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A Study of Awareness, Attitude and Factors

influencing Personal Financial Planning for

Residents of Gujarat

A Thesis submitted to Gujarat Technological University

for the Award of

Doctor of Philosophy

in

Management

By

Avni Tejas Patel

Enrollment No: 129990992002

Under supervision of

Dr. Satendra Kumar

GUJARAT TECHNOLOGICAL UNIVERSITY

AHMEDABAD

November - 2017

i

© [Avni Tejas Patel]

ii

DECLARATION

I declare that the thesis entitled “A Study of Awareness, Attitude and Factors

influencing Personal Financial Planning for Residents of Gujarat” submitted by me

for the degree of Doctor of Philosophy is the record of research work carried out by me

during the period from November 2012 to June 2017 under the supervision of Dr.

Satendra Kumar and this has not formed the basis for the award of any degree, diploma,

associate ship, fellowship, titles in this or any other University or other institution of

higher learning.

I further declare that the material obtained from other sources has been duly

acknowledged in the thesis. I shall be solely responsible for any plagiarism or other

irregularities, if noticed in the thesis.

Signature of the Research Scholar : …………………………… Date:

Name of Research Scholar: Avni Tejas Patel

Place : Ahmedabad

iii

CERTIFICATE

I certify that the work incorporated in the thesis “A Study of Awareness, Attitude

and Factors influencing Personal Financial Planning for Residents of Gujarat”

submitted by Smt. Avni Tejas Patel was carried out by the candidate under my

supervision/guidance. To the best of my knowledge: (i) the candidate has not submitted

the same research work to any other institution for any degree/diploma, Associateship,

Fellowship or other similar titles (ii) the thesis submitted is a record of original

research work done by the Research Scholar during the period of study under my

supervision, and (iii) the thesis represents independent research work on the part of the

Research Scholar.

Signature of Supervisor: ……………………………… Date:

Name of Supervisor: Dr. Satendra Kumar

Place: CKSVIM, Vadodara

iv

Originality Report Certificate

It is certified that PhD Thesis titled “A Study of Awareness, Attitude and Factors

influencing Personal Financial Planning for Residents of Gujarat” by Avni Tejas

Patel has been examined by us. We

undertake the following:

a. Thesis has significant new work / knowledge as compared already published or are

under consideration to be published elsewhere. No sentence, equation, diagram,

table, paragraph or section has been copied verbatim from previous work unless it

is placed under quotation marks and duly referenced.

b. The work presented is original and own work of the author (i.e. there is no

plagiarism). No ideas, processes, results or words of others have been presented as

Author own work.

c. There is no fabrication of data or results which have been compiled / analysed.

d. There is no falsification by manipulating research materials, equipment or

processes, or changing or omitting data or results such that the research is not

accurately represented in the research record.

e. The thesis has been checked using turnitin (copy of originality report attached) and

found within limits as per GTU Plagiarism Policy and instructions issued from time

to time (i.e. permitted similarity index <=25%).

Signature of the Research Scholar: …………………………… Date:


Place : Ahmedabad

Signature of Supervisor: ……………………………… Date:


Place: CKSVIM, Vadodara.

vii

PhD THESIS Non-Exclusive License to GUJARAT TECHNOLOGICAL UNIVERSITY

In consideration of being a PhD Research Scholar at GTU and in the interests of the

facilitation of research at GTU and elsewhere, I, Avni Tejas Patel having Enrollment No.

129990992002 hereby grant a non-exclusive, royalty free and perpetual license to GTU on

the following terms:

a) GTU is permitted to archive, reproduce and distribute my thesis, in whole or in

part, and/or my abstract, in whole or in part ( referred to collectively as the

―Work‖) anywhere in the world, for non-commercial purposes, in all forms of

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mentioned in paragraph (a);

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under the authority of their ―Thesis Non-Exclusive License‖;

d) The Universal Copyright Notice (©) shall appear on all copies made under the

authority of this license;

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Archives. Any abstract submitted with the thesis will be considered to form part of

the thesis.

f) I represent that my thesis is my original work, does not infringe any rights of

others, including privacy rights, and that I have the right to make the grant

conferred by this non-exclusive license.

g) If third party copyrighted material was included in my thesis for which, under the

terms of the Copyright Act, written permission from the copyright owners is

required, I have

viii

obtained such permission from the copyright owners to do the acts mentioned in

paragraph (a) above for the full term of copyright protection.

h) I retain copyright ownership and moral rights in my thesis, and may deal with the

copyright in my thesis, in any way consistent with rights granted by me to my

University in this non-exclusive license.

i) I further promise to inform any person to whom I may hereafter assign or license my

copyright in my thesis of the rights granted by me to my University in this non-

exclusive license.

j) I am aware of and agree to accept the conditions and regulations of PhD including all

policy matters related to authorship and plagiarism.

Signature of the Research Scholar:


Date: Place: Ahmedabad Signature of Supervisor:


Date: Place: CKSVIM, Vadodara

Seal:

ix

Thesis Approval Form The viva-voce of the PhD Thesis submitted by Smt. Avni Tejas

Patel (Enrollment No. 129990992002) entitled “A Study of Awareness, Attitude and

Factors influencing Personal Financial Planning for Residents of Gujarat” was

conducted on………………… at Gujarat Technological University.

(Please tick any one of the following option)

The performance of the candidate was satisfactory. We recommend that he/she be

awarded the PhD degree.

Any further modifications in research work recommended by the panel after 3

months from the date of first viva-voce upon request of the Supervisor or request of

Independent Research Scholar after which viva-voce can be re-conducted by the

same panel again.

(briefly specify the modifications suggested by the panel)

The performance of the candidate was unsatisfactory. We recommend that he/she

should not be awarded the PhD degree.

(The panel must give justifications for rejecting the research work)

----------------------------------------------------- ----------------------------------------------------- Name and Signature of Supervisor with Seal 1) (External Examiner 1) Name and Signature

------------------------------------------------------- ------------------------------------------------------- 2) (External Examiner 2) Name and Signature 3) (External Examiner 3) Name and Signature

x

ABSTRACT

Purpose

Post Liberalization India has undergone many socioeconomic changes. Increase in per

capita income, increase in life span of an average person, changing social structure from

joint family to nuclear ones and lack of robust social security system; ask for a change in

management of personal finance of an individual. According to latest surveys and recent

researches suggest that Indians are good at savings, but then they save only in traditional

investment avenues with minimum risk. Awareness and preferences for new age

investment avenues are too less amongst Indians. As financial well-being of any individual

depends upon how well they manage their personal finance, to assess the overall

awareness of Personal Financial Planning and its components has prime importance. The

study has tried to assess the financial literacy awareness and attitude towards Personal

Financial Planning of the residents of Gujarat.

Research Methodology

Descriptive research was conducted to study the respondent‘s awareness and attitude

towards Personal Financial Planning in state of Gujarat. Secondary data which was

collected from various books, Journals, websites, articles laid foundation for the study.

Primary data was collected with quota sampling technique. 600 salaried employees from

four major cities of Gujarat: Ahmedabad, Baroda, Rajkot, Surat were selected. 600 salaried

employees were further bifurcated as 200 Government Employees, 200 Pvt. Sector and

200 Public Sector employees. Chi Square, Mann Whitney U test, Kruskal Wallis, Factor

Analysis and Structural Equation Modeling technique have been used to analyze the data.

Findings

Present study has tried to assess the financial literacy of the respondents of Gujarat. For

that, respondents were asked eight questions based on financial numeracy and concepts.

Results suggest that respondents possess fair financial literacy. Respondents are aware

xi

about all traditional Investment Avenues. Awareness Related to Non-Conventional

Avenues like derivatives, Money Market etc. is less. Attitude towards Overall PFP is

Positive. Awareness for Retirement Planning & Estate Planning is little low and

respondents possess little negative attitude towards them. Respondents feel that their

Personal Financial Plan is not balanced and they require expert to manage the same.

Implications

There are very few studies done in the area of comprehensive Personal Financial Planning

in India and especially in the state of Gujarat. This study will help individual to better

understand process and components of PFP. Apart from them it will help financial

institutions, Financial Planners and Investment Advisors to understand the attitude of their

customers and help them in a better manner. The study has created base for the future

detailed study to be done in the area of PFP.

Research Limitations and Future Scope of the Study

The study is limited to 600 salaried employees of state of Gujarat; further study can be

extended towards other state too. Further research can be carried out on businessmen and

professionals also. The present study has focused on awareness and attitude as independent

components. Further model showing linkages between Financial Awareness, Attitude,

Behavior and Financial Well-being can be established.

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ACKNOWLEDGEMENT

At the outset, I would like to express my heartfelt gratitude towards my guide and mentor

Professor (Dr.) Satendra Kumar, Professor and Head, Research Center, C K Shah

Vijapurwala Institute of Management, Vadodara for guiding me throughout the journey of

the doctoral research. He has been the continuous source of motivation and inspiration.

Thank you will be the very small word against the knowledge and compassion he

bestowed throughout.

I also like to express my deepest gratitude towards the DPC Members, Dr. P.G.K.

Murthy, Dean, PhD Program, Faculty of Management, Parul University, Vadodara & Dr.

Dhaval Maheta, Department of Business & Industrial Management, VNSGU, Surat for

their constant guidance throughout all the DPC and Research Weeks. Their feedback and

endless support helped me to work much better.

I will like to express my sincere gratitude towards Dr. Hitesh Ruparel, Director General,

GLS University and Dean, Faculty of Management, GLS University for providing all the

support and encouragement to complete my study on time.

Next, I will like to thank Dr. Rajesh Khajuria and entire team of C K Shah

Vijapurwala Institute of Management, Vadodara for conducting all my DPC and

provided me all the support and resources required during all these years. I will also like to

extend the thanks towards entire team of Gujarat Technological University for all their

support.

Again I like to mention the special thanks to Dr. Dhaval Maheta & Dr. Hitesh Parmar

for helping me understand technical concepts of Statistical Analysis through the

workshops they have conducted and assisted me whenever I required.

I will like to thank few people from the industry, who helped me to prepare my

questionnaire and collecting primary data. My sincere thanks goes to Mr. Jagat Parikh,

Mrs. Parul Shah & Ms. Khushma Kanuga, Director, KGMS Broking & Research (P)

Ltd. Who had been my mentors during my corporate life and have laid the foundation for

my research work in the area of Financial Planning.

xiii

Journey of this research would not have been possible without the blessings and endless

support of my family members. I will like to express my gratitude towards My loving

Parents for all their efforts and encouragement they have given throughout my life.

Thank you Mom & Dad for encouraging me and providing endless support.

Tejas, My husband, who always stood by me, for everything I need. One who always tried

to come up with the solution of any problem I faced throughout this tenure. A thank you

will be the very small word for him. He has been continuous source of motivation for me.

Special love to my adorable daughter Jiya, for all the maturity she demonstrated through

the tenure.

Lastly, I thank Almighty God and Guruji for being with me all the time and guiding me

with their divine light.

Avni Patel

Research Scholar

Gujarat Technological University

xiv

Table of Contents

DECLARATION ......................................................................................................................... ii

ABSTRACT.................................................................................................................................. x

ACKNOWLEDGEMENT ...........................................................................................................xii

List of Abbreviations ................................................................................................................xviii

List of Figures ............................................................................................................................. xx

List of Tables ............................................................................................................................. xxi

List of Appendices .................................................................................................................... xxiv

CHAPTER - 1 .............................................................................................................................. 1

INTRODUCTION ....................................................................................................................... 1

1.1 Definition of Personal Financial Planning ....................................................................... 1

1.2 Need for Personal Financial Planning ............................................................................. 1

1.3 Components of Personal Financial Plan (PFP) ................................................................. 3

1.4 Process of PFP ............................................................................................................... 3

1.5 Definitions and Concept of Financial Literacy ................................................................ 4

1.6 Need of Financial Literacy ............................................................................................. 4

1.7 Approaches to Calculate Financial Literacy .................................................................... 5

1.8 Rationale of the Study .................................................................................................... 6

1.9 Organization of Thesis ................................................................................................... 6

1.10 Personal Financial Planning Process ............................................................................... 9

1.11 Components of PFP in details ....................................................................................... 10

1.11.1Money Management ................................................................................................... 10

1.11.2 Insurance Planning .................................................................................................... 11

1.11.3 Investment Planning .................................................................................................. 14

1.11.4 Retirement Planning .................................................................................................. 24

1.11.5 Estate Planning.......................................................................................................... 26

1.12 Financial Planning Strategies based on Life Cycle Stage ................................................ 27

CHAPTER - 2 ............................................................................................................................ 30

Literature Review ...................................................................................................................... 30

2.1 Prelude .............................................................................................................................. 30

2.2 Literature Review – Financial Literacy & Overall Personal Financial Planning ................. 30

2.2.1 Importance of Financial Literacy and Financial Planning ............................................. 30

xv

2.2.2 Researches done on Financial Literacy and Financial Planning across the world .......... 32

2.2.3 Researches done in India ............................................................................................. 41

2.3 Literature Review Related to various Components of Personal Financial Planning ........... 47

2.3.1 Money Management ................................................................................................... 47

2.3.2 Investment Management ............................................................................................. 48

2.3.3 Mutual Funds ............................................................................................................. 50

2.3.4 Insurance.................................................................................................................... 51

2.3.5 Retirement & Estate Planning ..................................................................................... 53

2.4 Research Gap ................................................................................................................... 56

Chapter 3 ................................................................................................................................... 57

Research Methodology .............................................................................................................. 57

3.1 A Brief Overview .............................................................................................................. 57

3.2 Objectives of the Study ...................................................................................................... 57

3.3 Research Questions ............................................................................................................ 57

3.4 Research Hypotheses ......................................................................................................... 58

3.5 Scope of the Study ............................................................................................................. 60

3.6 Research Design ................................................................................................................ 60

3.7 Sample Design ................................................................................................................... 61

3.7.1 Sampling unit .............................................................................................................. 61

3.7.2 Sampling Technique .................................................................................................... 61

3.7.3 The Sample size .......................................................................................................... 61

3.8 Data Sources ...................................................................................................................... 62

3.8.1 Secondary Data ........................................................................................................... 62

3.8.2 Primary Data ............................................................................................................... 62

3.9 Planning of Data Collection ............................................................................................... 62

3.10 Overview of Variables, Scaling Technique and Data collection Instrument – Structured

Questionnaire .......................................................................................................................... 63

3.10.1 Variables Identified for the study ............................................................................... 63

3.10.2 Overview of Questionnaire ........................................................................................ 64

3.10.3 Details of the Pilot Study ........................................................................................... 65

3.10.4 Reliability Test .......................................................................................................... 65

3.11 Various Statistical Tests and Tools Used .......................................................................... 65

CHAPTER - 4 ............................................................................................................................ 67

Analysis & Interpretation ......................................................................................................... 67

4.1 Introduction ....................................................................................................................... 67

4.2. Demographic Profile of the respondents ............................................................................ 67

xvi

4.2.1. Location ..................................................................................................................... 67

4.2.2. Job Type .................................................................................................................... 68

4.2.3. Age ............................................................................................................................ 68

4.2.4. Gender ....................................................................................................................... 69

4.2.5. Education ................................................................................................................... 70

4.2.6. Experience ................................................................................................................. 71

4.2.7. Income ....................................................................................................................... 72

4.2.8. Marital Status ............................................................................................................. 73

4.2.9. Savings ...................................................................................................................... 74

4.3 Financial Literacy .............................................................................................................. 76

4.3.1. Frequency Analysis .................................................................................................... 76

4.3.2. Non Parametric Tests: Chi-Square Test ...................................................................... 81

4.4 Awareness- level for various Investment Avenues ............................................................. 88

4.4.1 Frequency Analysis ..................................................................................................... 88

4.4.2 Inferential Statistics Pertaining to Awareness of Different Investment Avenues .......... 95

4.5 Attitude towards Personal Financial Planning................................................................... 117

4.6 Factor Analysis – I ........................................................................................................... 123

4.7 Factor Analysis - II – Overall Financial Planning ............................................................. 131

4.8 Confirmatory Factor Analysis - I ................................................................................ 135

4.9 Confirmatory Factor Analysis – II .............................................................................. 141

4.10 Structural Equation Modeling..................................................................................... 145

4.10.1 The Base Model ...................................................................................................... 145

4.10.2 First Modification (e47↔ e48) ................................................................................ 152

4.11 Association between Different Demographic Factors and Attitude of Personal Financial

Planning. ............................................................................................................................... 154

4.12 Linkages between Financial Literacy and Awareness related to different Investment

Avenues. ............................................................................................................................... 170

CHAPTER – 5 ......................................................................................................................... 173

Findings & Discussions............................................................................................................ 173

5.1 Introduction ..................................................................................................................... 173

5.2 General Findings.............................................................................................................. 173

5.3 Findings related to Financial Literacy .............................................................................. 174

5.3.1 Association between different demographic factors and financial literacy .................. 175

5.4 Findings related to Awareness of different Investment Avenues ....................................... 177

5.4.1 Inferential Statistics Pertaining to Awareness of Different Investment Avenues ......... 178

5.5 Findings related to Attitude and Factors Influencing PFP ................................................. 180

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5.5.1 Inferential Statistics with regards to Attitude towards PFP ......................................... 182

CHAPTER - 6 .......................................................................................................................... 189

Conclusion & Scope of Future Research ................................................................................ 189

6.1 Conclusion....................................................................................................................... 189

6.2 Limitations of the Study ................................................................................................... 190

6.3 Implications of the Study ................................................................................................. 190

6.4 Scope of the Future Research ........................................................................................... 191

List of References...................................................................................................................... 192

APPENDIX A ........................................................................................................................... 203

Copy of Questionnaire ............................................................................................................... 203

APPENDIX B ........................................................................................................................... 208

List of Publications .................................................................................................................... 208

xviii

List of Abbreviations

CFA Confirmatory Factor Analysis

CSO Central Statistics Office

ELSS Equity Linked Saving Schemes

EFA Exploratory Factor Analysis

EPF Employee Provident Fund

ETF Exchange Traded Funds

FD Fixed Deposits

FMP Fixed Maturity Plans

F & O Futures & Options

GDP Gross Domestic Product

G- Sec Government Securities

KVP Kisan Vikas Patra

MCX Multi Commodity Exchange of India Ltd.

MF Mutual Funds

MIP Monthly Income Plans

MMMF Money Market Mutual Funds

NCA Non Conventional Avenues

NCD Non Convertible Debentures

NCDEX National Commodity & Derivatives Exchange Ltd.

NPS National Pension System

NSC National Savings Certificate

PACFL Presidents Advisory Council on Financial Literacy

PFP Personal Financial Planning

PFRDA Pension Fund Regulatory and Development Authority

xix

PPF Public Provident Fund

RBI Reserve Bank of India

SEBI Securities and Exchange Board of India

SEM Structural Equation Modeling

ULIP Unit Linked Insurance Plan

xx

List of Figures

FIGURE 2. 1 - Possible Causes of Financial Behaviour ............................................................... 32

FIGURE 2. 2 - Research Model on Financial Literacy ................................................................. 38

FIGURE 4. 1 - Age of the Respondents ....................................................................................... 69

FIGURE 4. 2 - Gender of the respondents .................................................................................... 70

FIGURE 4. 3 - Education of the Respondents .............................................................................. 71

FIGURE 4. 4 – Experience of the respondents ............................................................................. 72

FIGURE 4. 5 – Income of the respondents ................................................................................... 73

FIGURE 4. 6 – Marital Status of the respondents ......................................................................... 74

FIGURE 4. 7 – Savings of the respondents .................................................................................. 75

FIGURE 4. 8 - Scree Plot ......................................................................................................... 126

FIGURE 4. 9 - Scree Plot a ....................................................................................................... 132

FIGURE 4. 10 – Factor Model ................................................................................................... 136

FIGURE 4. 11 – Factor Model a ................................................................................................. 141

FIGURE 4. 12 – SEM Base Model ............................................................................................ 145

FIGURE 4. 13 – SEM Modified Model ..................................................................................... 152

FIGURE 5. 1 – Association between Demographic Factors and Financial Literacy .................... 177

xxi

List of Tables

TABLE 1. 1 - Financial Planning Strategies Based on Life Cycle Stage ..................................... 29

TABLE 3. 1 – Sample Profile ...................................................................................................... 62

TABLE 4. 1 - Location of the respondents ................................................................................... 68

TABLE 4. 2 - Job Type of the respondents .................................................................................. 68

TABLE 4. 3 - Age of the respondents .......................................................................................... 69

TABLE 4. 4 – Gender of the respondents..................................................................................... 69

TABLE 4. 5 - Education of the respondents ................................................................................. 70

TABLE 4. 6 – Experience of the respondents ............................................................................... 71

TABLE 4. 7 – Income of the respondents .................................................................................... 72

TABLE 4. 8 – Marital Status of the respondents .......................................................................... 73

TABLE 4. 9 – Savings of the respondents .................................................................................... 74

TABLE 4. 10 – Literacy for Savings Bank Account ..................................................................... 76

TABLE 4. 11 – Literacy regarding concept of Inflation ............................................................... 77

TABLE 4. 12 – Literacy regarding concept of Time Value of Money........................................... 77

TABLE 4. 13 – Literacy regarding concept of Diversifications .................................................... 77

TABLE 4. 14 – Literacy regarding basics of Financial Planning .................................................. 78

TABLE 4. 15 – Literacy regarding basics of Risk & Returns Relationships .................................. 78

TABLE 4. 16 – Literacy regarding relationship of Bond Price & Interest Rates............................ 79

TABLE 4. 17 – Literacy regarding returns generated by financial assets in long run..................... 79

TABLE 4. 18 – Overall summary for Financial Literacy .............................................................. 80

TABLE 4. 19 – Financial Literacy of Respondents ...................................................................... 81

TABLE 4. 20 – Cross Tabulation - Age and Financial Literacy of the Respondent ....................... 81

TABLE 4. 21 - Chi-Square Tests – Age and Financial Literacy of the Respondent ....................... 82

TABLE 4. 22 – Cross Tabulation - Gender and Financial Literacy of the Respondent .................. 82

TABLE 4. 23 - Chi-Square Tests – Gender and Financial Literacy of the Respondent .................. 82

TABLE 4. 24 – Cross Tabulation - Education and Financial Literacy of the Respondent .............. 83

TABLE 4. 25 - Chi-Square Tests – Education and Financial Literacy of the Respondent .............. 83

TABLE 4. 26 – Cross Tabulation - Experience and Financial Literacy of the Respondent ............ 84

TABLE 4. 27 - Chi-Square Tests – Experience and Financial Literacy of the Respondent ........... 84

TABLE 4. 28 – Cross Tabulation – Job Type and Financial Literacy of the Respondent............... 85

TABLE 4. 29 - Chi-Square Tests – Job Type and Financial Literacy of the Respondent ............... 85

TABLE 4. 30 – Cross Tabulation - Income and Financial Literacy of the Respondent .................. 86

TABLE 4. 31 - Chi-Square Tests – Income and Financial Literacy of the Respondent .................. 86

TABLE 4. 32 – Cross Tabulation – Marital Status and Financial Literacy of the Respondent ....... 87

TABLE 4. 33 - Chi-Square Tests – Marital Status and Financial Literacy of the Respondent ........ 87

TABLE 4. 34 – Cross Tabulation - Location and Financial Literacy of the Respondent ................ 88

TABLE 4. 35 - Chi-Square Tests – Location and Financial Literacy of the Respondent ................ 88

TABLE 4. 36 - Awareness of Savings Account ............................................................................ 89

TABLE 4. 37 - Awareness of Fixed Deposit ............................................................................... 89

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TABLE 4. 38 - Awareness of Equity Shares ............................................................................... 90

TABLE 4. 39 - Awareness of Bonds ........................................................................................... 90

TABLE 4. 40 - Awareness of Derivatives .................................................................................... 90

TABLE 4. 41 - Awareness of Mutual Funds ................................................................................ 91

TABLE 4. 42 - Awareness of PPF .............................................................................................. 91

TABLE 4. 43 - Awareness of Other Post Office Schemes ............................................................ 92

TABLE 4. 44 - Awareness of Life Insurance ............................................................................... 92

TABLE 4. 45 - Awareness of Money Market ............................................................................... 93

TABLE 4. 46 - Awareness of Tax Saving Scheme ....................................................................... 93

TABLE 4. 47 - Awareness of Real Estate .................................................................................... 94

TABLE 4. 48 - Awareness of Non-Conventional Avenues ........................................................... 94

TABLE 4. 49 - Descriptive Statistics for Awareness of Financial Products .................................. 95

TABLE 4. 50 - Mann-Whitney U test – Gender and Awareness of Investment Avenues............... 96

TABLE 4. 51 – Mean Rank of Awareness with Age of the respondents ....................................... 97

TABLE 4. 52 – Test Statisticsa,b - Kruskal Wallis Test – Awareness Different Investment Avenues

among Age of the respondents ..................................................................................................... 99

TABLE 4. 53 – Mean Rank of Awareness with Education of the respondents ............................ 100


among Education of the respondents. ......................................................................................... 101

TABLE 4. 55 – Mean Rank of Awareness with Job Type of the respondents.............................. 102

TABLE 4. 56: Test Statisticsa,b - Kruskal Wallis Test – Awareness Different Investment

Avenues among Job Type of the respondents. ........................................................................... 104

TABLE 4. 57 – Mean Rank of Awareness with Experience of the respondents .......................... 105

TABLE 4. 58 : Test Statisticsa,b - Kruskal Wallis Test – Awareness Different Investment Avenues

among Experience of the respondents. ....................................................................................... 107

TABLE 4. 59 – Mean Rank of Awareness with Income of the respondents ................................ 108


among Income of the respondents. ............................................................................................. 109

TABLE 4. 61 – Mean Rank of Awareness with Marital Status of the respondents ...................... 110


among Marital Status of the respondents. ................................................................................... 112

TABLE 4. 63 – Mean Rank of Awareness with Location of the respondents .............................. 113


among Location of the respondents. ........................................................................................... 115

TABLE 4. 65 - Descriptive Statistics for Attitude of Personal Financial Planning ...................... 117

TABLE 4. 66 - Components wise Attitude regarding PFP .......................................................... 122

TABLE 4. 67 - KMO and Bartlett‘s Test ................................................................................... 123

TABLE 4. 68 - Communalities .................................................................................................. 124

TABLE 4. 69 – Total Variance Explained.................................................................................. 125

TABLE 4. 70- – Component Matrix .......................................................................................... 127

TABLE 4. 71 - Rotated Component Matrix ............................................................................... 128

TABLE 4. 72 – Labeling of Factors ........................................................................................... 129

TABLE 4. 73 – KMO and Bartlett's Test .................................................................................. 131

TABLE 4. 74 – Communalities.................................................................................................. 131

TABLE 4. 75 – Total Variance Explained ................................................................................. 132

TABLE 4. 76 – Component Matrixa........................................................................................... 133

TABLE 4. 77 – Rotated Component Matrixa .............................................................................. 133

TABLE 4. 78 – Labeling of Factors ........................................................................................... 134

xxiii

TABLE 4. 79 - Standardized Regression Weights: (Group number 1 - Default model) .............. 136

TABLE 4. 80 - Correlations: (Group number 1 - Default model) ................................................ 137

TABLE 4. 81 - Model Fit Indexes ............................................................................................. 138

TABLE 4. 82 - Standardized Regression Weights: (Group number 1 - Default model) ............... 142

TABLE 4. 83 - Correlations: (Group number 1 - Default model) ................................................ 142

TABLE 4. 84 Model Fit Index - 2 .............................................................................................. 142

TABLE 4. 85 - Regression Weights: (Group number 1 - Default model) .................................... 146

TABLE 4. 86 - Standardized Regression Weights: (Group number 1 - Default model) ............... 147

TABLE 4. 87 - Model Fit Index for SEM .................................................................................. 149

TABLE 4. 88 - Model Fit Index for SEM ( First Modification) .................................................. 153

TABLE 4. 89 - Mann-Whitney U test – Gender and Attitude towards PFP ................................. 154

TABLE 4. 90 – Mean Rank of Attitude with Location of the respondents .................................. 155

TABLE 4. 91 – Kruskal Wallis Test – Attitude towards PFP among Location of the respondents

.................................................................................................................................................. 157

TABLE 4. 92 – Mean Rank of Attitude with Age of the respondents.......................................... 157

TABLE 4. 93 – Kruskal Wallis Test – Attitude towards PFP among Age of the respondents ...... 159

TABLE 4. 94 – Mean Rank of Attitude with Education of the respondents ................................ 160

TABLE 4. 95 – Kruskal Wallis Test – Attitude towards PFP among Education of the respondents

.................................................................................................................................................. 161

TABLE 4. 96 – Mean Rank of Attitude with Job Type of the respondents .................................. 162

TABLE 4. 97 – Kruskal Wallis Test – Attitude towards PFP among Job Type of the respondents

.................................................................................................................................................. 163

TABLE 4. 98 – Mean Rank of Attitude with Experience of the respondents ............................... 164

TABLE 4. 99 – Kruskal Wallis Test – Attitude towards PFP among Experience of the respondents

.................................................................................................................................................. 165

TABLE 4. 100 – Mean Rank of Attitude with Income of the respondents................................... 166

TABLE 4. 101 – Kruskal Wallis Test – Attitude towards PFP among Income of the respondents

.................................................................................................................................................. 167

TABLE 4. 102 – Mean Rank of Attitude with Marital Status of the respondents ........................ 168

TABLE 4. 103 – Kruskal Wallis Test – Attitude towards PFP among Marital of the respondents169

TABLE 4. 104 – Mean Rank of Financial Literacy with Awareness of Different Investment

Avenues .................................................................................................................................... 170

TABLE 4. 105 – Kruskal Wallis Test – Financial Literacy with Awareness of Different Investment

Avenues .................................................................................................................................... 171

TABLE 5. 1 - Summary of Major Findings ................................................................................ 184

xxiv

List of Appendices

Appendix A : Questionnaire

Appendix B : List of Publications

1

CHAPTER - 1

INTRODUCTION

1.1 Definition of Personal Financial Planning

―Financial Planning is the process of meeting one‘s life goals through the proper management

of personal finances.‖ ( Kapoor, 2008). Proper Personal Financial Planning leads to Financial

Satisfaction and Well– being. As Every person, family, or household has a unique needs and

financial position , their financial planning must also be carefully planned to meet specific

needs and goals.

According to Hallman and Rosenbloom, Personal Financial Planning is ―The development

and implementation of total coordinated plans for the achievement of one's overall financial

objectives.‖ Individuals and families have many goals or objectives in life to fulfil. For the

same they will have to save, accumulate and grow their money. The common life goals of

individuals are: Education and Marriage of Children, Buying a house and a Comfortable

Retirement. Other short term goals may include funding vacations, purchasing a car and fulfil

debt (home loan, car loan), etc. For achievement of short term or long term goals, proper

management of Personal Finance is essential. Financial Planning is all about managing

finances of an individual or a family. It means Proper Management of Income, Expenses,

Assets, Liabilities, Insurance, Taxation and Estate, so that one can successfully achieve all

their desired goals and enjoy financial well-being and hence financial satisfaction.

1.2 Need for Personal Financial Planning

India, post liberalization has experienced much change in terms of Economic Growth and

Social Structure. Basically, it serves as a base for the need of robust Personal Financial

Planning. Major factors which are relevant and important for the need of Personal Financial

Planning are discussed below.

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• Longer life span and lack of social security

According to economic survey 2012-13, the average life expectancy which was around 60

years in 1980-81, has increased to 64.6 (for males) and 67.6(for females in 2010-11). People

live longer now as compared to the earlier generations. Few generations ago, someone would

start earning by the time one reached the age of 20 years, work till the age of 58 years and

live till around 65 years. In such a case, one earns for 38 years and lives off the retirement

savings for the next 7 years. In recent times, one starts working at 25 years of age. Retire at

age of 60 years and life span of 80 years. So an individual works and earns for 35 years to

support post retirement life of 20 years. Government of India has withdrawn Pension Plans

for government employees and introduced New Pension Scheme (NPS), which is defined

contribution plan.

• Proliferation of numerous products

Post 1991, after implementation of LPG, many new products and services have been

introduced by the Life Insurance Industry, Banking industry and other NBFCs. New financial

products like Mutual Funds, Derivatives, Commodities, Portfolio Management Schemes,

Non-Convertible Debentures and Unit Linked Insurance Plans have been introduced for the

investors. It is difficult for investors to select financial product to tailor their needs.

• Increasing income and savings levels

Indian Economy has been growing at a 6% - 9% rate of GDP growth driven mainly by

domestic consumption. According to data, average Gross Domestic Saving was Rs.1067.30

Billion in 1980-81 which has increased to 24819.31 in 2010-11 (RBI). Per Capita Personal

Disposable Income was Rs. 23712 in 2004-05 which has increased to Rs. 66281 in 2012-13

(CSO). The educated and urban middle class has experienced increase in income levels. At

the same time, unlike our counterparts in many of the developed countries, Asians, and

especially Indians believe in saving money. India has a considerable household savings ratio

which is more than 25%. Here again investors need guidance to channelize their savings.

• Increasing level of borrowings

In today‘s financial markets, there is an easy access to loans resulting in increased levels of

borrowings by people. If not managed carefully, this may lead to a serious mismatch in

earnings and repayment leading to problems in cash flow. Leveraging the low interest rates is

a critical aspect which needs to be explained to the borrowers.

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• Inflation

Indians are wise savers but poor investors (Visa 2012). Indians save money into traditional

risk free products like Bank FD, Saving Bank Account, Insurance. This may not be sufficient

to overcome the impact of increase in inflation. Therefore, a well balanced Financial Plan is

required to protect the investors from the impact of inflation.

