Factors contributing to vietnamese adults intentions and behaviors towards personal financial planning

Abstract Financial literacy, especially personal financial planning, has been caught people‟s attention in recent years because poor financial management and unwise decision making can d

FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’ INTENTIONS AND

BEHAVIORS TOWARDS PERSONAL FINANCIAL PLANNING

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

August 2014

FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’ INTENTIONS AND

BEHAVIORS TOWARDS PERSONAL FINANCIAL PLANNING

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Committee member Committee member

- -

INTERNATIONAL UNIVERSITY SOCIALIST REPUBLIC OF VIETNAM

SCHOOL OF BUSINESS Independence - Freedom - Happiness

ASSURANCE QUALIFIED THESIS

Student’s Name: NGUYEN THI PHUONG TRANG

Student ID: MBA06036

Title of Thesis: FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’

INTENTIONS AND BEHAVIORS TOWARDS PERSONAL FINANCIAL PLANNING

I assure that the content of this thesis has been qualified all requirements for a research paper and able to participate in the final thesis defense

Approved by

Acknowledge

I would like to express my very great appreciation to my advisor – Ph.D Phan Trieu Anh with all my respect and gratitude I have been fortunate in receiving his insightful guidelines, recommendations and feedbacks during this research

I am grateful to all the researchers stated in my study, especially Dr Yasser Alhenawi who has provided me with further information related to his research I appreciate the research participants for taking time to answer my questions as their inputs are very valuable to my thesis I am also sincerely thankful all my friends for their willingness to encourage and motivate me fulfilling the research

Most especially to my mom, thank you for giving me strengths and love to overcome all the difficulties

