being and their Financial Literacy Index is for evaluating the progress of financial well-being This index in 2014 expressed that this progress was still postponed among these countries (MasterCard, 2015) Indeed, there are a lot of research confirming the positive relationship between financial literacy and financial well-being such as Taft et al (2013), Mohamad et al (2012), Joo and Grable (2004) However, some studies found the different or contrary conclusions Mugenda, Hira and Fanslow (1990) determined a negative instead of positive one; some defined direct influence while some found indirect one (as cited in Joo and Grable, 2004) All the above arguments indicate a high interest level of this construct, financial literacy Family is considered as the root of the society (Tuoi Tre, 2015) In addition, in Vietnam, where the Feudalistic ideology and the Confucianism have been remained their power, the role and power of this entity are much larger For most of Vietnamese, family is extremely important as it is the very first place the socialization of their children takes place In the process of individual socialization, the communication, upbringing and instruction of parents and other members in family, even the observation of the parents’ actions are the sources which help their children to attain knowledge, skills, values and form attitudes and behaviors later All these contribute to children’s human foundation It is the same to a specific case, financial socialization This socialization has great impact when the knowledge and attitude formed by it are the first ones which are difficult to change and associated with children over their lifetime In a family where parents always spend financial stress, children could be influenced and find it hard to get their financial satisfaction in the future (Jorgensen and Savla, 2010) Furthermore, parental financial socialization was also examined by many researchers for its relationship to financial well-being (Mohamad et al, 2012; Serido et al., 2010) Being aware of the significance of this construct in Vietnamese society, the thesis takes it into research Beside parents, peers, schools and media are also considered In summary, this thesis examines and identifies factors which have impacts on personal financial well-being among Vietnamese young adults namely financial socialization, financial literacy and financial behavior so that individuals, family, organization and society could be fully aware of this area then proceed with appropriate activities and programs to improve personal financial well-being and prevent people from harmful effects of financial distress 1.3 Research Objective and Research Questions The objective of this thesis is to determine factors affecting personal financial wellbeing of young adults, namely financial socialization, financial literacy and financial behavior The proposed questions are as follows: Is there any relationship between financial behavior and financial well-being among young adults? Is there any relationship between financial literacy and financial well-being among young adults? Is there any relationship between financial literacy and financial behavior among young adults? Is there any relationship between financial socialization and financial behavior among young adults? Is there any relationship between financial socialization and financial literacy among young adults? 1.4 Scope of the Research This study examines the determinants of personal financial well-being in the context of Ho Chi Minh City, Vietnam One more important point is that the subject of the research is young adults Also according to Vietnam’s Youth Law no 53/2005/QH11, young people are citizens aged between sixteen and thirty years old However, as clarified in the background, financial well-being of young adults are much considered since the people in this period of life seem to face more financial problems when they have just started to manage their finance completely by themselves Students in most advanced countries such as America and Europe must pay for their college therefore they have managed their finances since very early point of lifetime at about 18 years old or even earlier when they started their college life In Vietnam, a little differently from them, the majority of students still live based on allowances from their family but not work any job even part-time ones They also depend on their