Factors Analysis of Individual Childhood Affect Financial Literacy

Employee’s in Palembang

Marieska Lupikawaty

, Yusleli Herawati

, Purwati

and Elisa

Department of Business Administration, State Polytechnic of Sriwijaya, Palembang, Indonesia

Keywords: individual factors in childhood, financial literacy

Abstract: This study aims to determine the factors that affect the individual childhood on an individual's ability to

manage money today, who are already working and have income. Problems arise because there is still low

level financial literacy of individual to manage money and still not good financial behavior of individuals.

Respondents are individuals aged fifteen years aboved who worked in Palembang in formal sector with total

sample of 348 people. The results of multiple linear regression showed individual education quality factors

have the greatest influence on the level of individual financial literacy, while the smallest of factors influence

the educational background of parents to the level of an individual's ability to manage money. The results of

this study can be interpreted that the educational background of parents do not give a great influence on

financial literacy. The greater influence were factor individual education quality and factor of teaching parents

at home. Suggestions for respondents as individuals who have a good level of education, already working

and may be have children at home, should provide teaching manage money to their children in order to

produce the next generation being smarter. The results of this study give little different results from several

previous studies in which the majority factors that affect individual financial literacy from a family

background, while result of this research gives statement that the greater influence to individual financial

literacy were education quality factor from employee and teaching parents in childhood.

1 INTRODUCTION

Financial Services Authority (FSA) together with the

banking industry and non-bank financial industry

(IKNB) set October as the month of financial

inclusion in Indonesia. Financial inclusion is a

program that appealed to the middle to lower use of

formal financial products and services as a means of

saving money safe, transfer, savings and loans, and

insurance. Financial Inclusion Program is expecting

the public to gain access evenly and public finance

can leverage access formal financial services than

non-formal financial services.

Financial inclusion program will be successful

when the financial literacy of individuals and

communities is also good. Financial literacy is the

ability of individuals to manage personal finances and

avoid debt at a level where private not afford to pay

(www.birmingham.ac.uk). Based on a national

survey conducted Financi al Services Authority

(2016) that there was a rise in the index of financial

literacy in Indonesia as shown in the following

picture:

source: www.ojk.go.id

Figure 1: Financial literacy index 2013-2016

In Figure 1 above provides information that the

community banking sector has the largest financial

knowledge while the capital markets sector of society

still lacked the financial knowledge because most

small pick literacy index. In general, the financial

literacy index of the Indonesian people has increased

from the period 2013 to 2016 meaning that people

began to have the rise of financial knowledge in the

financial industry. Perhaps the question, what is the

Lupikawaty, M., Herawati, Y., Purwati, . and Elisa, .

Factors Analysis of Individual Childhood Affect Financial Literacy Employee’s in Palembang.

DOI: 10.5220/0009152100002500

In Proceedings of the 2nd Forum in Research, Science, and Technology (FIRST 2018), pages 37-42

ISBN: 978-989-758-574-6; ISSN: 2461-0739

 2022 by SCITEPRESS – Science and Technology Publications, Lda. All r ights reserved

purpose of government in an effort to increase

financial literacy.

This government program certainly has a purpose

and benefits. The goal is critical to economic and

financial stability of the country, while its benefits as

quoted from the OECD report (2013) of moving the

risk from the government and corporate employers to

individuals, increasing individual responsibility when

there are changes in the market and the economy,

raising the bids comprehensive financial products and

services and increasing demand on financial products

and services. The economic situation and the market

are always changing. Economic uncertainty is very

important to observe the policies of individual

financial decisions. The ability to make money policy

is the basis for today's prosperity and our future.

Personal financial planning is a process to manage

finances in achieving the satisfaction of individual

economies.

There are several factors an individual has a good

level of financial literacy as quoted by the DIW Berlin

(2015) is the educational background of parents,

teaching parents in managing money, economic

education in schools, the quality of education, and

experience managing money as a child. The level of

financial literacy that can either be a positive

influence on the individuals financial behavior.

The purpose of this study is to determine the

factors that affect the individual as a child on the

financial literacy of individuals today who are already

working and have income. The benefits of this

research that gives an idea of the level of the

individual's ability to manage money as an employee

in Palembang and to provide input for the individual

to manage personal finances are the basis for the well-

being of today and the future.

2 REVIEW OF LITERATURE

Financial literacy is often referred to as personal

financial education is an individual's ability to

manage personal finances and avoid debt at a level

where private is not afford to pay

(www.birmingham.ac.uk).

Definition from Huston (2010) personal financial

literacy is the ability to read, analyze, manage and

communicate about the personal financial condition

that affect material well being. It includes the ability

to discern financial choices, discuss money and

financial issues without (or despite) discomfort, plan

for the future and respond competently to life events

that affect everyday financial decisions, including

events in the general economy.