Without all of your help and support, I could not have completed this thesis

Plagiarism Statements

I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Ho Chi Minh City

Copyright Statement

This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author‟s prior consent

© Nguyen Thi Phuong Trang/MBA06036/2014

Table of Contents

PLAGIARISM STATEMENTS III

COPYRIGHT STATEMENT IV

CHAPTER ONE – INTRODUCTION - 14 -

1 INTRODUCTION -14-

2 BACKGROUND OF THE PROBLEM -15-

3 STATEMENT OF THE PROBLEM -16-

4 RESEARCH QUESTIONS -16-

5 RESEARCH OBJECTIVES AND LIMITATIONS -16-

6 RESEARCH RATIONALE -17-

6.1 Importance of the research 17

-6.2 Beneficiaries of this research 17

-CHAPTER TWO – LITERATURE REVIEW - 18 -

1 THE THEORY OF REASONED ACTION (TRA) -18-

2 THE THEORY OF PLANNED BEHAVIOR (TPB) -19-

3 PERSONAL FINANCIAL PLANNING -20-

4 TPB IN PERSONAL FINANCIAL PLANNING -25-

4.1 Attitudes 25

-4.2 Subjective Norms 27

-4.3 Perceived behavioral control 28

-4.4 Behavioral intentions 30

-4.5 Behavior 30

-5 RESEARCH MODEL -32-

6 RESEARCH HYPOTHESES -34-

CHAPTER THREE – RESEARCH METHODOLOGY - 35 -

1 RESEARCH DESIGN -35-

2 RESEARCH PROCESS -35-

3 SAMPLE AND DATA COLLECTION METHOD -36-

3.1 Sample statistics 36

-3.2 Sample size 37

-3.3 Data collection method 38

-4 OPERATIONALIZATION OF VARIABLES -38-

5 MEASUREMENT -41-

6 QUESTIONNAIRE DESIGN -43-

7 DATA ANALYSIS -43-

CHAPTER FOUR – DATA ANALYSIS AND DISCUSSIONS - 45 -

1 SAMPLE DEMOGRAPHIC -45-

2 OVERALL OF COLLECTED DATA -47-

3 TESTING RELIABILITY OF THE MEASUREMENT SCALE -50-

4 EXPLORATORY FACTOR ANALYSIS (EFA) -55-

5 STRUCTURAL EQUATION MODEL (SEM) -63-

5.1 Accessing the measurement model (Confirmatory Factor Analysis) 64

-5.1.1 Goodnessoffit 65

-5.1.2 Construct validity 67

-5.2 Accessing the structural model 71

-5.2.1 Goodnessoffit 71

-5.2.2 Significant and meaningful structural relationships 72

-6 TEST FOR DIFFERENCES IN THE MEANS OF THE BEHAVIORS -76-

6.1 Gender 76

-6.2 Marital status 77

-7 DISCUSSIONS -78-

CHAPTER FIVE – CONCLUSIONS, RECOMMENDATIONS AND LIMITATIONS - 82 -

1 CONCLUSIONS -82-

2 RECOMMENDATIONS -82-

3 LIMITATIONS -83-

REFERENCES - 85 -

APPENDIX 1 - 93 -

APPENDIX 2 - 99 -

RMSEA Root mean square error of approximation

SIC Squared interconstruct correlations

List of Tables

Table 1: Research hypotheses - 34 -

Table 2: Respondent selection criteria - 37 -

Table 3: Operationalization of variables - 40 -

Table 4: Measurement of the variables - 41 -

Table 5: Data analysis - 43 -

Table 6: Attitudes - 48 -

Table 7: Subjective norms - 48 -

Table 8: Perceived behavioral control - 49 -

Table 9: Intentions - 49 -

Table 10: Behaviors - 49 -

Table 11: Reliability statistics for Attitude variables - 50 -

Table 12: Item-Total Statistics for Attitude variables - 51 -

Table 13: Reliability statistics for Attitude variables after removing Attitude5 - 52 -

Table 14: Item-Total Statistics for Attitude variables after removing Attitude5 - 52 -

Table 15: Reliability statistics for Behaviors variables - 53 -

Table 16: Item-Total Statistics for Behaviors variables - 53 -

Table 17: Reliability statistics for Behaviors variables after removing Behaviors6 - 54 -

Table 18: Item-Total Statistics for Behaviors variables after removing Behaviors6 - 54 -

Table 19: KMO and Bartlett's Test - 56 -

Table 20: Total Variance Explained - 57 -

Table 21: Pattern Matrix - 59 -

Table 22: Pattern Matrix after removing Information5 - 61 -

Table 23: Fit indices for the test model result (CFA) - 66 -

Table 24: Standardized Regression Weights - 68 -

Table 25: Average variance extracted (AVE) and construct reliabilities (CR) - 69 -

Table 26: Discriminant validity - 70 -

Table 27: Covariances - 70 -

Table 28: Correlations - 70 -

Table 29: Fit indices for the test model result (SEM) - 71 -

Table 30: Regression Weights - 72 -

Table 31: Standardized regression weights - 75 -

Table 32: Squared Multiple Correlations - 75 -

Table 33: Covariances - 75 -

Table 34: Correlations - 75 -

Table 35: One-way Anova test for gender - 76 -

Table 36: One-way Anova test for marital status - 77 -

Table 37: Supported research hypotheses - 81 -

List of Figures

Figure 1: Theory of Reasoned Action (Ajzen & Fishbein, 1980) - 18 -

Figure 2: The Theory of Planned Behavior (Ajzen, 1991) - 20 -

Figure 3: Implement a plan for making personal financial decisions - 21 -

Figure 4: Components of personal financial planning - 21 -

Figure 5: The financial planning process - 24 -

Figure 6: Research model - 33 -

Figure 7: Research process - 36 -

Figure 8: Participants' gender - 45 -

Figure 9: Participants' marital status - 45 -

Figure 10: Participants' education level - 46 -

Figure 11: Participants' employment status - 46 -

Figure 12: Participants' total annual net income - 47 -

Figure 13: The diagram of variables in CFA - 66 -

Figure 14: Structural equation model - 71 -

Abstract

Financial literacy, especially personal financial planning, has been caught people‟s attention in recent years because poor financial management and unwise decision making can definitely lead to lower living standard, credit card debts, financial crisis and prevent families from achieving important long-term goals such as buying a home and raising kids as their wishes This thesis examines the factors contributing to adults‟ intentions and behaviors towards personal financial planning which could be important to newly affluent young Vietnamese adults for responsible financial behaviors

Quantitative research method is used for testing Structural Equation Model rooted from the model from the Theory of Planned Behavior (TPB) of Fishbein and Ajzein Using the convenience sample of 382 Vietnamese people participating into online survey, the research tries to answer one question and explore eight hypotheses

Through analysis of practical data via using SPSS 16 and AMOS 20 software, the results show that TPB is significant to predict to intentions and behaviors towards personal financial planning Future research is needed to further investigate more deeply

on how personal financial knowledge affects the financial planning behaviors for

motivating planning practices from Vietnamese adults

Keywords: Theory of Planned Behavior, personal financial planning, structural equation model, Vietnamese adults