parents’ decisions but not manage their finance by themselves Until graduating at about 22, most of these young adults have not spent their own experiences on finance management yet Of course there must be some of them have, but we cannot ensure whether the respondents APPENDIX DRAFT QUESTIONNAIRE Please indicate your answer using the 5-point scale (1: Strongly disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Agree) I Personal Financial Well-Being To what extent you agree with each of the following statement? You feel no stress at all about your level of financial stress today You are satisfied with your present financial situation You feel comfortable about your current financial situation You never worry about being able to meet normal monthly You are confident that you could find the money to pay for a 5 5 living expenses financial emergency that costs about $1,000 You want to go out to eat, go to a movie or something else and don’t go because you can’t afford to This never happens to you You never find yourself just getting by financially and getting paycheck to paycheck? You feel no stress at all about your personal finances in general II Personal Financial Behaviors Please indicate how often you have engaged in the following activities in the past six months You comparison-shopped when purchasing a product or 5 service 10 You paid all your bills on time 11 You kept a written or electronic record of your monthly expenses 12 You stayed within your budget or spending plan 13 You paid off credit card balance in full each month 14 You maxed out the limit on one or more credit cards 15 You made only minimum payments on a loan 16 You began or maintained an emergency savings fund 17 You saved money from every paycheck 18 You saved for a long term goal such as a car, education, home, etc 19 You contributed money to a retirement account 20 You bought bonds, stocks, or mutual funds 5 5 5 5 Please rate your behavior regarding insurance within the past years 21 You maintained or purchased an adequate health insurance policy 22 You maintained or purchased adequate property insurance like auto or homeowners insurance 23 You maintained or purchased adequate life insurance III Financial Socialization To what extent you agree with each of the following statement? 24 Parental socialization much affects the way you learn about and behave with money 25 Peers much affect the way you learn about and behave with money 26 Schools much affect the way you learn about and behave with money 27 Media much affects the way you learn about and behave with money ii IV Financial Literacy To what extent you agree with each of the following statement? 28 You know about interest rates, finance charges and credit terms 29 You know about credit ratings and credit files 30 You know about managing finances 31 You know how to invest your money 32 You know and understand your bank statement iii APPENDIX SCRIPT OF INTERVIEW IN QUALITATIVE RESEARCH Introduction Thanks for your time attending this interview for the research “Factors affecting personal financial well-being of young adults in Vietnam” Your answers are not assessed either “right” or “wrong” All you opinions or comments are completely meaningful for this research So please share your ideas and your thought comfortably and honestly with each other Discussion * The leader explains all the concepts discussed in the current study with the interviewees and ask all the interviewees to ensure the concepts’ meanings have been properly understood * The leader goes through the whole questionnaire with the interviewees * The leader asks the interviewees to show their opinions about all items of financial behavior, financial literacy and financial socialization and financial well-being * The modification must be agreed by equal or more than fifty percent of the participants before it is officially recorded * At the end of the interview, the leader needs to make sure that the interviewees/ respondents can understand the meaning of all statements properly and that all statements are suitable in the context of the research after modification iv APPENDIX FINAL QUESTIONNAIRE Dear Sir/ Madam, I am conducting a study on factors affecting personal financial well-being of young adults in Vietnam I would appreciate if you could spend a few minutes to fill in the questionnaire There is no right or wrong answer in this case All your response is completely significant to me and this research A PERSONAL INFORMATION Name (optional)…… Gender:  Male  Female What is your age? …… If you not belong to the age range of 22 to 30, please stop the survey here Thank you for your support again What is your career?  