CHAPTER 1

Background of the Study

Financial literacy is the ability to use knowledge and skill to make effective and informed

management decision. Gaining the knowledge and developing the skills to become financially

literate is a lifelong process (NFEC, 2019). Financial literacy is not emphasized in the education

system many students lack the necessary knowledge and skills to become financially responsible

adults. Being financially literate is very important for a person to manage their money well.

These days the issues of student’s having financial problems are alarming. With the amount of

scholarship attained still many students failed in term of managing their money end up having

insufficient among throughout their study.

Financially literacy is essential for making financial decisions related to savings,

borrowing and investments. Although numerable studies have been conducted to find elements

of financial literacy, most of them focus on developed countries (Rachna & Singh, 2017).

Managing your money is a personal skill that benefits you throughout your life and not one that

everybody learns. Managing your money requires a fundamental understanding of personal

credit and willingness to embrace personal responsibilities. Financially literate are the people

who know how to save money before spending.

Financial education can benefit students of all ages and income level. For student’s just

beginning their working lives, it can provide basic tools for budgeting and saving so that

expenses and consuming cash can be controlled. The level of financial literacy affects student’s

quality of life significantly. Financial literacy enables people to understand what is needed to

achieve a lifestyle that is financially balanced, sustainable, ethical, and responsible. It is also
helps entrepreneurs leverage others people’s money for business to generate sales and profit

(Mabazique, 2019). You can achieve financial literacy through financial education; hence by

understanding these competencies, students gain the ability to use knowledge and skills to

manage financial resources effectively for a lifetime of financial well-being.

These are competencies of financial literacy. As you make financial decisions each and

every day you should use these for managing and growing your money. Spending is probably the

most important concept because it is personal reflection of your values, lifestyle, and your

financial behavior. Needs and wants are different in the basic concept of controlling spending.

Budgeting is the most powerful and impactful tool you can put on to control spending to allow

for saving and investing.

Financial literacy is an essential life skill that has important impact on individual, family

well-being and on the broader economy. This has led to the recognition that better financial

literacy skills could contribute to improved financial decision making, and that these decisions

could, in turn, have positive effects not only on households but also on economic and financial

stability of a country more generally (OECD/INFE, 2017). Indeed, the acquisition and

development of financial literacy skills among young people is increasingly perceived by policy

makers as essential for several reasons. First, the current and future financial choices faced by

today’s youth are likely to be more challenging than those past generations, given the greater

complexity in the financial products, services and systems now available. Second, young people

will probably bear more financial risks in adulthood due to increased life expectancy, a decrease

in welfare and occupational benefits, and uncertain economic and job prospects. Third, providing

young people with proper financial education may also help bridge financial literacy disparities

due to differences in their socio-economic status.

people, particularly undergraduate students in both developed and developing countries. This

suggests that additional factors merit examination for their impact on financial literacy among

the youth. Financial literacy for students should involve partial activities, like homework and

exercises that introduces students to the real word (Ritchie, 2019).

Homework, homework assignment, is a set of task assigned to students by their teachers

to be completed outside the class. Common homework assignments may include required

reading, writing or typing project, mathematical exercises to be completed, information to be

reviewed before a test, or other skills to be practiced (CCBY, 2013). Financial literacy of

students can improved through homework, the most effective subject that may help students

financial literacy are Business Finance and Entrepreneurship. Business finance is a field of study

that deals with how the money can spend wisely. In the other hand, Entrepreneurship is the

capacity and willingness to develop, organize and manage a business venture along with any of

its risks in order to make a profit (Business Dictionary, n.d.). Business finance and

Entrepreneurship can affect student’s knowledge to become financially literate through

homework and exercises. According to Forzano (2016) exercises is a brief assessment used in

education and similar fields to measure growth in knowledge, abilities, and/or skills. Homework

and exercises may help the students to understand the concept of budgeting in order to make

wise decision with money.

Students can be financially literate. Homework and exercises can improve their financial

literacy. Exercises can affect their knowledge to be financially literate. It will help students to

know and analyze the basic way to consume your money in important things. Business finance

help students to analyze, and make wise decision in consuming cash. Financial literacy is based
upon providing individuals a financial knowledge and skills so that they can make informed

financial decisions and take effective action regarding their personal management.

Conceptual Framework

It is very essential that each person should have the ability to understand how money

work; how to manage it to earn and invest or how to donate it to help others (IEF, 2013).

Financial literacy provides the necessary knowledge, skills, and tools for individuals to make

informed financial decisions when confidence, to manage personal wealth with efficiency and to

increase financial competence to demand for better financial services (Aligon, 2013).

Students who pick up skills that they can truly apply real life situations will help them

succeed and become responsible after college. A solid practical financial literacy program should

include the mental aspects and building proper relationship with money; open appropriate

accounts; how to evaluate loans and loan terms; credit-building; how to use credit cards

responsibly; the basis of investing; and how to distinguish between a “need” and “wants”

(NFEC, 2005).

Only few Filipino adults could correctly answer the financial literacy-related questions. If

this problem continue, the Philippines might face the bigger problems that related to finances.

That is why they change and improved a curriculum of K-12. There are many subjects that

teaches students to be responsible in their financial management.

One of those subjects is Business finance. Business Finance is a financial management

that concerned with control and planning resources. Students can improved or enhance their

knowledge in financial literacy through homework and exercises. There are some applicable

exercises that can help students to be financially literate. For example, identification: that will
help students to analyze a situation to better spending, multiple choice: it will improved their

knowledge in wise decision on consuming cash.

The researchers will ask the respondents how much is their saving before and after

studying business finance. These information will be useful to determined persons financial

status.

The researchers will ask if respondents can relate and use the questions given in test in

the real life finance situations. These information will be useful to determined respondents

knowledge on financial literacy.

The researchers will ask if homework and exercises can help to understand the concept of

budgeting in order to make wise decision with money.

The researchers will also asses the relationship of homework and exercises on business

finance and if it’s effective.

This study assumes that the researchers will help Grade 12 ABM Students on their

financial literacy.