• Nuclear families & Change in Life Style

Traditional Indian social system of Joint families provided great safety net for most

individuals as it shared the resources and difficulties. Growing urbanisation during the past

decades have led to the birth of nuclear families. These smaller families have a need to plan

better. They can no longer depend on the support of the larger family since they might be

geographically distant. So, one needs a comprehensive financial plan to meet the

contingencies and to attain the short term and long term goals.

1.3 Components of Personal Financial Plan (PFP)

According to Garman and Forgue (1988) & CPFA – NISM (2009), Personal Financial

Plan is the balance of following components:

Planning Personal Finances

Managing Personal Finances

Managing Expenditure

Protecting Income & Assets

Managing Tax Planning

Planning Investments

Retirement Planning

Estate Planning

1.4 Process of PFP

According to Gitman & Joehenk ( 1990) The financial planning process is a logical, six-step

procedure. The steps involved are listed below:

determining your current financial situation

developing financial goals

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identifying alternative courses of action

evaluating alternatives

creating and implementing a financial action plan, and

re-evaluating and revising the plan.

1.5 Definitions and Concept of Financial Literacy

Various researchers and organizations have provided different definitions of financial

literacy. Some of the definitions are discussed here. Financial Literacy is a combination of

awareness, knowledge, skill, attitude and behaviour necessary to make sound financial

decisions and ultimately achieve individual financial well-being. (OECD INFE, 2011).

Financial Literacy is concerned with the understandings of basic financial concepts,

principles, skills and ability to understand key financial products to make good financial

choices. (Jariwala H., 2013). According to PACFL, ―Financial Literacy is the ability to use

knowledge and skills to manage financial resources effectively for a lifetime of financial

well-being‖. Lusardi & Mitchell (2007) have defined it as the most basic economic concepts

needed to make sensible savings and investment decisions. ANZ Bank (2008) has defined it

as the ability to make informed judgements and to take effective decisions regarding the use

and management of money.

1.6 Need of Financial Literacy

Need of financial literacy is increasing significantly with deregulation and globalization of

financial markets. More choices are available for investment avenues with easy access to

credit cards and personal loan. According to one survey ―Indians are wise saver but poor

investors.‖ Saving rate in the country is increasing year by year and on the other hand

increase in spending on consumption and change of life style have led to increase in personal

and household debt levels. Countries like India with almost nil social security system

provided by government, corpus saved by investors are not sufficient enough to meet the

expenses and maintain same life style post retirement. The one reason for the same is, though

there are many diversified options available for investors to invest their money, Indian

investors still prefer safe options like Bank FD, Post office schemes. Returns generated by

these instruments do not beat the increasing rate of inflation. So investors‘ financial well-

being is hampered. So it is required that investors should not only be aware about financial

http://www.mhhe.com/business/finance/kdh6e/graphics/kapoor6epf/els/01003.pdf

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market and its different components and be more informed about economic variables

impacting their financial decisions, they should be able to plan their finances carefully,

keeping into mind their own financial goals and objectives. Beal and Delpachitra (2003) had

stated that, ―the need for financial literacy has grown rapidly over the last decade because

financial markets have been deregulated and credit has become easier to obtain, as financial

institutions compete strongly with each other for market share.‖ Financial literacy is

important because well informed, well-educated consumers should make better decisions for

their families; increase their economic security and well-being; contribute to vital thriving

communities; and foster community economic development‖.(Hogarth, 2002)

1.7 Approaches to Calculate Financial Literacy

As discussed, financial literacy is associated with financial well-being and financial

satisfaction of an individual. Increase in Financial Literacy will help investors to make

informed choices, which, in turn, helps nation to build strong financial system and will help

to achieve goal of Financial Inclusion. Many government bodies like SEBI & RBI has

realized the value of financial literacy and to increase that, they have started various financial

education programmes. To design the program for investors, one really needs to know what is

the current level of financial literacy that investors possess and then course can be designed

to suit their literacy level.

There are different methods adopted by researchers and certain organizations to measure the

current level of financial literacy of the investors. Definitions on Financial Literacy provided

by different researchers serve as the basis for items to be included in research instrument to

measure the financial literacy. Some researchers have developed the scale for Self-

Assessment of Respondents and some have given performance test. Basic items covered in

different researches are Time value of Money, Calculation of Interest Rate, Relation between

Risk & Return, Inflation, Diversification etc.

Scale used in the present study is adopted from Lusardi & Mitschell ( 2008) and modified

according to Indian context.

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1.8 Rationale of the Study

Financial well-being of the individual depends upon Financial Attitude and Financial

Behavior which, in turn, depends upon Financial Literacy of an Individual. Many researches

have been done in area of Financial Literacy and some of the aspects of investment decision

making in India, but there is no comprehensive study so far that deals in the overall personal

financial planning aspects of the individual decision making process and/or which has

attempted to measure the awareness of overall personal financial plan, attitude of the

respondents for the same and factors influencing personal financial planning of an Individual.

The present study attempts to fill this gap in the current research.

1.9 Organization of Thesis

Chapter – 1 Introduction

The chapter is divided in two major sections. First Section introduces concept of Financial

Planning, Process of Financial Planning, Overview of Components of Financial Plan, and

Financial Literacy. Second section gives details on different components of Personal

Financial Plan.

Chapter – 2 Literature Review

The chapter discusses various research studies reported in Journals, periodicals, thesis on

Financial Literacy and Financial Plan, need for the same and literature related to various

components of Personal Financial Planning. After reviewing these research studies, the

research gap was identified at the end of this Chapter.

Chapter - 3 Research Methodology

The chapter discusses the research methodology adopted for the present study, which

includes objectives of the study, hypotheses, scope, research design, sampling plan, overview

of questionnaire, pilot test, sources of the data, and data analysis tools & techniques.

Chapter – 4 Analysis & Interpretation

The Chapter discusses various tools and test applied on data to obtain the objectives of the

research. It discusses descriptive statistics as well as inferential statistics.

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Chapter – 5 Findings

The Chapter discusses overall study and highlights the major findings which have been

derived from the analysis of data.

Chapter – 6 Conclusions, Major Contribution and Scope for the Future Research

The chapter discusses overall conclusion of the study, beneficiaries and contribution of the

study. It also discusses limitation of the present study and provides scope for the future

research work.

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Part – II

Personal Financial Planning

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1.10 Personal Financial Planning Process

Personal Financial Planning is the management of Personal Finance of Households. It

includes management of Debt, i.e., Personal Loan, Credit Card etc., Money Management,

maintaining liquidity for emergency; obtain short term & long term goals through proper

investments (keeping into mind the taxation, i.e., Tax Planning), managing risk of life with

Insurance, Planning for safe/comfortable retirement and proper planning of transference of

one‘s assets after the death. Steps for Personal Financial Planning are listed below:

(1) Determine your current financial position.

(2) Identify financial goals.

(3) Evaluate all the alternatives available.

(4) Create financial plan and make it into action.

(5) Revaluate it periodically and revise, if necessary.

Step 1: Determine Your Current Financial Position

This step includes preparing a personal financial budget. One will list down all their income

and expenses, savings, investments and debts. This will create a base to prepare your

financial plan.

Step 2: Identify financial goals

Next step involves identifying financial goals of the life. One should remember that goals

should be realistic and quantifiable in terms of money. Also attach timelines to the goals.

Some of the major and minor goals in an individual‘s life are listed below.

Major Long Term Goals in Life can be

• Children‘s Education, Children‘s Marriage, Purchasing a House, An Independent

Retirement

Short Term Goals in Life can be

• Vacations, Purchasing a Car, Purchasing electronic gadgets, paying off the loans.

Step 3: Evaluate all the alternatives available

Taking into consideration one‘s current financial position and objectives to attain; one needs

to decide the allocation of money in to various alternatives available. There are different

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investment vehicles available in Indian Capital Market, like equity shares, FD, Bonds, Mutual

Funds, Futures & Options, etc. One can choose the investment vehicle according to once

objective, tenure of investment and risk profile of the individual. One should also consider

opportunity cost of selecting a particular alternative. Opportunity cost is what you give up by

making another choice.

Step 4: Create financial plan and make it into action

Next step is to prepare a written Financial Plan. Here, the allocation of money will have to be

spelled and written clearly. To implement financial plan, one can take help of Investment

brokers, agents or certified financial planners to purchase stocks, mutual funds, insurance etc.

Step 5: Revaluate it periodically and revise, if necessary

Financial planning is a dynamic process that does not end when you take a particular action.

One need to regularly assess their plan and check whether it is aligned with objectives or not.

Changing personal, social, and economic factors may require more frequent assessments.

1.11 Components of PFP in details

1.11.1 Money Management

Money management is the day-to-day financial activities needed to manage personal

economic resources, while working toward long-term financial security.(Kapoor J., 2008).

Money Management includes:

Storing and maintaining personal financial records and documents.

One can prepare home file. In that, one can maintain the records which are often

required and can be referred when needed. For example, employment records, tax

returns, financial services records, investment statements, copy of insurance policies,

bills of consumer purchase, statement of loans etc. Some documents can be kept at

Safe deposit lockers, e.g., Birth Certificate, Marriage Certificate, Mortgage Papers,

Wills, Insurance policy, Certificate of investments. One can also keep computerized

records of personal budget, bank statements, investment statements, tax returns, etc.

Creating a personal balanced sheet and cash flow statements

Personal balanced sheet will include: List of Assets one has, like, liquid assets, real

estate, investment assets; Liabilities one has, like, Personal loans, credit card, debts,

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Home loans etc. Net worth is difference of one‘s assets and liabilities. Personal

balanced sheet determines your current financial position. Cash flow statements will

record inflow of income through various sources like salary, dividends etc. and

outflow of income like fixed and variable expenses.

Creating a personal budget

Budget is a plan for spending in the future, such as for the next month, next quarter or

next year. Budgeting helps a person to live within their income, reach their financial

goals, prepare for financial emergencies, and develop positive attitude towards

financial management. Effective budget will help one to achieve their financial goals.

Steps to prepare personal financial budget:

1. One can list all their future financial goals.

2. Estimate Income from all the sources.

3. Calculate the amount required for emergency purpose, periodic expenses and

financial goals.

4. Calculate the amount required for fixed expenses like home loan installments and

variable expenses like normal household expenses.

5. Set budget for savings.

6. Compare budgeted amount of inflow and outflow with actual amount, and

determine variance. Take necessary corrective actions in spending pattern to

reduce the variance.

1.11.2 Insurance Planning

Insurance Planning is determining the amount of insurance cover required by the individual

to cover the risk associated with one‘s life, medical emergencies and assets.

In case of pre-mature death of the primary earner of the family, the family‘s income will stop.

In that case, the family will need some source of money which can generate income to cover

the expenses and liabilities for the rest of their life. One can purchase Life Insurance policy to

protect their family in the event of death of primary earner. One need to calculate amount

required for Insurance Coverage.

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One can take up health insurance popularly known as Mediclaim to meet with medical

emergency. Assets like house, automobiles and other assets can be protected under Property

Insurance. Health & Property Insurance are covered under General Insurance.

Different Types of Life Insurance Products

1.11.2.1 Endowment Plan

It is a policy with a savings feature. At maturity or in case of death of policy holder, a lump

sum amount is paid equal to the sum assured and bonuses. It is considered as more expensive

than whole life or term plan. One can choose the term from 5 to 30 years. Endowment

insurance is a popular policy, which provides protection to self and family. It also acts as a

good tool for retirement planning.

1.11.2.2 Whole Life insurance

It is designed to provide life insurance cover for the entire life of the insured. Insured person

pay the premium throughout the lifetime. Generally premium amount remains the same

throughout the tenure. It is generally used when the need of the life insurance is life- long.

The benefits of whole life policies are guaranteed death benefits, fixed annual premiums. The

drawback of the same is that, the internal rate of return generated by the policy may not be

competitive with other investment options available.

1.11.2.3 Money Back Insurance

Under this policy certain percentage of sum assured is returned to policy holder on regular

interval. At the maturity the remaining amount is paid as the maturity amount. It is a savings

plan with the added advantage of life cover and regular cash inflow.

1.11.2.4 Children’s Plans

Children‘s plans are taken on life of parents for benefit of children. It ensures that, in case of

death of the parents, the child gets the sum assured and the insurance company may fund

future premiums so that the child can get the value accumulated at the end of the term.

Children‘s plans are suitable for passing on a financial asset to a child.

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1.11.2.5 Pension Plans

Pension Plans or annuities are Plans used for Retirement benefits. An individual can invest as

a lump sum amount or periodical amount till age of retirement. Maturity amount can be taken

as a monthly payment (annuity) from the accumulated funds. One can also withdraw one

third of total accumulated amount once the person has retired. There are two types of

Annuities: Immediate and Deferred. In Immediate Annuity Plan, one pays premium in Lump

sum mode and retirement benefits starts soon after the retirement. In Deferred Annuity

Policy, insurer regularly pays premiums to Insurance Company till the vesting age or date.

Annuity starts after the age of retirement.

1.11.2.6 ULIP

It is a combination of investment and insurance. Corpus of ULIP is invested in a basket of

market linked securities. The major advantages of market-linked plans are that they leave the

asset allocation decision in the hands of investors themselves. They are in control of how to

distribute the funds among the broad class of instruments. ULIPs are little expensive than

pure term plans or endowment plans. There are charges like Premium Allocation charges,

fund management charge, policy administration charge, and mortality charge etc. which are

levied to insurers. One should consider their own risk appetite, tenure for investment before

purchasing ULIP plan.

1.11.2.7 Term Insurance

Term insurance is an insurance product, which covers only risk there is no element of

investment associated with it. It pays the sum assured only when the policy holder dies during

the period for which is determined. Term insurance is the cheapest form of life insurance.

Term life insurance provides for life insurance coverage for a specified term of years for a

specified premium. If insurer survives the tenure then he receives nothing.

Different Types of Non-Life Insurance Products

1.11.2.8 Property

Insuring property means insurance of buildings, machinery, stocks etc. against risks to fire,

theft etc. It covers the protection of building against natural and man-made disasters.

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Property insurance covers Fire Insurance, Burglary Insurance, and Marine Insurance etc.

Things which are not covered in property insurance are wilful destruction of property,

damage due to wear and tear and Art and antiques.

1.11.2.9 Health – Medi-claim policy

Health insurance / Medi-claim protect insurer and their family members against any financial

contingency arising due to a medical emergency. This policy provides for reimbursement

(Many policy have cashless options also these days) of hospitalisation/ domiciliary treatment

expenses for illness/ disease or accidental injury. Medical expenses incurred during period of

30 days prior to and period of 60 days after hospitalisation are covered. Normal exclusions

include all diseases/ injuries which are pre-existing at the time of taking the cover. There are

many variants and riders available on simple health insurance plan. Facility like group health

insurance and family floaters are also available, which cover the group of employees and all

the family members respectively.

1.11.2.10 Motor Insurance

Under this Insurance, the company indemnifies the insured in the event of accident caused by

or arising out of the use of the motor vehicle anywhere in India against all sums including

claimant‘s cost and expenses which the insured shall become legally liable to pay in respect

of (i) death or bodily injury to any person, (ii) damage to the property other than property

belonging to the insured or held in trust or custody or control of the insured. The insurance of

motor vehicles against damage is not made compulsory but the insurance of third party

liability arising out of the use of motor vehicles in public places is made compulsory.

1.11.3 Investment Planning

Investment Planning defines optimum asset allocation of funds based on risk appetite,

financial objectives and time horizon of investor. Plethora of investment options are

available today to park surplus money. There are many different financial products available

under different asset class; one should carefully choose the Financial Products so that they

can achieve their financial goals within stipulated time. Things to be considered while

choosing the investment products are discussed below:

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Returns generated by the product

The Rate of return generated by the investment product can be in the form of capital gains, or

regular cash flows, or both. A retired person may be more interested in regular cash flows to

cater for his day to day needs, where as a younger person in accumulation phase may be more

concerned with growth of his investment for creating a corpus for his retirement.

Capital Protection

Protecting the capital is the important criteria while selecting an investment avenue. Each

investment avenue has risk and return associated with it. Risk and Return goes hand in hand.

Higher the risk, more is the expected return . One must understand risk and return associated

with any product before investing his money in any of the investment products.

Inflation

Inflation is the rise in general price levels of goods and services in an economy over a period

of time. Inflation erodes purchasing power of money. The objective of investment is to get

returns in order to increase the value of the money. Investment product should be able to beat

inflation.

Taxation

Return generated from investment assets is liable to taxation. The real return from any

investment product would be the return after taxation.

Liquidity

Liquidity is the ability to convert an investment product into cash quickly. The amount

needed for any emergency should be invested in instruments having higher liquidity.

Different Investment Avenues

Investment Avenues can be classified as Financial Assets and Non- Financial Assets.

Financial Assets

Financial Assets can further be classified into Cash instruments, Equity Instruments and Debt

Instruments.

Cash Instruments

Money in the Cash is the most Liquid asset available. But the cash in hand can‘t generate any

return so over a period of time because of inflation value of money can be eroded. One can

keep money in cash form for the purpose of emergency expenses. On an average three to six

months of our average monthly expenses should be kept in cash instruments.

Various cash instruments could be:

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i) Cash in Hand

ii) Cash in Bank

Debt Instruments

Investing money in debt instrument is like one lends their money. One may get stipulated

interest periodically on the capital invested. The capital is returned after the designated

period. Capital is relatively protected than equity instruments; returns are normally lower

than equity. Different debt instruments are: Small Saving Schemes, Government and

Corporate Debt Securities, Bank Fixed Deposits.

Small Saving Schemes can be further classified as:

1. Public Provident Fund

2. National Savings Certificates

3. Post office Monthly Income Scheme

4. Senior Citizen Saving Scheme

5. Post Office term deposit

6. Post office savings Accounts

7. Post office recurring deposit

8. Kisan Vikas Patra

9. Sukanya Samriddhi Account

1.11.3.1 Public Provident Fund (PPF)

The PPF account can be opened in branches of State Bank of India, Some Nationalized banks

and Post Offices. It can be opened by an individual for himself/herself, and or on behalf of a

minor of whom he/she is a guardian. Tenure of the PPF is 15 years. One can invest minimum

amount of Rs.500/- in the account maximum of Rs. 1, 50,000/-. One can invest a lump sum

amount or can invest in instalments not exceeding 12 per year. Amount invested in PPF per

year is eligible for deduction under sec 80C of Income tax Act 1961. The interest earned by

PPF is completely tax free in hand of investors. Interest rate is notified by the Central

Government in official gazette from time to time. Loan facility is also available on PPF.

Though maturity period is of 15 Years, one can partially withdraw the amount from 7th year

and every year thereafter. An account holder can withdraw 50% of his balance at the end of

the 4th or the 1st previous financial year, whichever is lower. Main benefit of PPF is that it is

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not subject to attachment (seizure of the account by Court order) under any order or decree of

a court. A person can have only one account in his name. Two accounts even at different

places anywhere in India are not permitted.

1.11.3.2 National Saving Certificates

NSC has a Five year term with tax benefits under section 80-C of Income Tax Act, 1961.

Minimum investment is Rs.500/- and there is no maximum limit for investment. It can be

bought by an individual or jointly. NRI, HUF, Companies, trusts, societies, or any other

institutions are not allowed to purchase the National Saving Certificates. Certificates can be

used as collateral to get loan from banks. Current interest rate is 7.9% p.a. One can avail NSC

from Post office.

1.11.3.3 Kisan Vikas Patra

One can invest minimum Rs.1000/- in KVP and it doesn‘t have any maximum limit on

investment. Amount will be matured in 113 months. Current Interest Rate on KVP is 7.6%.

Tax will not be deducted at source and one can withdraw the amount after two and a half

years of investment. It can be used as a collateral security for raising money. It can be

purchased from any departmental Post office.

1.11.3.4 Senior Citizen Savings Scheme

Investor age of 60 years and above is eligible for the same. It has 5 years maturity period.

NRIs and HUF are not eligible to invest in this scheme. Maximum limit on investment is

Rs.15, 00,000/-(Rupees fifteen Lac only. Any Post Office in India having the facility of

savings bank account, or an office or banking company or institution authorized by Central

Government, can operate this scheme. An investor can open more than one account subject

to the condition, that amount in all accounts taken together does not at any point of time

exceed Rs.15 Lac. The current interest rate is 8.4 % p.a. payable quarterly. The benefit of

section 80C is available on investment but interest is taxable at source.

1.11.3.5 Post Office Monthly Income Scheme (POMIS)

This scheme provides a regular monthly income to the depositors and has a term of 5 years.

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Minimum investment amount of investment is Rs.1500/- and maximum amount in case of

single account is Rs.4,50,000/-, and in case of joint account is Rs.9, 00,000/-. Current

Interest rate is 7.6 % p.a. payable monthly. Nomination facility is also available.

1.11.3.6 Post Office Time Deposits (POTD)

This is similar to FD of Banks. It can be opened at Post office by an individual. Any amount

of account can be opened by any individual in any of the post office. It can be open for 1

Year, 2 Years, 3 Years and 5 Years. Investment in 5 Years TD qualifies for deduction under

Section 80 C of Income Tax Act‘ 1961. Interest rates are calculated half yearly and

withdrawals are permitted after six months. Accounts can be pledged as a security for

availing a loan. Also nomination facility is available for this account.

1.11.3.7 Sukanya Samriddhi Account

It is a small deposit scheme, which can be opened in Post office. It has started in 2015 with

the objective of accumulating fund for Girl Child for her marriage and education purpose.

Amount invested in scheme is exempted under sec 80 C of Income Tax Act‘1961. A legal /

Natural guardian can open the account in name of the Girl Child. Account can be opened

upto the Age of 10 Years and mature at the age of 21 years. Minimum Investment amount is

Rs 1000 per year and Maximum is Rs. 1,50,000 per year. Current rate of interest is 8.4% p.a.

The Government and Corporate Debt securities include Government Securities, Treasury

Bills, Commercial Papers, Certificate of Deposits, Government Bonds, and Non-Convertible

Debenture etc.

Equity Instruments

1.11.3.8 Mutual Funds

Mutual Fund is a financial intermediary, which mobilise money from investors to various

avenues like equity, Bonds, G –Sec etc., in line with the investment objectives of the scheme.

Through mutual funds, one can invest in different class of assets. The fund mobilized through

Mutual Funds is handled by professional fund managers and they are parked in diversified

assets. The investor gets units of full amount they have invested. There is much transperacy

in the process and no hidden charges. One can transfer their money from one scheme to

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another scheme also. And Mutual Fund units can be redeemed easily so it provides

reasonable liquidity too.

Different types of Mutual Funds are described below:

Money Market / Liquid Funds

These categories of funds invest the corpus in Money Market instruments like T- Bills,

Certificates of deposit, Commercial papers etc. As these instruments are highly liquid funds

invested in MMMF, these can be redeemed at a very short notice. As money is invested in the

debt instruments capital is safe and so returns are low. But returns can be higher than Savings

Bank Account. These are suitable for investors looking to invest their short term surplus with

an objective of high liquidity with high safety.

Debt or Income Funds

These schemes invest the money in fixed income generating debt securities, issued by

different agencies like government, private companies, banks, financial institutions, and other

entities such as infrastructure companies/utilities. The main aim of these schemes is to

generate regular income at a low risk. As compared to the Liquid funds, these debt funds

have a higher risk of default by their borrowers and can generate higher return also. There are

varieties of debt funds available. Like Gilt Fund, FMP etc.

Gilt Funds

These funds invest the corpus in G- Sec. As G – Sec is issued by GOI, there is no credit risk

associated with the investments. But returns generated by G – Sec are low, so the returns of

the Gilt Funds are also low. Interest Rate risk is associated with the funds. These funds are

also known as Government Securities Funds or G-Sec Funds.

Fixed Term Plans or Fixed Maturity Plans (FMPs)

FMPs are similar to Bank FDs. They are close ended funds. FMPs have a defined maturity

period; say 3 months, 6 months, 1 year, 3 years, etc. The maturity of the debt securities in

which the fund is invested, and the maturity of the scheme are almost the same. Hence, when

the scheme matures and money has to be returned to the investors, the fund does not have to

sell the bonds in the market, but the bonds themselves mature and the fund gets maturity

proceeds. The units of the FMPs are traded on stock exchange, so it provides liquidity to

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investors also. These funds are suitable for investors who don‘t want to take much risk and

know the time when they will need the money.

Equity Funds

These schemes invest almost 65% of their corpus in equity market. Depending upon the type

of shares fund have selected, these funds can been classified as, Growth funds, Value funds,

Large Cap funds, Mid Cap or Small Cap funds, Sector funds, Equity Diversified funds,

Index funds. Certain equity diversified funds have tax benefit under section 80C of the

Income-tax Act, 1961 and have a lock in period of three years. These are Equity Linked

Savings Scheme (ELSS).

Growth funds

These funds invest in the money in growth stocks, which are stocks that are expected to earn

above average returns.

Value funds

Value funds invest in value stocks. That is stocks are out of favour with most investors in the

market and the market price is low compared to the value of the business. The value style

managers generally hold the stocks for longer time horizon than their growth style counter

parts.

Large cap funds / Mid. cap funds / Small cap funds

Fund investing in stocks of large companies are called Large Cap Funds and those investing

in stocks of midsized and small sized companies are called Mid Cap and Small Cap Funds.

Speciality / sector funds

These schemes invest money in specific sectors or industry, e.g., Pharma Funds, FMCG

Funds , Infrastructure Fund. High risk is associated with this kind of fund so these are

suitable for aggressive investors.

Diversified equity funds

These funds invest in stocks from across the market irrespective of market capitalization,

Industry or style. The fund manager chooses stocks from a wider selection. As it invests

money in diversified sectors, it is less risky than sector funds.

21

Index funds

It invests the money in stocks which constitute the index. So fund managers don‘t play that

active role. They just replicate the index they have selected.

Hybrid Funds

They are combinations of equity and debt funds. They can be further classified as Balanced

funds, Monthly Income Plans (MIP).

Balanced funds

As the name suggests balanced funds invest equally between equity and Debt securities. To

get an advantage of the provisions of the prevailing tax laws, these funds invest more than

65% of their assets into equity and remaining in Debt securities.

Monthly Income Plans (MIPs)

This scheme invests majority in fixed income securities with marginal exposure to equity.

The Debt securities provide stability to the portfolio and equity provides appreciation of

capital over period of time. Normally 80% of the scheme AUM is invested in fixed income

securities and the balance 20% in equity stocks.

Exchange Traded Funds (ETFs)

The units of these funds are traded on designated stock exchange. It combines features of

open and closed mutual fund schemes, and trade like a single stock on stock exchange. Gold

ETFs are very popular in India.

1.11.3.9 Equities

Investment in equity shares means becoming a shareholder in the particular company. One

also gets the voting rights of his share in the company. Higher risk is associated with higher

potential of returns. If company does well and makes profit, the investor is benefited as he is

part owner of the profit. However, if the business goes in loss, the investor would lose capital

proportionately. Returns from equities can be in the form of capital appreciation and/ or

dividends. One can do all fundamental and technical analysis before investing into direct

equities. One should analyse the market size, business of the company, its competitors,

regulations etc.

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1.11.3.10 Derivatives

Derivatives are contract between two or more parties, which derive their value form the

underlying assets. Traders in the derivative segments are Hedgers, Speculators, and

Arbitragers.

Hedging is basically protecting assets from losses. It is basically taking reverse position to

protect the funds against any odds in the market. This may compensate for any losses in cash

market from fall of the stock price.

Arbitraging is taking the advantage of difference in prices in different markets and earning

the profits. Say stock price in spot market is lower than the futures price. One can buy the

stock in spot market and sell the same in futures markets and can generate profits. On the day

of expiry, the prices converges. Stock may move in any direction but profit is booked.

Speculation is taking positions in futures markets based on the expectations regarding the

price movements of the underlying assets without having a position in cash markets.

Various derivatives instruments in use are Forwards, Futures, Options and Swaps.

Forwards are tailor made contracts between two parties. They are not standardized contracts

and hence they are not traded on exchange. Normally traders trading in currency market use

forwards contracts to hedge against fluctuations of exchange rate.

Futures are standardized exchange traded contracts. Contracts are available for the period of 3

months, 6 months, 1 year etc. Last Thursday of every month is the expiry of every contract.

Futures are available on single stock, Index and commodities. One needs to keep margin in

the account for the trading purpose. Futures can be traded only in lots.

Options are categorized as Call Option and Put Option. Call option gives the buyer a right to

buy the underlying security at a predetermined price in predetermined period. Call option

gives the buyer a right to buy the shares/underlying asset at a price which is below the market

price and vice versa for seller. Put Option gives the buyer a right to sell the underlying

security at a predetermined price during a predetermined period. Put option gives the buyer

23

the right to sell the shares/ underlying asset at a price which is above the market price. Option

buyer has to pay the price to the seller to buy this option, it is known as Option Premium.

Non-Financial Assets

1.11.3.11 Commodities

Commodities are the real physical assets like, agricultural products, precious metals like

Gold, silver, oil etc. Futures and Options contracts on these products are traded on

commodities exchanges like, MCX and NCDEX in India. The working of the derivative

contracts are discussed in the above segments.

1.11.3.12 Real Estate

The rapid rise in the price of the property in recent years, have made the real estate as one of

the most lucrative investment avenue. The benefits of investing in real estate can be

appreciation of capital, rental income, safety etc. Investment in Real estate can take following

modes:

a) Residential Property.

b) Commercial property.

c) Industrial real estate

d) Agricultural land.

e) Semi urban land.

f) Time share in a holiday resort.

Residential Property

This investment provides return in the form of rental income and appreciation in capital. Tax

shelters are available on interest paid and principal repayment, provided the investment is

done through the route of a loan.

Commercial property

Buying a shop or office in a commercial complex may offer rental income and capital

appreciation over a time period.

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Agricultural land

Agricultural income from agricultural land is not taxable. Further, agricultural land is exempt

from wealth tax too.

1.11.3.13 Other Non-Conventional Investment Avenues

Investments in Precious Metals, coins and other collectibles and Art objects are illiquid

investments. They are the most risky investment avenues. As organized exchanges are not

available for these instruments, one should be very careful while investing in these

instruments.

1.11.4 Retirement Planning

Changing Family structure from Join to Nuclear, increase in life expectancy and absence of

robust Social Security system have increased the importance of Retirement Planning.

Retirement Planning is determining how much amount will be required to fund the expenses

during the retirement years and how that amount can be accumulated during the pre-

retirement tenure. Ideally, one should start retirement planning with the starting of their first

job. One can invest their money in employer initiated schemes like Employee Provident Fund

(EPF), gratuity, superannuation, etc. Apart from that, there are other alternatives available

like; PPF Account, NPS, Pension & Annuity Plans, and Reverse Mortgage etc. in which one

can invest as a part of Retirement Planning.

According to CPFA- NISM (2012) there are two methods to calculate Retirement Corpus.

They are Expense Protection method and Income Replacement Method. In Expense

protection method, one lists down his/ her total monthly or annually expenses, then, those

amounts are adjusted for inflation. Amount which then arrives, indicates the corpus required

by person post retirement, which will be generating regular income equal to calculated

expenses. Income Replacement Method calculates person‘s income just before retirement.

Tools for Retirement Planning

1.11.4.1 Provident Fund

Provident Fund (PF) is the traditional and most popular product for Retirement Planning. A

certain amount is deducted from employee‘s salary every month and invested in Provident

Fund by their employers. Provident fund is a debt instrument, pool generated by employees

25

are invested in debt products. Employers also contribute their share in the employee‘s

account. On maturity investor gets total amount invested by him and his employer and

interest earned on that.

1.11.4.2 National Pension System (NPS)

NPS is a Defined Contribution Scheme and it is regulated by PFRDA (Pension Fund

Regulatory and Development Authority). The investment in NPS is to be maintained until the

age of sixty. On retirement, a part of the corpus can be withdrawn as lump sum, and the

balance would be paid as annuity. Government of India has started this scheme in 2004 for

Government Employees. From 2009, it was made available to all citizens of age group 18 –

60 Years, except individuals who are covered under Provident Fund and Miscellaneous

Provisions Act, 1952, Government employees who have joined services before Jan ‘2004,

Employees of Armed forces. It offers various investment options and choice of fund

managers to their investors. Investors also have flexibility to switch over from one fund

manager to another. Returns on this scheme are not definite; it is market linked product so

return varies with performance of underlying assets. Amount invested under this scheme get

exemption from income tax under Sec 80 C.

1.11.4.3 Reverse Mortgage

A reverse mortgage is a kind of Home loan. Any senior citizen having own house can avail it.

Basically working of Reverse Mortgage is opposite to Home Loan. Loan Amount is divided

in small monthly / quarterly / yearly instalments and paid to the lender by Bank. The loan is

typically settled after the death of the owner/co-owners. Some additional features of NPS are

discussed below:

1. The maximum tenure of the loan is 20 years.

2. Normally the owner of the property and spouse are borrowers in this scheme. If one of

the borrowers dies then other may continue to avail the instalments.

3. The maximum monthly payments under the scheme is Rs.50, 000/-.

4. Settlement of loan after tenure will be done in two ways. If legal heirs settle the full

amount of loan then property will be transferred to them, and if they don‘t, then Bank

will sell the house property mortgaged will settle the loan amount and if any amount

is remaining then it will be passed on to legal heirs.

5. Facility of early repayment of loan is also available.

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Normally senior citizens who don‘t have steady inflow of income post retirement can opt for

the same.

Apart from these schemes, plans discussed earlier like annuity, Pension Funds are also used

for Retirement Planning purpose.

1.11.5 Estate Planning

The next stage in Personal Financial Planning is Estate Planning. Estate can be defined as all

assets a person owns. Basic objective behind estate planning is to protect, preserve and

manage one‘s assets during and post one‘s life. Estate of the estate owner should be passed

on to estate owner‘s intended beneficiaries. (C. Jayaram, 2007). For the purpose of Estate

Planning, one can create their will or they can take route of trusts also.

