1

CHAPTER I

INTRODUCTION

1.1 Background of the Study

Financial literacy is an important component of sound financial decision-making, and

many young people wish they had more financial knowledge (Lusardi, Mitchell &
Curto, 2010). There is the need to improve financial literacy of individuals, especially
students at university level so they can have positive cash management attitudes
before they enter the job market. This positive attitude will help them to practice
proper personal financial management as working adults (Dahlia, Rabitah &
Zuraidah, 2009).

In the course of everyday life, people make a variety of financial decisions about
saving, investing and borrowing. The global marketplace is increasingly risky and is
becoming more vulnerable day by day. One of its main implications include rising
costs of goods and services that push people to be able to make well-informed
financial decisions (Lusardi & Mitchell, 2011).

Understanding financial literacy among young people is of critical importance for

policymakers in several areas; it can aid those who wish to devise effective financial
education programs targeted at young people as well as those writing legislation to
protect younger consumers (Lusardi et al., 2010). Our study appears to be the very
first in Ghana to contribute to literature on the predictors of financial literacy among
university students.

Financial literacy is a blend of financial knowledge, awareness, skills, ability,

attitudes and behaviors necessary to make prudentand reliable financial decisions to
improve financial health. In today’s fast-paced community, financial literacy is a
fundamental skill for daily life. It means being competent to understand how money
works, how to manages income and expenses, how and where to invests, manage
financial risks effectively and most importantly avoid financial distress.

Learning how to manage money (money management) is just as important as getting

it (Danes & Hira, 1987). This phenomenon requires individuals to be equipped with
 2

some knowledge and skills relating to personal financing, or simply financial literacy.
In academia, financial literacy can be defined as ‘‘one’s understanding and knowledge
of financial concepts” (Lee, 2005; and Hogarth & Hilgert, 2002). Financial literacy
can have important implications for financial behavior. For instance, people with low
financial literacy are more likely to have problems with debt (Lusardi & Turfano,
2009), less likely to participate in the stock market (Rooij et al., 2007), less likely
tochoose mutual funds with lower fees, less likely to accumulate and manage wealth
effectively and less likely to plan for retirement (Lusardi & Mitchell, 2006).

Pension finance literacy enables individuals to plan for retirement, make proper
choices on pension products and contribute effectively in management of their
pension schemes (Njuguna & Otsola, 2011). It also influences the saving behavior and
member participation in pension schemes of individuals and in turn contributes to
economic growth of countries (Agnew, Szykman, Utkus & Young, 2007).

Worthington (2005) defined financial literacy as the ability to make informed

judgments and to take effective decisions regarding the use of management and
money. Remund (2010) on the other hand defines it as a measure of understanding
key financial concepts. (Lusardi & Mitchell, 2013) further defined financial literacy
as peoples‟ ability to process economic information and make informed decisions
about financial planning, wealth accumulation, pensions, and debt. These authors
suggest that a financial literate population is able to make informed decisions and take
appropriate actions in matters affecting their financial wealth and wellbeing. OECD
(2005) also gave a comprehensive definition of „financial education‟ as:the process
by which financial consumers/investors improve their understanding of financial
products and concepts and, through information, instruction, and/or objective advice,
develop the skills and confidence to become more aware of financial risks and
opportunities to make informed choices, to know where to go for help, and to take
other effective actions to improve their financial well-being.

According to Norman (2010) financial education refers to knowledge or an

understanding on the importance of money and the use of money, it answers the
question, why spend on this as opposed to that. It can literally be summed up as the
wise use of money. Financial literacy is the ability to understand finance. More
 3

specifically, it refers to the set of skills and knowledge that allow an individual to
make informed and effective decisions through their understanding of finances.

According to Mahdzan and Tabiani (2013), increasing financial literacy and

capability promotes better financial decision-making, thus, enabling better planning
and management of life events such as education, housing purchase, or retirement.
This is particularly more relevant for college students. Peng et al. (2007) stated that
university students take on higher levels of personal financial responsibility. These
students face more financial challenges in conjunction with relevant instruction. It is
also more likely that college students are experiencing more challenges with finances
as they pay bills, use credit cards, working, saving, budgeting monthly expenses, and
manage debt. Thus, there is paramount importance of financial literacy among college
students.

The awareness of the importance of financial education is gaining momentum among

policy makers across the world’s economies. Again, helping young people by
understand their financial issues is quite important, as younger generations are likely
to face ever increasingly complex financial products and services. They are also more
likely to bear more financial risks in adulthood than their parents, especially in saving,
planning for retirement and covering their healthcare needs (OECD, 2011).The need
of financial literacy has become increasingly significant with the deregulation of
financial markets and the easier access to credit, the ready issue of credit cards and the
rapid growth in marketing financial products. Recognizing the importance of financial
literacy, a growing number of countries have developed and implemented national
strategies for financial education in order to improve the financial literacy of their
populations in general, often with a particular focus on younger generations (Grifoni
& Messy, 2012).

Financial literacy equipped individuals with the necessary knowledge, ability and
tools to make informed financial decisions with confidence, to manage personal
wealth with high degree of competency and heighten the efficiency in the demand
for best financial products (Ali, 2013). When individuals acquire knowledge about
savings and apply same, funds are made available to firms by means of loans from
financial institutions. These loans are used to finance productions and it does not only
 4

increase the gross domestic product (GDP) but also create employments among many
others.

The term financial literacy derives its description from The President’s Advisory
Council on Financial Literacy (PACFL 2008), in the U.S that was convened to
“improve financial literacy among all Americans.’’ The council defined financial
literacy as the ability to use knowledge and skills to manage financial resources
effectively for a lifetime of financial well-being. It emphasized the fact that financial
literacy goes hand in hand with financial education which was defined as the process
by which people improve their understanding of financial products, services and
concepts, so they are empowered to make informed choices, avoid pitfalls, know
where to go for help and take other actions to improve their present and long-term
financial well-being.

Financial literacy is the major challenge faced by all countries globally. Financial
literacy is the mix of one’s knowledge, skill and attitude towards financial matters. It
helps to make informed decisions and well being of an individual. In today’s world
which has a market with complicated products, the need for financial literacy
becomes inevitable. Country like India which has high young population, the
government is in a position to increase the level of financial literacy. The government
and other private institutions have taken steps through financial education programs.
Now financial education is included in the school and university curriculum also.

Financial literacy goes beyond the provision of financial information and advice. It is
the ability to know, monitor, and effectively use financial resources to enhance the
well-being and economic security of an individual, his family, and his business. The
OECD defines financial literacy as –“A combination of awareness, knowledge, skill,
attitude and behaviour necessary to make sound financial decisions and ultimately
achieve individual financial well being.”

Financial knowledge is the understanding of interest calculations, relationship

between inflation and return, inflation and prices, risk and return, and the role of
diversification in risk reduction. The financial behaviour assesses how the individual
deals with money. It includes prompt payment of bills, framing proper planned
budgets and monitoring it, continuous saving habits etc... Financial attitude influences
 5

the behaviour of the individual. Financial attitude is the opinion of the individual
about the belief in planning,their propensity to save and consume. So, the
combination of financial knowledge, attitude and behaviour determines the level of
financial literacy of an individual.

Financial literacy is mainly concerned with better planning of retirement life, gradual
wealth accumulation and better financial decision making. So to be financially literate
becomes important from the initial stages of one’s career. But due to some personal or
professional hindrances they become financially illiterate. This leaves them with
inadequate knowledge about financial dealings, inappropriate decisions etc., So, they
have to be enhanced with financial knowledge and tools which are needed to make
informed decisions. Financial literacy impacts the promotion of financial inclusion
which ultimately results in financial stability of any economy. The need for financial
literacy in India has gained importance because of low level of literacy and large
section of population which is financially excluded from the formal financial set up.

Greenspan (2002) argues that financial literacy helps to inculcate individuals with the
financial knowledge necessary to create household budgets, initiate savings plans, and
make strategic investment decisions. Proper application of that knowledge helps
households to meet their financial obligations through wise planning, and resource
allocation so as to derive maximum utility (Mwangi & Kihiu, 2012).

In younger generations, school and college students are focal point for the study. In
Nepal, to promote financial literacy, there are many programs held by government,
non-government organization (NGOs) and private sector. Nepal Rastra Bank launched
a program ‘NRB with Students’ for enhancing the financial literacy among students
(NRB, 2014). In enhancing financial literacy, NRB Strategic Plan 2012-2016 focuses
on financial literacy programs for women, victims of conflict, ethnic minorities, and
deprived and marginalized section of population. Similarly, since 2012 monetary
policy of NRB has emphasized on the financial awareness programs stating “because
of low financial literacy financial services are not effective so appropriate strategy
should be developed”. However, hardly any study has been conducted on financial
literacy among youth in Nepal. This paper, therefore, aims at identifying the financial
literacy among the employees of Chitwan District.
 6

1.2 Statement of Problem

Our nation’s economic system and society’s well-being depends in part on

knowledgeable consumers.One problem may be that many individuals and families do
not have the knowledge or skills to handle basic, let alone complex, financial
decisions (Alhabeeb, 1999; Klemme, 2002; NEFE, 2002). Many might say, “I learned
how to get a job and make money, but no one ever taught me how to manage money.”
Learning how to manage money is as important as earning it (Danes & Hira, 1987;
Lachance & Choquette-Bernier, 2004).The U.S. has the lowest individualsavings rate
in the industrialized world, with rates continuing to drop.Between 1970and 2002
consumer debt among U.S. families increased by 152% whereas median family
income only increased 13% (Economic Report of the President, 2006). Bankruptcies
have risen by nearly 400% over the last two decades affecting 1,759,503
U.Shouseholds in 2006 (U.S. Courts Bankruptcy Filings, 2006).