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Chapter One – Introduction

1 Introduction

Financial literacy can be described as the ability to use one‟s knowledge and skills to manage financial resources effectively It includes the ability to recognize available financial choices, to make financial plan for better future, to spend money wisely, and to well-manage the challenges as well as the risks that come as life events such as loosing job, having a family, saving for child‟s education, etc

Visa and Kiplinger‟s Personal Finance Magazine (2012) surveyed 25,500 participants from 28 countries, the countries with the least financially literacy were Pakistan, Indonesia and Vietnam Survey results shows that people in these countries have no family budgeting, and there is no discussions with children about money management However, Vietnamese respondents hold the rank at 10th out of 28 in savings account dedicated for risks

To measure the ways people in Asia Pacific region making decisions about their home finances, the MasterCard Index of Financial Literacy was studied with 7,756 respondents with age from 18 to 64 in 16 Asia Pacific markets The research found out that women in the emerging markets such as Myanmar, Vietnam and China outscored men in financial literacy, by 7 index points, 6 index points and 3 index points respectively And Vietnam was at the 12th in overall financial literacy index out of 16 (MasterCard, 2013)

Financial literacy is a concern in which a large proportion of society having no support and education that is necessary for granting a developed world One of the

practices of financial literacy is personal financial planning Figuring out the factors contributing to the intentions and behaviors of adults towards personal financial planning

in order to identify opportunities for improvement is calling for action of this research

2 Background of the problem

Financial literacy, especially personal financial planning, has been caught people‟s attention in recent years because poor financial management and unwise decision making can definitely lead to lower living standard, credit card debts, financial crisis and prevent families from achieving important long-term goals such as buying a home and raising kids as their wishes Having low knowledge on personal finance and having no personal financial planning can lead to none budgeting allocation and expenses tracking which can lead to conspicuous consumption behaviors such as lavish spending on goods and services for impressing others Furthermore, public education about the importance of having savings account is critical to increase national saving rate which is an important element for economic growth of every country

The first part of this research is examination of the factors contribute to adults‟ intentions and behavior towards personal financial planning such as budgeting, savings, insurance, education, investments and retirement And then, the second part explores the differences in levels Vietnamese‟s personal financial knowledge on behaviors towards personal financial planning

3 Statement of the problem

Research indicates the objective factors such as attitudes, subjective norms and perceived behavioral control are the important elements affecting adults‟ intentions and behaviors towards personal financial planning

4 Research questions

The research question that will be investigated in this study is: “What factors contribute to Vietnamese adults‟ intentions and behaviors towards personal financial planning?”

5 Research objectives and limitations

In order to answer the research question, the research objectives are as following:

- Investigate the factors that influence adults‟ personal intentions and behaviors towards personal financial planning

- Analyze the linkage between intentions and behaviors towards personal financial planning

- Encourage public sectors and educational academia on building up personal financial knowledge that will help adults achieve financial success in their life

Limitations on the study can be considered as below:

- Only Vietnamese persons who are higher educated and from 25 to 34 years old were requested to participate in the quantitative survey The investigations on the group of teenagers or students or more mature adults might be the suggestions for further researches

6 Research rationale

6.1 Importance of the research

The motivation for this study is based on the observations that most Vietnamese adults have low level of personal financial knowledge and no attention to personal financial planning In recent years, people are disillusioned with returns getting from their investments They have invested in totally inappropriate channels without even being aware of this Personal financial literacy and personal financial planning are highly recommended in this era of unstable economic not only in Vietnam but also in the whole world

During data collection steps, I have received an encouragement from a respondent named Frederikke Lindholm as “I applaud that you've chosen a thesis topic that will benefit society, and I enjoyed answering your questions I work with an NGO on poverty reduction, and I'm happy to see independent research in this area, instead of that done by banks who are only trying to gain more customers With your thirst for knowledge and your polite approach to potential respondents, I'm sure you will succeed gathering valuable data.”