1.11.5.1 Wills

It is a declaration made by a person clearly mentioning the manner in which one likes his or

her property to be distributed after the death. It is a legal written document. It comes in power

only after the death of the person. So till then it can be changed according to situation. As a

part of Estate Planning, one should create their wills at early age only. This is to avoid any

hardships to the family in case of death of the owner of the property.

1.11.5.2 Trusts

Trusts is a mechanism by which owner of property can pass the legal title of that property to

another person to hold on trust for the benefit of the beneficiary. They are used as

mechanisms to hold asset for present or /and future needs of legal heirs and other family

members and designed in a manner to reduce the burden of tax. Trusts are used to

accumulation of income and capital for specified children. Some terminologies related to

trusts are discussed below.

Grantor

It is the person who creates the trust. One who is an owner of the property.

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Trustee

This is the person or an institution that will follow wishes of grantor as per the legal

document to manage the trust upon the death of the grantor.

Beneficiaries

They are persons who will be benefited by the trust property.

There are many financial institutions and Professionals, who work as a trustee for the fees.

1.12 Financial Planning Strategies based on Life Cycle Stage

Financial Planning of an individual depends upon his/her financial goals – short term & long

term, number of dependants, stage of Lifecycle, risk appetite and many more. It is assumed

that persons in the similar stage of life cycle have almost common financial goals. Life cycle

of the individual can be divided in following four segments. Stage of the life cycle determines

their future goals and risk taking capabilities. Depending on these factors, their financial

planning strategy can be determined.

Young Unmarried Investor

Young Couple with small children

Mature Couple with grown up children

Post Retirement Stage

• Young Unmarried Investor

Any one, who is young and single may have goal of wealth creation with long term

investment horizon. He needs to give more importance on capital appreciation because he has

to fund for all future responsibilities along with planning for healthy retirement. As the

person is not married, he may not have much of the family responsibilities and his risk taking

capability can be on peak at this stage. So one‘s focus can be the pay- offs for any loans

which he has and start investing aggressively into Equity and very small portion into fixed

income asset class. If there are no dependants, then taking Insurance cannot be of paramount

Importance. Also one can start investing into PPF, NPS, Annuity Plans or other Retirement

Planning tool for Comfortable Retirement. It is advisable that one should start Retirement

Planning from the first job itself.

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Young Couple with small children

Any one, who is married and has small children has long term focus and capital growth is of

utmost importance for him. A person in this stage, may start thinking about buying his home.

As the person has dependants on him, he may start taking good Life insurance policies, which

may give protection to his dependants in case of any eventuality. One should take health

insurance of own and family members. Investment should be done majorly into Blue Chip

equity stocks which are not too volatile or they may take root of Mutual Funds to get

advantage of diversification and Professional management, as also they can save tax by

investing into ELSS. Contributions towards Fixed Income Securities should also be

increased to balance their portfolio.

Mature Couple with grown up children

A person in their mid-aged with grown up children have responsibilities towards higher

education of their children or marriages. As their responsibilities are higher with years to

retirement are less, they will have low risk appetite and objective will be maximum wealth

creation before retirement. Portfolio should be revised in a manner to have exact balance

between equity and fixed income securities. One can invest in balanced fund of Mutual Funds

which is combination of Equity and Fixed Income Securities. Also as a part of Estate

Planning, one can create a legal will or can create a trust to transfer the asset to their intended

beneficiaries in event of death.

Post Retirement Stage

In this stage, a person may not have a salaried income, at the same time, their children are

independent and settled. His responsibility towards his children has decreased. One needs to

have fixed flow of income to fund their routine household expense, healthcare expense and

expenses towards leisure. Capital preservation with fixed flow of Income is their prime

importance. A little holding in equity with higher exposure in fixed income securities like

bond, Post office MIS, Post Office Senior Citizen Schemes are desirable. One can also take

route of Reverse Mortgage for fund their post retirement expenses.

Every individual has different risk appetite and different goals, according to their own life

conditions. Therefore, the strategy and asset allocation will change accordingly. One may

take help of Certified Financial Planners and Advisors to create a balanced Financial Plan.

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After implementation of it, one should periodically review the same and make changes if it is

necessary.

TABLE 1. 1 - Financial Planning Strategies Based on Life Cycle Stage

Stage of the

Life Cycle

Age Group Risk Capacity Strategy Recommended

Young Single

Investor

22 – 25 Years Very High Payoff the debt, Invest into

Aggressive Equity Stocks,

start planning for

Retirement

Young Couple

with small

children

30 - 45 Years High Payoff the Debt, Take up

Life Insurance Policy &

Mediclaim Policy,

Investment into Blue chip

stocks or Mutual Funds,

Increase allocation in

Fixed Income Securities.

Mature Couple

with Grown up

children

45 -58 Years Medium to Low Portfolio should be

balanced of equity and

fixed income security.

Post Retirement 58 Years &

Above

Very Low A very little holding in

equity with more

investment in Debt

Securities like, Post office

MIS, Post office Senior

citizen scheme, Govt.

Bonds are desirable.

Reverse Mortgage can also

be availed.

Source: Primary Data

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CHAPTER - 2

Literature Review

2.1 Prelude

A review of prior literature is an essential feature of any academic research. An effective

review lays foundation for advanced research. It facilitates new theory development and

uncovers the areas where research is needed (Jane, 2002). The chapter has been divided in

two parts. In the First Part, the literature on Financial Literacy and Personal Financial

Planning has been discussed and in the Second one, Literature related to components of

Personal Financial Planning has been reported.

2.2 Literature Review – Financial Literacy & Overall Personal Financial

Planning

The section is divided in three major parts. First part is related to importance of Financial

Literacy and Personal Financial Planning, Second Part is related to researches done on the

same across the world. Third part is related to research done in India.

2.2.1 Importance of Financial Literacy and Financial Planning

According to Hung A. et. al. (2012), there is a positive impact of financial literacy on

financial attitude, behaviour and financial well-being. Financially literate people do better at

budgeting, saving money and spending, handling mortgages, participating in other financial

markets, do better at retirement planning and successfully accumulate wealth. Higher

financial literacy leads to greater financial well-being and less financial concerns. (Taft M,

2013)

Capuano, A., & Ramsay, I. (2011) had done project in Australia on Financial Literacy.

According to them Financially Literate consumers can have more savings, they can actively

manage debt, they can be realistic regarding their future goals, they can be more financially

31

confident, can be more active in financial markets, they can choose more carefully financial

products that are suitable to their needs, they can plan their finances, budget and know how to

be financially efficient. They have also stated that in a way financially literate people benefit

financial system and economy too. They can help in achieving the target for Financial

Inclusion in the economy. Financially literate people can better understand the Financial

policies framed by any government.

Andreas Oehler & Christina Werner ( 2008) has stated that financial literacy is important

in life stages when some important decisions are made, and financial education at this stage

may alter the behavior related to Retirement Planning & Saving.

Lusardi A. (2009) in her paper stated that Financial Literacy has positive causal impact on

wealth holdings and saving behaviour. From this research, it has been found that financial

literacy increases the awareness for importance of savings and planning for retirement.

Nag R. (2007) in his speech delivered at CITI- FT Financial Education summit at Delhi has

stated that Financial Literacy allows people to increase and manage their earnings and so

they can better manage their life events like education , retirement, loss of job , illness etc.

There are many studies done which establishes link between financial literacy and Positive

Financial Behaviour. Borden L. (2008) stated that there is a causal link from financial

knowledge to healthy attitudes about money which in turn influences the behaviour.

Martin M. (2007) has discussed variables which influence Financial Behaviour. They are

Financial Knowledge, Attitude, Income, and Financial Safety.

Gallery N, Newton C.& Palm C ( 2010) had presented the model on variables which

influences Financial Well Being. It is evident from model that Financial Well- Being is

dependent on Personal Financial Behaviour which in turn depends upon Financial Literacy.

32

FIGURE 2. 1 - Possible Causes of Financial Behaviour

(Source: 18th Annual Colloquium of Superannuation Researchers, UNSW, Sydney, Australia, 12-13 July 2010).

Zakaria, R. et. al ( 2012) has tried to find factors affecting financial position or financial

well-being of the Malaysians. Study was done in Klang Valley region in Malaysia. Data was

collected with survey method from Urban Household and then analyzed with help of

Structural Equation Modeling. Study revealed that Positive Financial behavior is most

dominant factor of having good financial position. Also financial behavior is strongly related

to sound financial knowledge or Financial Literacy. From paper, it is evident that Financial

well-being of the respondents is related with their financial literacy.

2.2.2 Researches done on Financial Literacy and Financial Planning across the world

Following section discusses studies conducted worldwide to assess financial literacy,

financial awareness, attitude towards PFP and Factors influencing the same.

Parrotta, J. L., & Johnson, P. J. (1998) in their study examined impact of financial attitude

and financial knowledge on financial management and financial satisfaction. Study was

conducted in Canada in which 194 recently married couples were selected. Questionnaire was

designed to assess financial attitude, financial knowledge and financial management.

Financial Management was assessed using 35 items on five point Likert scale. To identify the

satisfaction level 10 items on 5 point Likert scale was used. Descriptive Analysis,

Correlation and regression were used to analyze the data. Important findings of the study

were financial management is better predicted by financial attitude than financial knowledge.

Age didn‘t have any significant impact on financial satisfaction. Income had significant

impact on financial satisfaction. Financial management was the best predictor for financial

satisfaction. In turn, Financial Attitude predicts Financial Management and Financial

Management predicts Financial Satisfaction.

33

Vople, Chen, & Liu (2006) in their paper have tried to identify issues which are important to

respondents regarding personal financial planning. Along with it, researchers have also tried

to probe the knowledge regarding this aspects which are considered to be important by

respondents. Survey took place in US; around 212 companies participated in it. Respondents

have given greater importance to retirement planning but the results showed that there is the

large gap between importance given to this variable and actual knowledge possessed by them.

Similar is the result for Basics of Personal Financial Planning. The Gap which was identified

is that in future, more focus can be given to the areas which are considered important but

lacking in knowledge. Financial Educational programs can be designed by looking into these

aspects.

Stendardi E .et.al (2006) had done literature survey on impact of gender on Personal

Financial Planning process. From the study it was concluded that gender has significant

impact on PFP process. Researcher also explained steps involved in PFP. These are:

gathering data, establishing financial goals and objectives, process and analyze the

information, recommend a comprehensive financial plan, Implement the plan and monitor the

plan.

Williams A. ( 2008 ) has explained the importance of financial planning and literacy in

college students. Objective of the study was to identify the common mistakes done by the

students when first starting to deal with their financials. Study found that mistakes done by

majority of the students who graduate are due to lack of financial knowledge; they delay the

repayment of student loans, accumulation of unnecessary debt, high credit card debts and

their failure to save. Other objective was to outline the essentials of financial planning for

college graduates. Study has thrown light to various concepts like principle of investing,

power of compounding, investment avenues like equity, bonds, Mutual Funds, ETFs,

Concept of diversification, Retirement planning, and Real Estate. This study serves as a

theoretical background for further studies.

Ming Lei, wei- Khong Tan ( 2009 ) has examined attitudes of Malaysians towards Financial

Planning. The study encompasses money management, insurance planning, investment

planning, retirement planning and estate planning. Study showed that people manages money

seriously. They spend money carefully and manage them very well. Study also revealed that

Chinese scores high on money management as compared to Indians and Malay respondents.

Study revealed that the job status of respondent is the primary factor for influencing the

34

attitudes towards personal financial planning and frequency in managing for various aspect of

financial planning. Demographic characteristics such as age, race, gender, marital status,

educational level are the secondary factors which influence personal financial planning. Lack

of their active participation in personal financial planning indicates that there is a need to

create awareness regarding overall personal financial planning.

Ford, M. W., & Kent, D. W. (2009) in their study attempted to find attitudes and awareness

of students for financial markets. Their sample consisted of 157 undergraduate business

school students. Age group of sample was 20 – 25 years. Their objective was to find

intimidation, Interest and awareness of students with respect to financial markets. Study

indicates significantly higher mean values for market intimidation and lower mean values of

market interest among female participants. Females had exhibited lower level of market

awareness, less understanding of current market context and less familiarity of market related

terms than their male counter parts. Study indicates that gender has significant impact on

attitudes and awareness of students with respect to financial markets.

Fünfgeld, B., & Wang, M. (2009) had conducted a study to analyze impact of demographic

variables on financial attitude and behavior. Study was conducted in German speaking part of

Switzerland. 1252 respondents were selected with convenience sampling method. Factor

analysis was used to analyze the data. Result of the factor analysis showed five dimensions of

financial attitude. They are: anxiety, interests in financial issues, decision styles, need for

precautionary savings, spending tendency. Apart from these factors, demographic variables

such as gender, age and education were found to have significant impact on financial attitude.

Yun Zhang; Li Xiuzhen (2010) gave theoretical base for financial planning which is helpful

to the people who lack knowledge regarding the same. The researcher has tried to analyze

three major factors for investment planning which are family life cycle, investment principles

and risk appetite. Researcher has also analyzed steps and approaches for risk management as

a part of Financial Planning. Family life cycle can be divided in stages of forming, growing,

mature and aging. Risk appetite normally reduces in later stages and savings for retirement

and medical expenses increase. In the section on principles of investment, the researcher has

explained that there is inverse relationship between return of the instruments and risk

associated with that. Higher the yield of the instrument more risky it is. Investor will always

try to take rational decision by weighing yield and risk associated with it. In the section on

principles of risk dispersion, the researcher has explained theory of Markowitz mean variance

35

theory for reducing nonsystematic risk of portfolio, which suggests for the diversification of

investments in different stocks to reduce the variance of entire portfolio. Approaches for Risk

Management are Risk Avoidance, Risk Control, Risk retention, Risk diversification and Risk

transfer. One has to re assess the risk as the changes occur in ones individual or family life

cycle. Thus risk management is a dynamic process.

Mohamad R. (2010) found that there are significant differences in financial literacy between

Gender and Working Sector. Study was conducted in Malaysia. Researcher stated that there

is a significant impact of Gender on frequency of managing Financial Planning, but working

sector didn‘t have any impact on frequency for managing personal financial planning.

Murphy D & Yetmar S., (2010): Their study is about ―Personal financial planning attitudes: a

preliminary study of graduate students‖. Tthe purpose of this paper is to report the Personal

Financial Planning attitudes of MBA students in USA. Participants were asked about the

level of their knowledge, their preparation regarding components of financial plan, their

confidence in their plan to meet their long term needs, and their likelihood for

implementation of such plan. Findings revealed that most of the respondents feel that

Financial Planning is important and they are interested to develop the Financial Plan, very

few feels that they have necessary skills and knowledge to develop their own financial plan

and majority of the students had not prepared their comprehensive financial plan. Study also

indicated there is strong need of Financial Planner to manage their financials.

Nga J et.al. (2010) had done study on financial awareness. Study was conducted in Malaysia

on 280 respondents. Study aimed to find level of general financial awareness and product

awareness among youth of Malaysia. Study revealed that level of education and

specialization had a major impact on general financial awareness and product awareness.

Study also revealed that Male had higher awareness than females.

Boon T. (2011) in his study has tried to relate financial literacy with financial planning.

Study was done in commercial city of Malaysia. Researcher has asked questions related to

basic knowledge of financial planning .Study revealed that respondents generally were aware

about amount of money they need for retirement purpose, they are also aware that

contribution towards EPF is not sufficient to meet the requirement, still they did not engage

in any active retirement planning. Study also revealed that respondents are not much aware

36

with various concepts of Estate planning, and as such they did not feel it as important aspect

too. Study revealed that individuals who are more financially literate focus more on financial

planning. This confirms that financial literacy is a useful indicator of individual‘s financial

planning decision.

Altintas, K. M. (2011) in his study tried to find variables that significantly affect the

financial literacy of the respondents. Study was carried in Turkey on University Students.

Independent variable was financial literacy score and dependent variables tested were Age,

Rank in class, Gender, Academic Discipline, Family Income, Education level of Father,

Education level of Mother and Participants‘ discussion with their parents about Financial

Matters. Multiple Regression method was used to find out factors affecting Financial Literacy

score. The most important variables that affect the financial literacy are Class Rank, Age,

Education level of Father and Participants‘ discussion with their parents regarding financial

Matters and Family Income.

Rajna. A et. al. (2011) had done survey in Malaysia to find financial attitude and practices of

Medical practitioners in Public & Private Medical practices. Sample size was 400. Primary

data was collected with the help of questionnaire. Financial attitude and practices were

measured with five point Liker scale. Major findings of the study are, more than 75 % of the

doctors have shown positive attitude towards personal finance but only 35% of the doctors

practice active money management. Almost 90% of the respondents have shown positive

attitude towards Retirement Planning but 60% of these respondent didn‘t know that how

much money they will require to fund post retirement expenses. Age, gender, marital status,

work experience didn‘t have any effect on financial attitude of doctors. Only ethnicity has

significant impact on the same. Chinese Doctors had shown more positive attitude than

Malay & Indian Doctors.

Leora Claper, Annamaria Lusardi (2012) has examined the relation between financial

literacy and Financial Crisis. The survey was conducted in Russia. In the survey questions

were asked on financial literacy, consumer borrowing and spending behavior. Paper revealed

that though consumer borrowings have been increasing, hardly 41% of them knew how

interest has been calculated on their borrowings and only 46% people could answer about

inflation. Survey found that financial literacy is positively related with participation in

Financial Markets and negatively related with the use of informal source of borrowing.

Individuals having higher financial literacy are significantly more likely to report higher

37

unspent income at the end of the month, and hence higher spending capacity. Study showed

that better financial literacy may equip individuals to deal with macroeconomic shocks.

Pillai, Carlo, & D'souza(2012) have tried to study youth of Asia regarding their financial

literacy, their spending behavior and approach towards Personal Financial Planning. Study

was carried out in Asia through judgmental and Quota sampling. Study comprised to check

four major areas of financial prudence of youth covering financial literacy, spending and

saving behavior, credit card usage and borrowing and Financial Planning. Study revealed that

respondents had considerable level of financial literacy but they did not have prudent

Personal Financial Plan to work for them. This is the gap identified by the study that youth of

Asia possess financial literacy but do not take an extra effort to work for their financial

future.

Yoong, F.et.al. (2012) had conducted study in Malaysia to assess impact of financial literacy

on Retirement well-being. 750 respondents were selected in Klang Valley area of Malaysia.

Study found that financial learning had significant impact on financial literacy. Financial

literacy has significant contribution in economic well-being. Financial literacy plays a

mediating role between financial literacy and financial well-being.

Taft M. et.al. (2013) had done study to find association between financial literacy, financial

well-being and financial concerns. Study was conducted in Iran and a sample of 300

respondents were selected with convenience sampling technique. Data was analyzed using t -

test, correlation test and regression. Results showed that age and education are positively

correlated with financial literacy and financial well-being and higher financial literacy leads

to higher financial well-being and lesser financial concerns.

Ali, A., Rahman, M. S., & Bakar, A. (2013) had done research to find factors contributing

to level of financial literacy and its relation with financial satisfaction. Study was done in

Malaysia. Researcher had hypothesized model on financial literacy. Model postulated that

financial literacy of the person can determine financial satisfaction of the person. To measure

the financial literacy, five different aspects were assessed. They were: Basic money

management, financial planning, investment know how, attitude to money and financial

activities. Model hypothesized by researcher is shown in Figure 2.2.

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FIGURE 2. 2 - Research Model on Financial Literacy

(Source: Financial Literacy and Satisfaction in Malaysia: A Pilot Study. International Journal of Trade,

Economics and Finance, Vol. 4, No. 5, October 2013)

Ibrahim, M. E., & Alqaydi, F. R. (2013) in their paper examined financial literacy among

individuals residing in UAE, and tried to find association of the same with types of personal

debt obtained by them. Forms of personal debt included loans from Bank, money borrowed

from friends / relatives and borrowing through credit cards. With the help of convenience

sampling method 412 respondents were selected to fill the questionnaire. There were eight

variables used in the paper. Personal Debt as an independent variable and Dependent

Variables are Financial Literacy, Financial Attitude, Gender, Age, Nationality, Education and

Marital Status. Data were analyzed with help of descriptive statistics and t- test. Results

indicated that level of financial literacy was low in respondents compared to stated level of

literacy in previous literature. Financial Attitude is positive in respondents. Important

derivation from study was that there is a strong negative correlation between personal

financial attitude and borrowing with the help of credit card.

Jalil, M. et.al (2013) has explored the critical factors that influence Personal Financial

Planning after retirement. Study was conducted in Malaysia in Klang Valley region. Survey

method was used to take data from 170 Malaysian citizens. From Exploratory Factor

Analysis, Confirmatory Factor Analysis and Structural Equation Modeling, three factors were

found which influence PFP after retirement. These are: Income / Salary, Culture and Attitude.

Income / Salary have the highest influence on PFP followed by attitude and culture.

Ramasawmy, D. et.al (2013) has done study in Mauritius on students of Management to

assess their level of awareness regarding financial literacy. Primary data was collected with

the help of questionnaire. Questionnaire was designed to collect the information related to

39

level and importance of financial literacy, definitions and theories, constrains and measures to

improve the financial literacy. Study was also aimed to identify any significance of

association between demographic variables and level of awareness. Chi square test of

association and factor analyses were used for analysis of the data. Results of Chi square test

suggest that Age group has significant association with level of importance attached with

Financial literacy, other variables like Gender, Income Level did not have any association

with the same. Factor analysis was run to measure perception of respondents with regards to

definition of Financial Literacy, sources of Financial Information and financial education.

Four factors were extracted with help of Principal Component Analysis. They were

Analytical skills, Awareness of financial issues, Ability to make financial decisions, and

Awareness of financial risks.

Arrondel. L et. Al. (2014) has done research on financial literacy and Financial Planning in

France. Financial literacy was assessed with the tool developed by Lusardi & Mitchell

(2011). Overall financial literacy score obtained was in line with other developed countries of

the world. Important finding from the research is respondents with higher financial literacy

are more likely to be engaged in preparation of well-defined financial plan for long term.

Onyango, O. (2014) had presented research report on Effect of Financial Literacy on

Management of Personal Finances. Study was conducted on Commercial Bank Employees of

Kenya. Simple random sampling was used to select 100 bank employees of five commercial

banks in Nairobi. Main objectives of the study were: to assess the financial literacy of the

respondents and to evaluate influence of financial literacy on management of personal

finance. Multiple Regression technique was used to establish relation between financial

literacy and financial management. Financial Management score was used as dependent

variable. Gender, Age, Level of Education, Saving Plan Index, Investment Plan Index were

used as Independent variables in Regression model. Major findings of the study are Age,

gender, education level, work experience is positively related with investment plan, saving

plan and thus positively related with personal financial management.

Krajnakova E. et. Al. (2014) had done online survey in Lithuania to assess financial literacy

of the youth of Lithuania. Respondents of Age group between 18- 30 were selected in the

sample. Main objective of the study was to find association of financial literacy with personal

financial management. Financial literacy was assessed through online survey and major cities

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of Lithuania were covered for the same. Personal Financial Management practices of the

Lithuanian citizens were studied with the help of Literature survey. With the help of

comparative analysis of literature and survey of Lithuanian Population, it was found that

influence of financial literacy on personal financial management is very high.

Ciumora T. (2014) has done excessive literature survey to identify factors influencing

individual financial decisions. From the literature survey, the researcher divided factors in

two parts. Internal Factors affecting financial decisions and External Factors affecting

financial decisions. Internal Factors are Financial Education & Literacy, Age or Positioning

in a life cycle, Focus on Financial matters, cognitive functioning, Family dynamics,

Household structures, Psychological elements, Gender and health. External Factors are

National Culture, Religion, Stereotype threats, Income uncertainty, Access to financial

advice, Geography, Demographics, Financial system development, and Economic

environment.

Mien, N. T., & Thao, T. P. (2015) has done study to investigate Personal Financial

Management Behavior. Study was conducted in Vietnam; around 400 respondents of Age

group of 18 – 30 were selected for the same. With the help of Exploratory Factor Analysis,

Confirmatory Factor Analysis and SEM, they have derived a model that Personal Financial

Management Behavior depends upon Financial Knowledge and Financial Attitude and locus

of control. Financial Attitude was checked with respect to Financial Attitude towards Saving

Plan, daily Financial Behavior, Financial Management and Future Financial Ability.

Financial Attitude and Financial Knowledge were significantly positively related to Financial

Behavior whereas external locus of control is negatively related to Financial Behavior.

Mehmet I. (2015) in his study has tried to investigate factors which may influence individual

investor behavior. Study was conducted in Turkey; data for study were collected through

survey methods from 277 bankers. Researcher had used Exploratory and Confirmatory Factor

Analysis to identify the factors influencing investor behavior. Study revealed that Factors

affecting individual Investment Decision Making behavior are level of Income, Past

Investment Experience, Expert and other Investors‘ opinion and Financial Stability.

Kebede, M., & Kuar, J. (2015) has done literature survey to find association of financial

literacy with Personal Finance behavior. Survey suggested that developed and developing

both the worlds lack in financial literacy. Study even suggested that low level of financial

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literacy is related with Gender, Age, employment status, education level, Income and area of

residence (Urban or Rural). Study suggested from previous literatures that there is an impact

of financial literacy on financial behavior and financial inclusion.

2.2.3 Researches done in India

There are many surveys conducted by various agencies to assess the level of financial literacy

and planning in India. Some of them are discussed here.

NCAER (2011) in association with SEBI has done survey on how households save and

invest. 38412 households were chosen from 44 cities and 40 villages. Survey showed that

percentage of investors is 20 in urban area and it is as low as 6 percent in rural area, eleven to

twenty five percent of households save in post office scheme. Allocation doesn‘t even change

with relaxation in budget constrain; it stuck to traditional avenues only. People with higher

level of education choose pension plans. Only twenty one percent of urban investors invest in

secondary markets. Majority of surveyed households (53%) falls in least risk taker capacity.

Educational level plays an important role to determine risk appetite of a person. Majority of

the respondents while applying in IPO use only Newspaper as the source of information. For

participation in secondary market and mutual funds, investors relies more on advisors and

friends.

Visa’s international financial literacy survey (2012) found that India stands 23 out of 28

countries on which survey was carried out regarding financial literacy. Survey showed only

35% of respondent in India possessed financial literacy. This survey covered issues like

follow up of household budget, emergency fund for financial crisis, time people talk to their

children regarding money management issues and extent till they understand basics of money

management.

Life Freedom Index Survey for Women (2012) revealed that financial freedom of majority

of Indian Women is very low and needs improvement. Survey also showed that Indian Urban

women scores low on financial awareness regarding future financial events and risks. She

scores good on awareness regarding different financial products available. This is the gap

between product knowledge and event awareness, which causes misalignment in her financial

plans. So products she opt for are not according to their financial needs.

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The next section is regarding various empirical studies conducted on status of financial

literacy, Personal Financial planning awareness and attitude towards personal financial

planning in India.

Sundarajan S. (1997) had presented his thesis on Personal Financial Planning and Income

Tax Saving devices commonly employed. Major finding of the study were individuals

overwhelmingly employed tax shelters to reduce their tax liabilities. Investors preferred LIC

vis-à-vis ULIP plans. Investors preferred ELSS and PPF than NSC and Annuity Plans to park

their money to save the tax. Interesting fact noticed here that majority of the respondents

sought tax shelters late in the financial year, especially in PPF. Hhence, they forgo the benefit

of tax free interest early in the year.

Agrwal S. (2010) had done survey to check financial literacy and financial planning of

Indian investors. Study found that majority of the respondents replied correctly for question

related to numeracy, inflation and diversification. But there were many variations with

different demographic variables. Males tend to know better than the females, educational

level also had a positive relation with financial literacy, and people with more goals are well

informed compared with people with less number of goals. As the number of goals increases,

there is increase in financial instruments, that means increase in insurance, number of

investments and liabilities too. Male tends to take more risk than females. Aggressive growth

individual have more insurance policies, which contradicts with previous study which found

that insurance are preferred by conservative investors. More aggressive the investor more

financially literate he is.

Seth et al. (2010) tried to assess the level of financial literacy among investors of Delhi and

NCR. Study revealed that financial literacy of the respondents was different for different

investment alternatives. Almost all the respondents were aware about saving bank account,

but awareness for other investment alternatives was relatively lower. Life Insurance policies

were highly preferred avenue followed by fixed deposits. Study also revealed Age, Income

and education level had significant impact on financial literacy.

Ranjani K. & Chpora A. (2011) have done empirical study to find financial awareness of

working women of Mumbai City. 225 women were selected from the age group of 21- 55

years. Primary data was collected with the help of questionnaire. Questionnaire was designed

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to collect the data on parameters like financial awareness, perception towards investments,

preference for various investment avenues, self-assessment as an investor and perception

regarding riskier investments. The findings of the research were: respondents accepted that

they don‘t have expertise in financial knowledge; they have only basic financial knowledge.

Majority of the respondents have assertive attitude towards investing their money. Female

Respondents preferred Investment avenues with lower risk & higher liquidity. Majority of the

respondents have stated that they have not adequately planned for their retirement.

Pravin Mahmuni (2011) has done study on Personal Financial Planning for IT sector in

Pune, India. Objectives of the research were to study interest of investors towards financial

planning and to study preference of financial products on magnitude of age. 150 Samples

were collected from IT sector in Pune using convenience sampling method. Study finds that

awareness of financial products amongst sample is good but investors are not much aware

about non-conventional investment avenues. Inclination of people is towards saving rather

than investing. One very interesting finding of the researcher is that respondents are confused

about tax planning and financial planning. Main focus of investors is on tax planning and not

overall personal financial planning. From study, it is also found that there is positive relation

with age and investment in FD and negative relation with age and investment in stock market.

Preeti Kulkarni ( 2012 ) has written in Economic Times , based on the survey done by

HDFC and Value Notes. According to survey, Young India ( age group of 20 – 30 ) years

score low on financial awareness and Planning. There is lack of awareness of financial

planning, and also points that their financial planning is not aligned with their financial goals.

This is a result of poor awareness about financial events.

Noel Maye – CEO FPSB USA (2012) in his interview cited that financial awareness in India

is very low and it leads to poor financial planning. Consumers do not know as to what

financial planning is and hence do not value it. So according to him for a normal resident who

is not much aware about financial planning needs a financial Planner to plan his financials.

Agarwalla S. et. Al ( 2013) have done survey in India on 1000 samples to assess their

financial literacy, financial attitude and financial behavior. Study had focused on working

youth in Urban India. Data was collected from sox major cities of India. OECD approach was

used to measure the financial knowledge of the respondents. Around 24 % of the respondents

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had scored high financial knowledge, which was lower than OECD study done on 13

countries earlier. Family Income, Gender had significant impact on financial literacy. Around

68 % of the respondents possessed positive financial behavior; the particular result was in

line with OECD survey. Around half of the respondents have shown positive attitude toward

financial management, which was again in line with results obtained in OECD survey.

Gender, Family Income and decision making by self has significant impact on the financial

attitude.

Jariwala H. (2013) had done her study to assess the financial literacy of the investors of

Gujarat State. Sample of 385 investors were collected across Gujarat state with the help of

convenience sampling technique. Data were analyzed with the help of descriptive analysis,

chi square, logistic regression and factor analysis. Results showed that 56% of the

respondents are financially literate and 44% are financially illiterate. Females possess lower

financial literacy then males. Study also found that age and income also has significant

impact on financial literacy.

Altaf N. (2014) had done study to assess the financial literacy of the students studying in the

Central University of Kashmir. Samples size was 100 students of different post graduate

courses. Primary data was collected with the help of structured questionnaire designed with

balanced five point Likert scale. Financial literacy was assessed in four parts, first part was

measurement of perception towards definition and theories, second part was measuring the

ability of respondents to manage personal finance, third part was related to measurement of

constraints of financial literacy, and fourth part was on measurement of respondents view

towards way to improve financial literacy. Mean analysis was used to analyze the data. From

the results, it is evident that students don‘t have the satisfactory level of financial literacy.

Aggarwal M. & Gupta M. (2014) have tried to find out awareness regarding financial

literacy among college students and also tried to find association of demographic variables on

financial literacy. Primary data was collected with the help of questionnaire; sample size was

180 students of private and government higher educational institutes of Chandigarh. Students

were of the age group of 18 – 25 years. Financial literacy was assessed in three parts: Basic,

average and advanced. With the help of descriptive statistics and ANOVA, association of

different variables were tested with levels of financial literacy. Result showed that Commerce

students‘ literacy score was better than non-commerce students. ANOVA indicated that there

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is a significant difference of gender in case of different level of financial literacy. Males tend

to have higher financial literacy than females. From study it is found that Education

discipline (commerce, non- commerce) and gender have the significant impact on financial

literacy.

Bhushan, P. (2014) in his paper has examined awareness level and investment behavior of

salaried employees towards financial products. Study was conducted in Himachal Pradesh

and employees from both, Government and non Government organizations were selected in

the sample. Sample size was 516 employees. Awareness of different financial products was

assessed with five point Likert scale. Based on the mean score, financial products were given

rank from 1 to 14. It was found from the results that highest awareness was observed for

fixed deposits followed by saving accounts, PPF, NSCs, KVPs, Pension funds, mutual funds,

stock market, bonds, debenture, commodity market and forex market. It was evident that

respondents were quite aware about the products having safe returns, while awareness about

new age financial products was very low among respondents. In another study researcher had

tried to link financial literacy with awareness and preference of investment avenues.

Researcher found that respondents with high financial literacy tend to be more aware and

prefer risky investment avenues. Respondents with low financial literacy tend to be less

aware and prefer traditionally safe investment avenues.