Officer  Worker  Manager  Others B MAIN SURVEY Please indicate your answer using the 5-point scale (1: Strongly disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly Agree) I Personal Financial Well-Being To what extent you agree with each of the following statement You feel no stress at all about your level of financial stress today You are satisfied with your present financial situation You feel comfortable about your current financial situation v You never worry about being able to meet normal monthly You are confident that you could find the money to pay for a 5 5 living expenses financial emergency that costs about 20 million dong You want to go out to eat, go to a movie or something else and don’t go because you can’t afford to This never happens to you You never find yourself just getting by financially and getting paycheck to paycheck? You feel no stress at all about your personal finances in general II Personal Financial Behaviors To what extent you agree with each of the following statement in the past six months You comparison-shopped when purchasing a product or service 10 You paid all your bills on time 11 You kept a written or electronic record of your monthly expenses 12 You stayed within your budget or spending plan 13 You began or maintained an emergency savings fund 14 You saved money from every paycheck 15 You saved for a long term goal such as a car, education, home, etc To what extent you agree with each of the following statement within the past year 16 You maintained or purchased an adequate health insurance 5 policy 17 You maintained or purchased adequate property insurance vi like auto or homeowners insurance 18 You maintained or purchased adequate life insurance 5 5 5 III Financial Socialization To what extent you agree with each of the following statement 19 Parental socialization much affects the way you learn about and behave with money 20 Peers much affect the way you learn about and behave with money 21 Schools much affect the way you learn about and behave with money 22 Media much affects the way you learn about and behave with money IV Financial Literacy To what extent you agree with each of the following statement 23 You know about interest rates, finance charges and credit terms 24 You know about managing finances 25 You know how to invest your money 26 You know and understand your bank statement vii APPENDIX BẢNG CÂU HỎI KHẢO SÁT Xin chào Anh/Chị, Tôi học viên lớp cao học MBus - Viện Đào Tạo Quốc Tế, trường Đại Học Kinh Tế TP.HCM Hiện thực đề tài "Các yếu tố ảnh hưởng đến thỏa mãn tài cá nhân" Rất mong Anh/Chị dành chút thời gian trả lời bảng câu hỏi Lưu ý câu trả lời sai Tất ý kiến thông tin giá trị hữu ích cho nghiên cứu Xin chân thành cám ơn Anh/Chị PHẦN A – THÔNG TIN CÁ NHÂN Giới tính (câu hỏi bắt buộc) o Nam o Nữ Năm sinh (câu hỏi bắt buộc) o 1985 o 1986 o 1987 o 1988 o 1989 o 1990 o 1991 viii o 1992 o 1993 Nếu Anh/ Chị KHÔNG sinh vào năm liệt kê bên trên, vui lòng dừng khảo sát Chân thành cám ơn Anh/ Chị dành thời gian hỗ trợ khảo sát Họ tên ……………………………………………………… Nghề nghiệp (câu hỏi bắt buộc) o Quản lý o Nhân viên văn phòng o Công nhân o Khác: PHẦN B – NỘI DUNG (các câu hỏi bắt buộc) Xin vui lòng cho biết mức độ đồng ý Anh/Chị phát biểu sau cách đánh dấu X vào ô tương ứng Trong đó: - hoàn toàn không đồng ý - không đồng ý - trung lập / ý kiến - đồng ý - hoàn toàn đồng ý ix Mức độ đồng ý Sự thỏa mãn tài cá nhân Tôi không cảm thấy căng thẳng nói đến tình trạng tài Tôi hài lòng với tình trạng tài Tôi cảm thấy thoải mái tình trạng tài Tôi không lo lắng khả đáp ứng chi phí sinh hoạt hàng tháng thông thường Tôi tự tin kiếm tiền để chi trả cho khoản chi tiêu khẩn cấp khoảng 20 triệu Việt nam đồng "Tôi muốn ăn bên ngoài, xem phim, làm đủ khả chi trả." Điều chưa xảy với Tôi không cảm thấy kiếm đủ tiền sống qua ngày Nhìn chung không cảm thấy căng thẳng tình hình tài cá nhân Sự xã hội hóa tài Cha mẹ ảnh hưởng đến cách hiếu biết quản lý tiền 10 Bạn bè ảnh hưởng đến cách hiểu biết quản lý tiền 11 Trường học ảnh hưởng đến cách hiểu biết quản lý tiền 12 Các phương tiện truyền thông đại chúng (tivi, báo đài, internet ) ảnh hưởng đến cách hiểu biết quản lý tiền Hành vi