Potrich, Vieira and Kirch (2015) gives the

conclusions of some previous studies that financial

literacy is synonymous with financial literacy or

financial education. Financial literacy is defined by

Chen and Volpe (1998) is as the knowledge to manage

finances in decision-making. Chen and Volpe using

four financial aspects of the individual with the

description of Remund (2010) there are:

1. general knowledge; planning process and

financial control of individual or family unit

2. save and borrow ; savings in the bank that can be

done in the form of savings, time deposits,

certificates of deposit and current accounts

3. insurance; one form of risk control is done by

controlling/transfer of risk from one party to

another party

4. investment; a form of revenue allocation is done

today to make a profit at a later date could exceed

current investment capital.

Based on the description of several previous

studies it can be concluded that financial literacy is an

individual's knowledge and ability to read financial

condition and manage personal finances.

3 METHODOLOGY

Data collection method used in this research is using

interviews, questionnaires and literature review.

Questionnaires used research instrument to make a

measured data, is called scale. Type of scale that used

in this research is interval, a measured data that have

range and have a meaning (Ferdinand, 2014).

Respond from respondent can be measured with

intervally scaled data with two extreme category,

there are strongly disagree to strongly agree (1-10).

The population in this study are individuals who

work in the formal sector in Palembang. The reason

is (i) priorities that require the ability to manage

finances individuals are those who already have a

salary income and non-salary, (ii) individuals who

work in the formal sector usually graduated from

university level because to look at factors level of

individual financial literacy and have a good quality

education.

Type of data is secondary data and is sourced from

Central Bureau of Statistic Palembang City (2015).

The study population are employee in Palembang

whose age of fifteen years above in the formal sector

with amount as 661192, with a sample size of 348

people. The sampling method using simple random

sampling method in which every element of the

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population has an equal chance to be selected as the

sample (Puspowarsito, 2008).

Technical analysis of data using multiple linear

regression, by the following equation:

FL = a + b

PE + b

PT + b

EE + b

EQ + b

Exp + e

Information:

PE = parents educational background

PT = parents teaching

EE = Economic Education

EQ = Quality of education

Exp = Experience managing money

FL = individual financial literacy

Test the hypothesis in this study conducted on

statistical hypothesis using t test and F test with

significance level 0. 05, while the hypothesis are:

: there is no a significant influence between

independent variables to dependent variable

: There is a significant influence between parental

background variables to variable individual

financial literacy

: There is a significant influence between the

variables of teaching parents to variable

individual financial literacy

: There is a significant influence between the

variables of economic education of the

individual against individual financial literacy

variables

: There is a significant influence between the

variables of education quality of the individual

against individual financial literacy variables

: There is a significant influence between the

variables of individual experience managing

money against individual financial literacy

variables

4 RESULT AND DISCUSSION

Here are the results of the technical analysis of the

data with regression:

Table 1: t-Test and F-test

Var iabl es B T Significant*

Constants 35.323 5.676 0,000

The

educational

background of

arents (PE)

0,365 2,092 0,037

Teaching

Parents (PT)

.737 2.208 0,028

Economic

education (EE) 

.688 3.679 0,000

Education

quality (EQ)

1.957 3.649 0,000

Experience

managing

money (Exp)

.480 2,853 0,000

F = 19.728 0,000

Source: results of data processing, 2018

*) Significant at the 0.05 level

FL = 35.323 + 0,365PE + 0,737PT + 0,688EE +

1,957EQ + 0,480Exp

4.1 Partial Test

Table 1 was the results with multiple linear regression

analysis showed that all independent variables a

significant and positive influence on the variable,

where: Constants means that without any influence of

factors of childhood, the financial literacy of

respondents in the amount of 35.323

: there is no a significant influence between

parental background variables to individual financial

literacy variable

: There is a significant influence between parental

background variables to variable individual financial

literacy

Result from Table 1 indicate that PE has sig 0,037

< 0,05 it means parental background variables

influences significant to financial literacy. Formal

educational background of parents influence the

financial literacy of respondents is 0.364. This may

imply that the respondents felt the parental education

does not too influence the respondents in managing

money. Education background of respondents parents

are not of from college graduates.

: there is no a significant influence between

teaching parents variables to individual financial

literacy variable

: There is a significant influence between the

variables of teaching parents to variable individual

financial literacy

Result from Table 1 indicate that PT has sig 0,028

< 0,05 it means teaching parents variables influences

significant to financial literacy. Teaching parents

affect the financial literacy of respondents is 0.737.

Factors Analysis of Individual Childhood Affect Financial Literacy Employee’s in Palembang

This may imply that parents in the direction and

teaching in childhood about managing money plays a

sizable and more remembered by the respondents

until now as employee.