Vasagadekar P. (2014) in her paper tried to find investment awareness among working

women. Study was conducted in Pune. Eighty working women of different sectors were

selected as sample. Primary data was collected through structured questionnaire and with the

help of in depth interviews. Results of the study were: 85% of the respondents were aware

about investments. Out of this 85% of the aware investors, only 65% of the investors were

ready to park their money in traditional safe products. Only 20% of the respondents were

ready to park their money in risky assets. Interesting result was that 90% of the respondents

were dependents on their husbands to take up the investment related decisions.

Shingla P. & Shrivstava A. (2014) had done survey in Bihar on working women to analyze

knowledge and practice of their personal financial planning. Data were collected from 300

respondents of Patna town with the help of personal interview and mailed questionnaire.

Respondents were asked questions pertaining to saving plan, approach towards tax, financial

emergency and retirement planning. Interesting findings were: only 31% of females had

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created their short term or long term financial goals, 61% of the females use their savings to

buy durable goods or gold, 26% of the respondents got their saving deposited in fixed

deposits and the rest 13% of the respondents invested their savings in stock market or mutual

funds. 27% of the respondents were not actively planning for tax benefits mainly because of

lack of financial literacy. Only 30% of the respondents had created fund for financial

emergency. Only 20% respondents have estimated the retirement corpus required for them.

Overall this survey reports very low awareness of personal financial planning among

respondents.

Mane S. & Bhandari R. (2014) in their research paper tried to find awareness level of

investors for different investment avenues and their preference for the same. A sample of

784 respondents from Pune city were selected with convenience sampling method. Primary

data was collected with help of questionnaire. Data was analyzed with help of descriptive

analysis, Chi square and correlation tests. Major findings of the study were: respondents of

Pune city preferred safe investment avenues like saving bank account and Fixed Deposits.

Preference towards risky investment avenues was very low. Women had highly preferred

gold as their investment avenue.

Mishra, L. (2015) had done survey on 590 educated middle class respondents to assess the

awareness regarding Personal Financial Planning in India. Survey had reported that 93%

respondents, irrespective of age, educational background, Income level and family status had

stated that they need financial planning. Only 63% of the respondents clearly understood

benefits of financial planning. Only 38% of the respondents understood investment planning

and 39% of the respondents clearly understood the benefits of retirement planning. Majority

of the respondents lack awareness regarding liability planning and estate planning.

Interesting revelation was that only 11% respondents reported that there father had written a

will, which shows very low awareness regarding estate planning.

Khan K. (2015) had done similar study in city of Kampala, Uganda. Study was done to

assess financial awareness of the working women in Kampala and to study the correlation

between financial awareness and their investment preferences. Sample was selected with

convenience sampling method and 200 working women were selected in the sample. Primary

data was collected with the help of structured questionnaire. Study revealed that women of

Kampala city are highly aware about Saving Bank Account, Insurance, and Bank Fixed

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Deposits. Awareness related to stock market is considerably low amongst them. From the

correlation test, it was found that there is a strong correlation between financial awareness

and investment preference of the respondents.

Kamugundu A. & Rajmohan P. (2016) in their paper reported that existing macro-

economic variables, funds available for investments besides all level of financial literacy

determine willingness of investors to undertake investments in high risk financial products.

So, selecting a financial products depends upon the level of financial literacy which a person

has.

2.3 Literature Review Related to various Components of Personal

Financial Planning

In this section, Literature review related to different components of Personal Financial

Planning i.e. Money Management, Insurance Management, Investment Management,

Retirement Planning and Estate Planning has been discussed.

2.3.1 Money Management

Kidwell, B., Brinberg, D., & Turrisi, R. (2003) in their research paper attepmted to found

out determinants of money management behavior. Study was conducted on 250 students of

Northwestern University, USA. Regression Analysis was used to analyze the data. From the

results, it was evident that factors which influence money management behavior are:

cognitive, affective, past behavior and perceived budgetary control. Attitude, past behavior

and perceived ability were positively related with behavior while Affect was negatively

related to behavior.

Joji Alex. N , P.T. Raveendran ( 2007) have done single cross sectional study on credit card

holders to find whether there is any compulsive buying behaviour possessed by them , and

whether there are any chances of default lead by personality trait of individuals. The study

revealed that respondents moderately agree that they are enhanced credit card users but they

rarely indicate compulsive buying behaviour, which was a positive sign.

Wang, L. et. al. (2011) had done study on Chinese credit card holders to study consumer

credit card behavior in correlation with demographics, attitude, personality and credit card

48

features. Study revealed that credit card features and demographic variables have little

explaining power on credit card behavior compared to attitude of card holders and personality

variables. Interesting finding was that some features of credit card have easily led to illusion

of income, which affected consumer credit card behavior.

Jusoh, Z., & Lin, L. Y. (2012) had tried to analyze Personal Financial Management

awareness & attitude regarding credit card practices in Malaysia. Study was conducted on

100 respondents. All the respondents were working adults having at least one credit card.

Descriptive statistics, t test and ANOVA were used to analyze the data. Results suggested

that Gender, Monthly income, financial knowledge and financial attitude don‘t have any

significant impact on credit card practices. Only education level has significant impact on

credit card practices.

Rekha Attri ( 2012) has done survey in Indore to analyze spending and saving behavior of

youths in the age group of 14 -30 years. In western country, normally this age group is

emotionally and financially free while in India, children are dependent on their parents till the

age of 24 – 25. Still it has been observed from the study that youth doesn‘t believe much in

saving. Rather, they spend more on entertainment, gadgets, eating out and personal

grooming. There is huge influence of peer group while taking purchase decision on youth

below age of 19 years.

R. Mathivanan and K. Mohanranjani (2013) had tried to analyze the gap between financial

literacy and saving behavior of working women in Coimbatore city. Objectives of the study

were to determine financial decision making capacity & financial literacy of women, and to

analyze gap between financial literacy and actual saving practices. Study revealed that

women are shifting their asset allocation from traditional avenues to more risky avenues.

With the help of t- test researcher has concluded that there exist a close relationship between

financial literacy and saving / investment practices.

2.3.2 Investment Management

Felton James et al. (2003) examined the role of gender and optimism on the risky

investment and concluded that males make more riskier investment choices than females.

Verma (2008) has tried to find out impact of demographic variables and personality types for

choice of investment avenues. Mix of judgmental and quota sampling were used for the

study. Study was conducted in Jaipur and around 500 respondents were interviewed. Results

49

showed that choice of investment is dependent upon demographic variables such as age,

gender, occupation, income, education and also personality type like conservative, medium

conservative, moderate, medium aggressive and aggressive.

Chatterjee S (2008) has analyzed the survey done by NCAER that Indians are wise savers

but poor investors. Article show that people in India do not invest for long term, they plan

for long term goals, but they rather save it not invest it, i.e., people in India majorly use

traditional savings instruments like Bank FDs, PPF, and post office saving schemes rather

than investing in equities and mutual funds which are considered to be riskier avenues.

Ajmi Jasim ( 2008 ) investigated the determinants of risk tolerance of individual investors.

Study concluded that men with higher level of education, wealth and having less financial

commitment are more likely to take risk.

Manish Sitlani, Geeta Sharma, Bhoomi Sitlani (2010) found that there exists a direct

relation between demographic factors (like age, gender, profession, qualification, marital

status of occupants) and investment choice of Investors.

N. Geetha and M. Ramesh (2010) have done study on peoples preference regarding their

investments. Study was done in Kurumbalur town and 210 respondents were chosen by

convenience sampling technique. The objectives of the study were: to study factors

influencing investment choice and attitude of respondents towards different investment

avenues. Study revealed that respondents prefer insurance, PPF, Post office schemes, Bank

F.Ds rather than investing into equities and mutual funds. They are less aware about these

instruments. Safety, liquidity, returns are important factors that determine their portfolio

allocation.

Gaur A. et. al.(2011) had done gender based survey to identify the difference in Investment

Decision making process between Males and Females. The data was collected with structured

questionnaire from 200 respondents of Hyderabad city. Convenience sampling technique was

used to select the sample. Findings of the study were: Males were comparatively more aware

then females for Investment Avenues. Female respondents had low confidence level in their

investment decisions. So, they had lower financial satisfaction than their male counterparts.

Das Sanjay (2012) has examined investment attitude, preference and knowledge about

capital market. Study revealed that High income class people invest in capital market and low

50

and middle income class people prefer more of insurance and Banks. Majority of the

respondents prefer insurance policies for the reason of tax benefits, life protection and

average profitable investment avenue.

Bashir T. (2013) had done study on Pakistani Investors to find factors influencing individual

investor decision making behavior. Sample size was 125 investors. Study revealed that

factors influencing individual investor‘s decision making behavior are Firm‘s Image,

Accounting Information, Neutral Information, Advocate Recommendations and Personal

Financial needs.

Rani R. (2014) had done literature survey on factors affecting decisions related to investment

in stock market. According to the findings of this research, factors which play major role for

investor‘s behavior in stock market are: herding, over reaction, cognitive bias, confidence,

age, income, education, risk factor, dividends, influence of people, past performance of the

company, accounting information, ownership structure and expected corporate earnings.

2.3.3 Mutual Funds

Simran Soni, Dr. Anjum, Ramandeep Saini (2011) have tried to analyze Mutual Fund

investments in relation to investor‘s behavior. Investor‘s perception and opinion have been

studied relating to various issues like, type of Mutual Fund schemes, Main objectives behind

investing into Mutual Funds, deficiencies in the services provided by managers, role of

financial advisors and brokers, factors affecting investment in mutual funds, and sources of

information. Study concluded that main objective behind investing in Mutual Fund is for

gaining tax benefits, followed by High Returns. Main feature which attracts investor for

investing in a particular scheme is the past performance and the stability of the scheme.

Rao K. ( 2011) in her article ― Analysis of Investors‘ perception towards Mutual Fund

scheme‖ has tried to explore investors‘ awareness & adoption towards mutual fund schemes.

Study concluded that there is an effect of age of investor on their awareness and adoption of

mutual fund schemes. Other socio economic factors like number of family members,

Residence of Investors also influence awareness and adoption of mutual fund schemes.

N.S. Santhi, K.Balanga Gurunathan (2011) has tried to analyze investor‘s attitude towards

tax saving mutual funds. Study finds that participants in tax saving mutual fund is less than

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other safer investment areas like, insurance, postal deposit schemes, and fixed income

schemes. The study also revealed that majority of the investors do not have knowledge

regarding schemes of mutual funds and regulating authorities. They are satisfied with overall

benefits of tax saving mutual funds.

Dr. Bernadette D’silva, Miss. Roshni Bhuptani ( 2012) in their article ― A study on factor

influencing Mutual Fund Investment in India‖ has revealed the factors which influence

investment decision for selection of mutual funds. Investors prefer those schemes of mutual

fund which give maximum attention to their needs and requirements. Educational

background of investors influences the pattern of investment in mutual fund. There exists a

vast difference of purpose of investment in investors with different academic background.

Purpose of an investor behind investing in Mutual fund influence the selection of the mutual

fund scheme.

A.Venilla, R. Nandhagopal (2012) in their article ―Investors‘ preference towards Mutual

Funds in Coimbatore City‖ have observed attitude of investors investing in Mutual funds.

Study concluded that most of the investors rely on investment consultant to choose the right

fund for them. They monitor their investment periodically.

Joshi, J. R. (2013) had tried to find out perception of Investors for their investments in

Mutual Funds. Objectives of the study were to find investment preference of the investors

and identifying factors motivating investors to invest in Mutual funds. The study was

conducted in Anand city of Gujarat, India and 100 investors were selected with the help of

convenience sampling method. 34 % of the respondents do invest in Mutual funds. While

choosing investment avenues, respondents look at higher returns, and tax benefits provided

by the products. Respondents preferred open ended mutual funds than close ended one.

Factors motivating investors to invest in Mutual funds are portfolio diversification, lower

risk, higher liquidity and better return provided by Mutual funds.

2.3.4 Insurance

Sabhya R and Panwala M ( 2011) have done study on factors affecting buying decision for

Life Insurance. The other objective of the study was to find preference for insurance

company, i.e., investors preferred LIC or private insurance company. Study found that

investors prefer LIC over private insurance company. Age, income, awareness of insurer,

type of insurer are most affective factors for buying life insurance in Surat city.

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Bava S and Ruchita (2011) have done empirical research on health insurance. Main

objectives of the study were to find awareness regarding health insurance policy in Punjab,

study has also attempted to find various factors which act as barriers for subscribing health

insurance and to check willingness for subscribing it by non health insurance holders. The

Study revealed that there is low level of awareness and willingness to pay for health

insurance and that there is significant relationship between age, education, income,

occupation of respondents and their willingness to pay for health insurance. Interesting

results were drawn from the study, that is, there are mainly seven key factors which act as a

barrier for subscription of the same. These factors are: lack of funds to meet costly affairs,

lack of awareness, lack of intermediaries outreach and capabilities, lack of reliability and

comprehensive coverage, lack of availability and accessibility of service, and narrow policy

options.

Madhukumar S. et.al. (2012) had done study to identify awareness and adaption of health

insurance policy and to identify the factors that works as barrier for subscription of health

insurance policy. Village near Bengaluru was selected as sample area. 343 households with

systematic random sampling were selected as samples. Results revealed that: one third of the

population were aware about health insurance but only 22 % had the policy. Not all the

family members were covered with health insurance. Almost one third of the respondents in

the sample said that they were willing to pay Rs.500 per annum as premium. Study also

found that low income, uncertainty of income and low awareness regarding health insurance

act as main barriers for non-subscription of the same.

Yadav B. & Tiwari. A (2012) in their research paper tried to find factors affecting

customers investment towards Life Insurance Policies. Primary data was collected with the

help of structured questionnaire. Study was conducted in Jabalpur, sample size was 150

policyholders. Chi- Square and correlation test were used to analyze the data. From the

analysis, it is inferred that Age plays major role in buying life insurance. Respondents

between Age group of 30 – 40 years are more interested in buying life insurance than

respondents of other Age groups. Respondents prefer LIC than any other private insurance

company. While selecting company for insurance, respondents look for trusted name, good

plans, friendly service and accessibility. While selecting policy, respondents look for

company reputation, money back guarantee, risk coverage, low premium and easy access to

agents.

53

Deb B. (2013) had done study on consumer‘s preference towards Life Insurance Companies.

Study was conducted in Guwahati. Main objectives of the study were to assess client‘s

perception, purchase behavior and awareness regarding Life Insurance Industry in Guwahati.

To identify factors affecting choice of Life Insurance Policy. A sample of300 respondents

were selected with non-random sampling. Findings of the study were, 30 % of the

respondents did not have any life insurance policy. Factors which motivate respondents to

purchase policy is to cover the future risk. 53% of the respondents had preferred LIC over

any other life insurance company. Respondents considered low premium and high risk

coverage while selecting a particular policy.

2.3.5 Retirement & Estate Planning

Raghani, V. & Singhi N.K. (1970) found that problems faced by retirees is shortage of

money, too much free time, widowhood, feeling physically weak , mental tension, feeling

of social neglect by family members. Annamria Lusardi, Olivia Mitchell (2005) had

reported in their paper regarding financial planning and literacy level of Americans and how

these impact their retirement wellbeing. Study found that majority of the respondent had high

level of financial illiteracy and that led them to poor retirement planning. Majority of the

respondent didn‘t even have worked out the amount they might require for retirement

planning.

Shyodan Singh & Paramjeet K. Dhillon (2006) have done research to understand

adjustments of retirees. Study found that retirees in India and abroad have problems in

adjustments to retirement and due to sudden loss of work they suffer from mental depression.

But people with constructive attitude prepare and plan for retirement, they involve their self

in community, remain physically fit and adjust well to retirement.

Hira & Rock (2009) have established study related to retirement planning behavior and

determinants of the behavior. Survey took place in US involving around 911 individuals to

check impact of socio demographic variables on ownership of Retirement Account and

maximizing contribution towards them. Study found that there is a significant relationship

between age, sources of financial information on ownership of Retirement account and that

employment, income, saving activity, review of investment performance have significant

impact on maximization of retirement contribution

54

Petkoska J.& Earl J.(2009) had tried to understand demographic and psychological

variables influencing retirement planning. Study was conducted in Australia. A sample of 377

respondents with age 50 years or more were selected to participate in online survey. Study

revealed that out of all demographic factors like age, gender, education level, only age is the

predictor of the financial planning. Goals, positive attitude towards retirement are major

predictor for the financial planning.

Noone, J. H. (2010) had presented thesis on psychological and socioeconomic factors

influencing Retirement planning. Study suggested that physical health and psychological

health are major predictors for retirement satisfaction. Study also suggested that men tend to

have better psychological health than women. Thus, gender is predictive of well-being

whereas education, ethnicity, age, job satisfaction are not predictors of well-being.

Singhal & Jain (2010) in conference of actuaries have presented a research paper regarding

basics of Reverse Mortgage and how it is related to Indian market today. Study also had

thrown light on risks associated with offering this product and means to mitigate those risks.

According to them, Reverse mortgage is defined as “A reverse mortgage is a loan available to

seniors and is used to release the home equity in the property as one lump sum or multiple

payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the

home is sold, or the owner leaves (e.g., into aged care)‖. Borrower has to keep into

consideration many points while charging the price, some of them are age of borrower, value

of property, expected interest rates etc. Social Security system in India does not have any

provision to provide support to retired people. In that case, reverse mortgage is the system

which will provide them cash flows till they live. Researchers have also suggested that life

insurance players can contribute more towards this product because of their experience of

better understanding of mortality/ longevity trends, they are also long term players and RM is

also long term product.

Dr. Levy (2011) did the survey of resident of New York for their attitude and efforts they put

forward their entire financial planning. Survey showed that majority of the respondent said

they have not contributed money for their retirement. Only few residents were there, who

responded that they are better off financially today than previous year. Majority of the

respondents replied that their quality of life would be worst than those who are already

55

retired. For majority of the respondents, retirement benefits will come out from Social

Security System.

Gallery.N et. Al (2011) did literature survey on financial literacy & Superannuation

Investment choice decision. Study was conducted in Australian context and Superannuation

choices available in Australia are linked with financial literacy of the Australians. The

researcher had identified series of factors that influence financial literacy and which, in turn,

had impact on decision making related to investment choices. The factors which influence

financial literacy are demographic factors such as Age, Gender, Educational Attainment,

work type & status, household income and socio economic factors such as sources of advice

and information. Risk preference of individuals had impact on their investment choices.

Researcher also found that respondents who were financially literate, actively sought for the

other options available for their superannuation investments, while respondents with low

level of financial literacy generally choose default options which are available.

Pant G. (2013) had done study to assess the level of awareness and attitude of female

faculties towards Retirement Planning. For the study, 50 female faculties of Bansathali

University were selected. Study revealed that marital status of the samples was major

determinant towards awareness and preparedness of retirement. Married females were more

aware & prepared for retirement than unmarried females.

56

2.4 Research Gap

The current Researches show that Financial Literacy is associated with financial attitude and

behaviour which, in turn, is associated with financial well - being and satisfaction. To attain

the objective of financial inclusion and strengthening of financial system and financial

markets in any country, financial literacy of the investors is quite important. Many researches

have been done in developed countries to assess the financial literacy. Majority of the studies

are done on graduate or Post Graduate Students. Researches done in past are confined to

measurement of financial literacy, where in scales developed by OECD and /or Lusardi &

Mitschell had been used. These scales normally assess numeracy skills and knowledge of

individuals regarding saving, inflation, diversification related concepts & assess awareness

related to investment choices available. But very few studies have been done to assess

awareness related to overall Personal Financial Planning. i.e. not only Investment avenues but

also awareness related to Money management, Insurance, Tax Planning, Retirement Planning

& Estate Planning.

From the literature review it is evident that majority of the studies in the area of financial

literacy and Personal Financial Planning have been done in western countries, and in

countries like Malaysia has contributed a lot in the same field. But in India and particularly

in Gujarat, very few comprehensive studies have been done on Personal Financial Planning.

This provides the researcher with the opportunity to take up the comprehensive study that

will assess the financial literacy and awareness related to personal financial planning,

measure the attitude of the investors related to same, and will also find association between

financial literacy and awareness amongst Investors of Gujarat.

57

Chapter 3

Research Methodology

3.1 A Brief Overview

This chapter basically describes the objectives of study. It also focuses on how study has been

conducted, the research design used for the study, methods of selecting and approaching the

samples, sources used for the collection of data. It also describes hypothesis used to identify

the relationship between variables and tests applied with the help of statistical tools. Five

research objectives were identified from the research gap obtained from literature review.

They are as follow

3.2 Objectives of the Study

To assess the financial literacy among residents of Gujarat.

To study and to analyze the awareness of Personal Financial Planning among

residents of Gujarat.

To study and to analyze the attitude regarding Personal Financial Planning among

residents of Gujarat.

To identify the factors influencing personal financial planning behavior.

To examine the need of Financial Planner by investors.

3.3 Research Questions

What is the level of financial literacy of residents of Gujarat State?

Is there any impact of demographic variables on financial literacy of the respondents?

Are respondents aware about different Investment avenues available for Personal

Financial Planning (PFP)?

Do respondents have positive attitude towards PFP?

Is there any impact of demographic variables on attitude towards PFP?

58

Is there any association between financial literacy and attitude towards PFP?

Which are the factors influencing PFP?

3.4 Research Hypotheses

H01: There is no significant association between Age and financial literacy of the respondents.

H02: There is no significant association between Gender and financial literacy of the

respondents.

H03: There is no significant association between Education and financial literacy of the

respondents.

H04: There is no significant association between Experience and financial literacy of the

respondents.

H05: There is no significant association between Job Type and financial literacy of the

respondents.

H06: There is no significant association between Income and financial literacy of the

respondents.

H07: There is no significant association between Marital Status and financial literacy of the

respondents.

H08: There is no significant association between Location and financial literacy of the

respondents.

Ho9: Awareness of different Investment avenues does not differ significantly with respect to

gender of the respondents.

H010: Awareness of different Investment avenues does not differ significantly with respect to

Age of the respondents.


Education of the respondents.


Job Type of the respondents.

59


Experience of the respondents.


Income of the respondents.


Marital Status of the respondents.


Location of the respondents.

H017: Attitude towards PFP does not differ significantly with respect to gender of the

respondents.

H018: Attitude towards PFP does not differ significantly with respect to Location of the

respondents.

H019: Attitude towards PFP does not differ significantly with respect to Age of the

respondents.

H020: Attitude towards PFP does not differ significantly with respect to Education of the

respondents.

H021: Attitude towards PFP does not differ significantly with respect to Job Type of the

respondents.

H022: Attitude towards PFP does not differ significantly with respect to Experience of the

respondents.

H023: Attitude towards PFP does not differ significantly with respect to Income of the

respondents.

H024: Attitude towards PFP does not differ significantly with respect to Marital Status of the

respondents.

H025: Awareness of different Investment Avenues does not differ significantly with respect to

Financial Literacy of the respondents.

60

3.5 Scope of the Study

Study is designed to find awareness and attitude of investors for Personal Financial Planning.

Study also tries to identify factors influencing Personal Financial Planning for investors. To

conduct the study, a sample of 600 respondents has been chosen from four major cities from

the State of Gujarat. These are: Ahmedabad, Baroda, Rajkot and Surat. Scope of the study

was limited to Urban Salaried Employees of the State of Gujarat.

3.6 Research Design

(Parahoo, 2006) describes a research design as ―a plan that describes how, when and where

data are to be collected and analyzed‖. It basically shows how study will be conducted to

fulfill the defined objectives. Malhotra and Dash ( 2009) states that there are major two ways

in which research design is identified, Exploratory Research and Descriptive Research.

Exploratory research is useful when researcher doesn‘t have enough idea about how to

proceed with the research problem. If any formal research methods or protocol are not

employed in particular area then researcher may use Exploratory Research Design.

Descriptive Research helps to identify characteristics of groups or individuals. The major

purpose of descriptive research is description of the state of affairs as it exists at present.

( C R Kothari, 2004)

Descriptive research is gathering of information about prevailing conditions or situations for

the purpose of description and interpretation. This type of research method is not simply

amassing and tabulating facts but includes proper analyses, interpretation, comparisons,

identification of trends and relationships. (Dr. Y.P. Aggarwal, 2008)

Research Design Selected

For purpose of fulfilling the objectives defined earlier Descriptive Research Design was most

suitable. Hence it has been adopted for conducting study.

61

3.7 Sample Design

A sample design is the roadmap or framework which serves as the basis for selecting sample

for survey. It will include Sampling Unit, Sampling Technique and Sample Size.

3.7.1 Sampling unit

Main objective of the research is to assess level of financial literacy, awareness related to PFP

in Gujarat. Sampling Unit of the research is salaried employees of Government, Public Sector

and Private Sector.

3.7.2 Sampling Technique

Sampling technique can be broadly classified as Non Probability and Probability Sampling.

Non Probability technique of selecting sample has been used for the study. Samples were

divided in quota according to their job types: Public sector employees, private sector

employees and Government employees. Hence, Quota sampling technique has been used

under non probability method.

3.7.3 The Sample size

Sample size determination in empirical research is very important. Sample size should be

carefully selected so inference for entire population can be done from it. Aim of the study is

to find financial literacy, attitude and awareness of PFP of the respondents in Gujarat State.

Therefore, for the purpose of study, samples were selected from four Major cities of Gujarat:

Ahmedabad, Vadodara, Rajkot & Surat. From each City 150 salaried employees were

selected. Again they were divided into: 50 Government Employees, 50 Public Sector

Employees and 50 Private Sector Employees. So Sample size for the present study is 600

Employees of Gujarat state. Profile of the samples are tabulated in Table 3.1.

62

TABLE 3. 1 – Sample Profile

150 Residents of Ahmedabad City 50 Govt. Employees+ 50 Public

Sector Employees + 50 Private

Sector Employees

150 Residents of Baroda City 50 Govt. Employees+ 50 Public


Sector Employees

150 Residents of Rajkot City 50 Govt. Employees+ 50 Public


Sector Employees

150 Residents of Surat City 50 Govt. Employees+ 50 Public


Sector Employees


3.8 Data Sources

3.8.1 Secondary Data

Secondary Data are the data already collected and published. For the study, secondary data

were collected from various Books, journals, thesis, periodicals, magazines, newspapers and

Websites.

3.8.2 Primary Data

Primary data are the data originated by researcher to meet certain objectives. For the study

primary data has been collected through structured questionnaire. Questionnaires were filled

by respondents through one to one approach.

3.9 Planning of Data Collection

For the purpose of Primary Data collection, survey technique has been adopted, in which

close ended questions are asked with the help of structured questionnaire. In this study, data

were collected from 600 salaried employees of Gujarat State by using Survey Method. Any

salaried employee can be a sampling unit for the survey. Planning was done to select

63

employees from diversified industries, so that the result may not get skewed. For the purpose

of collecting data, employees of different government bodies, Public Sector Units and Private

Sector were contacted with convenience sampling and with referrals methods. Government

employees selected for the study were employees of different municipal corporations, GIDC

Class I & II officers, Custom & Excise officers, Public School teachers. Public Sector

employees were selected from various PSUs like ONGC, Public Sector Banks etc. Data of

Private Sector employees were collected from different industries like Banking, IT, Heavy

Engineering, Education, FMCG etc.

3.10 Overview of Variables, Scaling Technique and Data collection

Instrument – Structured Questionnaire

A questionnaire is a written list of questions, the answers to which are recorded by

respondents. The respondents read the questions from the questionnaire, interpret what is

expected and then write down the answers.( Ranjit Kumar, 2011). Questionnaire may have

questions which are classified as Open ended and Closed ended questions. Open ended

questions gives respondents‘ liberty to think and narrate answers in their own language of

understanding. It may get difficult to code and analyze the response given in open ended

questionnaire. Closed ended questions, because they provide ―ready-made‖ categories within

which respondents reply to the questions asked by researcher, help to ensure that the

information needed by the researcher is collected. In this study, close ended questions were

used to record the responses from the respondents. Data collected through closed ended

questions include Nominal Data, Categorical Data and data on Likert Scale. For some

sections, Three Point and Five Point Likert scale has been used by the researcher. Five Point

Likert scale is easy to construct and administer and respondents easily understand how to use

the particular scale.( Malhotra N., 2009)

3.10.1 Variables Identified for the study

Dependent Variables: Financial Literacy, Financial Attitude & Personal Financial Planning

are the dependent variables identified for the present research.

Independent Variables: From the literature review, demographic variables like; Age,

Gender, Education, Job Type, Work Experience, Income, Marital Status, Location have been

64

identified as independent variables, and these variables may have impact on financial literacy

and financial attitude. So the different demographic variables are independent variables of the

study.

3.10.2 Overview of Questionnaire

Questionnaire was divided mainly in four sections. First section was designed to assess

Financial Literacy; Second section was designed to assess awareness of respondents

regarding various Investment Avenues. Third section was designed to analyze attitude of

respondents regarding Personal Financial Planning and Factors influencing the same. Fourth

section of questionnaire was pertaining to collection of Demographic profile of respondents.

To check the content validity of questionnaire, views of academicians and industry experts

were sought to check the validity of the content of the questionnaire. Their opinions &

suggestions were incorporated in the questionnaire.

To assess the financial literacy of the respondents, questions to assess knowledge for basic

financial terms were asked. Respondents had to choose one correct answers from four options

given to them. The first three questions were asked to assess basic financial literacy and the

remaining five questions were asked to assess advanced financial literacy. Questions asked

were adopted from the scale developed by Lusardi & Mitschell (2011).

Different study has shown that awareness related to different investment avenues are very

low among the Indian Investors. So present study aims at finding out awareness of different

investment avenues in Investors of Gujarat. To identify the awareness for some thirteen

different investment avenues, respondents were asked to assess their awareness on three point

Likert scale. Where ‗1 is unaware, 2 is moderately aware and 3 is completely aware‘. Next

Section of the questionnaire is for analyzing attitude towards Personal Financial Planning and

Factors influencing the same. Lai M. & Tan W. (2009) performed similar study in Malaysia

to analyze attitude and identify factors influencing PFP. Five point Scale developed by them

was referred and modified according to present Indian context. Attitude related to all the

components of Personal Financial Planning i.e. Money Management, Investments, Risk

(Insurance) Management, Tax Management, Retirement Planning, Estate Planning & Overall

PFP was assessed. For the purpose, statements related to all the components and Overall PFP

were asked and their agreeableness on Five Point Likert scale has been checked. Where ‗1

being strongly disagree to 5 being Strongly Agree‘. Some negatively worded questions were

also asked and then inverted coding had been done for them. From various literature, factors

which may influence Personal Financial Planning were identified. Responses were taken on

65

five point Likert scale for respondents agreeableness of the factors influencing their financial

planning decisions.

3.10.3 Details of the Pilot Study

Pilot survey is in fact the replica and rehearsal of the main survey. Such a survey, being

conducted by experts, brings to the light the weaknesses (if any) of the questionnaires and

also of the survey techniques. From the experience gained in this way, improvement can be

effected.

(C R Kothari, 2004)

Pilot study was conducted on 100 respondents of Ahmedabad City to check appropriateness

of the questions, content & sequence of the questions. Pilot Study was done using one to one

approach, so researcher can gauge the problems faced by respondents while filling it up.

There were some items in the questionnaire which were difficult to understand for a layman.

Those items were modified in a simple language so that respondents can easily understand

the same. After data collected for Pilot Study, data were analyzed to check whether

questionnaire is designed according to objectives and researcher is getting proper response or

not. Analysis on Pilot Data suggested that proper responses have been obtained. There after

the data was collected for the entire sample using the questionnaire.

3.10.4 Reliability Test

Reliability is consistency of measurement (Bollen, 1989), or stability of measurement over a

variety of conditions in which basically the same results should be obtained (Nunnally,

1975).

Cronbach Alpha is the measure to check reliability of the instrument. According to some

previous researches done in the area Alpha value above 0.7 is acceptable.

With the help of SPSS 20, Reliability test has been performed on Likert Scale items. For

attitudinal scale used in questionnaire, the Cronbach Alpha value obtained was 0.7.

Therefore, the research instrument used was considered as reliable.

3.11 Various Statistical Tests and Tools Used

Microsoft – Excel was used for data entry stage. Later that data was exported to SPSS.

Microsoft Excel was also used to find some descriptive analysis. Data collected on Likert

Scale is an ordinal data. Normality of ordinal data can‘t be checked, so for the present study

66

only non-parametric test have been used. SPSS 20 has been used to perform various tests like

Chi- Square, Mann Whitney U Test, Krushkal Wallis Test, Factor Analysis etc. AMOS is

normally used for building, validating and presenting a hypothesized model. For this study,

AMOS 18 software was used for Confirmatory Factor Analysis and Structural Equation

Modeling.

67

CHAPTER - 4

Analysis & Interpretation

4.1 Introduction

This Chapter deals with the Descriptive and inferential statistical analysis of data collected

from 4 major cities of Gujarat State, namely; Ahmedabad, Baroda, Surat and Rajkot. Data

were collected from 600 respondents from these cities.

Analysis of the data has been divided in four major sections

Section I: Demographic Profile of the respondents.

Section II: Financial Literacy of the respondents

Section III: Awareness of Financial Products within respondents

Sections IV: Attitude and Factors influencing Personal Financial Planning

4.2. Demographic Profile of the respondents

4.2.1. Location

The Table below shows the responses obtained from four major cities of Gujarat State.The

data from 150 respondents from each city (Ahmedabad, Baroda, Rajkot and Surat) have been

obtained for analysis purpose.

68

TABLE 4. 1 - Location of the respondents

Frequency Percent

Cumulative

Percent

Valid

Ahmedabad 150 25.0 25.0

Baroda 150 25.0 50.0

Rajkot 150 25.0 75.0

Surat 150 25.0 100.0

Total 600 100.0

Source : Primary Data

4.2.2. Job Type

The Table 4.2 shows the job type of the respondents. For the purpose of the study, only

salaried employees of Public Sector, Private Sector and Government employees were chosen.