6.2 Beneficiaries of this research

The research explores factors which impact adults‟ intentions and behaviors towards personal financial planning which could be important to newly affluent young Vietnamese adults for responsible financial behaviors It encourages people to practice personal financial planning for better financial management and brighter future It also suggests academia and public sectors to consider on monitoring and improving people‟s positive financial intentions and behaviors towards personal financial planning

Chapter Two – Literature Review

A critical investigation of the relevant literature must be conducted as the background information of this research Literature study includes definitions and previous research results in social sciences and economics sciences via typical publications, international books, articles and researches After literature review, the researcher will be able to develop a research model and a meaningful questionnaire for answering the research questions

1 The Theory of Reasoned Action (TRA)

The theory of reasoned action (Ajzen & Fishbein, 1980) provides a model that has potential benefits for predicting the intention to perform a behavior based on an individual‟s attitudinal and normative beliefs (Southey, 2011)

Figure 1: Theory of Reasoned Action (Ajzen & Fishbein, 1980)

According to the theory, the most important determinant of a person's behavior is behavior intention The individual's intention to perform a behavior is a combination of

attitude toward performing the behavior and subjective norm TRA works most successfully when applied to behaviors that are under a person's volitional control If behaviors are not fully under volitional control, even though a person may be highly motivated by her own attitudes and subjective norm, she may not actually perform the behavior due to intervening environmental conditions The Theory of Planned Behavior (TPB) was developed to predict behaviors in which individuals have incomplete volitional control

2 The Theory of Planned Behavior (TPB)

The Theory of Planned Behavior is an extension of the Theory of Reasoned Action (Ajzen & Fishbein, 1980; Fishbein & Ajzen, 1975) made necessary by the original model‟s limitations in dealing with behaviors over which people have incomplete volitional control As a general rule, the more favorable the attitude and subjective norm with respect to a behavior, and the greater the perceived behavioral control, the stronger should be an individual‟s intention to perform the behavior under consideration The relative importance of attitude, subjective norm, and perceived behavioral control in the prediction of intention is expected to vary across behaviors and situations Thus, in some applications it may be found that only attitudes have a significant impact on intentions, in others that attitudes and perceived behavioral control are sufficient to account for intentions, and in still others that all three predictors make independent contributions (Ajzen, 1991)

Figure 2: The Theory of Planned Behavior (Ajzen, 1991)

3 Personal financial planning

Kapoor, Dlabay, and Hughes (2012) stated that “Financial uncertainty affects everyone However, wise choices can ease potential difficulties Avoid the temptation of credit card use Identify budget items that can be eliminated or reduced Have adequate auto, home, health, and life insurance Prevent becoming a victim of financial scams by being well informed Talk with others about your financial concerns to help reduce anxiety Your ability to use wise money management strategies will serve you in every stage of your life, and in every phase of the business cycle.”

Personal financial planning is described in the below figure:

Figure 3: Implement a plan for making personal financial decisions

The figure below presents an overview of the eight major personal financial planning areas that must be coordinated through an organized plan and wise decision making to achieve a successful financial situation

Figure 4: Components of personal financial planning

i Obtaining: You obtain financial resources from employment, investments, or

owner-ship of a business Obtaining financial resources is the foundation of financial planning, since these resources are used for all financial activities

ii Planning: Planned spending through budgeting is the key to achieving goals and

future financial security Efforts to anticipate expenses along with making certain financial decisions can reduce taxes, increase savings, and result in less financial stress

iii Saving: Long-term financial security starts with a regular savings plan for

emergencies, unexpected bills, replacement of major items, and the purchase of special goods and services, such as a college education, a boat, or a vacation home Once you have established a basic savings plan, you may use additional money for investments that offer greater financial growth

iv Borrowing: Maintaining control over your credit buying habits will contribute to

your financial goals The overuse and misuse of credit may cause a situation in which a person‟s debts far exceed the resources available to pay those debts Bankruptcy is a set of federal laws allowing you to either restructure your debts or remove certain debts The people who declare bankruptcy each year may have avoided this trauma with wise spending and borrowing decisions

v Spending: Financial planning is designed not to prevent your enjoyment of life

but to help you obtain the items you want Too often, however, people make purchases without considering the financial consequences Some people shop compulsively, creating financial difficulties You should detail your living

expenses and your other financial obligations in a spending plan Spending less than you earn is the only way to achieve long-term financial security

vi Managing risk: Adequate insurance coverage is another component of personal

financial planning Certain types of insurance are commonly overlooked in financial plans For example, the number of people who suffer disabling injuries

or diseases at age 50 is greater than the number who dies at that age, so people may need disability insurance more than they need life insurance Yet surveys reveal that most people have adequate life insurance but few have needed disability insurance

vii Investing: Although many types of investments are available, people invest for

two primary reasons Those interested in current income select investments that pay regular dividends or interest In contrast, investors who desire long-term growth choose stocks, mutual funds, real estate, and other investments with potential for increased value in the future You can achieve investment diversification by including a variety of assets in your portfolio – these may include stocks, bond mutual funds, real estate, and collectibles such as rare coins viii Retirement and estate planning: Most people desire financial security upon

completion of full-time employment But retirement planning also involves thinking about your housing situation, your recreational activities, and possible part-time or volunteer work