Financial literacy condition in case of our country is poor. About two third of that
population are literate and among literate and among literate population also, most of
them are financially illiterate. Financially literate people can manage to save even
though their earnings are low. Country’s economic condition will be boost up only if
the citizens of that country is financially literate .In any country, the rate of employees
is high that any other profession. If those employees are financially literate and can
manage take sound financial decisions, then economic condition of the nation can be
changed. With the fact stated above, this study is focused to conduct research on
employees in Chitwan district.

Efforts have been made by different researchers and academicians to investigate into
the concept of financial literacy at the personal level. Financial illiteracy regarding
personal finance in both developed and underdeveloped countries are the problem
which have an impact to the financial system of the particular country. In case of
Nepal, financially literate citizens are very less. Financial literacy can be measured on
the different paramount like financial knowledge, financial behavior, financial
attitude, etc.The study has following research questions:

1. What is the status of financial literacy among employees?

 7

2. What is the impact of demographic characteristics (gender, income, age) and

educational characteristics (level, type, stream) in financial literacy among
employees?

3. What is the relationship between personality characteristics (financial

behaviour, financial attitude and financial influence) and financial literacy
among employees?

1.3 Purpose of the Study

The generalobjectives of the study is to examine the level of financial knowledge of

employees in Chitwan district. The specific purposes of the research are as follows:

1. To examine the status of financial literacy among employees in Chitwan

district.

2. To analyze the impact of demographic characteristics (gender, income,

age) and educational characteristics (level, type, stream) in financial
literacy among employees.

3. To identify the relationship between personality characteristics (financial

behaviour, financial attitude and financial influence) and financial literacy
among employees.

1.4 Research Hypothesis

Following hypotheses has formulated for the study:

H1: There is significant difference in financial knowledge among employees of

different demographic characteristics (gender, age, income).

H2: There is significant difference in financial knowledge among employees in

educational characteristic (level, stream, type).

H3: There is significant relationship of financial knowledge of employees with

theirpersonality characteristics (financial attitude, financial influence and financial
behavior).
 8

1.5 Significance of the Study

This study will contribute to existing literature on financial literacy. The study is
conducted in Nepal, where awareness about importance of financial literacy is in
increasing trends. That means this study helps to attract policymakers, researchers,
and other people to know and research on financial literacy. This study highlighted to
analyse the status of financial literacy among employees in Chitwan district which
provide good opportunity to analyse the condition of employees financial literacy in
Chitwan district. Similarly, it examined the impact of demographic, educational
characteristics in financial literacy. This study will be helpful to stakeholders, Nepal
Rastra bank to develop and implement the literacy program. Similarly, this study will
be helpful to financial institutions to lunch different schemes and program. To the
researcher for further research by taking more variables than this study and to the
general public to see their status of financial literacy and take necessary action to
improve the literacy if necessary.

1.6 Limitations of the Study

As every study is conducted within certain limitations the present study is not an
exceptional. The study is based on a financial literacy among employees in Chitwan
district, which may not represent the overall scenario of Nepal. Basically, the study is
limited with-in the following factors:

1. The responses might not be very representatives of the population due to

sample limitations, area limitations and result cannot be generalized since
collected questionnaire is small.

2. The study concentrates private sectors, public services, small entrepreneurs

and big enterprises employees in Chitwan district.

3. The study only considers variables such as numeracy, compound interest,

inflation, money illusion, risk and return, share market, banking, insurance,
taxes, credit and diversification.
 9

4. The study covers demographics variables (gender, age, income), educational

variables (level, type, stream), personal variable (financial behaviour, financial
influence, financial attitude).

1.7 Organization of the Study

This study has organized into following five chapters.

Chapter I - Introduction:

This chapter deals with background of the study, statement of the problem, purpose of
the study, significance of the study, research hypothesis,limitations of the study and
organization of the study

Chapter II – Literature Review:

This chapter includes review of literature which incorporates the theoretical review,
review of previous studies, conceptual frameworkand research gap.

Chapter III – Research Methodology:

This chapter focuses on research methodology and it contains research design,

population and sample size, sources of data, data collection processing &procedures,
model specification and analysis tools and technique used for this analysis along with
pilot test.

Chapter IV– Results:

This chapter includes results and discussion, which focuses on data presentation and
analysis and this chapter deals with the main body of the research works and deals
with data presentation and analysis of data and scoring the empirical finding of the
study through definite cause of research methodology.

Chapter V - Conclusions:

This chapter deals with summary, conclusion and implications.Reference and

implications are also attached at the end of the study.
 10

CHAPTER II

LITERATURE REVIEW

Review of literature is the process of learning and understanding the concept of the
related topic. After selecting the topic of research, researchers should study different
materials (like Books, Journals, Magazines, Newspapers, Articles etc) to collect the
information’s about the subject matter of the study. This process of studying different
education materials which are related with the selected topic of the research is called
“Review of Literature”. It helps to find out the research gap.

2.1 Theoretical Review

The study was guided by theories which had previously been developed and that have
called for more research on the subject matter over the years. These theories include
Behavioural theory, Prospect theory and Life cycle theory.

2.1.1 Behavioral Finance Theory

The roots of the concept of literacy refer to the human ability to read. In psychology
and education, learning is commonly defined as a process that brings together
cognitive, emotional, and environmental influences and experiences for acquiring,
enhancing, or making changes in one's knowledge, skills, values, and world views
(Illeris, 2004; Ormrod, 1995). The level of knowledge in any subject, including
financial knowledge, can therefore be connected to variables, such as: Age, gender,
level and programme of study, parents’ level of education, accessibility to media,
sources of education on money matters, place of residence, among others (Shefrin &
Statman, 1994). It is argued that some financial phenomena can be better explained
using models where it is recognized that some investors are not fully rational or
realize that it is not possible for arbitrageurs to offset all instances of mispricing
(Barberis & Thaler, 2003). Over the past years psychologists have found again and
again that the usual axioms of finance theory are descriptively false.

2.1.2 Prospect Theory

Regret is an emotion that occurs after people make mistakes. Investors avoid regret by
refusing to sell shares whose prices have gone down and willing to sell those that
 11

have appreciated. Moreover, investors tend to be more regretful about holding losing
stocks too long than selling winning ones too soon (Fogel & Berry, 2006). According
to prospect theory, people feel more strongly about the pain from loss than the
pleasure from an equal gain. People tend to under-weigh probable outcomes
compared with certain ones and people respond differently to the similar situations
depending on the context of losses or gains in which they are presented (Kahneman &
Perttunen, 2004).Prospect theory was developed by Daniel Kahneman, professor at
Princeton University's Department of Psychology, and Amos Tverskyin 1979 as a
psychologically realistic alternative to expected utility theory. (Kahneman, 2003)
explain that prospect theory allows one to describe how people make choices in
situations where they have to decide between alternatives that involve risk. It
describes how people frame and value a decision involving uncertainty and therefore
they look at choices in terms of potential gains or losses in relation to a specific
reference point, which is often the purchase price. Prospect theory describes the
states of mind affecting an individual's decision-making processes including regret
aversion and loss aversion (Waweru et al, 2003). According to Kahneman (2003), an
important implication of prospect theory is that the way economic agents subjectively
frame an outcome or transaction in their mind affects the utility they expect or
receive. This theory guided the current study which considered decision making
between current consumption and savings for future consumption. This incorporates
the usefulness of time value of money based upon discount rates and credit constraints
and thus this study explored the moderating effect of financial factors on the
relationship between financial literacy and financial preparedness for retirement
which informed the specific objective four of the study.

2.1.3 Life Cycle Theory

This theory deals with economic decisions on retirement saving in the rationalization
of an individual’s income in order to maximize utility over his lifetime. Initially
developed by (Ando & Modigliani, 1963), it was based on the conventional economic
approach to saving and consumption which assumes that a fully rational and well-
informed individual will consume less than his income in times of high earnings
(during employment), and will save to support consumption when income falls (after
retirement). This type of saving behavior enables households to smooth their marginal
 12

utility of consumption over their life cycle. This model assumes the following of the
human behavior: that they are forward-looking over their life spans; they can predict
the financial resources they will have over their lifetime; they understand something
about the financial resources they will need in all periods of their lives; and they make
informed decisions about the use oftheir financial resources. Given that financial
preparedness for retirement is future looking, the current study infers from life cycle
theory to explain how individuals make decisions on deferring current consumptions
inform of savings and investments to future savings. This incorporates the usefulness
of time value of money based upon discount rates and thus this study explored the
moderating effect of demographic characteristics, financial factors and the
independent variable of financial literacy on financial preparedness for retirement.

The Economic Importance of Financial Literacy: Theory and Evidence

Lusardi and Olivia (2014), “The Economic Importance of Financial Literacy: Theory
and Evidence” This paper undertakes an assessment of a rapidly growing body of
economic research on financial literacy. The study starts with an overview of
theoretical research which casts financial knowledge as a form of investment in
human capital. Endogenizing financial knowledge has important implications for
welfare as well as policies intended to enhance levels of financial knowledge in the
larger population. Next, we draw on recent surveys to establish how much (or how
little) people know and identify the least financially savvy population subgroups. This
is followed by an examination of the impact of financial literacy on economic
decision-making in the United States and elsewhere. While the literature is still
young, conclusions may be drawn about the effects and consequences of financial
illiteracy and what works to remedy these gaps.