From each city, 50 respondents under each category had been selected. Thus, 200

respondents from Public Sector, 200 respondents from Private Sector and 200 Government

employees have been selected for the study.

TABLE 4. 2 - Job Type of the respondents

Frequency Percent

Cumulative

Percent

Valid

Public Sector 200 33.3 33.3

Private Sector 200 33.3 66.7

Government 200 33.3 100.0

Total 600 100.0


4.2.3. Age

The Table 4.3 and Figure 4.1 show the Age of the respondents. Age categories are classified

as : under 20-35, 36-58 and 59 and above. 35.5 percent of the respondents belong to 20-35

age group, 46 percent of the respondents belong to 36-58 age group and remaining 18.5

percent of the respondents belong to 59 and above age group.

69

TABLE 4. 3 - Age of the respondents

Frequency Percent

Cumulative

Percent

Valid

20-35 213 35.5 35.5

36-58 276 46.0 81.5

59 and above 111 18.5 100.0

Total 600 100.0


FIGURE 4. 1 - Age of the Respondents

4.2.4. Gender

From Table 4.4 and Figure 4.2, it is evident that there are 59.7 Percent Male and 40.3 Percent

Female respondents.

TABLE 4. 4 – Gender of the respondents

Frequency Percent

Cumulative

Percent

Valid

Male 358 59.7 59.7

Female 242 40.3 100.0

Total 600 100.0


70

FIGURE 4. 2 - Gender of the respondents

4.2.5. Education

It can be seen from Table 4.5 (Figure 4.3 ) that about 52.5 % of the respondents were

Graduates, 29.5 % of the respondents were Post Graduate and 18% of the respondents were

High School pass.

TABLE 4. 5 - Education of the respondents

Frequency Percent

Cumulative

Percent

Valid

High school 108 18.0 18.0

Graduation 315 52.5 70.5

Post Graduation 177 29.5 100.0

Total 600 100.0


71

FIGURE 4. 3 - Education of the Respondents

4.2.6. Experience

Table 4.6 ( Figure 4.4) shows that 49.3% respondents had 5 – 15 years of experience, around

29.5% respondents had 16 -25 years of experience, around 17.5 % respondents had

experience of 25 years and above and 3.7 % respondents had less than 5 years of experience.

TABLE 4. 6 – Experience of the respondents

Frequency Percent

Cumulative

Percent

Valid

Less Than 5 Years 22 3.7 3.7

5-15 years 296 49.3 53.0

16-25 Years 177 29.5 82.5

25 and Above 105 17.5 100.0

Total 600 100.0


72

FIGURE 4. 4 – Experience of the respondents

4.2.7. Income

From Table 4.7 ( Figure 4.5), one can observe that 55.7% of the respondents had income

between 5 – 10 Lakhs, 23.3 % of the respondents had income between 10 -15 Lakhs, 14% of

the respondents had income less than 5 Lakhs and 7% of the respondents had income more

than 15 Lakhs.

TABLE 4. 7 – Income of the respondents

Frequency Percent

Cumulative

Percent

Valid

Less Than 5 Lakhs 84 14.0 14.0

5-10 Lakh 334 55.7 69.7

10-15 lakhs 140 23.3 93.0

More Than 15 lakh 42 7.0 100.0

Total 600 100.0


73

FIGURE 4. 5 – Income of the respondents

4.2.8. Marital Status

Table 4.8 ( Figure 4.6) shows that 62.7 % of the respondents were married, 34.7 %

respondents were unmarried, 1 % were widow/ widower and 1.7 % were divorcee.

TABLE 4. 8 – Marital Status of the respondents

Frequency Percent

Cumulative

Percent

Valid

Married 376 62.7 62.7

Unmarried 208 34.7 97.3

Widow/Widower 6 1.0 98.3

Divorcee 10 1.7 100.0

Total 600 100.0


74

FIGURE 4. 6 – Marital Status of the respondents

4.2.9. Savings

From Table 4.9 ( Figure 4.7), it is noteworthy that 40.8 % of the respondents could save 10 –

30% of the income, 38.2% respondents have savings of less than 10% of the income and 21

% of the respondents could save more than 30% of their income.

TABLE 4. 9 – Savings of the respondents

Frequency Percent

Cumulative

Percent

Valid

Less Than 10 % 229 38.2 38.2

10-30 % 245 40.8 79.0

More Than 30 % 126 21.0 100.0

Total 600 100.0


75

FIGURE 4. 7 – Savings of the respondents

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4.3 Financial Literacy

Financial literacy was classified as (1) basic financial literacy and (2) advance financial

literacy (Lusardi Annamaria , 2012). To identify the basic level of financial literacy,

respondents were asked questions related to compounding of Interest Rate, Inflation, and

Diversifications. To identify advance level of financial literacy, respondents were asked

questions related to Risk Return Relationship, concept of Time Value of Money, relationship

between interest rate and bond price etc. At the end of the question, four options are provided

out of which one was correct. The Question and the frequency of the answers as true and

false are given below.

4.3.1. Frequency Analysis

1. Suppose you had Rs. 1000 in Saving Bank account and interest rate was 2% per year,

after 5 years how much do you think you would have earned in saving account, if you

had left your money to grow:

The particular question is being asked to check basic financial literacy about

cumulative interest percentage calculations. From Table 4.10, it is evident that 80 %

of the respondents have given correct answer for the same. Only 20% of the

respondents have given false answer.

TABLE 4. 10 – Literacy for Savings Bank Account

Frequency Percent

Cumulative

Percent

Valid

False 120 20.0 20.0

True 480 80.0 100.0

Total 600 100.0


2. Imagine that interest rate on your saving bank account was 1% per year and inflation

was 2% per year. After 1 year would you be able to buy.

Particular question was asked to check general financial literacy for economic concept

like inflation. Table 4.11 shows that around 71% of the respondents had given correct

answer for the same and 29 % had given incorrect answer.

77

TABLE 4. 11 – Literacy regarding concept of Inflation

Frequency Percent

Cumulative

Percent

False 174 29.0 29.0

True 426 71.0 100.0

Total 600 100.0


3. Assume that a friend inherits Rs. 10000 today and his sibling inherits Rs. 10000, 3

years from now. Who is richer because of Time Value of Money?

Question was asked to check the knowledge regarding time value of money. From

Table 4.12, it is evident that 64% of the respondents possess fair knowledge of time

value of money. Only 36% of the respondents had given incorrect answer.

TABLE 4. 12 – Literacy regarding concept of Time Value of Money

Frequency Percent

Cumulative

Percent

False 216 36.0 36.0

True 384 64.0 100.0

Total 600 100.0


4. Buying a single company stock usually provide safer return than a stock mutual fund.

As a part to check the knowledge regarding concept of diversification, the particular

question was asked. The answers have been classified as either True or False and are

tabulated in Table 4.13. From the Table, it is evident that 72% of the respondents

gave correct answer that Mutual funds give safer return than a single company stock.

28 % of the respondents failed to give correct answer.

TABLE 4. 13 – Literacy regarding concept of Diversifications

Frequency Percent

Cumulative

Percent

Valid

False 168 28.0 28.0

True 432 72.0 100.0

Total 600 100.0


78

5. Financial Planning is all about buying enough insurance.

The question is asked to check basic awareness regarding Financial Planning. It is

generally observed that people conceptualize Financial Planning as investing only

into insurance. Whereas, a Balanced Financial Plan is composed of Insurance,

Investments, Debt, Retirement, Taxation and Estate Planning. From Table 4.14, it is

evident that 80 % of the respondents have given correct answer for the same while 20

% of the respondents gave incorrect answers.

TABLE 4. 14 – Literacy regarding basics of Financial Planning

Frequency Percent

Cumulative

Percent

Valid

False 120 20.0 20.0

True 480 80.0 100.0

Total 600 100.0


6. Any investment opportunity which claims higher returns usually carries lower risk.

From Table 4.15, it is evident that 80% of the respondents have given correct answer

for the same. 20 % of the respondents failed to give correct answer.

TABLE 4. 15 – Literacy regarding basics of Risk & Returns Relationships

Frequency Percent

Cumulative

Percent

Valid

False 120 20.0 20.0

True 480 80.0 100.0

Total 600 100.0


7. If interest rate falls, what will happen to price of the bond?

Particular question deals with economy‘s concept of relationship between price of the

bond and interest rate in the market. If interest rate in economy will go down, the

price of bond will go high and vice-a versa. Table 4.16 shows that majority i.e. 60 %

of the respondents fails to give correct answer, only 40% of the respondents were

aware about the relationship between interest rate in economy and price of bond.

79

TABLE 4. 16 – Literacy regarding relationship of Bond Price & Interest Rates

Frequency Percent

Cumulative

Percent

Valid

False 360 60.0 60.0

True 240 40.0 100.0

Total 600 100.0


8. Considering the long term tenure (10 to 20 Years), which assets normally gives the

highest return?

Particular question was asked to check awareness regarding different financial

instruments available in the economy and their normal features. From Table 4.17, it is

evident that 54 % of the respondents failed to give correct answer, which is equity

which generates higher return in the long run. 46 % of the respondents gave correct

answer. It is interesting to note that majority of the respondents have chosen bond as

an instruments which provides higher return in the long run.

TABLE 4. 17 – Literacy regarding returns generated by financial assets in long run

Frequency Percent

Cumulative

Percent

Valid

False 324 54.0 54.0

True 276 46.0 100.0

Total 600 100.0


Table 4.18 shows the overall summary for financial literacy. Respondents possessed fairly

good knowledge of basic financial literacy. Only two questions pertaining to advanced

financial literacy were such where more incorrect answers were observed. To check the

overall performance of the respondents pertaining to correct answers given by individual

respondents, Modal value of the responses was calculated with the help of excel sheet. Mode

of the responses came out to be 6. Which shows that out of 8 questions, majority of the

respondents have given 6 correct answers. It can be summarized through the Table that

overall people possessed fairly good knowledge of financial literacy regarding all the

parameters.

80

TABLE 4. 18 – Overall summary for Financial Literacy

Levels Sr. No Parameters on which literacy has

been checked

Frequency

(%)

Interpretation

Basic

Literacy

1 Saving Bank Interest 80 From the above data it is

observed that respondents

possessed fair literacy

regarding all the

parameters asked. Only 2

parameters: Working of

Bond and Returns on

Long Term Investments

has shown little low

literacy.

2 Inflation 71

3 Time Value of Money 64

Advanced

Literacy

4 Concept of Diversifications 72

5 Basics of Financial Planning 80

6 Relation between Risk & Return 80

7 Relationship of Bond Price &

Interest Rates

40

8 Returns generated by financial

assets in long run

46


Jariwala H. (2013) in her thesis had stated that median can be used to find out the status of

financial literacy of the respondent. One can take overall score of correct answers given by

respondents, and then median of the score is found. Respondents scoring above median score

are known to be financially literate while those with score below that are financially illiterate.

The same method is adopted in the present study to find out whether respondent is financially

literate or not. In the present research, 8 questions pertaining to financial literacy were asked.

With the help of Microsoft Excel score of each respondent in terms of correct answers

provided by them was found. Median of these scores was found to be 6. So, respondents who

gave 6 or more than 6 correct answers are financially literate and those with less than 6 are

financially illiterate. Table 4.19 shows the frequency of Financially Literate and Illiterate

Respondents.

81

TABLE 4. 19 – Financial Literacy of Respondents

Frequency Percent Cumulative

Percent

Valid

Financial

Illiterate 282 47.0 47.0

Financial Literate 318 53.0 100.0

Total 600 100.0


Table 4.19 depicts that 47 % of the respondent are financially illiterate and 53% of the

respondents are financially literate.

4.3.2. Non Parametric Tests: Chi-Square Test

To find association between different demographic factors and financial literacy Chi –square

test has been performed. Various hypotheses are formed as under.

H01: There is no significant association between Age and financial literacy of the

respondents.

The Table below shows the result of the Chi-square test of association. Age and Financial

Literacy of the respondent were tested for association.

TABLE 4. 20 – Cross Tabulation - Age and Financial Literacy of the Respondent

Financial Literacy Total

Financial

Illiterate

Financial

Literate

Age

20-35 53 160 213

36-58 144 132 276

59 and above 85 26 111

Total 282 318 600


The Table below shows the result of test statistics. As the P Value is less than 0.05, we reject

the null hypothesis. Therefore, it can be concluded that Age and Financial Literacy of the

respondents are related with each other, Chi-Square at 2 degree of freedom = 83.775, P <

0.05.

82

TABLE 4. 21 - Chi-Square Tests – Age and Financial Literacy of the Respondent

Value Df Asymp. Sig. (2-

sided)

Pearson Chi-Square 83.775a 2 .000

a. 0 cells (0.0%) have expected count less than 5. The minimum expected count

is 52.17.



respondents.

The Table below shows the result of the Chi-square test of association. Gender and Financial


TABLE 4. 22 – Cross Tabulation - Gender and Financial Literacy of the Respondent


Financial

Illiterate

Financial

Literate

Gender Male 124 234 358

Female 158 84 242

Total 282 318 600



the null hypothesis. So, it can be concluded that Gender and Financial Literacy of the


0.05.

TABLE 4. 23 - Chi-Square Tests – Gender and Financial Literacy of the

Respondent


sided)



is 113.74.


83


respondents.

The Table below shows the result of the Chi-square test of association. Education and

Financial Literacy of the respondent were tested for association.

TABLE 4. 24 – Cross Tabulation - Education and Financial Literacy of the Respondent


Financial

Illiterate

Financial

Illiterate

Education

High school 45 63 108

Graduation 188 127 315

Post Graduation 49 128 177

Total 282 318 600



the null hypothesis. So, it can be concluded that Education and Financial Literacy of the

respondents are related with each other. Chi-Square at 2 degree of freedom = 48.086, P <

0.05.

TABLE 4. 25 - Chi-Square Tests – Education and Financial Literacy of the Respondent


sided)



is 50.76.



respondents.

The Table below shows the result of the chi-square test of association. Experience and


84

TABLE 4. 26 – Cross Tabulation - Experience and Financial Literacy of the

Respondent


Financial

Illiterate

Financial

Illiterate

Experience

Less Than 5 Years 16 6 22

5-15 years 91 205 296

16-25 Years 88 89 177

25 and Above 87 18 105

Total 282 318 600



the null hypothesis. So, it can be concluded that Experience and Financial Literacy of the


0.05.

TABLE 4. 27 - Chi-Square Tests – Experience and Financial Literacy of the

Respondent

Value df Asymp. Sig. (2-

sided)



is 10.34.



respondents.

The Table below shows the result of the chi-square test of association. Job Type and


85

TABLE 4. 28 – Cross Tabulation – Job Type and Financial Literacy of the Respondent


Financial

Illiterate

Financial

Illiterate

Job

type

Public Sector 109 91 200

Private Sector 96 104 200

Government 77 123 200

Total 282 318 600



the null hypothesis. So, it can be concluded that Job Type and Financial Literacy of the

respondents are related with each other. Chi-Square at 2 degree of freedom = 10.397, P <

0.05.

TABLE 4. 29 - Chi-Square Tests – Job Type and Financial Literacy of the Respondent


sided)



is 94.00.



respondents.

The Table below shows the result of the chi-square test of association. Income and Financial


86

TABLE 4. 30 – Cross Tabulation - Income and Financial Literacy of the Respondent


Financial

Illiterate

Financial

Illiterate

Income

Less Than 5 Lakhs 37 47 84

5-10 Lakh 148 186 334

10-15 lakhs 69 71 140

More Than 15 lakh 28 14 42

Total 282 318 600



the null hypothesis. So, it can be concluded that Income and Financial Literacy of the


0.05.

TABLE 4. 31 - Chi-Square Tests – Income and Financial Literacy of the Respondent


sided)



is 19.74.


H07: There is no significant association between Marital Status and financial literacy of

the respondents.

The Table below shows the result of the chi-square test of association. Marital Status and


87

TABLE 4. 32 – Cross Tabulation – Marital Status and Financial Literacy of the

Respondent


Financial

Illiterate

Financial

Illiterate

Marital

Status

Married 144 232 376

Unmarried 130 78 208

Widow/Widower 3 3 6

Divorcee 5 5 10

Total 282 318 600



the null hypothesis. So, it can be concluded that Marital Status and Financial Literacy of the


0.05.

TABLE 4. 33 - Chi-Square Tests – Marital Status and Financial Literacy of the

Respondent

Value df Asymp. Sig. (2-

sided)


a. 3 cells (37.5%) have expected count less than 5. The minimum expected

count is 2.82.



respondents.

The Table below shows the result of the Chi-square test of association. Location and


88

TABLE 4. 34 – Cross Tabulation - Location and Financial Literacy of the Respondent


Financial

Illiterate

Financial

Illiterate

Location

Ahmedabad 71 79 150

Baroda 70 80 150

Rajkot 72 78 150

Surat 69 81 150

Total 282 318 600


The Table below shows the result of test statistics. As the P Value is more than 0.05, we fail

to reject the null hypothesis. Therefore, we may infer that Location and Financial Literacy of

the respondents are not related with each other.

TABLE 4. 35 - Chi-Square Tests – Location and Financial Literacy of the Respondent


sided)

Pearson Chi-Square .134a 3 .987


is 70.50.


4.4 Awareness- level for various Investment Avenues

The respondents were asked to select their level of awareness pertaining to various

Investment Avenues. The awareness level was measured in 3 point scale where 3 indicate

completely aware, 2 indicates moderately aware and 1 indicates unaware regarding

Investment Avenue. The result is shown below.

4.4.1 Frequency Analysis

The following section discusses the frequency analysis of different investment avenues.

1. Saving Account

The Table below shows the frequency and its percentage regarding the awareness about the

Savings account. 70 percent of the respondents are completely aware about the Savings

89

Account. 15 percent of the respondents are moderately aware regarding the Savings Account

and remaining 15 percent of the respondents are not aware about savings account.

TABLE 4. 36 - Awareness of Savings Account

Frequency Percent

Cumulative

Percent

Valid

Unaware 90 15.0 15.0

Moderately Aware 90 15.0 30.0

Completely Aware 420 70.0 100.0

Total 600 100.0


2. Fixed Deposit


Fixed Deposit. 70 percent of the respondents are completely aware about the Fixed Deposit.

10 percent of the respondents are moderately aware regarding the Fixed Deposit and

remaining 20 percent of the respondents are not aware about Fixed Deposit.

TABLE 4. 37 - Awareness of Fixed Deposit

Frequency Percent

Cumulative

Percent

Valid

Unaware 120 20.0 20.0



Total 600 100.0


3. Equity Shares


Equity Shares. 37 percent of the respondents are completely aware about the Equity Shares.

23 percent of the respondents are moderately aware regarding the Equity Shares and

remaining 40 percent of the respondents are not aware about Equity Shares.

90

TABLE 4. 38 - Awareness of Equity Shares

Frequency Percent

Cumulative

Percent

Valid

Unaware 240 40.0 40.0



Total 600 100.0


4. Bonds


Bonds. 54 percent of the respondents are completely aware about the Bonds. 23 percent of

the respondents are moderately aware regarding the Bonds and remaining 23 percent of the

respondents are not aware about Bonds.

TABLE 4. 39 - Awareness of Bonds

Frequency Percent

Cumulative

Percent

Valid

Unaware 138 23.0 23.0



Total 600 100.0


5. Derivatives


Derivatives. 17 percent of the respondents are completely aware about the Derivatives. 23

percent of the respondents are moderately aware regarding the Derivatives and remaining 60

percent of the respondents are not aware about Derivatives.

TABLE 4. 40 - Awareness of Derivatives

Frequency Percent

Cumulative

Percent

Valid

Unaware 360 60.0 60.0



Total 600 100.0

91

6. Mutual Funds

The Table 4.41 shows the frequency and its percentage regarding the awareness about the

Mutual Funds. 62 percent of the respondents are completely aware about the Mutual Funds.

18 percent of the respondents are moderately aware regarding the Mutual Funds and

remaining 20 percent of the respondents are not aware about Mutual Funds.

TABLE 4. 41 - Awareness of Mutual Funds

Frequency Percent

Cumulative

Percent

Valid

Unaware 120 20.0 20.0



Total 600 100.0


7. PPF


Public Provident Fund. 65 percent of the respondents are completely aware about the PPF. 25

percent of the respondents are moderately aware regarding the PPF and remaining 10 percent

of the respondents are not aware about PPF.

TABLE 4. 42 - Awareness of PPF

Frequency Percent

Cumulative

Percent

Valid

Unaware 60 10.0 10.0



Total 600 100.0


8. Other Post Office Schemes


Other Post Office Schemes. 66 percent of the respondents are completely aware about the

Other Post Office Schemes. 34 percent of the respondents are moderately aware regarding it.

92

TABLE 4. 43 - Awareness of Other Post Office Schemes

Frequency Percent

Cumulative

Percent

Valid



Total 600 100.0


9. Life Insurance


Life Insurance. 59 percent of the respondents are completely aware about the Life Insurance.

31 percent of the respondents are moderately aware regarding the Life Insurance and

remaining 10 percent of the respondents are not aware about Life Insurance.

TABLE 4. 44 - Awareness of Life Insurance

Frequency Percent

Cumulative

Percent

Valid

Unaware 60 10.0 10.0



Total 600 100.0


10. Money Market


Money Market. 10 percent of the respondents are completely aware about the Money Market.

25 percent of the respondents are moderately aware regarding the Money Market and

remaining 65 percent of the respondents are not aware about Money Market.

93

TABLE 4. 45 - Awareness of Money Market

Frequency Percent

Cumulative

Percent

Valid

Unaware 390 65.0 65.0



Total 600 100.0


11. Tax Saving Scheme


Tax Saving Schemes. 62 percent of the respondents are completely aware about the Tax

Saving Schemes. 18 percent of the respondents are moderately aware regarding the Tax

Saving Schemes and remaining 20 percent of the respondents are not aware about Tax Saving

Schemes.

TABLE 4. 46 - Awareness of Tax Saving Scheme

Frequency Percent

Cumulative

Percent

Valid

Unaware 120 20.0 20.0



Total 600 100.0


12. Real Estate


Real Estate. 25 percent of the respondents are completely aware about the Real Estate. 48

percent of the respondents are moderately aware regarding the Real Estate and remaining 27

percent of the respondents are not aware about Real Estate.

94

TABLE 4. 47 - Awareness of Real Estate

Frequency Percent

Cumulative

Percent

Valid

Unaware 162 27.0 27.0



Total 600 100.0


13. Non-Conventional Avenues


Non-Conventional Avenues. 15.3 percent of the respondents are completely aware about the

Non-Conventional Avenues. 30 percent of the respondents are moderately aware regarding

the Savings Account and remaining 54.7 percent of the respondents are not aware about Non-

Conventional Avenues.

TABLE 4. 48 - Awareness of Non-Conventional Avenues

Frequency Percent

Cumulative

Percent

Valid

Unaware 328 54.7 54.7



Total 600 100.0


From Table 4.49, one can see that highest awareness has been observed for Post Office

schemes, PPF , Life Insurance and Saving Bank Account. Lowest awareness has been

observed for Money Market, Derivatives and Non- Conventional Avenues like precious

coins, paintings etc. Thus one can infer that respondents possess fair awareness regarding

conventional products like FD, PPF, Saving Account, Life Insurance, while awareness

regarding non-conventional products like Real estate, Money Market, NCA, Derivatives is

very low.

95

TABLE 4. 49 - Descriptive Statistics for Awareness of Financial Products

Sr. No. Financial Products Descriptive Statistics

(Mode)

1 Saving Account 3

2 Fixed Deposits 3

3 Equity Shares 1

4 Bonds 3

5 Derivatives 1

6 Mutual Funds 3

7 PPF 3

8 Other Post Office Schemes 3

9 Life Insurance 3

10 Money Market 1

11 Tax Saving Schemes 3

12 Real Estate 2

13 Non - Conventional Avenues 1


4.4.2 Inferential Statistics Pertaining to Awareness of Different Investment Avenues

To find association between Awareness level of respondents towards various investment

avenues and different demographic variables, Mann Whitney U Test and Kruskal Wallis Test

had been used.

Ho9: Awareness of different Investment avenues does not differ significantly with

respect to gender of the respondents.

To test this hypothesis, Mann Whitney U test has been applied. Result of test is shown in the

Table 4.50.

96

TABLE 4. 50 - Mann-Whitney U test – Gender and Awareness of Investment Avenues

Gender N Mean Rank Sum of Ranks Asymp. Sig. (2-

tailed)

Saving Account

Male 358 327.32 117179.00

0.000 Female 242 260.83 63121.00

Total 600

FD

Male 358 342.90 122759.00

0.000 Female 242 237.77 57541.00

Total 600

Shares

Male 358 322.62 115499.00

0.000 Female 242 267.77 64801.00

Total 600

Bonds

Male 358 309.84 110921.00

0.000 Female 242 286.69 69379.00

Total 600

Derivatives

Male 358 297.76 106598.00

0.000 Female 242 304.55 73702.00

Total 600

Mutual Funds

Male 358 331.51 118679.00

0.000 Female 242 254.63 61621.00

Total 600

PPF

Male 358 346.42 124019.00

0.000 Female 242 232.57 56281.00

Total 600

Other Post Office Schemes

Male 358 339.78 121643.00

0.001 Female 242 242.38 58657.00

Total 600

Life Insurance

Male 358 323.44 115793.00

0.076 Female 242 266.56 64507.00

Total 600

Money Market

Male 358 283.66 101549.00

0.591 Female 242 325.42 78751.00

Total 600

Tax Saving Scheme

Male 358 320.54 114755.00

0.000 Female 242 270.85 65545.00

Total 600

Real Estate

Male 358 314.88 112727.00

0.007 Female 242 279.23 67573.00

Total 600

97

Non-Conventional

Avenues

Male 358 267.97 95935.00

0.000 Female 242 348.62 84365.00

Total 600


From Table 4.50, it can be interpreted that overall significant value for all the investment

avenues except Money Market is less than 0.05. So we reject the null hypothesis for all the

other investment avenues except Money Market. Awareness regarding Money Market

doesn‘t differ significantly with Gender.

H010: Awareness of different Investment avenues does not differ significantly with

respect to Age of the respondents.

Kruskal Wallis Test has been performed to test the results. The Table 4.51 shows the Mean

Rank of Percentage of Age of the respondents and Awareness of different Investment

Avenues.

TABLE 4. 51 – Mean Rank of Awareness with Age of the respondents

Age N Mean Rank

Saving Account

20-35 213 303.88

36-58 276 314.14

59 and above 111 260.09

Total 600

FD

20-35 213 306.56

36-58 276 323.22

59 and above 111 232.39

Total 600

Shares

20-35 213 371.78

36-58 276 246.86

59 and above 111 297.09

Total 600

Bonds

20-35 213 301.33

36-58 276 337.33

59 and above 111 207.34

Total 600

Derivatives 20-35 213 345.44

36-58 276 239.35

98

59 and above 111 366.31

Total 600

Mutual Funds

20-35 213 286.39

36-58 276 336.52

59 and above 111 238.01

Total 600

PPF

20-35 213 326.49

36-58 276 327.67

59 and above 111 183.07

Total 600


20-35 213 333.85

36-58 276 318.28

59 and above 111 192.28

Total 600

Life Insurance

20-35 213 252.80

36-58 276 353.75

59 and above 111 259.64

Total 600

Money Market

20-35 213 310.01

36-58 276 238.98

59 and above 111 435.23

Total 600

Tax Saving Scheme

20-35 213 304.42

36-58 276 350.93

59 and above 111 167.58

Total 600

Real Estate

20-35 213 295.89

36-58 276 295.39

59 and above 111 322.04

Total 600

Non Conventional

Avenues

20-35 213 287.32

36-58 276 293.66

59 and above 111 342.81

Total 600


99

TABLE 4. 52 – Test Statisticsa,b - Kruskal Wallis Test – Awareness Different

Investment Avenues among Age of the respondents

Investment Avenues Chi-Square df Asymp.

Sig.

Saving Account 12.027 2 .002

FD 34.158 2 .000

Shares 71.562 2 .000

Bonds 54.412 2 .000

Derivatives 84.315 2 .000

Mutual Funds 37.110 2 .000

PPF 88.195 2 .000

Other Post Office Schemes 78.192 2 .000

Life Insurance 63.290 2 .000

Money Market 144.557 2 .000

Tax Saving Scheme 118.651 2 .000

Real Estate 2.463 2 .292

Non Conventional

Avenues 10.264 2 .006

a. Kruskal Wallis Test

b. Grouping Variable: Age


Table 4.52 shows the calculated Chi-Square, degree of freedom, and significant value. For

Awareness regarding Saving Account, FD, Shares, Bonds, Derivatives, Mutual Funds, PPF,

Post Office Schemes, Life Insurance, Money Market, Tax Saving Schemes and Non-

Conventional Avenues – P Value is less than 0.05 , so we reject the null hypothesis for these

factors. For Real Estate, P- Value is more than 0.05. So, for Real Estate, we fail to reject the

Null Hypothesis. Hence it, can be concluded that for Saving Account, FD, Shares, Bonds,

Derivatives, Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money Market, Tax

Saving Schemes and Non-Conventional Avenues there is significant difference in Awareness

and Age of the respondents. There is no significant difference in Awareness regarding Real

Estate and Age of the respondents.

100


respect to Education of the respondents.


Rank of Percentage of Education of the respondents and Awareness of different Investment

Avenues.

TABLE 4. 53 – Mean Rank of Awareness with Education of the respondents

Education N Mean Rank

Saving Account

High school 108 303.83

Graduation 315 291.50

Post Graduation 177 314.48

Total 600

FD




Total 600

Shares




Total 600

Bonds




Total 600

Derivatives




Total 600

Mutual Funds




Total 600

PPF




Total 600

Other Post Office Schemes High school 108 325.17


101


Total 600

Life Insurance




Total 600

Money Market




Total 600

Tax Saving Scheme




Total 600

Real Estate




Total 600

Non Conventional

Avenues




Total 600



Investment Avenues among Education of the respondents.

Investment Avenues Chi-Square Df Asymp.

Sig.


FD 27.123 2 .000

Shares 10.062 2 .007

Bonds 18.376 2 .000



PPF 11.617 2 .003





102


Non Conventional

Avenues 19.179 2 .000


b. Grouping Variable: Education


Table 4.54 depicts the calculated Chi-Square, degree of freedom, and significance value. P -

Value is less than 0.05 for Awareness regarding FD, Shares, Bonds, Derivatives, Mutual

Funds, PPF, Post Office Schemes, Life Insurance, Money Market, Tax Saving Schemes, Real

Estate and Non-Conventional Avenues. So, we reject the null hypothesis for them. For

Saving Bank Account, P- Value is more than 0.05. So, we fail to reject the Null Hypothesis

for this factor. Hence it can be concluded that for factors of FD, Shares, Bonds, Derivatives,

Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money Market, Tax Saving

Schemes, Real Estate and Non-Conventional Avenues, there is significant difference between

Awareness and Education of the respondents. But, there is no significant difference in

Awareness regarding Saving Bank Account and Education of the respondents.


respect to Job Type of the respondents.


Rank of Percentage of Job Type of the respondents and Awareness of different Investment

Avenues.

TABLE 4. 55 – Mean Rank of Awareness with Job Type of the respondents

Job Type N Mean Rank

Saving Account

Public Sector 200 286.70

Private Sector 200 308.15

Government 200 306.65

Total 600

FD




Total 600

Shares Public Sector 200 311.26

103



Total 600

Bonds




Total 600

Derivatives




Total 600

Mutual Funds




Total 600

PPF




Total 600





Total 600

Life Insurance




Total 600

Money Market




Total 600

Tax Saving Scheme




Total 600

Real Estate




Total 600

104

Non Conventional

Avenues




Total 600


TABLE 4. 56: Test Statisticsa,b - Kruskal Wallis Test – Awareness Different

Investment Avenues among Job Type of the respondents.

Investment Avenue Chi-Square df Asymp.

Sig.


FD 38.421 2 .000

Shares 1.384 2 .501

Bonds 12.011 2 .002



PPF 21.612 2 .000






Non Conventional

Avenues 48.481 2 .000


b. Grouping Variable: Job Type


Table 4.56 shows the calculated Chi-Square, degree of freedom, and significance value. P -

Value is less than 0.05 for Awareness regarding FD, Bonds, Derivatives, Mutual Funds, PPF,

Life Insurance, Money Market, Tax Saving Schemes, Real Estate and Non-Conventional

Avenues. So, we reject the null hypothesis for them. For Saving Bank Account, Shares and

Post Office Schemes, P- Value is more than 0.05. So, we fail to reject the Null Hypothesis.

Hence, it can be concluded that for FD, Bonds, Derivatives, Mutual Funds, PPF, Life

Insurance, Money Market, Tax Saving Schemes, Real Estate and Non-Conventional

Avenues, there is significant difference in Awareness and Job Type of the respondents.

105

However, there is no significant difference in Awareness regarding Saving Bank Account,

Shares and Post Office Schemes and Job Type of the respondents.


respect to Experience of the respondents. Kruskal Wallis Test has been performed to test

the results. The Table 4.57 shows the Mean Rank of Percentage of Experience of the

respondents and Awareness of different Investment Avenues.