The financial planning process as shown below can be viewed as a six-step procedure that can be adapted to any life situation

Figure 5: The financial planning process

Kapoor et al (2012) point out in details six steps of personal financial planning process as below:

i Determine current financial situation: In this first step, determine current

financial situation regarding income, savings, living expenses, and debts Preparing a list of current asset and debt balances and amounts spent for various items gives a foundation for financial planning activities

ii Develop financial goals: Periodically analyze financial values and goals are to

differentiate needs from wants Specific financial goals are vital to financial planning They can range from spending all of current income to developing an extensive savings and investment program for future financial security

iii Identify alternative courses of action: Developing alternatives is crucial when

making decisions Although many factors will influence the available alternatives, possible courses of action usually fall into the categories:

- Continue the same course of action

- Expand the current situation

- Change the current situation

- Take a new course of action

iv Evaluate alternatives: There is the need for evaluating possible courses of

action, taking into consideration life situation, personal values, and current economic conditions

v Create and implement financial action plan: Developing an action plan is to

identify ways to achieve financial goals To implement the financial action plan, you may need assistance from others

vi Review and revise financial plan: Financial planning is a dynamic process that

does not end when you take a particular action You need to regularly assess your financial decisions You should do a complete review of your finances at least once a year Changing personal, social, and economic factors may require more frequent assessments

4 TPB in personal financial planning

4.1 Attitudes

The attitude toward the behavior refers to the degree to which a person has a favorable or unfavorable evaluation or appraisal of the behavior in question, an individual's positive or negative feelings about performing a behavior and it is determined through an assessment of one's beliefs regarding the consequences arising from a behavior and an evaluation of the desirability of these consequences (Ajzen, 1991)

In the study surveyed 206 MBA students about their attitudes to personal financial planning, Murphy and Yetmar (2010) list the attitudes toward personal financial planning

as below:

i Whether they thought that preparing a personal financial plan was important

ii Whether they were interested in preparing such a plan

iii Whether they had time to do so

iv Whether or not they felt that they had the necessary skills to prepare a personal financial plan

v Whether or not they felt that they had the necessary knowledge to prepare a personal financial plan

Lai and Tan (2009) examined the attitudes of the Malaysians toward personal financial planning which encompasses money management, insurance planning, investment planning, retirement planning, and estate planning A survey data was obtained from 400 Malaysians by using a set of structured questionnaire They associated personal financial planning efforts with three measures: attitudes towards personal financial planning, factors influencing various aspects of personal financial planning decision, and frequency of managing for various aspects of personal financial planning The results show that the job status of a respondent is the primary factor in influencing attitudes towards personal financial planning and the frequency in managing for various aspects of personal financial planning Self-employed and employed respondents showed statistically significant higher in their mean values as compared to unemployed respondents Employed and self-employed respondents appear to be more positive and active in money management, insurance, and investment planning

As a general rule, the more favorable the attitude and subjective norm with respect to a behavior, and the greater the perceived behavioral control, the stronger should be an individual‟s intention to perform the behavior under consideration (Ajzen, 1991)

Thus, the first hypothesis would be:

H1: There is significant and positive relationship between attitudes and intentions to personal financial planning

4.2 Subjective Norms

Fishbein and Ajzen (1975) defined subjective norm as the perceived social pressures

to perform or not perform the behavior, an individual's perception of whether people important to the individual think the behavior should be performed and the contribution

of the opinion of any given referent is weighted by the motivation that an individual has

to comply with the wishes of that referent

Kapoor et al (2012) point out some influences on personal financial planning as following:

i Life situation, such as household size, graduation, dependent children leaving home, changes in health, engagement and marriage, divorce, birth or adoption of a child, retirement, a career change or a move to new area, or the death of a spouse, family member, or other dependent

ii Economic factors, such as income, global influences, inflation, and interest rates have a strong influence on financial planning