2.2 Review of Previous Studies

Thapa & Nepal (2014) Study showed that the most of the students had basic level of
financial knowledge but they lack in understanding of credit, taxes, share market,
financial statement and insurance. Students were highly influenced by their parents at
home and they had positive attitude towards savings. The study further took points
such as income, age, gender, stream of education, types of college and attitude of
students as determinants of financial knowledge. However, overall financial
 13

knowledge was unaffected by gender, University affiliation, financial behavior and

influence. The study concluded the college students have basic level of financial
knowledge. However, overallfinancial knowledge of the student was affected by some
of their demographic, educational and personality characteristic. It suggested to the
Government and Universities to include some financial literacy program to improve
students’ financial literacy.

In Srilankan context, Heenkenda (2014), study found that the socio-economic-

demographic characteristics have a very strong association with the financial literacy
of individuals. And, it also found that the majority of the respondents demonstrated a
modest financial knowledge and the functional financial literacy was quite diverse
across respondents depending on the levels of education, income, gender, age, etc. It
recommended that this study can be taken as a base research to have further study by
researcher and also it can be taken as an important report to make correction about
financial literacy.

The study revealed that the spending habit and year of study have a significant
positive relationship with the financial literacy, whereby the age and gender are
negatively associated with the financial literacy. The study suggested that financial
literacy can prevent the university students from engaging in extensive debt especially
credit card debt (Shaari et al., 2013).

Several studies have been done to address claim related to retirement preparedness.
Recognizing that Kenya has old age dependency estimated at 56%, Githui and Ngare
(2014) carried a study focusing on measuring the impact of financial literacy on
retirement planning in the informal sector in Kenya. The study modeled with six
hypothesis conceptualizes that gender, age, marital status, education, occupation,
income, number of children and financial literarcy influence retirement planning.
Pearson’s Chi-square tests were used in the study which established that all variables
except gender are significantly associated with retirement planning. Given that
financial literacy is one of the variables associated with retirement planning, the study
recommends development of a curriculum on financial education and pension
education in middle level and higher learning institutions as well as community
pension awareness programs such as road shows and advertisements. The study noted
that income greatly affects retirement planning with low income earners feeling that
 14

they do not have sufficient income to save. Though the paper introduces other control
variables in form of demographic factors on the relationship between financial
literacy and retirement planning,the finding washowever limited by the fact that
statistical techniques was not robust enough to show the direction of the relationship
besides the fact that the population from whom the sample was drawn was not
relevant since self employed people do not retire, one important question that remains
unaddressed is whether informal sector participants really retire. Though SME
employees may retire, business owners that are included in the sample do not retire.

The relationship between financial literacy and pension preparedness in the informal
sector in Kenya is investigated by Ade (2013) using a stratified random sample of 30
traders in each of the selected markets from Nairobi. In each market, five informal
sector traders were randomly selected from small scale trader categories namely
second hand clothes dealers, small shops and kiosks, Jua Kali artisans, hawkers, fruits
and vegetable vendors and food processing kiosks. The multivariate logic model
developed from 150 responses to the questionnaires proposes that retirement
preparedness is explained by financial literacy, age, income, marital status and highest
education level. The study notes that there is a statistically significant positive
relationship between financial literacy and retirement preparedness. It is inferred that
the foregoing study has not clearly articulated how retirement preparedness is
measured in the study. The choice of the sample frame from micro scale entrepreneurs
leads to questions on the possibility of retirement in the informal sector in Kenya.

The results of the study suggests that financial literacy level of individuals affects the
awareness as well as investment preferences of salaried individuals towards financial
products (Bhushan, 2014).This clearly implies that due to low level of financial
literacy, individuals invest their money in traditional financial products and are not
able to take advantage of new age financial products which can offer them higher
returns. Thus it becomes the need of the hour that government as well as policy
makers take necessary steps to improve the level of financial literacy among the
population.

The study found that financial literacy positively affect financial preparedness for
retirement. However, knowledge of financial instrument was found to be insignificant
while computation capability for retirement was significant. Demographic
 15

characteristics and financial factors findings revealed that they moderates the
relationship between financial literacy and financial preparedness for retirement and
both were as well significant. The study recommended the need to formulate policies
and programs oneducation and training and as well as a well documented information
in order to foster financial preparedness for retirement (Agunga, 2014). Survey shows
that Malaysian consider themselves good in financial literacy but in reality they are
still weak in mastering financial literacy knowledge. This study also shows that, in
Malaysia context, financial literacy among young men who earn below RM1500 and
certificate qualification holders need to be targeted as focus group to increase their
financial literacy awareness and financial knowledge. Therefore, strategies to create
awareness and improve financial literacy knowledge among Malaysian has been
identified in this study (Murugiah, 2016). The study concluded herding effect, risk
aversion, prospecting and anchoring influences the investment decision making in
stock market. The study recommended that since herding effect or behavior is
relevant to the individuals, market environment and atmosphere, the investment banks
should give their investors the relevant information to ensure that they are well versed
with the prevailing market and economic situations. The study also recommended that
since risk aversion influences investment decision of the individuals in stock market,
there is need for the relevant organizations to ensure that their investment in the stock
market are well chosen to ensure that the interests of the investors are well taken care
of (Wamae, 2013).

Fogel & Berry (2006) suggests that individual investors are consistently engaging in
behavior that they have been warned can cost them money and that they regret later.
Two additional experiments confirm the disposition effect and the role of regret, and
offer evidence about the role of an agent (broker) in the assignment of blame and
regret. The study show that investor satisfaction and regret are not simply functions of
outcome, but are influenced by counterfactual alternatives and the type of action
taken.

Online investors' knowledge of investments is insufficient and needs to be improved

in the future. Online investors who decide their own investment decisions need to
understand and be able to evaluate the appropriateness of their investments. Investors
who receive guidance from brokers also need to be able to evaluate whether the
 16

recommended investments are suitable for them. As discussed previously the problem
may be in the presentation of educational information. At online broker websites,
educational information, if any, is located in a separate and distinct section of the
website. The investor must make an effort to find the needed information. The
Securities Exchange and Commissions (1999) suggests one possible way to better
educate investors is through the use of popup screens that contain educational
information on the specificactivity the investor is performing. At that point investors
may elect to either use the educational information or indicate that they do not wish to
use it. While solutions have proven difficult to find, this problem needs to be
addressed for the financial health of both individual investors and society as a whole.
An educated investor is a better investor, and contributes to a more efficient and
effective capital market (Volpe, Kotel & Chen, 2002).

Mahdzan & Tabiani (2013) examined the influence of financial literacy on individual
saving in the context of an emerging market, Malaysia. A survey was conducted on
approximately 200 individuals in Klang Valley, Malaysia to study the relationship
under investigation. Other determinants of individual saving were also examined, in
particular, saving regularity, risk-taking behaviour, and socio- demographic
characteristics. Results of a Probit regression revealed that the level of financial
literacy had a significant, positive impact on individual saving. In addition, saving
regularity, gender, income and educational level influenced the probability of saving
positively. Results of this study suggest that it is important for policymakers to
increase financial literacy of households by implementing various financial education
programmes, to further influence saving rates at the national level.

Nidar and Bestari (2012) assessed on personal financial literacy. Main purpose of the
study was to investigate the level and factors influencing the personal financial
literacy. The study surveyed on 400 students in Padjadjaran University of Indonesia
and found that level of personal financial literacy was within the low category,
especially in investment, credit, and insurance. The study also showed that level of
education, faculty, personal income, knowledge from parents, parents’ income, and
ownership of insurance factors have significant impact on personal financial literacy.
The study used personal financial literacy in: basic personal finance, income &
spending, credit & debt, saving & investment and insurance. The study mentioned
 17

that financial institutions, stakeholders, Reserve Bank can considered this study as a
reference. It is also suggested that financial literacy education for students was
mandatory.

Britt et al. (2004) examined financial behavior and problems among university
students and its determinants factors. The study examined among 1500 students about
financial behavior of university and college students. The study found that 90% were
interested in learning about specific topics in financial education, where the highest
percentage of them were found the need of counseling services, followed by learning
about savings and investment, budgeting, how to increase their income and financial
management. The study further found that those female students were more tended to
enjoy shopping and bought items that were on sale than male, and males however,
tended to hide their spending habits from their families. It is suggested that, to
improve the studentsfinancial knowledge, college had to provide financial knowledge
education to learn about saving and financial management.

Jorgensen (2007) investigated the personal financial literacy (knowledge, attitudes

and behavior) of a sample of undergraduate and graduate college students by gender,
class rank, andsocioeconomic status (SES). Second,examined parental and peer
influences on the levelof financial literacy of college students. Finally, examined how
college students’financial knowledge and attitudes correlated with their financial
behavior. The study was based on field survey. Researcher distributed questionnaire
among college students. The study found that financial knowledge, attitude,
andbehavior scores were low but that they significantly increased each year from
freshman to masters. Further, students who were financially influenced by their
parents had higher financial knowledge, attitude, and behavior scores.Finally,
studentwith higher financial knowledge also had higher financial attitude and
behavior scores. The study recommended that financial topic should be discussed
among family members and college also need to add some programs related to
financial literacy.

Agarwal et al. (2013) identified the influence of various socio-demographic factors on

different dimensions of financial literacy among the working young in urban India. A
few factors specific to India, such as joint-family and consultative decision-making
process were found to significantly influence financial literacy in urban Indian youths.
 18

Ramasawmy et al. (2013) assessed the level of awareness of financial literacy by

surveying among management students at the University of Mauritius. Four
fundamental aspects in financial literacy were considered: level and importance,
definitions and theories, constraints and measures to improve financial literacy. The
study found that management students at the University of Mauritius attached a sound
level of importance to financial literacy to their subject of study. However, according
to the results, most students had a medium level of knowledge and skills in financial
literacy and in savings and borrowings. They did not find thesignificant difference in
the financial literacy level between male and female respondents while male and
female’s ability to read, analyze, manage and communicate was found significantly
different. Similarly, the study also stated that age, gender, language, race and income
level did not have an impact on the level of financial literacy. The study recommends
stakeholders, universities etc to include financial literacy education on its syllabus to
both management and non-management students.