: there is no a significant influence between

economic education variables to individual financial

literacy variable

: There is a significant influence between the

variables of economic education of the individual

against individual financial literacy variables

Result from Table 1 indicate that EE has sig

0,000 < 0,05 it means economic education variables

influences significant to financial literacy. Formal

economic education affect the financial literacy of

respondents is 0.688. It can imply that respondents

recognize that economic education in schools sizable

role for respondents to manage money. This factor did

not become dominant because the background

education respondents most are not from economic

background

: there is no a significant influence between

education quality variables to individual financial

literacy variable

: There is a significant influence between the

variables of education quality of the individual

against individual financial literacy variables

Result from Table 1 indicate that EQ has sig 0,000

< 0,05 it means education quality variables

influences significant to financial literacy. The quality

of education affect the financial literacy of

respondents is 1.957. This factor affects

predominantly the respondents manage your money

on this research. This means the respondents feel that

the knowledge to manage the money due to the

quality of education they have achieved from college

graduate. The quality of education driven responden

to improve about information about managing

money. The main source they can access is through

the internet. This finding same as research from

Goetz, et al (2011) which states that the students are

more comfortable learning online through the

financial management and learning through

technology.

: there is no a significant influence between

experience managing money variables to individual

financial literacy variable.

: There is a significant influence between the

variables of individual experience managing money

against individual financial literacy variables.

Result from Table 1 indicate that Exp has sig

0,000 < 0,05 it means education quality variables

influences significant to financial literacy. Experience

managing money affects the financial literacy of

individuals amounted only 0.480. This factor is the

lowest as independent variables affect the dependent

variable. This means that most respondents do not

have the experience of managing their own money in

childhood, the respondent has not worked before

entering college so that all financial management still

arranged by the parents.

Partial test research results show the influence of

the majority which gives greater influence were

individual education quality factors and factors of

teaching parents at home. It means also that the first

education level gave major influence to respondents

financial literacy because the respondents as an

employee and have graduated from college, the

second that the factors of childhood that is teaching

from parents in the house plays an important role in

improving the financial literacy of individuals,

because respondents already fifteen years above and

already working, then it can’t be happen again so that

it becomes responsibility to respondent if they have

children to provide financial teaching better and right

for their children. Findings from Volpe, Chen and Liu

(2006) have statement that future education program

should be focus to importance individual financial.

4.2 Simultaneous Test

Simultaneous testing results indicate that all

independent variables are the educational background

of parents, teaching parents at home, economic

education of respondents, the quality of the

respondents' education and experience to manage

money significantly affect the financial literacy of

respondents. This means that factors influencing

respondents' childhood literacy rate of respondents or

knowledge and management of money from

respondents. This is consistent with previous studies

of Grohmann and Menkhoff (2015) and Chen and

Volpe (1998). The aims for literacy financial of

childhood is to create a better generation in managing

the finances of individuals. Individual financial

education being able to make good decisions for their

families, improve the economic security and life well-

being (Hilgert and Hogart, 2003).

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Benefits for individual has the ability to manage

finances, so it can take a good financial decisions for

individuals, families and even where people are

working, so the aims government's financial literacy

at macro level can be realized.

4.3 Coefficient Determination

The technical analysis used in this study is multiple

linear regression so that to see the magnitude of the

coefficient of determination used is adjusted R square

(Sarwono, 2007) which is equal to 0.268 or 26.8%.

Table 2: Coefficient of determination

R R Square Adjusted R Square

0,531 0,282 0.268

Source: processed data, 2018

Table 2 above informed that the number has the

intention that the influence of individual childhood

factors jointly affects individual financial literacy

only by 26.8%, while the factors outside the research

variable are 73.2%. These results can be interpreted

that there are still many factors from outside the

individual's childhood that affect individual financial

literacy, so this can be a further research opportunity

in looking at the influence of individual financial

literacy factors.

5 CONCLUSION

The regression results showed that the quality factor

of individual education has the greatest influence on

the level of individual financial literacy, while the

smallest influence of factors is parents' educational

background to the level of individual finance literacy.

The results of this study can be interpreted that the

educational background of parents does not have a

large influence on the level of individual finance

literacy or understanding in managing money.

There are still many factors from outside variabel

research in the individual's childhood that affect

individual financial literacy, so this can be a further

research opportunity in looking at the influence of

individual financial literacy factors.

Suggestions for respondents as individuals who

have graduates from college, have worked and if they

have children at home, they should be provide

teaching how to manage money to their children, in

order to get a better generation in managing money.

The results of this study give slightly different results

from several previous studies where the major factors

that influence the individual financial literacy is from

family backgrounds (Grohmann and Menkhoff,

2015), namely parents' educational background and

parents' teaching managing money to their children at

home. The ability to make money policies is the basis

for our well-being present and future.

Personal financial planning is a process for

managing finances in achieving individual economic

satisfaction. This process is to control the financial

situation, because income has an allocation to meet

the needs of individuals and families today and future

needs. Furthermore, at the macro level, the goal of

long-term financial literacy from the government will

be realized and useful for the progress of the

economy’s country.

ACKNOWLEDGEMENTS

This paper is one part of an annual duties research in

Polytechnic State of Sriwijaya. The author would like

to thankfull with the team, students and the

institutions which has provided funding through

research grants in 2018.

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