TABLE 4. 57 – Mean Rank of Awareness with Experience of the respondents

Experience N Mean Rank

Saving Account

Less Than 5 Years 22 179.14

5-15 years 296 316.41

16-25 Years 177 291.77

25 and Above 105 295.79

Total 600

FD


5-15 years 296 326.04

16-25 Years 177 305.42

25 and Above 105 245.36

Total 600

Shares


5-15 years 296 341.70

16-25 Years 177 251.53

25 and Above 105 267.07

Total 600

Bonds


5-15 years 296 325.63

16-25 Years 177 282.55

25 and Above 105 266.64

Total 600

Derivatives


5-15 years 296 300.03

16-25 Years 177 266.74

25 and Above 105 332.21

Total 600

Mutual Funds


5-15 years 296 313.88

16-25 Years 177 322.09

106

25 and Above 105 251.99

Total 600

PPF


5-15 years 296 335.16

16-25 Years 177 294.14

25 and Above 105 228.50

Total 600

Other Post Office

Schemes


5-15 years 296 327.42

16-25 Years 177 274.60

25 and Above 105 251.36

Total 600

Life Insurance


5-15 years 296 298.68

16-25 Years 177 339.58

25 and Above 105 269.19

Total 600

Money Market


5-15 years 296 289.86

16-25 Years 177 299.06

25 and Above 105 344.64

Total 600

Tax Saving Scheme


5-15 years 296 332.24

16-25 Years 177 298.09

25 and Above 105 226.56

Total 600

Real Estate


5-15 years 296 299.26

16-25 Years 177 352.64

25 and Above 105 221.39

Total 600

Non Conventional

Avenues


5-15 years 296 326.00

16-25 Years 177 262.84

25 and Above 105 277.32

Total 600


107

TABLE 4. 58 : Test Statisticsa,b - Kruskal Wallis Test – Awareness Different Investment

Avenues among Experience of the respondents.


Sig.


FD 42.801 3 .000

Shares 39.794 3 .000

Bonds 15.733 3 .001



PPF 47.885 3 .000






Non-Conventional

Avenues 25.161 3 .000


b. Grouping Variable: Experience



Value is less than 0.05 for Awareness regarding Saving Bank Account, FD, Bonds, Shares,

Derivatives, Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money Market, Tax

Saving Schemes, Real Estate and Non-Conventional Avenues. So, we reject the null

hypothesis for them. Hence, it can be concluded that for Saving Bank Account, FD, Bonds,

Shares, Derivatives, Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money

Market, Tax Saving Schemes, Real Estate and Non-Conventional Avenues, there is

significant difference in Awareness and Experience of the respondents.


respect to Income of the respondents.


Rank of Percentage of Income of the respondents and Awareness of different Investment

Avenues.

108

TABLE 4. 59 – Mean Rank of Awareness with Income of the respondents

Income N Mean Rank

Saving Account

Less Than 5 Lakhs 84 240.14

5-10 Lakh 334 315.41

10-15 lakhs 140 284.00

More Than 15 lakh 42 357.64

Total 600

FD


5-10 Lakh 334 313.70

10-15 lakhs 140 293.43


Total 600

Shares


5-10 Lakh 334 288.91

10-15 lakhs 140 299.15


Total 600

Bonds


5-10 Lakh 334 299.24

10-15 lakhs 140 311.86


Total 600

Derivatives


5-10 Lakh 334 285.50

10-15 lakhs 140 295.34


Total 600

Mutual Funds


5-10 Lakh 334 300.70

10-15 lakhs 140 310.40


Total 600

PPF


5-10 Lakh 334 316.62

10-15 lakhs 140 282.71


Total 600

Other Post Office Schemes Less Than 5 Lakhs 84 222.79

5-10 Lakh 334 322.27

109

10-15 lakhs 140 309.93


Total 600

Life Insurance


5-10 Lakh 334 299.06

10-15 lakhs 140 353.00


Total 600

Money Market


5-10 Lakh 334 302.16

10-15 lakhs 140 288.93


Total 600

Tax Saving Scheme


5-10 Lakh 334 297.09

10-15 lakhs 140 314.47


Total 600

Real Estate


5-10 Lakh 334 292.10

10-15 lakhs 140 332.24


Total 600

Non Conventional

Avenues


5-10 Lakh 334 290.46

10-15 lakhs 140 319.41


Total 600



Investment Avenues among Income of the respondents.


Sig.


FD 17.651 3 .001

Shares 8.518 3 .036

Bonds 1.504 3 .681


110


PPF 15.590 3 .001






Non Conventional

Avenues 45.093 3 .000


b. Grouping Variable: Income



Value is less than 0.05 for Awareness regarding Saving Account, FD, Shares, Derivatives,

Mutual Funds, PPF, Post office Schemes, Life Insurance, Money Market, Real Estate and

Non-Conventional Avenues. So, we reject the null hypothesis for them. For Bonds and Tax

Saving Schemes, P- Value is more than 0.05. So, we fail to reject the Null Hypothesis.

Hence, it can be concluded that for Saving Account, FD, Shares, Derivatives, Mutual Funds,

PPF, Life Insurance, Post office schemes, Money Market, Real Estate and Non-Conventional

Avenues there is significant difference in Awareness and Income of the respondents. There is

no significant difference in Awareness regarding Bonds, Tax Saving schemes and Income of

the respondents.


respect to Marital Status of the respondents.


Rank of Percentage of Marital Status of the respondents and Awareness of different

Investment Avenues.

TABLE 4. 61 – Mean Rank of Awareness with Marital Status of the respondents

Marital Status N Mean Rank

Saving Account

Married 376 318.53

Unmarried 208 268.41

Widow/Widower 6 248.00

Divorcee 10 321.50

Total 600

111

FD

Married 376 337.52



Divorcee 10 390.50

Total 600

Shares

Married 376 316.73



Divorcee 10 305.00

Total 600

Bonds

Married 376 319.43



Divorcee 10 341.60

Total 600

Derivatives

Married 376 298.03



Divorcee 10 377.90

Total 600

Mutual Funds

Married 376 339.31



Divorcee 10 414.50

Total 600

PPF

Married 376 340.39



Divorcee 10 351.50

Total 600


Married 376 303.98



Divorcee 10 318.50

Total 600

Life Insurance

Married 376 312.63



Divorcee 10 423.50

112

Total 600

Money Market

Married 376 295.19



Divorcee 10 378.50

Total 600

Tax Saving Scheme

Married 376 330.01



Divorcee 10 343.70

Total 600

Real Estate

Married 376 325.15



Divorcee 10 503.60

Total 600

Non Conventional

Avenues

Married 376 282.15



Divorcee 10 540.90

Total 600



Investment Avenues among Marital Status of the respondents.

Investment Avenues Chi-Square Df Asymp.

Sig.


FD 83.517 3 .000

Shares 11.497 3 .009

Bonds 18.290 3 .000



PPF 82.621 3 .000





113


Non Conventional

Avenues 35.379 3 .000


b. Grouping Variable: Marital Status



Value is less than 0.05 for Awareness regarding Saving Account, FD, Shares, Bonds, Mutual

Funds, PPF, Life Insurance, Tax Saving Schemes, Real Estate and Non-Conventional

Avenues. So, we reject the null hypothesis for them. For Derivatives, Post office Schemes

and Money Market, P- Value is more than 0.05. So, we fail to reject the Null Hypothesis.

Hence it can be concluded that for Saving Account, FD, Shares, Bonds, Mutual Funds, PPF,

Life Insurance, Tax Saving Schemes, Real Estate and Non-Conventional Avenues, there is

significant difference in Awareness and Marital Status of the respondents. There is no

significant difference in Awareness regarding Derivatives, Post office Schemes and Money

Market and Marital Status of the respondents.


respect to Location of the respondents.


Rank of Percentage of Location of the respondents and Awareness of different Investment

Avenues.

TABLE 4. 63 – Mean Rank of Awareness with Location of the respondents

Location N Mean Rank

Saving Account

Ahmedabad 150 300.20

Baroda 150 300.80

Rajkot 150 298.50

Surat 150 302.50

Total 600

FD


Baroda 150 302.70

Rajkot 150 296.70

Surat 150 304.30

Total 600

Shares Ahmedabad 150 302.36

114

Baroda 150 298.64

Rajkot 150 299.90

Surat 150 301.10

Total 600

Bonds


Baroda 150 302.50

Rajkot 150 298.50

Surat 150 302.50

Total 600

Derivatives


Baroda 150 297.64

Rajkot 150 303.36

Surat 150 297.64

Total 600

Mutual Funds


Baroda 150 302.86

Rajkot 150 296.54

Surat 150 304.46

Total 600

PPF


Baroda 150 302.10

Rajkot 150 297.10

Surat 150 303.90

Total 600



Baroda 150 302.50

Rajkot 150 298.50

Surat 150 302.50

Total 600

Life Insurance


Baroda 150 304.02

Rajkot 150 296.98

Surat 150 304.02

Total 600

Money Market


Baroda 150 299.60

Rajkot 150 301.40

Surat 150 299.60

Total 600

115

Tax Saving Scheme


Baroda 150 302.86

Rajkot 150 298.14

Surat 150 302.86

Total 600

Real Estate


Baroda 150 300.52

Rajkot 150 300.48

Surat 150 300.52

Total 600

Non Conventional

Avenues


Baroda 150 282.54

Rajkot 150 310.66

Surat 150 295.54

Total 600



Investment Avenues among Location of the respondents.


Sig.

Saving Account .063 3 .996

FD .297 3 .961

Shares .044 3 .998

Bonds .098 3 .992

Derivatives .213 3 .975

MutualFunds .284 3 .963

PPF .199 3 .978

Other Post Office Schemes .116 3 .990

Life Insurance .324 3 .955

Money Market .023 3 .999

Tax Saving Scheme .149 3 .985

Real Estate .000 3 1.000

Non Conventional

Avenues 3.798 3 .284


b. Grouping Variable: Location


116


Value is more than 0.05 for Awareness regarding Saving Account, FD, Shares, Bonds,

Mutual Funds, Derivatives, Post office schemes, PPF, Life Insurance, Money Market, Tax

Saving Schemes, Real Estate and Non-Conventional Avenues. So, we fail to reject the Null

Hypothesis. Hence, we may infer that for Saving Account, FD, Shares, Bonds, Mutual

Funds, Derivatives, Post office schemes, PPF, Life Insurance, Money Market, Tax Saving

Schemes, Real Estate and Non-Conventional Avenues, there is no significant difference

between Awareness and Location of the respondents.

117

4.5 Attitude towards Personal Financial Planning

To analyze the attitude of the respondents for Personal Financial Planning, the statements

related to Personal Financial Planning pertaining to various components were presented

before the respondents and they were asked to rate these statements on a Five Point Scale.

The different components were: Money Management, Insurance Planning, Investments,

Retirement planning, Taxation Planning, Estate Planning and overall PFP. Attitude for each

individual component and Overall attitude of PFP had been checked. The descriptive

statistics of the statements are given below. The number in each cell indicates the frequency

of responses for each statement. Along with that Mean for every item is tabulated.

Where 1 -Strongly Disagree , 2 – Disagree, 3 –Neither Agree or Disagree , 4 – Agree, 5 – Strongly Agree

TABLE 4. 65 - Descriptive Statistics for Attitude of Personal Financial Planning

Sr.

No

Particulars 1 2 3 4 5 Mean

1 Budgeting and keeping financial records are

very essential

210 60 54 36 240 3.06

2 I should save more before spending the

balance.

48 60 78 120 294 3.92

3 I spend my money very carefully 30 66 90 240 174 3.77

4 I payoff the full credit card outstanding amount

every month

60 60 84 228 168 3.64

5 I spend more when I use a credit card 84 120 72 180 144 3.30

6 Insurance is a forced saving to ensure that

family gets continue stream of flow of income

to your family in event of death or accident

90 168 72 108 162 3.14

7 I have an adequate insurance to ensure that if I

were to passes away or become sick or

disabled, my family and I will not suffer

financially.

72 138 72 126 192 3.38

8 I have Life Insurance but no other type of

insurance i.e Health, Personal accident,

Property etc.

102 156 60 174 108 3.05

9 I do not have any Insurance 162 180 42 108 108 2.70

10 I consult an insurance agent for purchase of an

insurance

150 168 30 162 90 2.79

118

11 I take advise of my family, friends before

investing into insurance

72 204 48 174 102 3.05

12 I consider the coverage offered by insurance

company before purchasing it.

54 132 72 216 126 3.38

13 I often feel difficulty for purchasing financial

products

42 150 84 240 84 3.29

14 Long term savings with a regular saving

pattern is important

48 108 84 192 168 3.54

15 Investing is becoming important nowadays 24 30 108 168 270 4.05

16 Investment is commitment of funds to achieve

long term goals or objectives

18 30 132 186 234 3.98

17 I understand my risk profile- high risk taker,

medium risk taker, or low risk taker

60 30 90 180 240 3.85

18 I invest in different investment instruments i.e

shares, mutual fund, real estate, bonds with

minimal knowledge and research on it.

54 120 90 168 168 3.46

19 If I were given an amount of equal to six

month salary to invest, I would know exactly

what to do with it.

18 162 78 252 90 3.39

20 I know how taxes would be applied on my

different investments avenues

18 108 60 312 102 3.62

21 I utilize the various tax rebates that I‘m entitled

to when filing my tax returns.

12 48 90 324 126 3.84

22 I know the amount I need to fund a

comfortable retirement.

18 114 90 276 102 3.55

23 I have started planning for my retirement. 30 192 96 192 90 3.20

24 Retirement planning should be started at early

working age

30

126 78 240 126 3.51

25 My Retirement plan provides for inflation and

standard of living changes that will occur over

a period of time

30 96 90 252 132 3.60

26 I have a will 144 168 66 156 66 2.72

27 I understand what a trust is. 192 120 96 102 90 2.63

28 I know what income my family would receive

from proceeds of my estate

174 60 78 174 114 2.99

29 Estate planning is important to me. 90 102 78 228 102 3.25

30 I am aware about overall financial planning: i.e

Money Management, Investments, Insurance,

30 120 138 228 84 3.36

119

Retirement planning, estate planning, tax

planning

31 I feel that my financial plan is well balanced,

keeping into the mind all aspects: Money

Management, Investments, Insurance,

Retirement planning, estate planning, tax

planning

30 120 102 258 90 3.43

32 I set financial goals and objectives in my life. 30 132 114 234 90 3.37

33 I gather relevant data and analyze my current

financial position before I make financial

decision.

30 114 114 270 72 3.40

34 I freely discuss with others ,regarding financial

planning

42 108 102 264 84 3.40

35 I need expert for planning my finances. 66 120 90 216 108 3.30

36 I am actively involved in managing my

Financial Plan, I review my plan periodically

after the implementation.

30 216 96 168 90 3.12

37 I need to keep cash reserve in case of an

emergency

18 120 90 156 216 3.72

38

My willingness to take risk is factor I consider

before planning my finances.

30 78 54 252 186 3.81

39 I try to take information from all authenticated

sources and then invest my money.

30 78 60 306 126 3.70

40 I get influenced by my friends and relatives

while taking financial decisions.

90 162 78 138 132 3.10

41 I look at Economic factors such as prevailing

inflation and interest rates for financial

planning.

54 228 78 108 132 3.06

42 I look for Service provided by the company

before investing into that.

42 138 144 156 120 3.29

43 My decisions on planning also depend upon

knowledge of the representative of the

particular company.

90 108 126 216 60 3.08

44 I consider Future Responsibilities- Like

purchasing home, child‘s education, marriage

etc.

42 84 90 318 66 3.47

45 Expected Return on investment products is

important to me.

00 24 96 324 156 4.02

120

46 I consider Tax benefits linked with the

products

00 00 102 294 204 4.17

47 I look for Liquidity provided by the products 42 108 126 186 138 3.45

48 I consider stage of my life cycle before taking

any financial decisions.

48 132 78 264 78 3.32

49 Regular Cash flow for managing my routine

expenses is important factor to me.

54 60 48 252 186 3.76

50 Objective behind my planning is to minimize

inconvenience to my family members in case

of my death.

30 12 42 222 294 4.23


Table 4.65 shows the results of the responses of the respondents for various factors of

Personal Financial Planning. First five statements denote Money Management Attitude of the

respondents. The mean score of first five statements show that respondents demonstrated

positive attitude towards Money Management. This is in consistent with Lai & Tan (2009) &

Tang et al. (2002a) in which people have positive attitude towards Money Management.

Respondents feel that budgeting and keeping financial records are important to them; they

also give importance to ‗savings and think before spending money‘. This shows the

responsible behavior of the respondents as far as money management is considered.

Interesting to note here that respondents confess that they spend more when they use credit

card, although they don‘t carry forward the bill payments, they pay full credit card bill each

month. As per table 4.66, respondents possess overall positive attitude towards Money

Management.

In Table 4.65 - Statements No. 6 to 12 pertain to Attitude towards Insurance Planning.

Respondents feel that they should have enough Insurance for which they take Life Insurance

Policies but they have agreed that they don‘t invest in General Insurance which is also

equally important. They don‘t consult or seek advice of Financial Planner but they rely upon

suggestions of the peer group while purchasing Insurance. From Table 4.66, total Mean score

of Insurance Planning is 3.08 which indicates that the respondents have positive attitude

towards Insurance.

Statements No. 13 to 21 in Table 4.65 are related to Investment Management. Respondents

have shown positive attitude towards Investment Management. They feel that the Investments

121

are long term commitments. They are of the opinion that though Investments are very

important, they invest without prior research and that they face difficulty while purchasing

financial products. This shows that investments are important to them but they require experts

who can help them to invest.

Table 4.66 suggests that overall attitude towards investment planning is 3.71 which indicates

positive attitude of respondents towards Investment Management.

Table 4.65 – Statements No.22 to 25 are for Retirement Planning. Respondents have agreed

that Retirement Planning should start at early age and that the Retirement amount should be

such so as to maintain the similar lifestyle after retirement. However, majority of the

respondents have not started saving the funds as a part of Retirement Planning. Overall mean

for Retirement Planning comes to 3.46, which shows that respondents have fairly positive

attitude towards it.

Statements No. 26 to 29 in Table 4.65 are for Estate Planning. Respondents have agreed that

it is important for them but majority of them have not prepared well and they have agreed

that they don‘t know what a ‗trust‘ is? It indicates that respondents are not aware about

working of Estate Management. We find from Table 4.66 that overall mean score of Estate

Management is 2.89. This is lower than all other components of Personal Financial Planning.

Statement No. 30 -37 in Table 4.65 are for Overall Personal Financial Planning. Out of 600

respondents only 312 are aware about all the components of Financial Planning. This shows

that respondents don‘t have fair awareness of all the components of Financial Plan and hence

their Plan cannot be a balanced one. It might be possible that their plan may not be linked

with their financial goals. Mean score of the statement ‗I need experts for planning my

finances‘ is 3.6. This shows that the respondents feel that they should have experts for their

Financial Planning. They also freely discuss regarding their Financial Plans, which also

shows the positive attitude of the respondents for Financial Planning. When asked to

respondents if an efficient Financial Plan should be reviewed periodically, the mean score

was found to be 3.12. That shows that they are not reviewing their plans periodically. Overall

Mean score from Table 4.66 is 3.34, which shows that respondents have positive attitude

towards Overall Personal Financial Planning.

Statements No. 38 to 50 are factors which are important while making financial decisions.

Out of 600 respondents 252 have agreed and 186 respondents have completely agreed that

122

that they consider their own risk profile before taking any financial decision. Respondents,

while taking financial decisions, gather information from different sources and used to

authenticate one. Mean score of the statement comes to 3.70 showing that it is the important

factor which influences financial planning. Respondents were asked about Economic factors

like prevailing interest rate, rate of inflation and that whether these factors influence their

financial planning. For economic factors, mean score turns out to be 3.08, which is little

low. It shows that respondents do not give more importance to Economic factors for financial

planning. Statements No. 42 – 47 are Company related and Product related factors that may

influence financial plan of the respondents. Mean score for service provided by the company

turns to be 3.29. Mean score for knowledge of the representative of the company is 3.08; it

shows that respondents do consider services provided by the company and knowledge level

of employees representing the company before taking financial decision. Mean score for the

expected return & tax benefits linked to the product are 4.02 and 4.17 respectively. It shows

that they influence Financial Planning of the respondents. Mean score for the liquidity

provided by the product is 3.45; it shows that respondents consider liquidity of the product

before investing into it. Out of 600 respondents, 264 had agreed & 78 had strongly agreed

that their stage in life cycle is important parameter for them and that it influences their

financial planning. Mean score for the same is 3.32. Out of 600 respondents 318 had agreed

and 66 had strongly agreed that they consider their future responsibilities while planning their

finances. Minimizing inconvenience to their family in their absence is the factor which highly

influence the respondents. Mean score of the statement is 4.23, suggesting the highest score

amongst all the factors described here.

Overall mean score of all the 50 statements which were asked to analyze attitude of

respondents towards Financial Planning is 3.29. Which is higher than 2.5, which suggests

that on the whole the respondents of Gujarat have positive attitude towards Personal

Financial Planning.

TABLE 4. 66 - Components wise Attitude regarding PFP

Component Mean Score Attitude

Money Management 3.3 Positive

Insurance 3.09 Positive

123


4.6 Factor Analysis – I

For getting a deeper insight into the factors which influence Personal Financial Planning, we

use the technique of Factor Analysis. Factor Analysis is the technique used to estimate factors

or to reduce the dimensionality of a large number of variables to a fewer number of factors. It

is a data reduction technique and the main objective of the technique is to reduce the number

of variables. Factor Analysis has been performed twice: Once on the components of Personal

Financial Planning and then on the Personal Factors related to Personal Financial Planning. It

has been hypothesized that overall financial planning depends upon the factors influencing

financial planning.

KMO Test checks whether the number of samples are adequate to conduct Factor Analysis.

The ideal value for the statistics should be more than 0.7. In Table 4.67, KMO Statistics is

0.847. It can be inferred that Number of respondents in the Sample are adequate to conduct

Factor Analysis.

Bartlett‘s Test of Sphericity shows whether data are suitable for Factor Analysis or not. This

test should be significant at 0.05 level. In Table 4.67, significant value is 0.0 which is lower

than 0.05. It indicates that data are suitable for Factor Analysis.

TABLE 4. 67 - KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .847

Bartlett's Test of

Sphericity

Approx. Chi-Square 25930.156

Df 561

Sig. .000


Investment 3.71 Positive

Retirement Planning 3.46 Positive

Estate Planning 2.89 Positive

Overall PFP 3.34 Positive

Overall Score 3.29 Positive

124

Table 4.68 shows the communalities values of the variables. It is the regression value of each

variable in the scale, which is shared by all the other variables. The cut off value for variable

is 0.4. Variables above 0.4 value are considered for the further studies. In this case all the

variables have the value above 0.4, so all variables will be considered further for Factor

Analysis.

TABLE 4. 68 - Communalities

Initial Extraction

Insurance is a forced Saving 1.000 .662

Enough Insurance 1.000 .914

Only Life Insurance 1.000 .910

No Insurance 1.000 .897

Insurance agent 1.000 .897

Advise for Insurance 1.000 .894

Coverage 1.000 .876

Long term saving 1.000 .678

InvImp 1.000 .682

Invcommitment 1.000 .750

RiskProfile 1.000 .675

Diversification 1.000 .598

SixMonthSalary 1.000 .820

BalancedFP 1.000 .713

FinGoals 1.000 .688

CrntFinPosition 1.000 .735

DiscussFP 1.000 .738

NeedExpert 1.000 .701

FPReview 1.000 .669

Budget 1.000 .970

SavingbeforeSpending 1.000 .948

Spend 1.000 .968

CreditSpendbill 1.000 .972

CreditSpend 1.000 .932

Will 1.000 .783

Trust 1.000 .811

EstateProceed 1.000 .773

EstateImp 1.000 .808

AmtRetirement 1.000 .828

Planning Retirement 1.000 .816

RetEarlyAge 1.000 .782

125

RetInflationProof 1.000 .642

Taxtreatment 1.000 .783

Taxrebates 1.000 .773

Extraction Method: Principal Component Analysis.


TABLE 4. 69 – Total Variance Explained

Compone

nt

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings

Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

%

1 10.829 31.850 31.850 10.829 31.850 31.850 6.086 17.899 17.899

2 6.590 19.382 51.233 6.590 19.382 51.233 4.714 13.866 31.765

3 3.223 9.480 60.713 3.223 9.480 60.713 4.035 11.868 43.632

4 2.234 6.570 67.283 2.234 6.570 67.283 4.018 11.818 55.450

5 2.047 6.020 73.303 2.047 6.020 73.303 3.114 9.158 64.608

6 1.121 3.298 76.602 1.121 3.298 76.602 3.046 8.960 73.568

7 1.040 3.060 79.662 1.040 3.060 79.662 2.072 6.093 79.662

8 .720 2.118 81.780

9 .653 1.922 83.702

10 .622 1.830 85.532

11 .531 1.562 87.094

12 .508 1.493 88.587

13 .434 1.276 89.863

14 .400 1.177 91.040

15 .361 1.062 92.102

16 .350 1.030 93.132

17 .310 .912 94.044

18 .298 .877 94.921

19 .275 .809 95.729

20 .249 .733 96.463

21 .198 .582 97.045

22 .175 .516 97.560

23 .150 .440 98.001

24 .147 .432 98.432

25 .122 .358 98.790

26 .106 .311 99.102

27 .088 .259 99.361

28 .076 .224 99.585

126


Eigen value is the standardized form to decide number of factors extracted from Factor

Analysis. Ideal Eigen value is 1. So those factors which had the Eigen value of 1 or above

had been considered for the study. Each factor here shows the percentage of variance in

descending order. But researcher had considered cumulative variance of all valid factors

together. As per the research, the minimum cumulative variance should be more than 60%.

Factor 1 has the Eigen value 10.829, having the variance of 31.850, Factor 2 has Eigen value

6.590, having the variance of 19.382, Factor 3 has Eigen value of 3.223, having the variance

of 9.480, Factor 4 has Eigen value of 2.234, having the variance of 6.570, Factor 5 has Eigen

value of 2.047, having the variance of 6.020, Factor 6 has Eigen value of 1.121, having the

variance of 3.298, Factor 7 has Eigen value of 1.040, having the variance of 3.060.

Cumulative variance of all seven factors is 79.662 %, It is higher than the cut off value of

60%.

FIGURE 4. 8 - Scree Plot

29 .040 .119 99.704

30 .038 .112 99.816

31 .025 .074 99.890

32 .019 .056 99.946

33 .010 .029 99.975

34 .009 .025 100.000


127

Scree Plot is the graphical method to determine the number of factors. The Eigen Value are

plotted in the sequence of Principal Factors. Above scree plot also suggest that there are 7

factors whose Eigen Value are greater than 1 and considered for the further study.

TABLE 4. 70- – Component Matrix

Component

1 2 3 4 5 6 7

InsForced .692

CreditSpendbill .677 -.515

Budget .672 -.509

Spend .672 -.510

SavingbeforeSpending .666

CreditSpend .662

Trust .659

Coverage .654 -.609

EstateImp .645

FinGoals .633

EstateProceed .627

AdviseforInsurance .619 -.575

Insuranceagent .618 -.570

Longtermsav .608

Will .607

CrntFinPosition .605

Taxrebates .594

BalancedFP .588

RiskProfile .580

InvImp .562

Taxtreatment .556

DiscussFP .552

Diversification .514

SixMonthSalary

OnlyLifeInsurance .612 -.653

NoInsurance .602 -.652

EnoughInsurance .561 -.641

RetEarlyAge .839

AmtRetirement .834

PlanningRetirement .803

RetInflationProof .747

128

FPReview

NeedExpert

Invcommitment


a. 7 components extracted.


Table 4.71 shows the Rotated Component Matrix. It depicts the pattern of the factors that are

grouped together based on their regression weight and degree of correlation. For the purpose

of extraction, Principal Component Analysis method had been used and for Rotation –

Varimax with Kaiser Normalization had been used. The table helps to understand the variable

grouped together to form a factor.

TABLE 4. 71 - Rotated Component Matrix

Component

1 2 3 4 5 6 7

EnoughInsurance .939

Insuranceagent .925

AdviseforInsurance .920

OnlyLifeInsurance .909

NoInsurance .904

Coverage .872

InsForced .685

CreditSpendbill .921

Budget .919

Spend .919

SavingbeforeSpending .904

CreditSpend .897

Invcommitment .844

SixMonthSalary .792

RiskProfile .710

Diversification .670

Longtermsav .640

InvImp .638

NeedExpert .816

FPReview .792

DiscussFP .735

BalancedFP .728

129

FinGoals .586

CrntFinPosition .586 .550

AmtRetirement .902

PlanningRetirement .895

RetEarlyAge .869

RetInflationProof .787

EstateProceed .744

Will .734

EstateImp .708

Trust .706

Taxrebates .717

Taxtreatment .678


Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 7 iterations.


Table 4.72 shows the different variables under the same factor as well as labeling of the

factors. The Seven Factors were identified and labeled as : Insurance , Spending Behavior,

Investment, Overall view of PFP, Retirement Planning, Taxation Planning and Estate

Planning.

TABLE 4. 72 – Labeling of Factors

Sr.

No

Name of Factor Variables No of

Items

Reliability

(Cronbach’s

Alpha)

1 Insurance Enough Insurance

Insurance Agent

Advise for Insurance

Only Life Insurance

No Insurance

Coverage

Insurance is forced Saving

07 0.94

2 Spending Behavior Credit Card Spend Bill

Budget

Spend

Saving Before Spending

Credit Spend

05 0.91

130

3 Investment Investment Commitment

Six Month Salary

Risk Profile

Diversification

Long Term Saving

Investment is Important

06 0.93

4 Overall view of PFP Need Expert

FP Review

Discuss FP

Balanced FP

Financial Goals

Current Financial Position

06 0.92

5 Retirement Planning Amount Retirement

Planning Retirement

Retirement Early Age

Retirement Plan Inflation proof

04 0.89

6 Estate Planning Estate Proceed

Will

Estate Important

Trust

04 0.88

7 Tax Planning Tax Rebates

Tax Treatments

02 0.78


131

4.7 Factor Analysis - II – Overall Financial Planning

In Table 4.73 KMO Statistics is 0.903. It can be inferred that Number of Samples are

adequate enough to conduct Factor Analysis.

Bartlett‘s Test of Sphericity shows whether data are suitable for Factor Analysis or not. This

test should be significant at 0.05 level. In Table 4.73 significant value is 0.0 which is lower

than 0.05. It indicates that data are suitable for Factor Analysis.

TABLE 4. 73 – KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .903

Bartlett's Test of

Sphericity

Approx. Chi-Square 8935.126

Df 91

Sig. .000


Table 4.74 shows the communalities values of the variables. It is the regression value of each

variable in the scale, which is shared by all the other variables. The cut off value for variable

is 0.4. Variables above 0.4 value are considered for the further studies. In this case all the

variables have the value above 0.4, so all variables will be considered further for Factor

Analysis.

TABLE 4. 74 – Communalities

Initial Extraction

CashReserve 1.000 .743

Risk 1.000 .745

Information 1.000 .744

Influencedbyfriends 1.000 .625

EcoVar 1.000 .623

Service 1.000 .625

KnowledgeRepresentative 1.000 .802

FutRespo 1.000 .801

ExpectedReturn 1.000 .820

Taxbenefits 1.000 .806

Liquidity 1.000 .772

LifeCycle 1.000 .735

RegCashFlow 1.000 .711

Inconvenience 1.000 .729


132

TABLE 4. 75 – Total Variance Explained

Compone

nt

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings

Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

%

1 9.063 64.732 64.732 9.063 64.732 64.732 5.617 40.120 40.120

2 1.221 8.724 73.456 1.221 8.724 73.456 4.667 33.336 73.456

3 .998 7.131 80.587

4 .602 4.299 84.886

5 .442 3.159 88.045

6 .345 2.462 90.506

7 .264 1.887 92.394

8 .242 1.730 94.124

9 .209 1.492 95.616

10 .195 1.391 97.007

11 .136 .969 97.977

12 .115 .818 98.795

13 .092 .659 99.453

14 .077 .547 100.000



Table 4.75 shows two factors have Eigen Value more than 1, so they can be extracted further.

Factor 1 has Eigen value of 9.063 and variance 64.732. Factor 2 has Eigen value of 1.221 and

variance of 8.724. Cumulative variance of both the factors is 73. 456%, it is higher than cut

off value of 60 %.

FIGURE 4. 9 - Scree Plot a

133

Scree plot also suggest that there are two factors having more than 1 Eigen value. So they can

be extracted further.

TABLE 4. 76 – Component Matrixa

Component

1 2

Risk .855

CashReserve .854

Information .851

LifeCycle .824

KnowledgeRepresentative .815

Taxbenefits .813

Inconvenience .810

Service .791

Influencedbyfriends .790

ExpectedReturn .786

EcoVar .785

Liquidity .779

FutRespo .761

RegCashFlow .740


a. 2 components extracted.


Table 4.77 shows the Rotated Component Matrix. It depicts the pattern of the factors that are

grouped together based on their regression weight and degree of correlation. For the purpose

of extraction Principal Component Analysis method had been used and for Rotation –

Varimax with Kaiser Normalization had been used. The table helps to understand the variable

grouped together to form a factor.

TABLE 4. 77 – Rotated Component Matrixa

Component

1 2

Liquidity .853

RegCashFlow .822

Inconvenience .785

LifeCycle .774

Information .730

134

Risk .719

CashReserve .717

Influencedbyfriends .619

Service .518 .598

ExpectedReturn .858

FutRespo .858

Taxbenefits .825

KnowledgeRepresentative .818

EcoVar .582 .523


Rotation Method: Varimax with Kaiser

Normalization.

a. Rotation converged in 3 iterations.


Table 4.78 shows the different variables under the same factor as well as labeling of the

factors. The Two Factors were identified and labeled as : Personal Factors and Company /

Scheme related factors.

TABLE 4. 78 – Labeling of Factors

Sr. No Name of Factor Variables No of

Items

Reliability

(Cronbach‘s Alpha)

1 Personal Factors Liquidity 09 0.96

Reg Cash Flow

Inconvenience

Life Cycle

Information

Risk

Cash Reserve

Influenced by friends

Eco Var

2 Company / scheme Related

Factors

Expected Return 05 0.85

Fut Respo

Tax benefits

Knowledge Representative

Service


135

4.8 Confirmatory Factor Analysis - I

Confirmatory Factor Analysis ( CFA) is a way of testing how well measured variables

represent a smaller number of construct. The result of exploratory factor analysis is

confirmed by using the confirmatory factor analysis. The figure below shows the structure of

the confirmatory Factor analysis.