Hence, the second hypothesis would be:

H2: There is significant and positive relationship between subjective norms and intentions to personal financial planning

4.3 Perceived behavioral control

In fact, the Theory of Planned Behavior differs from the Theory of Reasoned Action

in its addition of perceived behavior control Perceived behavioral control plays an important part in the Theory of Planned Behavior In the scope of this research, perceived behavior control is investigated via two elements such as perception and personal financial planning information sources

Consistent with an emphasis on factors that are directly linked to a particular behavior, perceived behavior control refers to people‟s perception of the ease or difficulty

of performing the behavior of interest Perceived behavioral control, together with behavioral intention, can be used directly to predict behavioral achievement (Ajzen, 1991) Participants were asked to indicate their level of confidence in a financial plan‟s capacity to help them meet their long-term needs and the likelihood that they would implement such a plan (Murphy & Yetmar, 2010) Ajzen (2006) also categorized the items directly measure people‟s perception are capability of performing the behavior, and controllability which addresses people‟s belief that they have control over the behavior, that its performance is or is not up to them

Kapoor et al (2012) stated that personal financial planning information sources can be:

i The internet

ii Financial institutions, such as banks, credit unions, and investment companies

iii Media sources, such as newspaper, magazines, television, etc

iv Financial specialists, such as financial planners, insurance agents, investment advisers, credit counselors, lawyers, and tax preparers

Rutherford and Devaney (2009) researched the factors influencing convenience use of credit cards with perceived behavioral control construct with source of financial credit advices such as financial experts, friends and family, media and self-advice (reference)

The findings of Murphy and Yetmar (2010) indicated that, while most respondents feel both that financial planning is important and that they are interested in developing a financial plan, very few feels that they have the necessary skills and knowledge to prepare their own plan In addition, the participants indicated a strong preference for professional personal financial planning advice The study also indicates that less than 13 percent have prepared a comprehensive personal financial plan When asked to identify the one professional from whom they would seek advice, certified financial planners were the preferred resource

The lack of active involvement in personal financial planning by individuals implies that there is a great need of awareness of well-planned and sophisticated financial planning The demand of personal financial planning professional has opened an additional avenue for financial practitioners (Lai & Tan, 2009)

From the above literature review for two components of perceived behavioral control, the third hypotheses would be:

H3: There is significant and positive relationship between perceived behavioral control and intentions to personal financial planning

H4: There is significant and positive relationship between perceived behavioral control and behaviors to personal financial planning

Armitage and Conner (2001) mentioned that desires, intentions and self-predictions were coded according to the criteria discussed in Bagozzi (1992), Fishbein and Stasson (1990), Norman and Smith (1995), Sheppard et al (1988) and Warshaw and Davis (1985) Briefly, „desire‟ was coded if studies employed items such as „I want to perform behaviour x‟; „self-prediction‟ was coded for measures such as „I will perform behaviour x‟ or „How likely is it that you will perform behaviour x?‟ and „intention‟ was coded for studies that employed only measures such as „I intend to perform behaviour x‟ Where studies employed some combination of the above, these were coded as „mixed‟ measures And this research is applying the mixed measure with three questions to evaluate intentions towards personal financial planning

4.5 Behavior

Explaining human behavior in all its complexity is a difficult task It can be approached at many levels, from concern with physiological processes at one extreme to concentration on social institutions at the other Social and personality psychologists have

tended to focus on an intermediate level, the fully functioning individual whose processing of available information mediates the effects of biological and environmental factors on behavior Intentions to perform behaviors of different kinds can be predicted with high accuracy from attitudes toward the behavior, subjective norms, and perceived behavioral control; and these intentions, together with perceptions of behavioral control, account for considerable variance in actual behavior (Ajzen, 1991)

Lusardi and Mitchell (2007) found out that planners in both cohorts arrive close to retirement with much higher wealth levels and display higher financial literacy than non-planners and instrumental variables estimates show that planning behavior can explain the differences in savings and why some people arrive close to retirement with very little

or no wealth

Murphy and Yetmar (2010) asked respondents whether they had prepared components of a financial plan such as comprehensive personal financial plan, current year tax liability analysis and plan, educational funding analysis, estate plan, insurance needs analysis, retirement plan and will In the scope of this research, the current year tax liability analysis and plan is skipped as this term hasn‟t been applied in the context of Vietnam tax and laws

