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Today's youth are multi-tasking, interactive, digital-driven consumers. Most of them have a "live for today" attitude rather than a "saving for the future" mindset. Young people seldom observe basic financial skills such as budgeting and developing a regular savings plan. In making financial decisions, peer groups are said to have a huge impact specifically for students below nineteen years old (Attri, 2013). Current research also looks at other matters affecting an individual's financial skills such as calculations of interest rates, attitudes to money, spending and saving habits, student loans, mortgage contracts, life/travel/health insurance and even budgetary planning techniques for parents-to-be and recently unemployed or disabled (Zokaityte, 2017).
Saving leads to an increase in assets if an individual's saving tendencies are greater than his spending tendencies (Wong, 2013).
How people spend and save their money across their life is supposed to be a rational act (Karlson, 2013). Birari & Patil (2014) suggest that the youth should rationally decide before spending the money and should be more knowledgeable about various savings and investment avenues available in the market.
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The ability to make conscious financial decisions is critical to achieving financial well-being; most often, individuals rely on unconscious decision-making strategies to navigate their day-to-day financial lives (Drever et al., 2015).
Financial literacy is a significant component in individual saving. Financial literacy has been found positively affiliated to the probability of having positive saving among individuals (Mahdzan & Tabiani, 2013). Jappelli & Padula (2013) stated that financial literacy and saving are positively correlated as well as literacy and wealth are correlated over the consumers' life cycle.
Higher levels of resources, higher returns to literacy and a larger initial endowment of literacy are associated with higher levels of saving as well as a greater current stock literacy. Lusardi (2008) claimed that those who are more likely to save later in life are those who were exposed to financial education programs while in high school.
According to Balint & Horvathne (2013), every individual in the household should be knowledgeable about financial literacy, however, only a few adulthood-graduates are familiar with this concept. Despite the development of government systems to encourage long-term savings, adult members of each household are not familiar with them, but even if they are, they fail to comprehend their advantages, and unable to exert them, as they are deemed to be too complicated, and they cannot see through the benefits efficiently. A large proportion of the adult population is not substantially aware of finance and basic economic concepts (Jappelli & Padula, 2013).
Teenagers do not bring out the topic of finance with their parents when they were growing up (Balint & Horvathne, 2013). Even young children integrate financial values by observing their parents. They benefit from discussions of wants versus needs. Parental monitoring remains influential into early adulthood and parents can support young adults by providing guidance and opportunities with the financial system (Drever et al., 2015). Parents can encourage their children to make cautious spending decisions. An allowance can help students make independent decisions and give them confidence and self-discipline in handling money (Wong, 2013). As teenagers mature, the influence of friends and family decreases and he/she relies more on evaluating the characteristics of a product, thus making an independent decision (Attri, 2013). By the time students reach college age, their saving practices are increased. Students at the secondary level have fewer saving practices and have less responsibility to control and manage their expenditures (Wong, 2013).
In saving habits, young people do not primarily consider them as they mostly spend their sources on gadgets, entertainment, and personal grooming (Attri, 2013). Students spend more money on shopping, especially on branded items. Students who belong to different education levels differ substantially when it comes to spending in various categories. A significant portion of their spending goes to shopping, fast food restaurants, mobile phone expenditure, investment, and transportation (Birari & Patil, 2014). People are generally unemployed or retired during the early and late stages of life. How they spend their money is typically above how much they earn or how much they have. People constantly wish to expend more than their income when they are both young and old, and therefore save most in their middle stage of life (Karlson, 2013).
The entire nation benefits when an individual saves his financial sources. Saving allocates the foundation for long-term investments and infrastructure development for every country, thus contributing to economic growth. Saving also serves as a barrier for nations against economic downturns and financial crisis (Mahdzan & Tabiani, 2013). Saving money for an emergency fund is always necessary. An emergency fund is convenient when students experience a shortage of income or an increase in expense (Wong, 2013).
In the research conducted by Birari & Patil (2014), results showed that only 20% of the students go for savings or investment so it is suggested that the habit of savings and investment should be absorbed from the very beginning of one's educational journey. The students should be equipped with financial literacy, specifically on the importance of savings and investment. They should learn different kinds of investment options, so they can plan their investments accordingly. This habit of investing and saving will help them to plan better for their future.
Balint & Horvathne (2013) suggest that the concept of financial education should be introduced as early as in primary schools. It is essential to teach money management skills to students, more specifically on how they could manage their own money based on their needs, wants, and goals. Students should have control over on how their allowances are spent or saved. The role of financial education is to assist individuals in evaluating abilities to make saving and investment decisions, and for them to comprehend financial advice or equip them with tools to deal effectively with advisors and financial intermediaries (Lusardi, 2008). Financial knowledge helps in guiding students' saving practices but requires a lot of effort and discipline (Wong, 2013).
Young people and their financial skills. (2019, Nov 26). Retrieved from https://studymoose.com/young-people-and-their-financial-skills-essay
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