Lusardi et al. (2010) studied to find out the youth’s knowledge regarding interest
rates, inflation and risk diversification and relationship between socio-demographics
characteristics and family financial sophistication. The study showed that financial
literacy among the youth in Germany and showed that financial literacy was low; only
less than one-third of young adults were found with basic knowledge of interest rates,
inflation, and risk diversification. However, financial literacy was strongly related to
socio-demographic characteristics and family financial sophistication. It is suggested
that to make young financially literate, government, Reserve banks, financial
institutions need to take an action. This study could become base to other researcher
to do further research by taking other financial literacy variables.

The association between financial literacy and retirement planning in Russia is

investigated by Klapper and Panos (2011). With a correlation matrix, a significant and
positive association between savings for retirement and all financial literacy measures
is established. Instrumental variables indicate that the three measures of financial
literacy exert a positive impact on private retirement planning. Paradoxically,
continuing to work after retirement is also positively correlated to correct financial
literacy responses. This finding therefore suggests that financial literacy influences
provate retirement planning though at the same time, financially literate individuals
 19

who have planned for retirement are not willing to retire which means that there may
be other considerations for the willingness to stop actively working after retirement.

Table 2.1: Summary of Literature Review

Authors, Years Focus on Key Findings

Volpe et Investment Literacy Investors 50 years of age or older were more

al.(2002) among onlineinvestors knowledgeable than those who are younger.Women
had lower level of investment knowledge
thanmen.Investors with graduate degrees were more
knowledgeable than those with some high school or
college education.

Fogel & Berry disposition effect and The study suggests that individual investors are
(2006) individual investor consistently engaging in behavior that they have been
decisions warned can cost them money and that they regret
later.

Githui & Ngare Investigated impact of The study found that age, marital status, education,
(2014) financial literacy on occupation, income, number of children variables are
retirement planning in significantly associated with retirement planning.
informal factor in The study cited that income greatly affects retirement
Kenya. planning with low income earners feeling that they
do not have sufficient income to save.

Ade (2013) Effect Of Financial The study notes that there is a statistically significant
Literacy On Pension positive relationship between financial literacy and
Preparedness Among retirement preparedness.
Members Of The
Informal Sector In
Kenya.

Mahdzan & Impact of Financial The study suggests that it is important for
Tabiani (2013) Literacyon Individual policymakers to increase financial literacy of
Saving in the households by implementing various financial
Malaysian Context. education programs, to further influence saving rates
at the national level.

Agunga (2014) Effect of financial The study found that financial literacy positively
literacy on financial affect financial preparedness for retirement.
 20

preparedness for However, knowledge of financial instrument was

retirement among found to be in significant while computation
permanent and capability for retirement was significant.
pensionable
employees in state
owned corporations in
Nairobi, Kenya.

Murugiah (2016) The Level of The study shows that Malaysian consider themselves
Understanding and good in financial literacy but in reality they are still
Strategies to Enhance weak in mastering financial literacy knowledge. This
Financial Literacy study found that, in Malaysia context, financial
among Malaysian. literacy among young men who earn below RM1500
and certificate qualification holders need to be
targeted as focus group to increase their financial
literacy awareness and financial knowledge.

Wamae (2013) Effect of behavior in The study concluded herding effect, risk aversion,
investment decision prospecting and
making. anchoring influences the investment decision making
in stock market.

Bhushan (2014) Relationship between The study clearly implies that due to low level of
Financial Literacy and financial literacy, individuals invest their money in
Investment Behavior traditional financial products and are not able to take
of Salaried advantage of new age financial products which can
Individuals. offer them higher returns. The study suggests that
financial literacy level of individuals affects the
awareness as well as investment preferences of
salaried individuals towards financial products.

Shaari et al. Financial literacy The study revealed that the spending habit and year
(2013) among university of study have a significant positive relationship with
students. the financial literacy, whereby the age and gender are
negatively associated with the financial literacy. The
study suggested that financial literacy can prevent the
university students from engaging in extensive debt
especially credit card debt.

Heenkenda Inequalities in the The study found that the majority of the respondents
(2014) financial inclusion in demonstrated a modest financial knowledge and the
Srilanka: an functional financial literacy was quite diverse across
assessmentof the respondents depending on the levels of education,
functional financial income, gender, age, etc.
literacy.
 21

Thapa & Nepal Financial Literacy in The study showed that the most of the students had
(2014) Nepal: A Survey basic level of financial knowledge but they lack in
Analysis from College understanding of credit, taxes, share market, financial
Students. statement and insurance. The study further took
points such as income, age, gender, stream of
education, types of college and attitude of students as
determinants of financial knowledge. However
overall financial knowledge was unaffected by
gender, University affiliation, financial behavior and
influence. The study concluded the college students
have basic level of financial knowledge.

Nidar & Bistari Personal Finance The study showed that level of education, faculty,
(2012) Literacy in personal income, knowledge from parents income
Padjadjaran and ownership of insurance factors have significant
University of impact on personal financial literacy.
Indonesia.

Britt et.al. (2004) Financial Behaviour The study found that female students were more
and Problems among tended to enjoy shopping and brought items that
University Students. were on sale than male, and males however, tended
to hide their spending habits from their families.

Jorgensen (2007) Financial Literacy of The study revealed that financial knowledge, attitude
College Students: and behavior scores were low but they significantly
Parental and Peer increased each year from freshman to masters.
Influences.

Agarwal et.al. Financial Literacy A few factors specific to India, such as joint family
(2013) among Working and consultative decision making process were found
Young in Urban India. to significantly influence financial literacy in Urban
Indian Youths.

Ramasawmy A study of the level of The study found that most students had a medium
et.al. (2013) Awareness of level of knowledge and skills in financial literacy and
Financial Literacy in savings and borrowings which stated that age,
among Management gender, language, race and income level did not have
Undergraduates. an impact on the level of financial literacy.

Lusardi et.al. Financial Literacy The study showed that financial literacy among the
(2010) among the Young: youth in Germany and showed that financial literacy
Evidence and was low, only less than one-third of young adults
Implications for were found with basic knowledge of interest rates,
Consumer Policy. inflation and risk diversification.

Klapper & Financial Literacy and The study suggests that financial literacy influences
 22

Panos(2011) Retirement Planning provate retirement planning though at the same time,
in View of a Growing financially literate individuals who have planned for
Youth Demographic: retirement are not willing to retire which means that
The Russian Case there may be other considerations for the willingness
to stop actively working after retirement.

2.3 Conceptual Framework

The conceptual framework is an analytical tool used to make conceptual distinctions

or organize ideas. Conceptual framework of the study explains the systematic
explanation of the relationship among the dependent and independent variables for the
purpose of explaining the financial literacy of employees and its influencing factors
on financial literacy.In the figure 2.1 financial literacy of employees in Chitwan
District is the dependent variable taken for the study and independent variable
aredemographic characteristics, educational characteristics and personality
characteristics.

DemographicCharacteristics

 Gender
 Age
 Income Level

Educational Characteristics

 Level Level of Financial Literacy

 Type
 Stream

Personality Characteristics

 Financial Behaviour
 Financial Attitude
 Financial Influence

Figure 4.1: Schematic Diagram

 23

2.3.1 Operational Variables:

Demographic Characteristics

It consists of gender, age and income level. Genders are male and female whereas
employees are subdivided into four groups as per the monthly income. First, below
Rs. 20000, second, Rs. 20000 – Rs. 300000, third, Rs. 30000 – Rs. 50000 and four,
above Rs. 50000.Age of employees are subdivided into five groups. First, below 18,
second, 18-20, third, 21-24, fourth, 25-29 and fifth, 30 and above.

Educational Characteristics

Employees, on the basis of educational level are subgroup on three parts. They are i)
High School Level ii) Under Graduate Level iii) Graduate level. Similarly, employees
on the basis of education stream are management and non- management. On the basis
of type employees employed on private sectors, public services, small entrepreneurs
and big enterprises.

Personality Characteristics

It consists of financial attitude, financial behavior and financial influence. Financial

attitude of employees have an impact on level of financial knowledge or not? What is
the impact of financial behavior and financial attitude of the employees towards the
financial literacy?

Financial Literacy

Financial literacy involves the proficiency of financial principles and concepts such as
financial planning, compound interest, managing debt, profitable saving techniques
and the time value of money.The lack of financial literacy or financial illiteracy may
lead to make poor financial choices that can have negative consequences on the
financial wellbeing of an individual. The main steps to achieving financial includes:
Learning the skills to create budgets, the ability to track spending, learning the
techniques to pay off debts, and effectively planning for retirement. The topic focuses
on the ability to manage personal financematters in an efficient manner, and, it
includes the knowledge of making appropriate decisions about personal finance such
 24

as investing, insurance, real estate, paying for college, budgeting, retirement and tax
planning.

2.4 Research Gap

A review of the literature on financial literacy shows that most of the studies focused
on the students. Though some of the studies dealt with the educators teaching to
Undergraduate and Graduate students to examine the relationship between their
background characteristics, financial behavior, financial awareness and financial
literacy. Some studies had done among young with the demographic variables.
Similarly, some research had been conducted to test the investors’ knowledge then
some had done the research to test the financial literacy in adult’s life by taking their
attitudes to saving and borrowing, their use of banks and building societies, how they
managed their transaction accounts, who managed the money in family groups, and
about their confidence in handling money matters as variables of the study. In
addition, knowledge of financial markets and instruments, of financial decision-
making, of solving financial problems and of financialplanning also taken as
variables.Similarly, some research was conducted Among Working Young in Urban
India.