Lai and Tan (2009) asked a series of questions on a five-point Likert-type scale comprising how to manage for various aspects of personal financial planning on the frequency of engagement in managing for their money, insurance, investment, retirement, and estate

As a general rule, the stronger the intention to engage in a behavior, the more likely should be its performance (Ajzen, 1991) This leads to the next hypotheses as below:

H5: There is significant and positive relationship between behavioral intentions and behaviors to personal financial planning

H6: Attitudes will be positively correlated with subjective norms

H7: Subjective norms will be positively correlated with perceived behavioral control H8: Attitudes will be positively correlated with perceived behavioral control

5 Research model

In psychology literature, intention has been proved to be the best predictor of planned behavior, especially when the behavior is rare, difficult to observe, or involves time lags that cannot be predicted (Astuti & Martdianty, 2012) This theory not only helps us to understand how we can predict and change the behavior of others but also implies that one‟s intention are factors that influence behavior (Bakotic, et al., 2010)

Personal financial planning is the process of managing money to achieve personal economic satisfaction This planning process allows people to control financial situation Every person, family, or household has a unique situation; therefore, financial decisions must be planned to meet specific needs and goals (Kapoor et al., 2012) Therefore, personal financial planning is considered as planned behavior

From the above literature review, research model is based on TPB and modified as below:

Figure 6: Research model based on the Theory of Planned Behavior (Ajzen, 1991)

H7 H8

H6 Attitudes will be positively correlated with subjective norms

H7 Subjective norms will be positively correlated with perceived behavioral control H8 Attitudes will be positively correlated with perceived behavioral control

Chapter Three – Research Methodology

1 Research design

As cited in Castellan (2010), “from a quantitative aspect, the goal of research is collecting facts of human behavior, which when accumulated will provide verification and elaboration on a theory that will allow scientists to state causes and predict human behavior" (Bogdan & Biklen, 1998) and “In more succinct terms, the goal of quantitative research can be: to show relationships between variables, statistical description, establishing facts (Bogdan & Biklen, 1998), validation (Krathwohl, 1998), prediction and control (Gage, 1989), and testing hypotheses (Gall, et al., 1996)”

In many quantitative studies, the research question or hypotheses usually follows the review of the literature The researcher uses the theories, results, and findings of other studies in order to form a hypothesis to test McMillan (2000) stated that a hypothesis is

an informed guess or prediction that indicates what the researcher thinks the results will

be before the study is carried out (as cited in Castellan, 2010)

For the case of this research, quantitative research method is used to identify the factors effecting on intentions and behaviors towards personal financial planning and testing eight researched hypotheses

2 Research process

Research process started with literature review for coming up with research model and hypotheses The pilot test helped to get feedbacks from respondents before completing measurement and questionnaire for collecting primary data In the analysis

stage, reliability test, EFA, SEM and ANOVA were performed on practical data Finally, discussions and conclusion aimed to wrap up the findings

Figure 7: Research process

3 Sample and data collection method

3.1 Sample statistics

A substantial portion of quantitative research is performed to examine what are the factors contribute to adults‟ intentions and behaviors towards personal financial planning There are age groups such as 18-24, 25-34, 35-44, 45-54, 55-64 and over 65 with common financial goals and activities that affect financial planning (Kapoor et al., 2012)

In the scope of this research, the age group 25-34 is selected to investigate based on their diversified goals and activities such as having income to establish financial independence, consider home purchase, carefully manage the increased need for the use

of credit, obtain an appropriate amount of life insurance, etc Furthermore, regarding

Literature review

Research model

Hypotheses

Questionnaire design

Descriptive analysis Collecting data

Redesign questionnaire

Pilot test Reliability test

EFA

SEM

Discussions and conclusions

personal financial knowledge and planning skills, the respondents were classified from university graduation and above Therefore, respondent selection criteria are as following table:

Table 2: Respondent selection criteria

No Criteria Respondents characteristics

4 Marital status Single & married

The respondents are recruited from researcher‟s friends on social network Researcher explained to the respondent the purpose of the survey and give clear instructions to assure that all questionnaires will be completed anonymously The respondents are being asked

to be as honest as possible in giving the answers as the data will not be traced back to specific respondent