The Level and the Impact of Demographic Factors on the Financial Literacy: An Empirical Analysis of Undergraduates of State Universities in Sri Lanka

Abstract

The importance of financial literacy has regained its prominence in the Sri Lankan context due to the recent public scandals, where in many instances the general public had been duped. Furthermore, some extant studies indicate a low literacy rates among the younger individuals in Sri Lanka. Accordingly, this study assesses the degree of financial literacy and how certain demographic factors (i.e., the business and non-business majors, class-rank, age, gender, work experience and income of parents) influence the financial literacy levels among the undergraduates of selected state universities in Sri Lanka. For this purpose, 612 undergraduates (355 business majors and 257 non-business majors) from state universities of Sri Lanka were surveyed using a validated comprehensive financial literacy assessment tool that covered four sub-areas on awareness of general financial knowledge, savings and borrowings, insurance and investments. The findings indicate that the overall literacy level of these undergraduates is 58.35 (mean) out of 100 of the total sample. In terms of sub-areas, the knowledge on investments had had the lowest score of 46.09, while the highest score was 64.05 on the area of insurance. In terms of selected demographic factors, a pronounced statistically significant difference is observed between business majors (mean: 69.58) and non-business majors (mean 42.83) in terms of overall financial literacy and all four sub-areas. When business majors were considered, One-way ANOVA analysis indicated that there are significant differences of overall financial literacy among the undergraduates based on their class-rank and income levels of their parents. On the other hand, any of the demographic factors did not cause a significant difference on the overall financial literacy of the non-business major undergraduates. These findings are expected to have significant educational policy implications, especially in enhancing the financial literacy of non-business major undergraduates, which is found to be below average.

Keywords: business and non-business majors, financial literacy, financial products, personal financial planning