In Nepalese context, studies are rarely found that have examined the financial literacy
in any field except some in students. With the fact, it is rarely found any study had
been done about financial literacy on employees in Nepal. Likewise, this study tries to
fill the gap by studying in Chitwan District for the very first time. Broadly, all
independent variables are categories into three groups: Demographic, educational and
personality characteristics.
 25

CHAPTER III

RESEARCH METHODOLOGY

This chapter deals with methodology aspect to be used in this study. Different types
of methodology is used in various types of research depending up on purposes, nature
of problem and data.The study uses quantitative methods in the analysis of the data
gathered. This section captures the research design, population and sample, sources of
data, data collection procedure, data processing procedure and data analysis tools &
techniques. In this study the following methodologies are adopted.

3.1 Research Design

The research employee an descriptive and analytical research design. In this study, the
approach is employed to establish how variables such as gender, income,
qualification, financial behavior, financial influence and financial attitude impact on
financial literacy of Chitwan District employees’. Thus, the main research strategy
use in this study is a survey which allows quantitative data collection and analyses
using descriptive and inferential statistics. Quantitative research methodology is also
concerned with the collection and analysis of data in numeric form.

The study employs an all-inclusive questionnaire design to cover major aspects of

personal finance. It includes financial literacy on numeracy, inflation, compound
interest, time value of money, money illusion, risk and return, share market, banking,
insurance, taxes, credit and diversification. The research questionnaireis based on the
study conducted by Thapa & Nepal (2007) research studyand Jorgensen (2007).
Several considerations are made in the selection of questionnaire items for the study.

A full-fledged questionnaire is constructed covering five areas namely personal

information of respondents, financial behavior, financial influence, financial attitude
and financial knowledge with reference to Jorgensen (2007). Along with demographic
information, survey participants were asked 21 questions including multiple-choice
questions on their knowledge of finance, and multiple answer questions and opinion
of different aspects of financial literacy. However, name was optional. The pilot test
 26

was conducted among 20 prospective respondents and opinion of two experts was
taken to refine and finalize the questionnaire.

3.2 Population and Sample

The sample for this study has taken from private sector employees, Public services
employees, small entrepreneur and big enterprises from Chitwan district. Chitwan
district is divided into seven municipalities and twenty two “Gaupalika”. Among the
seven municipalities Bharatpur, Ratnanagar, and Kalika municipalities has been
selected for the study. Bottlers Nepal ( Terai) Ltd., Bhatbhateni Supermarket, Honda
Yamaha and Suzuki Showroom, United Beverage Pvt.Ltd., Hotel Royal Century,
Food Mart, K.C. Poultry Farm, Abinash Hatchery, Chitwan Water Pvt. Ltd. and
Gokarna Copy Udhyog are taken as private company. Public organizations are
(Bharatpur Municipality, Ratnanagar Munipality, “Napi Karyala”, Land revenue
office, Tax Revenue Office) taken for the study. Bishal Fruits Center, Street Vendor,
Prakriti Furnishing Gallery, Laxmi Narayan Bhastralaya, Thapa “Kirana” Shop and
Baisnav Sweets entrepreneurs and MAW enterprises are taken for the study. Total
180 employees from these organization. Out of the population, 125 employees
institutions have been selected (Sekaran, 2003) conveniently altogether from private
sectors, public services, small entrepreneurs and big enterprises. 125 questionnaires
distributed to the employees, 108 were the respondents. So the response rate was 86.4
percent.

3.3 Sources of Data

The study is based on primary data: a convenience sample survey through

questionnaire of 108 employees in Chitwan District. The questionnaire is structure
into two sections. Section1 is concerned with demographic and educational profile of
employees and section 2 focuseson getting information about influencing factor about
financial behavior, financial attitude and financial influence. It also tries to find out
the level of financial knowledge of respondents. The questionnaire includes both
Likertscale questions and multiple choices question and option based questions.
 27

3.4 Data Collection Processing Procedures

The study collects data from the respondents by approaching directly in their working
place. Questionnaires were distributed to each and every individual and the researcher
was present there to assist the respondents. After receiving the response, data were
decoded into excel file.

3.5 Data Analysis Tools and Techniques

This study uses the summary of descriptive statistics associated with the primary data
analysis which is carried out on the basis of responses derived from questionnaire
survey. Descriptive statistical tools like mean, standard deviation and percentageis
used to described result obtained and logistic regression model is used to show the
relationship between dependent variables and independent variable. Data are
presented table which makes easier to analyse and understand the data. ANOVA is
tested for the reliability of model. Data analyses on the basis of percentage of the
respondents responding a questionnaire.

The collected data is used for acquiring the scenario of the employees. The collected
data is used for the analysis purpose. The collected data are processed, analyses and
interprete by using several tools like SPSS, Ms-excel, and Ms-word etc.

3.6 Model Specification

The logistic model takes on the following form:

log [p/(1 -p)] = + (Gender)+ (Level) + (Type) + (Stream) + (Behavior)

+ (Influence) + (Attitude) + ei ………. (1)

Where,

p = the probability of an employee who is more knowledgeable about finance.

Gender = 1 if the participant is a male, 0 otherwise.

Level = 1 if the participant is studying in bachelor level, 0 otherwise.

Type = 1 if the participant is working in private sector, 0 otherwise.

 28

Stream = 1 if participant’s stream is management, 0 otherwise.

Behavior = Financial Behavior measured in 4-point scale

Influence = Financial Influence measured in 4-point scale

Attitude = Financial Attitude measured in 4-point scale

ei = Error term

3.7 Pilot Test

A questionnaire should be piloted with a reasonable sample of respondents

representing the target population. Weakness in design and instrumentation can be
detected through a pilot study and it can provide proxy data for selection of suitable
sample. A total of 20 respondents were chosen for the pilot test. The questionnaire
were distributed among employees in Chitwan District in order to determine the
reliability of the instrument that is used to measure the variable of this study prior to
performing data collection in order to achieve the objectives of the study.

3.7.1 Reliability and validity

The purpose of the validity and reliability analysis is to determine whether data are
trustworthy or not. The designed questionnaire is finalized before requesting the
respondents to participate. For the reliability test, Cronbach’s Alpha was calculated
for this questionnaire. It is generally used as a measure of internal consistency or
reliability. Details results are shown in table 3.1.

Table 3.1 Cronbach’s Alpha of variables

S. N. Variables Cronbach’s Alpha

1 Financial Behaviour 0.671

2 Financial Influence 0.644

3 Financial Attitude 0.682

 29

Table 3.1 shows the Cronbach’s alpha coefficients of independent variables- Financial
Behavior, Financial Influence, Financial Attitude. Cronbach’s Alpha coefficient less
than 0.6 is considered as ‘poor’; greater than 0.6 but less than 0.8 is considered
‘acceptable’ and greater than 0.8 is considered ‘good’ (Sekaran, 2000). Here,
Cronbach’s Alpha of all variables is greater than 0.6 but less than 0.8. The Cronbach’s
Alpha of all variables is acceptable. Therefore, the instruments used in this research
are considered to be reliable.
 30

CHAPTER IV

RESULTS

This chapter describes the analysis results generated from the process of data
collection. It deals with the analysis and interpretation of the primary data collected
through questionnaire from 108 respondents. Data were analyzed with reference to the
purpose of this research as mentioned in the earlier chapter. The primary purpose of
this chapter is to analyze and interpret the collected data and present the results of the
questionnaire survey. The main purpose of this research study will be fulfilled with
the outcomes derived from the analysis of the data.

4.1 Respondents Profile

In the table below, respondents’ demographic profile such as age, gender, monthly
income range and educational level, type and stream are presented.

Table 4.1 shows the characteristics of the sample. It shows 60.2 percent of the
respondents are male and39.8 percent of the respondent are female. While
categorizing on the basis of age, 2.8 percent respondents are from below 18 and 1.9
percent, 18.5 percent, 45.4 percent and 31.5 percent are from 18-20, 21-24, 25-29 and
30 and above respectively. While categorizing on the basis of income level, 19.4
percent respondents are from below Rs 20000 and 45.4 percent, 24.1 percent and 11.1
percent respondents are from income group Rs 20000 – Rs 30000, Rs 30000 – Rs
50000 and More than Rs 50000 respectively. On the basis of education stream, 63
percent respondents are from management and 37 percent respondents are from non-
management. Similarly talking about education level, high level possessed highest
percentage i.e. 37percentage while under SLC, undergraduate level and graduate
level’s employees are 16.7 percentage, 25.9 percentage and 20.4 percentage
respectively.
 31

Table 4.1 Respondents Profile

DemographicCharacteristics
Frequency Percentage
Gender
Male 65 60.2
Female 43 39.8
Age
Below 18 3 2.8
18-20 2 1.9
21-24 20 18.5
25-29 49 45.4
30 and above 34 31.5
Monthly Income (NRS)
Below 20000 21 19.4
20000-30000 49 45.4
30000-50000 26 24.1
More than 50000 12 11.1
Education Stream
Management 68 63
Non-Management 40 37
Educational Level
Under SLC 18 16.7
High School 40 37
Under Graduate 28 25.9
Graduate 22 20.4
Type of Institution
Private Sector 43 39.8
Public Services 24 22.2
Small Entrepreneurs 20 18.5
Big Enterprises 21 19.4
Source: Field Survey, 2018
 32

4.2 Financial Knowledge

Financial knowledge means having basic as well as advance concept about financial
terms. It is the ability to have sound decisions regarding finance related topics. In this
study, respondents were asked 12 questions from basic to advance level of finance
covering numeracy, inflation, compound interest, money illusion, risk and return,
share market, banking, insurance, taxes, credit and diversification.