quản lý tài cá nhân Trong sáu tháng vừa qua: 13 Tôi so sánh giá mua sản phẩm dịch vụ 14 Tôi toán hóa đơn hạn x Mức độ đồng ý Hành vi quản lý tài cá nhân Trong sáu tháng vừa qua: 15 Tôi giữ sổ sách ghi chép (viết tay / điện tử) việc chi tiêu hàng tháng 16 Tôi tuân thủ kế hoạch chi tiêu đặt 17 Tôi bắt đầu trì quỹ tiết kiệm khẩn cấp cho 18 Tôi có tiết kiệm tiền trích từ khoản tiền lương 19 Tôi tiết kiệm tiền cho mục tiêu dài hạn mua xe, học hành, nhà cửa Trong năm vừa qua: 20 Tôi trì mua bảo hiểm y tế đầy đủ 21 Tôi trì mua bảo hiểm tài sản đầy đủ bảo hiểm xe bảo hiểm nhà 22 Tôi trì mua bảo hiểm nhân thọ đầy đủ Khả năng, kiến thức tài 23 Tôi biết lãi suất, chi phí tài điều kiện tín dụng 24 Tôi biết cách quản lý tài cá nhân 25 Tôi biết cách đầu tư tiền 26 Tôi biết hiểu kê tài khoản Chân thành cám ơn Anh/ Chị dành thời gian hỗ trợ khảo sát xi APPENDIX THE RESULT OF EFA ANALYSIS The result when we run EFA the first time Table a - KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Sphericity df Sig .855 2801.722 300 000 Table b - Total Variance Explained Component Initial Eigenvalues Total 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7.103 28.414 2.712 10.848 2.010 8.042 1.642 6.567 1.234 4.934 1.074 4.295 907 3.629 824 3.298 755 3.022 701 2.804 602 2.406 587 2.347 554 2.217 523 2.093 503 2.013 451 1.802 433 1.731 411 1.646 381 1.525 336 1.344 316 1.262 292 1.168 249 995 211 842 189 754 % of Cumulative Variance % 28.414 39.262 47.304 53.871 58.806 63.100 66.730 70.028 73.049 75.853 78.259 80.606 82.823 84.916 86.929 88.731 90.463 92.108 93.634 94.978 96.240 97.409 98.403 99.246 100.000 Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings Total Total % of Cumulative Variance % 7.103 28.414 2.712 10.848 2.010 8.042 1.642 6.567 1.234 4.934 1.074 4.295 Extraction Method: Principal Component Analysis xii 28.414 39.262 47.304 53.871 58.806 63.100 3.764 3.000 2.932 2.676 2.216 1.188 % of Cumulative Variance % 15.056 11.998 11.729 10.702 8.865 4.751 15.056 27.054 38.783 49.485 58.350 63.100 Table c - Rotated Component Matrixa Component FS1 FS2 FS3 FS4 FS5 FS6 FS8 FSO1 FSO2 FSO3 FSO4 FB1 FB2 FB3 FB4 FB5 FB6 FB7 FB8 FB9 FB10 FK1 FK2 FK3 FK4 665 814 825 660 542 503 763 789 799 755 737 451 571 799 704 547 699 740 646 606 680 567 745 764 784 745 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations After removing this item FB1, we run EFA for the second time The results are as follows Table d - KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Sphericity df Sig xiii 856 2685.522 276 000 Table e - Total Variance Explained Component Initial Eigenvalues Total % of Variance Cumulative % Extraction Sums of Squared Loadings Total % of Cumulative Variance % 6.950 28.957 28.957 6.950 28.957 2.592 10.801 39.759 2.592 10.801 2.009 8.371 48.130 2.009 8.371 1.624 6.768 54.898 1.624 6.768 1.214 5.059 59.957 1.214 5.059 985 4.104 64.061 883 3.681 67.742 764 3.185 70.927 743 3.096 74.023 10 700 2.916 76.939 11 594 2.474 79.413 12 555 2.311 81.725 13 543 2.262 83.986 14 503 2.097 86.083 15 465 1.937 88.020 16 438 1.827 89.847 17 422 1.760 91.607 18 386 1.609 93.216 19 352 1.466 94.682 20 317 1.323 96.004 21 293 1.222 97.226 22 260 1.082 98.308 23 216 901 99.209 24 190 791 100.000 Extraction Method: Principal Component Analysis FS1 FS2 FS3 FS4 FS5 FS6 FS8 FSO1 28.957 39.759 48.130 54.898 59.957 Rotation Sums of Squared Loadings Total % of Cumulative Variance % 3.828 2.943 2.911 2.657 2.050 15.949 12.264 12.129 11.071 8.544 Table f - Rotated Component Matrixa Component 650 801 830 687 581 540 749 805 xiv 15.949 28.213 40.342 51.413 59.957 Table f - Rotated Component Matrixa (cont.) FSO2 FSO3 FSO4 FB2 FB3 FB4 FB5 698 FB6 739 FB7 638 FB8 631 FB9 665 FB10 540 FK1 745 FK2 764 FK3 775 FK4 753 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations xv 785 772 699 489 802 715 ... the most financial problems and financial distress This research examines the factors affecting personal financial well- being of young adults in the Vietnamese context; among them are financial. .. understanding financial well- being and factors influencing it is extremely considerable According to the World Happiness Report 2013, the well- being level which includes financial well- being of Asians... Questions The objective of this thesis is to determine factors affecting personal financial wellbeing of young adults, namely financial socialization, financial literacy and financial behavior The