Many different fit statistics are used to check model fit for the data. The first is the Chi

Square Test with degrees of freedom less than two. Chi Square value close to zero and p

value above 0.05 is the indicator of good fit of data. Root Mean Square Error Approximation

(RMSEA) method is related to residuals in models. RMSEA value ranges from 0 to 1.

RMSEA value less than 0.10 is acceptable. CFI – Comparative Fit Index is an incremental fit

index, which assesses overall improvement of a proposed model over an independence model

where the observed variables are uncorrelated (Byrne, 2006). CFI value ranges from 0 to 1.

Value above 0.95 is recommended for model fit. The Normal Fit Index (NFI) is also another

measure for model fit. Larger value specifies better model fit. Values above 0.90 are

recommended for the model fit. Apart from this, Relative Fit Index (RFI) and Incremental Fit

Index (IFI) also indicate model fit. Value above 0.90 is recommended in both the cases.

The model is to be tested for Seven Factor model comprising of Insurance Planning,

Spending Behavior, Investment, Overall view of Personal Financial Planning, Retirement

Planning, Estate Planning, and Tax Planning. The Personal Financial Planning Model is 34

item instrument structured on a 5 point Likert scale. The component parts of the model are as

follow.

The seven factors are inter correlated, as indicated by the two-headed arrows.

There are 34 observed variables, as indicated by the 34 rectangles (From MM 1 to T2)

The observed variables load on the factors in the following pattern:

MM 1 to MM 5 load on Money Management (Spending Behavior), IN 1 to IN 7 load

on Insurance, INV 1 to INV 6 load on Investment, PF 1 to PF 6 load on Overall view

of PFP, RTM 1 to RTM 4 load on Retirement Planning, EP 1 to EP 4 load on Estate

Planning and T1 to T2 load on Tax planning.

Each observed variable loads on one and only one factor.

136

Modeling with AMOS Graphics

The hypothesized seven -factor model of Personal Financial Planning (Figure – 4.10)

provided the specification input for analyses using AMOS Graphics

FIGURE 4. 10 – Factor Model

The table below shows the standardized regression weights. The value above 0.7 indicates

reasonable amount of variance can be extracted from the variable. Majority of the regression

weights are greater than 0.7.

TABLE 4. 79 - Standardized Regression Weights: (Group number 1 - Default model)

Estimate

MM5 <--- Money_mgmt .926



137

Estimate



IN7 <--- Insurance .888







INV6 <--- Investment .746






PF1 <--- Personnel_Factors .794






RTM1 <--- Retirement .906




EP1 <--- Estate_Planning .790




T1 <--- Tax .775

T2 <--- Tax .821


TABLE 4. 80 - Correlations: (Group number 1 - Default model)

Estimate

Money_mgmt <--> Insurance .570

Money_mgmt <--> Investment .197

Money_mgmt <--> Personnel_Factors .226

Money_mgmt <--> Retirement .081

Money_mgmt <--> Estate_Planning .248

Money_mgmt <--> Tax .209

Insurance <--> Investment .128

Insurance <--> Personnel_Factors .150

Insurance <--> Retirement -.003

Insurance <--> Estate_Planning .130

138

Estimate

Insurance <--> Tax .141

Investment <--> Personnel_Factors .562

Investment <--> Retirement .255

Investment <--> Estate_Planning .721

Investment <--> Tax .708

Personnel_Factors <--> Retirement .044

Personnel_Factors <--> Estate_Planning .763

Retirement <--> Estate_Planning .081

Retirement <--> Tax .084

Estate_Planning <--> Tax .766

Personnel_Factors <--> Tax .773


Model Fit Summary: The Table 4.81 shows the Model Fit Indexes.

TABLE 4. 81 - Model Fit Indexes

Absolute Fit Measures Fit Measures

Test Recommended Value Reporting Model

χ2 p> 0.05 .000

CMIN/DF < 5 2.87

RMSEA <0.10 0.07

R Relative Fit Measures elative Fit Measures


CFI >0.90 0.91

NFI >0.90 0.90

RFI >0.90 0.90

IFI >0.90 0.90

139

Parsimonious Fit Measures Parsimonious Fit Measures


PCFI >0.50 0.79

PNFI >0.50 0.79

Note : All Recommended values are based on Hair et al.( 2000), Ullman ( 1996) recommended CMIN/DF < 5

χ2 = Chi- Square Test , CMIN/DF = Chi square test / Degree of freedom ,

RMSEA = Root Mean Square Error of Approximation, CFI = Comparative Fit Index

NFI = Normed Fit Index, RFI = Relative Fit Index , IFI = Incremental Fit Index,

PCFI= parsimony Comparative Fit Index , PNFI= Parsimony Normed Fit Index


Findings of well-fitting hypothesized models, where the χ2 value approximates the degrees of

freedom, have proven to be unrealistic in most SEM empirical research. More common are

findings of a large χ2 relative to degrees of freedom, thereby indicating a need to modify the

model in order to better fit the data (Joreskog & Sorbom, 1993). Thus, results related to the

test of hypothesized model are not unexpected. Indeed, given this problematic aspect of the

Likelihood Ratio Test, and the fact that postulated models (no matter how good) can only

ever fit real-world data approximately and never exactly.

One of the first fit statistics to address the problem was the χ2/degrees of freedom ratio

(Wheaton, Muthen, Alwin, & Summers, 1977), which appears as CMIN/DF is 2. 87

(Standard Recommended value is <= 5).

The next set of goodness-of-fit statistics (baseline comparisons), which can be classified as

incremental or comparative indices of fit (Hu & Bentler, 1995; Marsh et al., 1988).

However, addressing evidence that the NFI has shown a tendency to underestimate fit in

small samples. Bentler (1990) revised the NFI to take sample size into account and proposed

the Comparative Fit Index (CFI). Values for both the NFI and CFI range from zero to 1.00

and are derived from the comparison of a hypothesized model with the independence (or null)

model. As such, each provides a measure of complete covariation in the data. Value > .90 is

considered representative of a well-fitting model (Bentler, 1992). In this case the value is

0.91which indicates that the fit of the model is good.

The Relative Fit Index (RFI; Bollen, 1986) represents a derivative of the NFI; as with both

the NFI and CFI, the RFI coefficient values range from zero to 1.00, with values close to .95

140

indicating superior fit (Hu &Bentler, 1999). In this case the value is 0.90 indicating the

moderate fit of the model.

The next set of fit statistics focuses on the root mean square error of approximation

(RMSEA). Although this index, and the conceptual framework within which it is embedded,

was first proposed by Steiger and Lind in 1980, it has only recently been recognized as one of

the most informative criteria in covariance structure modeling. The RMSEA takes into

account the error of approximation in the population and asks the question ―How well would

the model, with unknown but optimally chosen parameter values, fit the population

covariance matrix if it were available?‖ (Browne & Cudeck, 1993, pp. 137–138). This

discrepancy, as measured by the RMSEA, is expressed as per the degree of freedom, thus

making it sensitive to the number of estimated parameters in the model (i.e., the complexity

of the model); values less than .05 indicate good fit, and values as high as .08 represent

reasonable errors of approximation in the population (Browne & Cudeck, 1993). MacCallum

et al. (1996) have recently elaborated on these cut points and noted that RMSEA values

ranging from .08 to .10 indicate mediocre fit, and those greater than .10 indicate poor fit.

Although Hu and Bentler (1999) have suggested a value of .06 to be indicative of good fit

between the hypothesized model and the observed data, they cautioned that, when sample

size is small, the RMSEA (and TLI) tend to over reject true population models. In this case

the value of RMSEA is 0.07 indicating good fit of model.

Thus, on the basis of our goodness-of-fit results, it can be concluded that the hypothesized

Seven-factor CFA model fit the sample data.

141

4.9 Confirmatory Factor Analysis – II

The model to be tested is Two Factor model composed of Personal Factors and Company /

Scheme related factors. The Personal Financial Planning Model is 14 item instrument

structured on a 5 point Likert scale. The component parts of the model are as follow.

The Two factors are inter correlated, as indicated by the two-headed arrows.

There are 14 observed variables, as indicated by the 14 rectangles (From OFP2 _1 to

OFP 9)

The observed variables load on the factors in the following pattern:

OFP2_1 to OFP2_5 load on Company / Scheme related factors, OFP1 to OFP 9 load

on Personal Factors.

Each observed variable loads on one and only one factor.

Modeling with AMOS Graphics

The hypothesized two -factor model of Personal Financial Planning (Figure – 4.11) provided

the specification input for analyses using AMOS Graphics

FIGURE 4. 11 – Factor Model a

142

The table 4.82 shows the standardized regression weights. The value above 0.7 indicates

reasonable amount of variance can be extracted from the variable. Majority of the regression

weights are greater than 0.7.


Estimate

OFP2_5 <--- Overall_Financial_Planning_2 .884





OFP9 <--- Overall_Financial_Planning_1 .790










TABLE 4. 83 - Correlations: (Group number 1 - Default model)

Estimate

Overall_Financial_Planning_2 <--> Overall_Financial_Planning_1 .793


Model Fit Summary: The Table 4.84 shows the Model Fit.

TABLE 4. 84 Model Fit Index - 2

Absolute Fit Measures it Measures


χ2 p> 0.05 .000

CMIN/DF < 5 2.87

RMSEA <0.10 0.09

143

Relative Fit Measures


CFI >0.90 0.91

NFI >0.90 0.90

RFI >0.90 0.90

IFI >0.90 0.90

Parsimonious Fit Measures


PCFI >0.50 0.69

PNFI >0.50 0.69














One of the first fit statistics to address the problem was the χ2/degrees of freedom ratio

(Wheaton, Muthen, Alwin, & Summers, 1977), which appears as CMIN/DF is 2. 87




144


small samples, Bentler (1990) revised the NFI to take sample size into account and proposed



model. As such, each provides a measure of complete covariation in the data. Value > .90 is

considered representative of a well-fitting model (Bentler, 1992). In this case the value is

0.91 indicates the fit of the model.








the most informative criteria in covariance structure modeling. The

RMSEA takes into account the error of approximation in the population and asks the question

―How well would the model, with unknown but optimally chosen parameter values, fit the

population covariance matrix if it were available?‖ (Browne & Cudeck, 1993, pp. 137–138).

This discrepancy, as measured by the RMSEA, is expressed per degree of freedom, thus




et al. (1996) have recently elaborated on these cutpoints and noted that RMSEA values





the value of RMSEA is 0.09 indicating mediocre fit of model.


two-factor CFA model moderately fit the sample data.

145

4.10 Structural Equation Modeling

SEM is a methodology for representing, estimating, and testing a theoretical network of

(mostly) linear relations between variables (Rigdon, 1998). Basic goal of SEM is to

understand the pattern of correlations/ covariance among a set of variables and to explain as

much of their variance as possible with model specified. (Kline, 1998). Basically it is a

multivariate statistical analysis technique which is combination of factor analysis and

multiple regression techniques. It is used to analyze the relationship between observed

variables and latent constructs. Observed variables are the variables which can be measured

and latent are the unobserved variables or variables which cannot directly be measured.

4.10.1 The Base Model

The following model was tested using Structural Equation Modeling. It has been

hypothesized that Overall Financial Planning depends upon the seven factors named as

Money Management, Insurance, Investment, Overall View of PFP, Retirement, Estate

Planning and Tax Planning.

FIGURE 4. 12 – SEM Base Model

146

TABLE 4. 85 - Regression Weights: (Group number 1 - Default model)

Estimate S.E. C.R. P Label

Overall_Fin_Plan_1 <--- Money_mgmt .089 .023 3.827 ***

Overall_Fin_Plan_2 <--- Money_mgmt .164 .025 6.659 ***

Overall_Fin_Plan_1 <--- Insurance .335 .025 13.663 ***

Overall_Fin_Plan_2 <--- Insurance .448 .025 17.643 ***

Overall_Fin_Plan_2 <--- Investment -.049 .038 -1.290 .197

Overall_Fin_Plan_1 <--- Investment .060 .036 1.663 .096

Overall_Fin_Plan_2 <--- Personal_ Factors .260 .050 5.148 ***

Overall_Fin_Plan_1 <--- Personal_ Factors .120 .048 2.513 .012

Overall_Fin_Plan_2 <--- Retirement -.030 .044 -.670 .503

Overall_Fin_Plan_1 <--- Retirement -.015 .042 -.351 .726

Overall_Fin_Plan_2 <--- Estate_Planning -.167 .045 -3.742 ***

Overall_Fin_Plan_1 <--- Estate_Planning .135 .043 3.158 .002

Overall_Fin_Plan_2 <--- Tax .162 .056 2.875 .004

Overall_Fin_Plan_1 <--- Tax .056 .040 1.420 .156

MM5 <--- Money_mgmt 1.000

MM4 <--- Money_mgmt 1.041 .018 57.657 ***

MM3 <--- Money_mgmt 1.045 .018 57.695 ***

MM2 <--- Money_mgmt 1.011 .023 44.141 ***

MM1 <--- Money_mgmt 1.036 .018 57.849 ***

IN7 <--- Insurance 1.000

IN6 <--- Insurance .893 .026 33.721 ***

IN5 <--- Insurance .903 .026 34.684 ***

IN4 <--- Insurance .991 .024 40.841 ***

IN3 <--- Insurance .977 .023 42.189 ***

IN2 <--- Insurance .941 .023 41.092 ***

IN1 <--- Insurance .720 .033 21.715 ***

INV6 <--- Investment 1.000

INV5 <--- Investment .588 .034 17.367 ***

INV4 <--- Investment .841 .045 18.875 ***

INV3 <--- Investment .852 .046 18.562 ***

INV2 <--- Investment .583 .035 16.630 ***

INV1 <--- Investment .682 .038 17.868 ***

PF1 <--- Personal_ Factors 1.000

PF2 <--- Personal_ Factors .947 .049 19.405 ***

PF3 <--- Personal_ Factors 1.065 .051 20.915 ***



PF6 <--- Personal_ Factors .673 .044 15.412 ***

RTM1 <--- Retirement 1.000

RTM2 <--- Retirement .898 .032 28.086 ***

RTM3 <--- Retirement .959 .036 26.804 ***

RTM4 <--- Retirement .888 .044 20.153 ***

EP1 <--- Estate_Planning 1.000

EP2 <--- Estate_Planning 1.118 .048 23.302 ***

147

Estimate S.E. C.R. P Label



T1 <--- Tax 1.000

T2 <--- Tax .689 .183 3.774 ***

OFP2_5 <--- Overall_Fin_Plan_2 1.000

OFP2_4 <--- Overall_Fin_Plan_2 1.032 .039 26.760 ***

OFP2_3 <--- Overall_Fin_Plan_2 .987 .033 29.643 ***

OFP2_2 <--- Overall_Fin_Plan_2 1.123 .037 30.296 ***

OFP2_1 <--- Overall_Fin_Plan_2 .726 .041 17.809 ***

OFP9 <--- Overall_Fin_Plan_1 1.000

OFP8 <--- Overall_Fin_Plan_1 .820 .042 19.480 ***





OFP3 <--- Overall_Fin_Plan_1 1.112 .048 23.138 ***





Estimate

Overall_Fin_Plan_1 <--- Money_mgmt .133

Overall_Fin_Plan_2 <--- Money_mgmt .208

Overall_Fin_Plan_1 <--- Insurance .564

Overall_Fin_Plan_2 <--- Insurance .644

Overall_Fin_Plan_2 <--- Investment -.042

Overall_Fin_Plan_1 <--- Investment .061

Overall_Fin_Plan_2 <--- Personal_ Factors .170

Overall_Fin_Plan_1 <--- Personal_ Factors .092

Overall_Fin_Plan_2 <--- Retirement -.022

Overall_Fin_Plan_1 <--- Retirement -.013

Overall_Fin_Plan_2 <--- Estate_Planning -.122

Overall_Fin_Plan_1 <--- Estate_Planning .115

Overall_Fin_Plan_2 <--- Tax .131

Overall_Fin_Plan_1 <--- Tax .054











148

Estimate









PF1 <--- Personal_ Factors .801














T1 <--- Tax .975

T2 <--- Tax .652

OFP2_5 <--- Overall_Fin_Plan_2 .868





OFP9 <--- Overall_Fin_Plan_1 .765










149

Model Fit Summary: The Table 4.87 shows the Model Fit.

TABLE 4. 87 - Model Fit Index for SEM

Absolute Fit Measures Measures


χ2 p> 0.05 .000

CMIN/DF < 5 2.98

RMSEA <0.10 0.09

Relative Fit Measures Measures


CFI >0.90 0.90

NFI >0.90 0.89

RFI >0.90 0.90

IFI >0.90 0.90



PCFI >0.50 0.76

PNFI >0.50 0.75






150








One of the first fit statistics to address the problem of problem was the χ2/degrees of freedom

ratio (Wheaton, Muthen, Alwin, & Summers, 1977), which appears as CMIN/DF is 2. 98





small samples, Bentler (1990) revised the NFI to take sample size into account and proposed



model. As such, each provides a measure of complete covariation in the data. value > .90 is

considered representative of a well-fitting model (Bentler, 1992). In this case the value of CFI

is 0.90 and NFI is 0.91 . Value of NFI is above the cut off value of 0.90.








the most informative criteria in covariance structure modeling. The

RMSEA takes into account the error of approximation in the population and asks the question

―How well would the model, with unknown but optimally chosen parameter values, fit the

population covariance matrix if it were available?‖ (Browne & Cudeck, 1993, pp. 137–138).

This discrepancy, as measured by the RMSEA, is expressed per degree of freedom, thus




151

et al. (1996) have recently elaborated on these cutpoints and noted that RMSEA values





the value of RMSEA is 0.09 indicate mediocre fit of model.


structural equation model moderate fit the sample data.

152

4.10.2 First Modification (e47↔ e48)

After running the Modification Indices, The improved values and diagram is presented below. Errors

e47 and 48 are correlated.

FIGURE 4. 13 – SEM Modified Model

153

Model Fit Summary: The table below shows the Model Fit. It can be concluded that all the

values are above the standard cut off values.

TABLE 4. 88 - Model Fit Index for SEM ( First Modification)

Absolute Fit Measures TABLE – 4.88 Absolute Fit Measures


χ2 p> 0.05 .000

CMIN/DF < 5 2.89

RMSEA <0.10 0.08

Relative Fit Measures Relative Fit Measures


CFI >0.90 0.91

NFI >0.90 0.90

RFI >0.90 0.91

IFI >0.90 0.91



PCFI >0.50 0.79

PNFI >0.50 0.79






154

4.11 Association between Different Demographic Factors and Attitude of

Personal Financial Planning.

The Factor scores obtained by exploratory factor analysis are used to study the significant

difference between the Demographic profile of the respondents and Major factors which

shows the attitude towards the financial planning.


respondents.

The Table 4.89 shows the result of the Mann- Whitney U test.

TABLE 4. 89 - Mann-Whitney U test – Gender and Attitude towards PFP

Gender N Mean Rank Sum of Ranks

Asymp. Sig. (2-

tailed)

Investment

Male 358 366.89 131345.00 0.000

Female 242 202.29 48955.00

Total 600

Insurance

Male 358 294.34 105374.00 0.284

Female 242 309.61 74926.00

Total 600

Overall PFP

Male 358 350.49 125477.00 0.000

Female 242 226.54 54823.00

Total 600

Tax

Male 358 338.61 121223.00 0.000

Female 242 244.12 59077.00

Total 600

Money_mgmt

Male 358 322.27 115373.00 0.000

Female 242 268.29 64927.00

Total 600

Retirement

Male 358 349.51 125126.00 0.000

Female 242 227.99 55174.00

Total 600

Estate

Male 358 325.56 116552.00 0.000

Female 242 263.42 63748.00

Total 600

Company/Product Male 358 304.04 108845.00 0.536

155

related Factors Female 242 295.27 71455.00

Total 600

Personal Factors

Male 358 313.71 112307.00 0.022

Female 242 280.96 67993.00

Total 600


From Table 4.89 it can be interpreted that P- value for the factors Investment, Overall PFP,

Tax, Retirement, Money Management, Estate Planning, and Personal Factors is less than

0.05. So we reject the null hypothesis for them. For Insurance and Company related factors

P- value is more than 0.05, so we fail to reject the null hypothesis for them. Attitude towards

Investment Management, Overall PFP, Retirement Planning, Money Management, Estate

Planning and Personal Factors differ with Gender.

H018: Attitude towards PFP does not differ significantly with respect to Location of the

respondents.


Rank of Location and attitude towards PFP.

TABLE 4. 90 – Mean Rank of Attitude with Location of the respondents

Location N Mean Rank

Investment


Baroda 150 314.72

Rajkot 150 285.08

Surat 150 315.92

Total 600

Insurance


Baroda 150 305.40

Rajkot 150 295.86

Surat 150 305.14

Total 600

Overall PFP


Baroda 150 307.84

Rajkot 150 291.62

Surat 150 309.38

Total 600

Tax Ahmedabad 150 291.38

156

Baroda 150 309.62

Rajkot 150 290.42

Surat 150 310.58

Total 600

Money_mgmt


Baroda 150 289.96

Rajkot 150 311.04

Surat 150 289.96

Total 600

Retirement


Baroda 150 307.56

Rajkot 150 292.74

Surat 150 308.26

Total 600

Estate


Baroda 150 311.04

Rajkot 150 290.42

Surat 150 310.58

Total 600

Company/Product

related Factors


Baroda 150 319.12

Rajkot 150 281.08

Surat 150 319.92

Total 600

Personal Factors


Baroda 150 291.62

Rajkot 150 309.92

Surat 150 291.08

Total 600


157

TABLE 4. 91 – Kruskal Wallis Test – Attitude towards PFP among Location of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Comp

/Product

related

factors

Personal

Factors

Chi-

Square

4.431 .465 1.345 1.959 2.241 1.115 2.193 7.502 1.713

Df 3 3 3 3 3 3 3 3 3

Asymp.

Sig.

.218 .927 .718 .581 .524 .773 .533 .058 .634


b. Grouping Variable: Location


From the Table 4.91, the calculated Chi-Square, degree of freedom, and significant value is

given. For all the factors P – Value is more than 0.05, so we fail to reject the null hypothesis

for the same. There is no significance difference among Personal Financial Planning attitude

and Location of the respondents.


respondents.


Rank of Age and attitude towards PFP.

TABLE 4. 92 – Mean Rank of Attitude with Age of the respondents

Age N Mean Rank

Investment

20-35 213 353.56

36-58 276 306.98

59 and above 111 182.58

Total 600

Insurance

20-35 213 270.57

36-58 276 349.50

59 and above 111 236.09

Total 600

Overall PFP 20-35 213 327.49

158

36-58 276 327.73

59 and above 111 181.01

Total 600

Tax

20-35 213 311.67

36-58 276 296.37

59 and above 111 289.34

Total 600

Money_mgmt

20-35 213 281.33

36-58 276 310.89

59 and above 111 311.45

Total 600

Retirement

20-35 213 364.74

36-58 276 259.17

59 and above 111 279.99

Total 600

Estate

20-35 213 315.20

36-58 276 282.08

59 and above 111 318.09

Total 600

Company /

Product Related

Factors

20-35 213 319.26

36-58 276 300.86

59 and above 111 263.61

Total 600

Personal Factors

20-35 213 318.16

36-58 276 292.54

59 and above 111 286.39

Total 600


159

TABLE 4. 93 – Kruskal Wallis Test – Attitude towards PFP among Age of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Comp /

Product

Related

Factors

Personal

Factors

Chi-

Square

72.336 44.713 65.691 1.594 4.080 47.187 5.983 7.810 3.612

Df 2 2 2 2 2 2 2 2 2

Asymp.

Sig.

.000 .000 .000 .451 .130 .000 .050 .020 .164


b. Grouping Variable: Age


From the table 4.93, the calculated Chi-Square, degree of freedom, and significant value is

given. For Investment, Insurance, Overall View of PFP, Retirement Planning, Estate

Planning, Company / Product related factors, P- value is less than 0.05. So, we reject the null

hypothesis for the same. For Tax Planning and Personal Factors P – Value is more than 0.05,

so we fail to reject the null hypothesis for the same. Hence it can be concluded that Attitude

for Investment, Insurance, Overall View of PFP, Retirement Planning, Estate Planning,

Company / Product related factors differs with Age. Attitude towards Tax Planning and

Personal Factors doesn‘t differ with Age.

Ho20: Attitude towards PFP does not differ significantly with respect to Education of the

respondents.


Rank of Education and attitude towards PFP.

160

TABLE 4. 94 – Mean Rank of Attitude with Education of the respondents

Education N Mean Rank

Investment




Total 600

Insurance




Total 600

Overall PFP




Total 600

Tax

High School 108 277.56



Total 600

Money_mgmt




Total 600

Retirement




Total 600

Estate




Total 600

Product/

Company Related

Factors




Total 600

Personal Factors




Total 600


161

TABLE 4. 95 – Kruskal Wallis Test – Attitude towards PFP among Education of the

respondents

Investme

nt

Insuranc

e Overall PFP Tax

Money_mg

mt

Retireme

nt Estate

Product /

Company

Related

Factors

Personal

Factors

Chi-

Square

22.976 29.710 27.616 19.374 23.596 5.414 31.920 20.892 42.401

Df 2 2 2 2 2 2 2 2 2

Asymp.

Sig.

.000 .000 .000 .000 .000 .067 .000 .000 .000


b. Grouping Variable: Education



given. For Investment, Insurance, Overall View of PFP, Tax Planning, Money Management,

Estate Planning, Company / Product related factors, P- value is less than 0.05. So, we reject

the null hypothesis for the same. For Retirement Planning, P – Value is more than 0.05, so we

fail to reject the null hypothesis for the same. Hence it can be concluded that Attitude for

Investment, Insurance, Overall View of PFP, Estate Planning, Company / Product related

factors differs with Education. Attitude towards Retirement Planning doesn‘t differ with

Education.

Ho21: Attitude towards PFP does not differ significantly with respect to Job Type of the

respondents.


Rank of Job Type and attitude towards PFP.

162

TABLE 4. 96 – Mean Rank of Attitude with Job Type of the respondents

Job type N Mean Rank

Investment




Total 600

Insurance




Total 600

Overall PFP




Total 600

Tax




Total 600

Money_mgmt




Total 600

Retirement




Total 600

Estate




Total 600

Company

/Product Related

Factors




Total 600

Personal Factors




Total 600


163

TABLE 4. 97 – Kruskal Wallis Test – Attitude towards PFP among Job Type of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Compan

y

/Product

Related

Factors

Personal

Factors

Chi-

Square

8.872 14.288 12.240 1.732 7.622 19.447 19.354 38.829 76.460

Df 2 2 2 2 2 2 2 2 2

Asymp.

Sig.

.012 .001 .002 .421 .022 .000 .000 .000 .000


b. Grouping Variable: Job type



given. For Investment, Insurance, Overall View of PFP, Money Management, Retirement

Planning, Estate Planning, Company / Product related factors, P- value is less than 0.05. So,

we reject the null hypothesis for the same. For Tax Planning, P – Value is more than 0.05, so

we fail to reject the null hypothesis for the same. Hence it can be concluded that Attitude for

Investment, Insurance, Overall View of PFP, Retirement Planning, Estate Planning,

Company / Product related factors differs with Education. Attitude towards Tax Planning

doesn‘t differ with Education.

Ho22: Attitude towards PFP does not differ significantly with respect to Experience of

the respondents.


Rank of Experience and attitude towards PFP.

164

TABLE 4. 98 – Mean Rank of Attitude with Experience of the respondents

Experience N Mean Rank

Investment


5-15 years 296 331.86

16-25 Years 177 281.60

25 and Above 105 248.50

Total 600

Insurance


5-15 years 296 276.80

16-25 Years 177 329.92

25 and Above 105 313.01

Total 600

Overall PFP


5-15 years 296 339.29

16-25 Years 177 268.48

25 and Above 105 257.84

Total 600

Tax


5-15 years 296 303.95

16-25 Years 177 296.25

25 and Above 105 316.90

Total 600

Money_mgmt


5-15 years 296 330.94

16-25 Years 177 224.45

25 and Above 105 347.16

Total 600

Retirement


5-15 years 296 303.94

16-25 Years 177 277.18

25 and Above 105 300.67

Total 600

Estate


5-15 years 296 337.75

16-25 Years 177 278.55

25 and Above 105 267.47

Total 600

Company/Product

Related Factors


5-15 years 296 278.79

165

16-25 Years 177 310.69

25 and Above 105 342.16

Total 600

Personal Factors


5-15 years 296 331.60

16-25 Years 177 293.55

25 and Above 105 223.47

Total 600


TABLE 4. 99 – Kruskal Wallis Test – Attitude towards PFP among Experience of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Compan

y/Produ

ct

Related

Factors

Personal

Factors

Chi-

Square

21.773 11.805 30.365 7.589 51.624 18.057 42.039 11.846 31.292

Df 3 3 3 3 3 3 3 3 3

Asymp.

Sig.

.000 .008 .000 .055 .000 .000 .000 .008 .000


b. Grouping Variable: Experience



given. For Investment, Insurance, Overall View of PFP, Money Management, Tax Planning,

Retirement Planning, Estate Planning, Company / Product related factors, P- value is less

than 0.05. So, we reject the null hypothesis for the same. Hence it can be concluded that

Attitude for Investment, Insurance, Overall View of PFP, Tax Planning, Retirement Planning,

Estate Planning, Company / Product related factors differs with Experience.

Ho23: Attitude towards PFP does not differ significantly with respect to Income of the

respondents.


Rank of Income and attitude towards PFP.

166

TABLE 4. 100 – Mean Rank of Attitude with Income of the respondents

Income N Mean Rank

Investment


5-10 Lakh 334 324.08

10-15 lakhs 140 279.31


Total 600

Insurance


5-10 Lakh 334 304.43

10-15 lakhs 140 316.36


Total 600

Overall PFP


5-10 Lakh 334 324.53

10-15 lakhs 140 308.75


Total 600

Tax


5-10 Lakh 334 302.03

10-15 lakhs 140 302.02


Total 600

Money_mgmt


5-10 Lakh 334 332.68

10-15 lakhs 140 322.94


Total 600

Retirement


5-10 Lakh 334 341.04

10-15 lakhs 140 279.07


Total 600

Estate


5-10 Lakh 334 328.90

10-15 lakhs 140 276.63


Total 600

Company / Less Than 5 Lakhs 84 380.07

167

Product Related

Factors

5-10 Lakh 334 291.53

10-15 lakhs 140 281.60


Total 600

Personal Factors


5-10 Lakh 334 322.10

10-15 lakhs 140 315.44


Total 600


TABLE 4. 101 – Kruskal Wallis Test – Attitude towards PFP among Income of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Compan

y /

Product

Related

Factors

Personal

Factors

Chi-

Square

15.402 7.274 30.395 7.735 90.750 50.586 22.891 21.922 29.911

Df 3 3 3 3 3 3 3 3 3

Asymp.

Sig.

.002 .064 .000 .050 .000 .000 .000 .000 .000


b. Grouping Variable: Income



given. For Investment, Insurance, Overall View of PFP, Money Management, Tax Planning,

Retirement Planning, Estate Planning, Company / Product related factors, P- value is less

than 0.05. So, we reject the null hypothesis for the same. Hence it can be concluded that

Attitude for Investment, Insurance, Overall View of PFP, Tax Planning, Retirement Planning,

Estate Planning, Company / Product related factors differs with Income.

Ho24: Attitude towards PFP does not differ significantly with respect to Marital Status

of the respondents.


Rank of Marital Status and attitude towards PFP.

168

TABLE 4. 102 – Mean Rank of Attitude with Marital Status of the respondents

MarStat N Mean Rank

Investment

Married 376 359.89



Divorcee 10 281.60

Total 600

Insurance

Married 376 281.71



Divorcee 10 230.90

Total 600

Overall PFP

Married 376 326.92



Divorcee 10 277.70

Total 600

Tax

Married 376 336.16



Divorcee 10 390.50

Total 600

Money_mgmt

Married 376 270.60



Divorcee 10 380.30

Total 600

Retirement

Married 376 309.32



Divorcee 10 249.50

Total 600

Estate

Married 376 314.07



Divorcee 10 232.70

169

Total 600

Product/Company

Related Factors

Married 376 315.61



Divorcee 10 213.50

Total 600

Personal Factors

Married 376 290.23



Divorcee 10 379.10

Total 600


TABLE 4. 103 – Kruskal Wallis Test – Attitude towards PFP among Marital of the

respondents

Investme

nt

Insuranc

e

Overall

PFP Tax

Money_mg

mt

Retireme

nt Estate

Product/

Compan

y

Related

Factors

Personal

Factors

Chi-

Square

122.612 15.778 24.814 53.935 30.708 3.326 11.096 9.327 5.860

Df 3 3 3 3 3 3 3 3 3

Asymp.

Sig.

.000 .001 .000 .000 .000 .344 .011 .025 .119


b. Grouping Variable: MarStat



given. For Investment, Insurance, Overall View of PFP, Tax Planning, Money Management,

Estate Planning, Company / Product related factors, P- value is less than 0.05. So, we reject

the null hypothesis for the same. For Retirement Planning, P – Value is more than 0.05, so we

fail to reject the null hypothesis for the same. Hence it can be concluded that Attitude for

Investment, Insurance, Overall View of PFP, Tax Planning, Estate Planning, Company /

Product related factors differs with Marital Status. Attitude towards Retirement Planning

doesn‘t differ with Marital Status.

170

4.12 Linkages between Financial Literacy and Awareness related to

different Investment Avenues.

Bhushan P. (2014) in his thesis stated that respondents with high literacy level tend to have high level

of awareness of financial products except for Post office saving schemes. Present study also has

attempted to find the association between financial literacy and Awareness of Financial Products. To

find this association following hypothesis had been formulated.