Overall financial knowledge is divided into basic and advance categories. Basic
financial literacy index is constructed by numeracy, compound interest rate, inflation,
and money illusion questions (Rooij et al., 2007) and advance financial literacy index
is developed by constituting questions related to risk and return, insurance, banking,
taxes, credit, share markets and diversification.

Mean percentage scores of each section of sample characteristics are categorized on

basic, advance and overall and are presented in table 4.3.Chen and Volpe’s (1996;
2002), developed the benchmark of financial literacy. The benchmark grouped
percentage correct scores into three categories: over 80% (Highest), 60 – 79%
(Medium) and below 60% (Low). The benchmark implies that correct score of 80%
and beyond show a high financial knowledge whilst scores between 60 to 79%
indicate fair knowledge in finance. Lastly, scores of respondents below 60% is an
indication of low financial knowledge, the level that needs more financial literacy
education.

Table 4.2 shows that most of the respondents (96.3%) correctly answered the question
regarding share market2 followed by banking (88%), risk and return
(67.6%),numeracy (63%),share market1 (60.2%) and credit (53.7%) while very few
respondents were familiar with taxes (26.9%), money illusion (4.6%), diversification
(22.2%), inflation (26.9%) , insurance (23.1%) and compound interest rate (27.8%).
 33

Table 4.2 Frequency and Percentage of Components of Financial Knowledge

Concepts Frequency Percentage

Numeracy 68 63

Compound Interest Rate 30 27.8

Inflation 29 26.9

Money Illusions 5 4.6

Risk and Return 73 67.6

Share Market 1 65 60.2

Share Market 2 104 96.3

Banking 95 88

Insurance 25 23.1

Taxes 29 26.9

Credit 58 53.7

Diversification 24 22.2
Source: Field Survey, 2018
 34

Table 4.3 Mean Percentage of Correct Responses to Each Section by

Characteristics of Sample

Characteristics Basic Advance Overall

Gender

Male 27.69 54.62 45.64

Female 34.88 52.62 46.71

Monthly income(NRS)

Below 20000 34.52 47.02 42.86

20000 – 30000 30.61 53.32 45.75

30000 – 50000 32.69 52.88 46.15

More than 50000 18.75 69.79 52.78

Education Stream

Management 38.60 55.70 50

Non-Management 16.88 50.63 39.38

Education Level

Under SLC 9.72 40.27 30.09

High School 21.88 57.19 45.42

Under Graduate 40.18 54.46 49.70

Graduate 51.14 57.95 55.68

Type of Institution

Private 47.09 55.81 52.91

Public services 22.92 48.96 40.28

Small Entrepreneurs 8.75 47.50 34.58

Big Enterprises 26.19 61.31 49.60

Source: Field Survey, 2018
 35

Table 4.3 shows thatthe respondents are categorized on three bases such ason gender
basis, on Monthly income basis (NRS), on Education Stream basis, Education Level
basis and Employed On basis. While considering gender as the basis for
categorization, female has higher knowledge on basic category and male has higher
knowledge on advance category with 34.88% and 54.62% respectively. Whereas male
has 27.69% on basic category and female has 52.62% on advance category. Similarly,
taken monthly income as the basis for category, employees’ group of below 20000
have higher knowledge in basic category with 34.52% whereas the group of more
than 50000 has higher knowledge in advance category with 69.79%. Percentage of
correct answer of the respondents on basic category are 30.61%, 32.69% and 18.75%
of the group of 20000- 30000, 30000-50000 and More than 50000. Similarly, on
advance category, employees answered47.02%, 53.32%and 52.88%from the group of
below 20000, 20000-30000 and 30000-50000 respectively. On the basis of education
stream group of management has higher knowledge in both basic and advance
category with 38.60% and 55.70% respectively. Whereas group of non management
has 16.88% on basic category and 50.63% on advance category. Similarly, on the
basis of educational level, on basic category, under SLC has the correct response of
9.72%, high school has the correct response of 21.88%, under graduate has 40.18%
and graduate level passed employees has 51.14%. Whereas on advance level category,
under SLC level employees has 40.28% correct response, high school level
employees has 57.19% correct response, under graduate level employees has 54.46%
correct response and graduate level employees has high correct response i.e. 57.95 %.
From the above table, it is clear that female has higher knowledge on basic and fair in
advance category questions and the income group of below 20000 and more than
50000 has higher knowledge.. Whereas male has low knowledge on basic but higher
in advance category followed by income group below 20000, andmore than 50000
and graduate level employees.
 36

4.3 Financial Behavior

It is the capability to capture of overall understanding of impacts of financial

decisions on one’s (i.e. personal, family, community, country) circumstances and to
make the right decisions related to the cash management, precautions and
opportunities for budget planning. It can be defined as any human behavior that is
relevant to money management. Common financial behaviors include cash, credit and
saving behavior.

Employees are asked 13 questions and they are classified into two subgroups on the
basis of median percentage of correct answers of the sample. Employees withscores
higher than the sample median are classified as those with relatively moreknowledge.
Employees with scores equal to or below the median are classified as employees with
relatively less knowledge.

Table 4.4 shows the financial behavior of less knowledgeable, more knowledgeable
and overall employees regarding spending habit, maintaining records, use of savings,
managing money in problem and use of additional income. Similarly, table 4.5 shows
that more, less financial knowledgeable employeesfinancial behavior regarding
budgeting, planning, spending, investing etc.
 37

Table 4.4 Frequency and percentage in financial behaviour according to level of

employees financial knowledge
Financial Knowledge
Financial Behaviour
Less Knowledge More Knowledge Overall
SpendingHabit Frequency Percentage Frequency Percentage Frequency Percentage
Very economical 10 13.3 2 6.1 12 11.1
Somewhat economical 32 42.7 11 33.3 43 39.8
Neither economical nor spending
16 21.3 5 15.2 21 19.4
oriented
Somewhat spending oriented, rarely
12 16 11 33.3 23 21.3
saving oriented
Very spending oriented, hardly ever
5 6.7 4 12.1 9 8.3
saving money
Total 75 100 33 100 108 100
Maintaining Records
Maintain adequate records 16 21.3 14 42.4 30 27.8
Maintain minimal records 46 61.3 12 36.4 58 53.7
Maintain very detailed records 13 17.3 7 21.2 20 18.5
Total 75 100 33 100 108 100
Use of Savings
Spend it on consumers goods 0 0 4 12.1 4 3.7
Keep it in cash 19 25.3 2 6.1 21 19.4
Deposit it into bank account 46 61.3 16 48.5 62 57.4
Invest it in the capital market 0 0 5 15.2 5 4.6
Lend it to friends or relatives 1 1.3 0 0 1 0.9
Invest it in our own business 7 9.3 6 18.2 13 12
Buy gold and jewellery 2 2.7 0 0 2 1.9
Others 0 0 0 0 0 0
Total 75 100 33 100 108 100
Managing Money In Problem
Cut down expenses and save 18 24 4 12.1 22 20.4
Borrow money from relatives,
29 38.7 10 30.3 39 36.1
friends and acquaintances
Spend our savings 17 22.7 9 27.3 26 24.1
Use credit card or bank loan 9 12 7 21.2 16 14.8
Work extra hour or do additional jobs 2 2.7 3 9.1 5 4.6
Others 0 0 0 0 0 0
Use of Additional Income
Purchase of household goods like
8 10.7 1 3 9 8.3
furniture. Clothes etc.
Fixed deposit for future 21 28 5 15.2 26 24.1
Saving for meeting contingency 5 6.7 4 12.1 9 8.3
Repay earlier debts 20 26.7 5 15.2 25 23.1
Go for travel or vacation 6 8 8 24.2 14 13
Investment in own business 9 12 8 24.2 17 15.7
Buy an insurance policy 4 5.3 0 0 4 3.7
Buy shares 0 0 2 6.1 2 1.9
Others (please specify 2 2.7 0 0 2 1.9
Source: Field survey, 2018
 38

Table 4.4 shows that despite the different level of financial knowledge that is less
knowledge and more knowledge, most of the employees are somewhat economical
(42.7%, 33.3%), maintain adequate records (61.3%,36.4%), deposit into bank account
(61.3%,48.5%), borrow money from relatives, friends and acquaintances
(38.7%,30.3%) and fixed deposit for future (28%,15.2%) while having additional
money. The results also show that most of the employees do not like to buy jewelry
(2.7%,0%), lend to friends or relatives (1%,0%), invest in own business
(9.3%,18.2%). They also work extra hour to manage money problem (2.7%,9.1%) nor
buy an insurance policy (5.3%,0%). The result shows that less knowledgeable
employees are neither economical nor spending oriented with 21.3% while more
knowledgeable and overall employees are spending oriented, rarely save with
(33.3%,21.3%). Similarly, more knowledgeable employees maintain no records,
deposit into bank account, borrow money from relatives, friends and acquaintances,
investment in own business with 42.4%, 48.5%, 30.3%, and 24.2% respectively.
However, less knowledgeable employees use fewer credit cards, like to borrow from
friends and relatives to manage money problem, neither invest in their own business
nor lend it to friends or relatives with 12%, 12%and 1.3% respectively. In overall,
employees are somewhat economical (39.8%), don’t like to maintain detailed records
(18.5%). They like to deposits into bank account of their savings (57.4%), borrow
money from relatives and friends (36.1%), spend their savings to manage money
problem (24.1%) and depositing in fixed deposits (24.1%) and paying back earlier
debt (23.1%) while having additional income.
 39

Table 4.5 Mean and Standard Deviation in Financial Behavior According to

Level of Employees’ Financial Knowledge

This table shows how much importance gives respondents to the financial behavior
related aspects included in the study. Mean value higher than 2 points in 4 Likert scale
give the meaning that employees give importance to all aspects.

