Financial Knowledge and Aptitudes: Impacts on College Students' Financial Well-Being

By Chan, S. Fiona; Chau, Albert Wai-Lap et al. | College Student Journal, March 2012 | Go to article overview

Financial Knowledge and Aptitudes: Impacts on College Students' Financial Well-Being


Chan, S. Fiona, Chau, Albert Wai-Lap, Chan, Kim Yin-Kwan, College Student Journal


The study examines relationship between college students' money-related aptitudes, financial management practices and financial well-being. By integrating Kidwell, Brinberg and Turrisi's model of money management (2003) and other research on financial well-being, we surveyed 802 university students in Hong Kong. Our findings confirm the hypothesis that students' tendency to engage in healthy financial management practices are related to attitudes toward debt, dysfunctional impulsivity, perceived behavioral control, financial knowledge, and employment. Students, who practice good financial management, tend to incur less debt and show better financial well-being. In conclusion, Kidwe11 et al's model provides a theoretical framework for administrators and educators to consider when designing programs to prepare new students for the challenges of university life.

Keywords: financial management, impulsivity, attitude towards debt, financial well-being

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Spending habits and financial management of college students have been the focus of many research as high level of debts and frequent bad budgeting practices have been shown to relate to serious financial and personal consequences, e.g. damaged credit history, stress-related health problems, poor academic performance, and even drop outs (Avard, Manton, English, & Walker, 2005; Kidwell, Brinberg, & Turrisi, 2003; Moore & Carpenter, 2009; Norvilitis & Santa Maria, 2002; Palmer, Bliss, Goetz, & Moorman, 2010; Robb & Pinto, 2010; Rosacker, Ragothaman, & Gillispie, 2009). The present study expands the scope of existing literature by examining the psychology behind financial management practices on a Hong Kong sample.

In Hong Kong, first year university students are the main targets of on-campus credit card promotions. Banks often partner with the university to offer branded credit cards (with university logo) to new students. Acquiring a credit card for freshmen is almost a rite of passage. The card becomes a symbol of success, as entering university is considered a significant personal achievement that brings honor to the family. However, with the new credit spending power, students have to also learn how to deal with the new financial responsibilities, such as managing expenses, budgeting for credit card payments, and maintaining healthy financial status.

With the extensive research conducted in this area, researchers have not been able come to a consensus whether providing financial knowledge or training to university students can help them better handle financial responsibilities, with some showing positive correlation (Robb, 2011), while some unable to substantiate the link (Borden, Lee, Serido, & Collins, 2008). To address the gap, we attempt to answer the question: Why some students adopt good money management practices, but some do not? The study examines the underlying mechanism of financial management, i.e. students' attitudes, personality, beliefs, financial knowledge of university students, and situational factors. Our objective is to provide a theoretical base for university administrators to design orientation programs to better prepare new students for non-academic challenges, which significant impact general well-being and academic performance, as demonstrated in recent research by Stinebricker and Stinebricker (2011).

Conceptual Framework

Kidwell and colleagues propose that amounts of debts incurred by college students are related to their budgeting practices, and students who perceived themselves as competent in budgeting have less debt (Kidwell, et al., 2003; Kidwell & Turrisi, 2000, 2004). They put forward a model of money management (MMM) to delineate how cognitive, personality and situational factors lead to pro-budgeting attitudes and then actual budgeting practices (see Figure 1; Kidwell et al., 2003). Their model has been used as a screening tool for identifying students at risk of running into debt related problems (Kidwell & Turrisi, 2004). …

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