Ho25: Awareness of different Investment Avenues does not differ significantly with

respect to Financial Literacy of the respondents.

To find out association between financial literacy of the respondent and their awareness

regarding different Investment Avenues, Mann Whitney –U test has been applied. The Table

4.104 shows the Mean Rank of Financial Literacy with Awareness of Different Investment

Avenues.

TABLE 4. 104 – Mean Rank of Financial Literacy with Awareness of Different

Investment Avenues

Financial

Literacy

N Mean Rank Sum of Ranks

Saving Account

Financial Illiterate 282 226.14 63771.00


Total 600

FD



Total 600

Shares



Total 600

Bonds



Total 600

Derivatives



Total 600

MutualFunds



Total 600

171

PPF



Total 600

Other Post Office Services



Total 600

Life Insurance



Total 600

Money Market



Total 600

Tax Saving Scheme



Total 600

Real Estate



Total 600

Non Conventional

Avenues



Total 600


TABLE 4. 105 – Kruskal Wallis Test – Financial Literacy with Awareness of Different

Investment Avenues

Mann-Whitney

U

Wilcoxon W Z Asymp. Sig. (2-

tailed)

Saving Account 23868.000 63771.000 -12.271 .000

FD 26118.000 66021.000 -10.973 .000

Shares 16488.000 56391.000 -14.316 .000

Bonds 36684.000 76587.000 -4.254 .000

Derivatives 41598.000 92319.000 -1.746 .081

Mutual Funds 30726.000 70629.000 -7.700 .000

PPF 19548.000 59451.000 -14.175 .000

Other Post Office Services 39294.000 79197.000 -3.147 .002

Life Insurance 39744.000 79647.000 -2.750 .006

Money Market 43848.000 94569.000 -.555 .579

Tax Saving Scheme 27306.000 67209.000 -9.566 .000

172

Real Estate 44532.000 84435.000 -.156 .876

Non Conventional

Avenues 38310.000 89031.000 -3.431 .001

a. Grouping Variable: Fin Literacy



given. For Saving Account, FD, Shares, Bonds, Mutual Funds, PPF, Post Office Schemes,

Life Insurance, Tax Saving Scheme and Non-Conventional Avenues, P- value is less than

0.05. So, we reject the null hypothesis for the same. For, Derivatives, Money Market and

Real Estate, P – Value is more than 0.05, so we fail to reject the null hypothesis for the same.

Hence it can be concluded that Awareness for Saving Account, FD, Shares, Bonds, Mutual

Funds, PPF, Post Office Schemes, Life Insurance, Tax Saving Scheme and Non-

Conventional Avenues differs with Financial Literacy. Awareness towards Derivatives,

Money Market and Real Estate doesn‘t differ with Financial Literacy.

173

CHAPTER – 5

Findings & Discussions

5.1 Introduction

This Chapter discusses Objective-wise major findings of the study based on the analysis of

data collected from 600 respondents across four major cities of Gujarat.

5.2 General Findings

Out of 600 respondents,

Four major cities of Gujarat, namely; Ahmedabad, Baroda, Surat and Rajkot have

been covered for the present study and 150 respondents were interviewed from each

of the above cities for collection of data using the structured questionnaires.

From 150 respondents in each city, 50 respondents were government employees, 50

respondents were Public Sector and 50 were Private Sector employees.

Around 35.5% respondents were from age group of 20 – 35 years, 46% from age

group 36 – 58 years and 18.5% were from age group 59 years and above.

59.7 % respondents were male and 40.3% were female.

52.5 % respondents were Graduates, 29.5 % were Post- graduates and 18% were High

School passed out.

49.3% respondents have 5 – 15 years of experience, 29.5% respondents have 16 -25

years of experience, 17.5 % respondents have experience of 25 years and above and

3.7 % respondents have less than 5 years of experience.

55.7% of the respondents have income between 5 – 10 Lakhs, 23.3 % of the

respondents have income between 10 -15 Lakhs, 14% of the respondents have income

less than 5 Lakhs and 7% of the respondents have income more than 15 Lakhs.

62.7 % of the respondents are married, 34.7 % respondents are unmarried, 1 % are

widow/ widower and 1.7 % are divorcee.

174

40.8 % of the respondents save 10 – 30% of the income, 38.2% respondents save less

than 10% of the income and 21 % of the respondents save more than 30% of their

income.

5.3 Findings related to Financial Literacy

To assess the financial literacy of the respondents, they were asked certain questions related

to different financial concepts. To identify the basic level of financial literacy, respondents

were asked questions related to compounding of Interest Rate, Inflation, and Diversifications.

To identify advanced level of financial literacy, respondents were asked questions related to

Risk Return Relationship, concept of Time Value of Money, relationship between interest

rate and bond price etc. Major findings related to them are discussed below.

Basic Financial Literacy

80 % of the respondents know the working of cumulative interest rate %age calculation.

Only 20% of the respondents have failed to give correct answer for the same.

71% of the respondents have basic idea regarding impact of inflation on purchasing

power. 29 % have given incorrect answer for the same.

64% of the respondents possess fair knowledge of time value of money. 36% of the

respondents failed to give correct answer for the same.

72% of the respondents have fair idea related to concept of diversification. 28 % of the

respondents don‘t have idea about diversification. When asked, they replied that Single

Company Stock provides generally more returns than Mutual Funds.

80 % of the respondents have idea regarding balanced financial plan. They believe that

Financial Planning is not only buying insurance. 20 % of the respondents have

misconception that Financial Planning is all about buying insurance.

Advanced Financial Literacy:

80% of the respondents understand that risk and return goes hand in hand. 20 % of the

respondents failed to give correct answer for the same.

Only 40 % of the respondents gave correct answer for the relationship between Bond

Price and Interest Rate. 60% of the respondents are not aware about the relationship

between interest rate in economy and price of bond.

175

46 % of the respondents have idea regarding financial literacy related to awareness of

financial products and returns generated by them. 54 % of the respondents failed to give

correct answer.

Overall Financial Literacy:

It has been observed from the frequency analysis that, respondents possessed Fair

knowledge of basic financial literacy. There were more incorrect answers than correct for

only two questions pertaining to advanced financial literacy,

Median of Respondents‘ financial literacy score comes to 6 out of 8. With the help of

median score, it has been found that 47 % of the respondents are financially illiterate and

53% of the respondents are financially literate.

5.3.1 Association between different demographic factors and financial literacy

H01: There is no significant association between Age and financial literacy of the

respondents.

From the result of Chi Square test, P Value is less than 0.05. So, we reject the null

hypothesis. It can be concluded that there is a significant association between Age and



respondents.

From the result of Chi Square test, P Value is less than 0.05. So, we reject the null

hypothesis. It can be concluded that, there is a significant association between Gender and



respondents.

From the result of Chi Square test, P Value is less than 0.05. Therefore, we reject the null

hypothesis. It can be concluded that, there is a significant association between Education

and Financial Literacy of the respondents.


respondents.

176

From the result of Chi Square test, P Value is less than 0.05. We, therefore, reject the null

hypothesis and may conclude that, there is a significant association between Experience

and Financial Literacy of the respondents.


respondents.

From the result of Chi Square test, P Value is less than 0.05. Therefore, we reject the null

hypothesis and may conclude that, there is a significant association between Job Type and



respondents.


hypothesis and may conclude that, there is a significant association between Income and


H07: There is no significant association between Marital Status and financial literacy of

the respondents.


hypothesis and conclude that, there is a significant association between Marital Status and



respondents.

From the result of Chi Square test, P Value is more than 0.05. We, therefore fail to reject the

null hypothesis and may conclude that, there seems to be no association between Location

and Financial Literacy of the respondents. So, whether the respondents belong to

Ahmedabad, Baroda , Rajkot or Surat, they don‘t differ in Financial Literacy.

It can, therefore, be concluded that Financial Literacy of the respondents gets affected by

Age, Gender, Income, Experience, Marital Status, and Job Type of the respondents, it is not

dependent on the Location of the respondents.

177

FIGURE 5. 1 – Association between Demographic Factors and Financial Literacy

5.4 Findings related to Awareness of different Investment Avenues

70% of the respondents are completely aware about the Savings Account. 15 % of the

respondents are moderately aware regarding the Savings Account and remaining 15 % of

the respondents are not aware about savings account.

70 % of the respondents are completely aware about the Fixed Deposit. 10 % of the

respondents are moderately aware regarding the Fixed Deposit and remaining 20 % of the

respondents are not aware about Fixed Deposit.

37 % of the respondents are completely aware about the Equity Shares. 23 % of the

respondents are moderately aware regarding the Equity Shares and remaining 40 % of the

respondents are not aware about Equity Shares.

54 % of the respondents are completely aware about the Bonds. 23 % of the respondents

are moderately aware regarding the Bonds and remaining 23 % of the respondents are not

aware about Bonds.

17 % of the respondents are completely aware about the Derivatives. 23 % of the

respondents are moderately aware regarding the Derivatives and remaining 60 % of the

respondents are not aware about Derivatives.

62 % of the respondents are completely aware about the Mutual Funds. 18 % of the

respondents are moderately aware regarding the Mutual Funds and remaining 20 % of the

respondents are not aware about Mutual Funds.

Age

Gender

Income

Experience

Marital Status

Job Type

Financial

Literacy

178

65 % of the respondents are completely aware about the PPF. 25 % of the respondents are

moderately aware regarding the PPF and remaining 10 % of the respondents are not

aware about PPF.

66 % of the respondents are completely aware about the Post Office Schemes. 34 % of

the respondents are moderately aware regarding it.

59 % of the respondents are completely aware about the Life Insurance. 31 % of the

respondents are moderately aware regarding the Life Insurance and remaining 10 % of

the respondents are not aware about Life Insurance.

10 % of the respondents are completely aware about the Money Market. 25 % of the

respondents are moderately aware regarding the Money Market and remaining 65 % of

the respondents are not aware about Money Market.

62 % of the respondents are completely aware about the Tax Saving Schemes. 18 % of

the respondents are moderately aware regarding the Tax Saving Schemes and remaining

20 % of the respondents are not aware about Tax Saving Schemes.

25 % of the respondents are completely aware about the Real Estate. 48 % of the

respondents are moderately aware regarding the Real Estate and remaining 27 % of the

respondents are not aware about Real Estate.

15.3 % of the respondents are completely aware about the Non-Conventional Avenues. 30

% of the respondents are moderately aware regarding the Savings Account and remaining

55 % of the respondents are not aware about Non-Conventional Avenues.

Post Office schemes, PPF, Life Insurance and Saving Bank Account have highest

awareness. Money Market, Derivatives and Non- Conventional Avenues like precious

coins, paintings etc. have very low awareness. Thus, Respondents possess fair awareness

pertaining to traditional Investment Products. These findings are in line with all the past

researches done in the area of personal financial planning.

5.4.1 Inferential Statistics Pertaining to Awareness of Different Investment Avenues

Ho9: Awareness of different Investment avenues does not differ significantly with

respect to gender of the respondents.

P - Value for the All the investment avenues except Money Market is less than 0.05. So, we

reject the null hypothesis for all the other investment avenues except Money Market.

Awareness regarding Money Market doesn‘t differ significantly with Gender.

179


respect to Age of the respondents.

There is a significant difference between the Awareness regarding Saving Account, FD,

Shares, Bonds, Derivatives, Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money

Market, Tax Saving Schemes, Non-Conventional Avenues and Age of the respondents. There

is no significant difference between the Awareness regarding Real Estate and Age of the

respondents.


respect to Education of the respondents.

There is a significant difference between the Awareness of FD, Shares, Bonds, Derivatives,

Mutual Funds, PPF, Post Office Schemes, Life Insurance, Money Market, Tax Saving

Schemes, Real Estate, Non-Conventional Avenues and Education of the respondents. There is

no significant difference between the Awareness regarding Saving Bank Account and

Education of the respondents.


respect to Job Type of the respondents.

There is a significant difference between the Awareness regarding FD, Bonds, Derivatives,

Mutual Funds, PPF, Life Insurance, Money Market, Tax Saving Schemes, Real Estate, Non-

Conventional Avenues and Job Type of the respondents. There is no significant difference in

Awareness regarding Saving Bank Account, Shares and Post Office Schemes and Job Type

of the respondents.


respect to Experience of the respondents.

There is a significant difference between the Awareness for Saving Bank Account, FD,

Bonds, Shares, Derivatives, Mutual Funds, PPF, Post Office Schemes, Life Insurance,

Money Market, Tax Saving Schemes, Real Estate and Non-Conventional Avenues and

Experience of the respondents.


respect to Income of the respondents.

180


Shares, Derivatives, Mutual Funds, PPF, Post office Schemes, Life Insurance, Money

Market, Real Estate, Non-Conventional Avenues and Income of the respondents. There is no

significant difference between the Awareness regarding Bonds, Tax Saving schemes and

Income of the respondents.


respect to Marital Status of the respondents.


Shares, Bonds, Mutual Funds, PPF, Life Insurance, Tax Saving Schemes, Real Estate, Non-

Conventional Avenues and Marital Status of the respondents. There is no significant

difference between the Awareness regarding Derivatives, Post office Schemes and Money

Market and Marital Status of the respondents.


respect to Location of the respondents.

There is no significant difference between the Awareness regarding Saving Account, FD,

Shares, Bonds, Mutual Funds, Derivatives, Post office schemes, PPF, Life Insurance, Money

Market, Tax Saving Schemes, Real Estate, Non-Conventional Avenues and Location of the

respondents.

5.5 Findings related to Attitude and Factors Influencing PFP

Attitude of the respondents towards PFP was measured on five point scale. The mean

score for Money Management comes to 3.54. This shows positive attitude towards Money

Management. This is in consistent with Lai & Tan (2009) & Tang et al. (2002a) in which

respondents have positive attitude towards Money Management.

Respondents have stated that they spend more when they use credit card, although they

don‘t carry forward the bill payments, they pay full credit card bill each month.

Mean score for attitude towards Insurance Planning is 3.08 which indicates positive

attitude of the respondents towards Insurance Planning.

Mean Score for investment planning is 3.71 which indicates positive attitude of

respondents towards Investment Management.

181

Respondents have agreed that Retirement Planning should start at early age and that the

Retirement amount should be such so as to maintain the similar lifestyle after retirement.

Majority of the respondents have not started saving the funds as a part of Retirement

Planning.

Overall mean for Retirement Planning comes to 3.46, which shows that respondents have

fairly positive attitude towards it.

Respondents have agreed that it is important for them but majority of them have not

prepared well and they have agreed that they don‘t have any idea about trust under the

head of Estate Planning. Awareness about Estate Management is low.

Mean score of Estate Management is 2.89. This is lower than all other components of


Out of 600 respondents only 312 are aware about all the components of Financial

Planning. This shows that respondents don’t have fairly awareness of Overall PFP and

hence their Financial Plan cannot be a balanced one.

Mean score of the statement ‗I need experts for planning my finances‘ is 3.6. Therefore,

we may infer that respondents need experts for their Financial Planning.

Mean score for overall PFP is 3.34. This shows that respondents have positive attitude

towards Overall Personal Financial Planning.

Mean score for economic factors is 3.08, which is little low. It shows that respondents do

not give more importance to Economic factors while planning their finances.

Mean score for Risk Profile comes to 3.81. It shows that respondents give much

importance to their own risk appetite while planning their finances.

Mean score for the expected return & tax benefits linked to the product are 4.02 and 4.17

respectively. It shows that these factors highly influence Financial Planning of the

respondents.

Mean score for service provided by the company is 3.29 and mean score regarding

knowledge about the representative of the company is 3.08; it shows that respondents do

consider services provided by the company and knowledge level of employees

representing the company before taking financial decisions .

Mean score for the liquidity provided by the product is 3.45; it shows that respondents

consider liquidity of the product before investing into it.

182

Overall mean score of all the statements used to analyze attitude & factors influencing

PFP is 3.29. It suggests that the respondents of Gujarat have positive attitude towards


Factors influencing PFP were identified with the help of Exploratory Factor Analysis

(EFA). They are Insurance Planning, Spending Behavior, Investment, Overall view of

PFP, Retirement Planning, Taxation Planning and Estate Planning, Personal Factors and

Company / Scheme related factors. The same had been confirmed with Confirmatory

Factor Analysis (CFA) also.

With the help of SEM technique hypothesized model was tested. It has been hypothesized

that Overall Financial Planning depends upon the seven factors named as Money

Management, Insurance, Investment, Overall View of PFP, Retirement, Estate Planning

and Tax. Different Model Fit indices suggest that, Data fit the Hypothesized model.

5.5.1 Inferential Statistics with regards to Attitude towards PFP


respondents. Attitude towards Investment Management, Overall PFP, Retirement Planning, Money

Management, Estate Planning differs with Gender.

H018: Attitude towards PFP does not differ significantly with respect to Location of

the respondents.

There is no significant difference between Personal Financial Planning Attitude and

Location of the respondents.


respondents.

Attitude for Investment, Insurance, Overall View of PFP, Retirement Planning, and Estate

Planning, Company / Product related factors differs with Age. Attitude towards Tax

Planning doesn‘t differ with Age.

Ho20: Attitude towards PFP does not differ significantly with respect to Education of

the respondents.

Attitude for Investment, Insurance, Overall View of PFP, Estate Planning, Company /

Product related factors differs with Education. Attitude towards Retirement Planning

doesn‘t differ with Education.

183

Ho21: Attitude towards PFP does not differ significantly with respect to Job Type of

the respondents.

Attitude for Investment, Insurance, Overall View of PFP, Retirement Planning, Estate

Planning, Company / Product related factors differs with Education. Attitude towards Tax

Planning doesn‘t differ with Education.

Ho22: Attitude towards PFP does not differ significantly with respect to Experience

of the respondents.

Attitude for Investment, Insurance, Overall View of PFP, Tax Planning, Retirement

Planning, Estate Planning, Company / Product related factors differs with Experience.

Ho23: Attitude towards PFP does not differ significantly with respect to Income of

the respondents.

Attitude for Investment, Insurance, Overall View of PFP, Tax Planning, Retirement

Planning, Estate Planning, Company / Product related factors differs with Income.

Ho24: Attitude towards PFP does not differ significantly with respect to Marital

Status of the respondents.

Attitude for Investment, Insurance, Overall View of PFP, Tax Planning, Estate Planning,

Company / Product related factors differs with Marital Status. Attitude towards

Retirement Planning doesn‘t differ with Marital Status.

Ho25: Awareness of different Investment Avenues does not differ significantly with

respect to Financial Literacy of the respondents.

Awareness for Saving Account, FD, Shares, Bonds, Mutual Funds, PPF, Post Office

Schemes, Life Insurance, Tax Saving Scheme and Non-Conventional Avenues differs

with Financial Literacy. Awareness towards Derivatives, Money Market and Real Estate

doesn‘t differ with Financial Literacy.

Overall Findings indicate that, Respondents of Gujarat State possess basic financial

literacy. Respondents are aware about all traditional Investment Avenues. Awareness

Related to Non-Conventional Avenues is less. Attitude towards Overall PFP is Positive.

Attitude towards Retirement Planning & Estate Planning is low. Respondents feel that

their Personal Financial Plan is not balanced and they require expert to manage the same.

184

TABLE 5. 1 - Summary of Major Findings

No Hypotheses Test P – Value Null Hyp. Findings

1 There is no significant

association between Age and

financial literacy of the

respondents.

Chi Square Less than

0.05

Rejected Significant association

between Age and

Financial Literacy of the

respondents.


association between Gender

and financial literacy of the

respondents


0.05


between Gender and


respondents.


association between

Education and financial

literacy of the respondents.


0.05


between Education and


respondents.


association between

Experience and financial

literacy of the respondents.


0.05


between Experience and


respondents.


association between Job Type


respondents.


0.05


between Job Type and


respondents.


association between Income


respondents.


0.05


between Income and


respondents.


association between Marital

Status and financial literacy

of the respondents


0.05


between Marital Status

and Financial Literacy of

the respondents.


association between Location


Chi Square More than

0.05

Fail to

Reject

No significant association

between Location and


185

respondents respondents.

9 Awareness of different

Investment avenues does not

differ significantly with

respect to gender of the

respondents.

Mann

Whitney U

Test

Less than

0.05

Rejected Gender influence

awareness related to

saving account, FD,

Bonds, Shares,

Derivatives, Mutual

Funds, Post Office

Schemes, Life Insurance,

Tax Saving Schemes,

Real Estate, NCA




respect to Age of the

respondents

Kruskal

Wallis

Less than

0.05

Rejected Significance difference in

Awareness of Saving

Account, FD, Shares,

Bonds, Derivatives,

Mutual Funds, PPF, Post

Office Schemes, Life

Insurance, Money Market,

Tax Saving Schemes,

Non-Conventional

Avenues and Age of the

respondents.




respect to Education of the

respondents

Kruskal

Wallis

Less than

0.05


Awareness of FD, Shares,

Bonds, Derivatives,


Office Schemes, Life


Tax Saving Schemes,

Real Estate, Non-

Conventional Avenues

and Education of the

respondents.




respect to Job Type of the

Kruskal

Wallis

Less than

0.05


Awareness FD, Bonds,

Derivatives, Mutual

Funds, PPF, Life


186

respondents Tax Saving Schemes,

Real Estate, Non-


and Job Type of the

respondents.




respect to Experience of the

respondents.

Kruskal

Wallis

Less than

0.05


Awareness for Saving

Bank Account, FD,

Bonds, Shares,

Derivatives, Mutual

Funds, PPF, Post Office


Money Market, Tax

Saving Schemes, Real

Estate and Non-


and Experience of the

respondents.




respect to Income of the

respondents

Kruskal

Wallis

Less than

0.05


Awareness regarding

Saving Account, FD,

Shares, Derivatives,


office Schemes, Life


Real Estate, Non-


and Income of the

respondents.




respect to Marital Status of

the respondents.

Kruskal

Wallis

Less than

0.05


Awareness Saving


Bonds, Mutual Funds,

PPF, Life Insurance, Tax

Saving Schemes, Real

Estate, Non-Conventional

Avenues and Marital

187

Status of the respondents




respect to Location of the

respondents

Kruskal

Wallis

More than

0.05

Fail to

Reject

There is no significance

difference among

Awareness of Investment

Avenues and Location of

the respondents.

17 Attitude towards PFP does

not differ significantly with

respect to gender of the

respondents.

Mann

Whiteny U

Test

Less than

0.05

Rejected Attitude towards

Investment Management,

Overall PFP, Retirement

Planning, Money

Management, Estate

Planning differ with

Gender.



respect to Location of the

respondents.

Kruskal

Wallis

More than

0.05

Fail to

Reject

There is no significance

difference among

Personal Financial

Planning attitude and

Location of the

respondents.



respect to Age of the

respondents.

Kruskal

Wallis

Less than

0.05

Rejected Attitude for Investment,

Insurance, Overall View

of PFP, Retirement

Planning, and Estate

Planning, Company /

Product related factors

differs with Age.



respect to Education of the

respondents.

Kruskal

Wallis

Less than

0.05



of PFP, Estate Planning,

Company / Product

related factors differs with

Education.



respect to Job Type of the

Kruskal

Wallis

Less than

0.05



of PFP, Retirement

Planning, Estate Planning,

188

respondents. Company / Product

related factors differs with

Job Type.



respect to Experience of the

respondents.

Kruskal

Wallis

Less than

0.05



of PFP, Tax Planning,

Retirement Planning,

Estate Planning, Company

/ Product related factors

differs with Experience.



respect to Income of the

respondents.

Kruskal

Wallis

Less than

0.05




Retirement Planning,



differs with Income.



respect to Marital Status of

the respondents.

Kruskal

Wallis

Less than

0.05






differs with Marital Status


Investment Avenues does not


respect to Financial Literacy

of the respondents.

Mann

Whitney U

test

Less than

0.05

Reject Awareness for Saving


Bonds, Mutual Funds,

PPF, Post Office


Tax Saving Scheme

differs with Financial

Literacy


189

CHAPTER - 6

Conclusion & Scope of Future Research

6.1 Conclusion

Strengthening of any economy depends upon the financial well-being of the residents of the

country. Past researches show that financial well-being of an individual depends upon their

financial behaviour, which in turn depends upon attitude towards personal financial planning

and the Financial Literacy of an individual. Balanced Personal Financial Plan also plays vital

role for Financial Well Being of an individual. Many studies have been done in the area of

financial literacy in Indian context but very few studies have been conducted on Overall

Personal Financial Planning, especially in the state of Gujarat. The present study had focused

on Financial Literacy, Awareness of overall PFP and Attitude of the respondents towards

PFP.

600 Salaried employees from four major cities of Gujarat had been selected for the purpose

of the study. Study revealed that Respondents possess fair financial literacy. This shows that

respondents are quite informed and aware about financial terms, concepts and its working.

Awareness related to traditional Investment Avenues like FD, Saving Bank Account, Post

Office Schemes and PPF is quite high. Still awareness of new age Investment Avenues like

Derivatives, Non-Conventional Avenues - Precious Coins, Paintings is still very low among

respondents, so they are not able to reap advantages associated with these products.

Interesting finding of the research is: though awareness of all the components of PFP is not

that high, attitude towards PFP is positive among the respondents. They understand the

importance of balanced Financial Plan and they feel that they require an expert to help them

in sketching a Financial Plan. Overall, the study has created a base for the future detailed

research to be done in the field of Personal Finance.

190

6.2 Limitations of the Study

Following are limitations and constraints of the present research.

The present study was confined to the state of Gujarat. Sample Size was 600 and only

salaried employees were considered for the research purpose. So, Findings of the present

study can‘t be generalized for the entire Nation.

The study was all about the Financial Planning of the respondents, there may be the

possibility of biasness in the responses given by them.

There were abundant literatures available in the area of Financial Literacy and Awareness

of Investment Avenues. But there was absence of studies specifically in the area of

Awareness of overall PFP, Attitude and Factors influencing PFP. There was absence of

some model or developed scale in the particular area. If some published research study

had been available, it would have helped the current study to gauge still better results.

Some of the findings of the study suggest that there may be chance of lack of

understanding of some of the concepts by respondents.

6.3 Implications of the Study

The current study suggests that Respondents possess Basic Financial Literacy.

Respondents are lacking awareness regarding new investment avenues, Retirement

Planning and Estate Planning. So, SEBI, RBI and Other Government Agencies, Banks &

Other financial Institutions may focus on increasing literacy regarding advanced financial

concepts.

Study will help financial planners and Investment Advisors, to better understand attitude

of investors regarding Personal Financial Planning and Factors which may influence the

decision for PFP.

Study provides comprehensive idea about Personal Financial Planning concept, Process

and the different components of the same. Study also provides idea about how to plan

finances through different stages of life cycle. So, it can be used as a ready reckoner by

normal investor for understanding concepts of PFP.

191

6.4 Scope of the Future Research

As present study was confined to state of Gujarat, scope of the study can be extended

towards other states.

The present study has focused only on salaried employees. The same can also be

extended towards responses of Businessmen and Professionals.

Linkages between Financial Literacy and Awareness of different Investment Avenues

have been established in the present study. Further linkages can be established between

Financial Literacy and Attitude. Past Researches suggest that Financial Well-being

depends upon the Financial Attitude of the respondents. So further studies can be done to

establish the linkage between Financial Attitude and Financial Well-being of the

respondents.

192

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APPENDIX A

Copy of Questionnaire

Dear Respondent, you are requested to participate in research study on Personal Financial Planning.

Your responses and views are very important for the success of the study. Please note that all data

provided by you will be used for academic purpose only and shall not be divulged to anyone else.

Section A:

Kindly select appropriate answer:

1. Suppose you had Rs. 1000 in saving Bank account and interest rate was 2% per year, after 5

years how much do you think you would have earn in saving account, if you have left your

money to grow:

More than Rs. 1020 Exact Rs. 1020 Less than Rs. 1020 Don’t Know

2. Imagine that interest rate on your saving bank account was 1% per year and inflation was 2%

per year. After 1 year would you be able to buy

More than today Less than today exactly the same Don’t Know

3. Assume a friend inherits Rs. 10000 today and his sibling inherits Rs. 10000, 3 years from

now. Who is richer because of inheritance?

Friend His sibling they are equally rich Don’t Know

4. Buying a single company stock usually provide safer return than a stock mutual fund.

True False Don’t Know

5. Financial Planning is all about buying enough insurance.


6. Any investment opportunity which claims higher returns usually carries lower risk.


7. If interest rate falls what will happen to price of the bond?

Rise Fall Not Change Don’t Know

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8. Considering the long term tenure (10 to 20 Years), which assets normally gives the highest

return?

Saving Account Stocks Bonds Don’t Know

Sec B : Several investment avenues are listed below, select appropriate column according to level

of awareness where : 1= Unaware , 2= Moderately aware , 3= Completely Aware

Sr. No

Particulars 1 2 3

1 Saving Account

2 Bank FD 3 Equity Shares

4 Govt. Bonds / Debentures/ NCDs

5 Derivatives ( Futures and Options Markets) / Commodity Market/ Currency Market

6 Mutual Funds 7 PPF

8 Other Post Office Products ( NSC, MIP )

9 Life Insurance

10 Money Market ( Call, T Bill, Liquid Funds)

11 Tax Saving Schemes 12 Real Estate

13 Non Conventional Avenues (precious Coins, Paintings etc.)

Section C:

Kindly rate your opinion for the following statements:

Where 1 -Strongly Disagree , 2 – Disagree, 3 –Neither Agree or Disagree , 4 – Agree, 5 – Strongly

Agree

Sr. No

Particulars 1 2 3 4 5

1 Budgeting and keeping financial records are very essential

2 I should save more before spending the balance.

3 I spend my money very carefully

4 I payoff the full credit card outstanding amount every month

5 I spend more when I use a credit card

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6 Insurance is a forced saving to ensure that family gets continue stream of flow of income to your family in event of death or accident

7 I have an adequate insurance to ensure that if I were to passes away or become sick or disabled, my family and I will not suffer financially.

8 I have Life Insurance but no other type of insurance i.e Health, Personal accident, Property etc.

9 I do not have any Insurance

10 I consult an insurance agent for purchase of an insurance

11 I take advise of my family, friends before investing into insurance

12 I consider the coverage offered by insurance company before purchasing it.

13 I often feel difficulty for purchasing financial products

14 Long term savings with a regular saving pattern is important

15 Investing is becoming important nowadays

16 Investment is commitment of funds to achieve long term goals or objectives

17 I understand my risk profile- high risk taker, medium risk taker, or low risk taker

18 I invest in different investment instruments i.e shares, mutual fund, real estate, bonds with minimal knowledge and research on it.

19 If I were given an amount of equal to six month salary to invest, I would know exactly what to do with it.

20 I know how taxes would be applied on my different investments avenues

21 I utilize the various tax rebates that I’m entitled to when filing my tax returns.

22 I know the amount I need to fund a comfortable retirement.

23 I have started planning for my retirement.

24 Retirement planning should be started at early working age

25 My Retirement plan provides for inflation and standard of living changes that will occur over a period of time

26 I have a will

27 I understand what a trust is.

28 I know what income my family would receive from proceeds of my estate

29 Estate planning is important to me. 30 I am aware about overall financial planning: i.e

Money Management, Investments, Insurance,

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Retirement planning, estate planning, tax planning

31 I feel that my financial plan is well balanced, keeping into the mind all aspects: Money Management, Investments, Insurance, Retirement planning, estate planning, tax planning

32 I set financial goals and objectives in my life. 33 I gather relevant data and analyze my current

financial position before I make financial decision.

34 I freely discuss with others ,regarding financial planning

35 I need expert for planning my finances.

36 I am actively involved in managing my Financial Plan, I review my plan periodically after the implementation.

37 I need to keep cash reserve in case of an emergency

38

My willingness to take risk is factor I consider before planning my finances.

39 I try to take information from all authenticated sources and then invest my money.

40 I get influenced by my friends and relatives while taking financial decisions.

41 I look at Economic factors such as prevailing inflation and interest rates for financial planning.

42 I look for Service provided by the company before investing into that.

43 My decisions on planning also depend upon knowledge of the representative of the particular company.

44 I consider Future Responsibilities- Like purchasing home, child’s education, marriage etc

45 Expected Return on investment products is important to me.

46 I consider Tax benefits linked with the products

47 I look for Liquidity provided by the products 48 I consider stage of my life cycle before taking any

financial decisions.

49 Regular Cash flow for managing my routine expenses is important factor to me.

50 Objective behind my planning is to minimize inconvenience to my family members in case of my death.

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Section D: Demographic Profile

Age in Years: 20-35 36-58 59 and above

Gender: Male Female

Education: High School Graduation Post Graduation

Others______

Job Type: Public Sector Private Sector Government

Work Experience:

Less than 5 years 5 years to 15 years 16 years to 25 years 25 years and

above

Income per annum: Less than 5 Lacs 5 Lacs to 10 Lacs 10 Lac to 15 Lacs

15 Lacs and above t

Marital Status: Married Unmarried widow/widower Divorcee

Location: Ahmedabad Baroda Rajkot Surat

How much percent of your income you save regularly: Less than 10% 10 % to 30%

30% and above

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APPENDIX B

List of Publications

Sr. No

Title of the Paper Name of the Authors

Name of Journal ISSN Number / Impact Factor

Month & Year of Publication

1 Personal Financial Planning : Literature Survey

Avni Patel International Journal of Research in Commerce, IT, Engineering and Social Science Volume 6, Issue 7

ISSN (P) 2349 -7793 Impact Factor – 3.908

July 2016

2 Awareness and Attitude of Investors regarding Personal Financial Planning

Avni Patel, Dr. Satendra Kumar

Paripex – Indian Journal of Research, Volume 5, Issue 11

ISSN – 2250-1991 Impact Factor – 5.215

November 2016

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