Less More
Overall
Knowledgeable Knowledgeable
Items
Mean SD Mean SD Mean SD

I budget and track my spending 2.71 0.866 2.61 0.788 2.68 0.841

I contribute to the bank

2.73 0.759 2.94 0.864 2.80 0.794
savingaccount regularly

I compare prices when shopping

2.92 0.955 3.00 1.031 2.94 0.975
for purchases

I have a life insurance policy 2.36 1.322 2.70 1.311 2.46 1.321

I invest in share under IPO 2.16 1.220 3.09 1.071 2.44 1.248

I read to increase my financial

2.60 0.854 2.91 0.723 2.69 0.826
knowledge

I maintain adequate financial

2.43 0.720 2.52 0.712 2.45 0.715
records

I spend less than income 2.96 0.796 2.67 0.924 2.87 0.844

I maintain adequate insurance

2.37 1.228 3.03 1.132 2.57 1.232
coverage

I plan and implement regular

2.69 0.870 2.73 0.761 2.70 0.835
savings/investment program
Source: Field Survey, 2018

Table 4.5 shows thatemployees opined that all are important to them since mean value
is higher than 2 points in 4 scale Likert questions. Table shows that less
knowledgeable employees give more important to spend less than income while more
knowledgeable employees give more important to invest in the shares under IPO and
overall employees compare prices when shopping for purchases with mean value
2.96, 3.09 and 2.94 respectively. Similarly, more knowledgeable as well as overall
 40

employees give less important to maintain adequate financial records with mean value
2.52 and 2.45 respectively, while less knowledgeable employees give less important
to invest in the shares under IPO (2.16). The table also shows that both subgroups as
well as overallemployees give almost equal important to maintain their financial
records and have a life insurance policy with mean value 2.45 and 2.46 respectively.

4.4 Financial Influence

Financial influence means making impact on financial know how of the employees.
This section shows that in what manner both more and less knowledgeable employees
are influenced with parents, friends, school, books, media, job, life experience and
internet. And what items regarding financial literacy have they learnt while growing
up in the home.

All of the influential variables affect somehow in financial knowledge of the

employees as mean value is more than 2 in 4-point scale. Table 4.6 shows that less
knowledgeable, more knowledgeable as well as overall employees’ financial
knowledge are influenced by life experiences (3.60, 3.64 and 3.61). Impact of friends,
school and internet is not much for less knowledge employees as mean values are
2.29, 2.52 and 2.59 respectively whereas parents, books, media and job have least
impact as mean values are (3.48, 3.43), (2.61,2.65), (2.70,2.90) and (3.21,3.27)
respectively on financial knowledge of both more knowledge and overall employees.
 41

Table 4.6 Mean and Standard Deviation in Financial Influence According to

Level of Employees’ Financial Knowledge

Less More
Overall
Knowledgeable Knowledgeable
Factors
Mean SD Mean SD Mean SD

Parents 3.40 0.717 3.48 0.795 3.43 0.739

Friends 2.29 0.941 2.36 0.783 2.31 0.893

School 2.52 0.811 2.52 0.667 2.52 0.767

Books 2.67 0.759 2.61 0.899 2.65 0.801

Media 2.99 0.688 2.70 0.637 2.90 0.683

Job 2.29 0.851 3.21 0.857 3.27 0.849

Life Experience 3.60 0.520 3.64 0.783 3.61 0.609

Internet 2.59 1.001 2.06 0.933 2.43 1.007

Source: Field Survey, 2018
 42

Table 4.6.1 Frequency and Percentage in Financial Influence According to level

of Employees Financial Knowledge

Learning at Less Knowledgeable More Knowledgeable Overall

Home Frequency Percentage Frequency Percentage Frequency Percentage

Budgeting 22 29.3 12 36.4 34 31.5

Investing 22 29.3 20 60.6 42 38.9

Taxes 4 5.3 3 9.1 7 6.5

Insurance 16 21.3 11 33.3 27 25

Loans 18 24 7 21.2 25 23.1

Savings 50 66.7 22 66.7 72 66.7

Interest Rates 17 22.7 7 21.2 24 22.2

Keeping Records 20 26.7 13 39.4 33 30.6

Source: Field Survey, 2018

Table 4.6.1 shows that most of the employees learned about saving of both groups
(66.7%,66.7%) as well as overall (66.7%). More knowledgeable and overall
employees learn more about investing with 60.6% and 38.9% respectively followed
by budgeting (36.4%,31.5%), keeping records (26.7%, 39.4%), loans (21.2%,23.1%),
interest rate (21.2%,22.2%) and taxes(9.1%,6.5%) and insurance(33.3%,25%).
However less knowledgeable employees learned least about insurance, taxes and
interest rates with 21.3%,5.3% and 22.7% respectively. Keeping records and
budgeting are learned by less knowledgeable employees more after about saving with
26.7% and 29.3 % respectively.

Financial Attitude

Financial Knowledge refers to the understanding one has of important personal

finance concepts, like budgeting and savings. Financial attitude refers to the one’s
beliefs and values related to various personal finance concepts, such as whether one
believes is it important to save money. Table presents the results regarding financial
attitude of the employees.
 43

Table 4.7 Mean and Standard Deviation in Financial Attitude According to Level
of Employees’ Financial Knowledge

Less More
Overall
Knowledgeable Knowledgeable
Items
Mean SD Mean SD Mean SD

I feel in control of my financial

2.51 0.860 2.91 0.879 2.63 0.882
situation

I feel capable of using my future

income to achieve my financial 2.59 0.699 2.91 0.631 2.69 0.692
goals

I worry to manage my finance 2.89 0.798 2.18 1.014 2.68 0.926

I am uncertain about where my

2.48 0.811 2.00 0.901 2.33 0.865
money is spent

I feel credit cards are safe and

2.32 1.221 2.97 1.212 2.52 1.249
risk free

I feel capable of handling my

financial future (e.g. buying 2.31 1.127 2.85 1.093 2.47 1.139
insurance)

I am afraid of loan 2.99 1.072 2.24 1.200 2.76 1.159

I give importance to saving

2.83 0.828 2.91 0.980 2.85 0.873
money from my monthly income

I feel having life insurance is an

important way to protect loved 3.11 0.953 2.97 1.045 3.06 0.979
ones

I enjoy thinking about and have

interest in reading about money 2.51 0.795 2.91 0.723 2.63 0.792
management

I enjoy talking to my peers about

2.53 0.794 2.64 0.895 2.56 0.823
money related issues (i.e. taxes)
Source: Field Survey, 2018

The table 4.7 showsall factors of financial attitude which are somehow true for them
as mean values are greater than 2 in 4-point scale. Among 11 items, most of the
employees opined that they feel having life insurance is an important way to protect
loved ones with mean value 3.06 overall. Most of the less knowledgeable employees
 44

feel having life insurance is an important way to protect loved ones (3.11) followed
by, enjoying thinking about and have interest in reading about money management
(2.51), feel in control of their financial situation (2.51) , worry to manage their finance
(2.89) and enjoy talking to their peers about money related issues (i.e. taxes) (2.53).
However most of them don’t think credit cards are safe and risk freewith mean value
2.32.

Similarly, more knowledgeable employees feel credit cards are safe and risk free and
enjoy thinking about and have interest in reading about money management (2.97,
2.91) followed by feel capable of handling their financial future (e.g. buying
insurance), feel in control of their financial situation, feel capable of using their future
income to achieve their financial goals and give importance to saving money from
monthly income with mean value 2.91, 2.91, 2.91 and 2.91 respectively. Talking
about overall, employees give importance to saving money from monthly income,
afraid of loan, feel capable of using future income to achieve financial goals and
worry to manage finance with mean value 2.85, 2.76, 2.69 and 2.68 respectively.

4.6 Analysis of Financial Literacy

Analysis of Variance (ANOVA)

ANOVA is used to test whether there is significant difference in financial knowledge

among different incomesand education level and the result is shown in Table 4.8.

Table 4.8 Results of ANOVA

Characteristics F-Statistics Sig

Gender 0.003 0.953

Age (in years) 0.379 0.540

Monthly Income (NRS) 4.623 0.034

Education Level 11.514 0.001

Education Stream 7.622 0.007

 45

Table indicates that gender and age are found to be insignificant, which means there is
no significant difference in knowledge among employees. However, monthly income,
education level and education stream are found significant at 10 percent and 1 percent
level of significance respectively. This implies that there is significant difference in
knowledge among various income, education level and education stream groups.
Financial knowledge increases as monthly income increases and increases in
education level and education stream.

4.7 Logistic Regression Analysis

Logistic regression is used to test whether there is significant relationship of gender,

monthly income, education level, education stream, behavior, influence and attitude
on financial knowledge. It is used because dependent variable, financial knowledge, is
dichotomous.

Table 4.9 Omnibus Tests of Model Coefficients

Chi-square D. F. Sig.

Step 1 Step 22.619 7 0.002

Block 22.619 7 0.002

Model 22.619 7 0.002

-2 Log likelihood Nagelkerke R-Square

110.329 0.267

Table 4.9 presents the result of Omnibus test of model and model summary. The
model seems to fit well for developing relationship between dependent and
independent variables defined in the model as it is significant at 1% level of
significance. Moreover, Nagelkerke R-Square is the evidence of explaining level
ofknowledge by selected independent variables. The value of Nagelkerke R-square
value as evident from table 4.9 is 0.267 which means 26.7 percent variation in
financial literacy is explained byGender, Education Level, Education Stream, Type of
Institution, Behavior, Influence, Attitudefactor. However, the remaining 73.3 percent
(100 percent - 26.7 percent) is still unexplained in this research. In other words, there
 46

are other additional variables are important in explaining financial literacywhich have
not been considered in this research.

Table 4.10 Summary of Logistic Regression Analysis for Variables Predicting

Financial Knowledge

Predictor B S.E. Wald D.F. Sig. Exp. (B)

Gender 0.056 0.534 0.011 1 0.916 1.058

Monthly Income 0.303 0.327 0.857 1 0.355 1.354

Education Stream -0.835 0.687 1.478 1 0.224 0.434

Education Level 0.475 0.309 2.368 1 0.124 1.608

Behaviour 0.681 0.418 2.659 1 0.103 1.976

Influence -1.832 1.293 2.006 1 0.157 0.160

Attitude 0.560 0.798 0.494 1 0.482 1.751

Constant -1.080 4.807 0.051 1 0.822 0.339

To examine the impact of some demographic variables and few personal

characteristics of employees on financial knowledge, logistic regression is performed
and the results are shown in Table 4.10. The result indicates that gender, monthly
income, education stream, education level, financial influence and financial attitude,
are statistically insignificant since its significance points are 0.916, 0.355, 0.224,
0.124, 0.157 and 0.482 respectively, which means these variables have no significant
impact on the financial knowledge. However, financial behavior is significant at 10
percent level (0.103). The table also shows that, when financial behaviour increases
by 1 point, the odd of more financial knowledge is likely to increase by 1.976 times.
Since standard error of each of independent variables is less than 2, there is no
problem of multi-collinearity in this model.

4.8 Findings

This study has been concentrated on financial literacy among employees in Chitwan
District. The major findings of the study are as follows:
 47

1) Out of total samples, male percentage sample is more (60.2%) than the female
(39.8%). Income group of Rs 20000- 30000 employees consists more
percentage (45.4%) of total sample. Similarly, high school level employees are
bigger in size (37%).

2) Most of the employees has knowledge about share market (96.3%) followed
by numeracy (63%) while most of them are not familiar with money illusion
(4.6%), diversification (22.2%) and insurance (23.1%).

3) The study shows that female are more knowledgeable (46.71%) in comparison
to male (45.64%) and income group of more than Rs. 50000 (52.78%) and
graduated employees (55.68%).

4) Both less and more knowledge employees are somewhat economical (42.7%,
33.3%), maintain minimal records (61.3%, 36.4%), deposit into bank account
(61.3%, 48.5%), borrow money from relatives, friends and acquaintances
(38.7%, 30.3%), fixed deposit for future (28%, 15.2%), repay earlier debts
(26.7%,15.2%) and investment in own business (12%,24.2%) while having
additional money.

5) Most of the employees do not like to buy jewelry (1.9%), lend to friends or
relatives (0.9%), and spend on consumer goods (3.7%). They neither work
extra hour to manage money problem (4.6%) nor buy an insurance policy
(3.7%) and nor buy shares (1.9%) when they have additional income.

6) More knowledgeable employees maintain adequate records (42.4%), use credit

cards to manage money (21.2%), invest in their own business (18.2%) and go
for travel or vacation (24.2%). However, less knowledgeable employees use
fewer credit cards (12%)and like to borrow from friends and relatives (38.7%)
to manage moneyproblem.

7) On an average, employees are somewhat economical (39.8%), don’t like to

maintain detailed records (18.5%).

8) Similarly, they like to deposits into bank account of their savings (57.4%),
borrow money from relatives and friends (36.1%) to manage money problem
 48

and like fixed deposit for future (24.1%) more as well as repaying earlier debts
(23.1%) and investment in own business (15.7%) while having additional
income.

9) Less knowledgeable employees give more important to spend less than income
(2.96) while more knowledgeable give more important to invest in the shares
under IPO (3.09) and overall employees compare prices when shopping for
purchases (2.94).

10) More knowledgeable as well as overall employees give less important to

maintain adequate financial records (2.52, 2.45) while less knowledgeable
employees give less important to invest in the shares under IPO (2.16).

11) The employees’ behavior shows that more knowledgeable, less knowledgeable
as well as overall employees give almost equal important to read to increase
their financial knowledge (2.60, 2.91, 2.69) and maintain their financial
records (2.44).

12) Less knowledgeable, more knowledgeable as well as overall employees’

financial knowledge are influenced by life experiences (3.60, 3.64 and 3.61).

13) Impact of friends, school, books and internet is not much for less knowledge
employees (2.29, 2.52, 2.67 and 2.59) whereas parents, media and job have
least impact on financial knowledge of both more knowledge (3.48, 2.70 and
3.21) and overall employees (3.43, 2.90 and 3.27).

14) Employees financial knowledge mainly influenced by life experiences and

parents with 3.61 and 3.43 respectively.

15) Most of the less knowledgeable employees feel having life insurance is an
important way to protect loved ones (3.11) followed by afraid of loans (2.99),
worry to manage finance (2.89), give importance to save money from monthly
income (2.83), and feel capable of using my future income to achieve financial
goals (2.59). However most of them don’t enjoy talking to their peers about
money related issues i.e. taxes (2.53).
 49

16) More knowledgeable employees feel having life insurance is an important way
to protect loved ones (2.97) followed by feeling credit cards are safe and risk
free (2.97), enjoy thinking about and have interest in reading about money
management (2.91), feel in control of financial situation (2.91), feeling
capable of using future income to achieve financial goals (2.91), give
importance to save money from monthly income and feeling capable of
handling financial future e.g. buying insurance (2.85). Talking about overall,
employees feel having life insurance is an important way to protect loved ones
(2.85), employees give importance to save money from monthly income (2.85)
and afraid of loans (2.76).

17) ANOVA test shows that there is significant difference in knowledge among
various income, education level and education stream groups at 10 percent and
1 percent significant level. Financial knowledge increases as monthly income
increases and increases in education level and education stream.

18) Income, education level and education stream are significant at 10 percent and
1 percent; financial behaviour at 10 percent.

4.9 Discussions on Findings

Employees were found knowledgeable in advance level of finance. In particular, level

of knowledge on share market, numeracy, banking and risk and return was found
highest while it was medium in credit, compound interest, inflation, taxes and low in
diversification, insurance, money illusion .Instead of buying insurance policy,
investing in stock markets, buying jewelry and lending friends, most of the employees
are involved in bank saving. Similar to Jorgensen (2007), this is because employees
are influenced by their life experience and their parents.More knowledgeable
employees maintain adequate records, use credit cards to manage money, invest in
their own business and go for travel or vacation. However, less knowledgeable
employees use fewer credit cards and like to borrow from friends and relatives to
manage money problem. To use credit one must have good financial knowledge too.
Investing in own business and shares are also highly risky task. May be because of
lack of knowledge regarding investment, less knowledgeable employees don’t invest
in their own business and share and they use fewer credit cards and borrow money
 50

from friends and relatives. On gender basis, female seems more knowledgeable.
Income level group of more than Rs.50000 have more knowledge in advance
category. However, group below Rs.20000, Rs.20000-30000 and Rs.30000-50000
have more basic level of knowledge. May be more earning group are in top level
position and dealt with executive level work.Similarly, graduated employees have
higher level of knowledge this may be due to high level of education which have
already tested by ANOVA which gave significance results.

There are two demographic variables are tested in hypothesis H1, out of them income
levelis accepted. This result implies that employees with high monthly income are
likely to be more knowledgeable.This result is consistent with Nidar & Bistari (2012),
Thapa & Nepal (2014), Henkenda (2014). This result has come may be because with
higher level knowledge, individuals get an opportunity to interact regarding financial
knowledge issues, may be because individuals invest more time in education etc.
However, gender of employees does not make any difference in level of financial
knowledge. This result is not consistent with Shari et.al. (2013) may be because the
respondents taken in the study both male and female are from private sectors, public
services and big enterprises respondents have similar level of knowledge regarding
financial literacy. However, financial influence and financial attitude is not consistent
with Henkenda (2014). It may be because attitude of the individuals is personal
aspects.Hypothesis H2, one educational variable level and stream were examined. It
was also accepted, which means employees’ level of knowledge dependent level.This
result is also consistent with the result of Thapa and Nepal (2014).It means, financial
knowledge is more in higher level of education employees may be due to high level of
study and may be more years they have spent than lower level educated employees.
Finally, three personality variables (behavior, influence and attitude) were assessed in
hypothesis H3. Financial behaviour is only variable accepted meaning that
employee’s financial knowledge can be enhanced by having behaviour towards the
finance. This result is consistent with the results of Nidar & Bistari (2012), Thapa &
Nepal (2014), Henkenda (2014). It may be because influenced by life experience,
parents, etc. may results in enhancing the financial knowledge.

Similarly, it may be true because financial literacy program may increase the financial
knowledge. Due to this result, may be, Government of Nepal and Nepal Rastra bank
 51

started Financial literacy program long before. Besides, financial knowledge of

employees does not vary with how they engage in financial activities and what
attitude they have.

Thus, financial knowledge is determined by income, level of education, education

stream and financial behaviour. However financial literacy is not affected by gender,
financial influence and financial attitude.
 52

CHAPTER V

CONCLUSIONS

5.1 Summary

The primary purpose of this study isto examine the status of financial literacy among
employees in Chitwan District, to examine the impact of demographic characteristic
(Gender, age, income) in financial literacy among employees, to examine the impact
of educational characteristics (level, stream, type) in financial literacy among
employees, to examine the relationship between personality characteristics (Financial
Behavior, Financial Attitude and Financial Influence) and financial literacy among
employees.

The research employs a descriptive and analytical research design. The main research
strategy use in this study is a survey which allows quantitative data collection and
analyses using descriptive and inferential statistics. Quantitative research
methodology is also concerned with the collection and analysis of data in numeric
form. The study employs an all-inclusive questionnaire designed to cover major
aspects of personal finance. It includes financial literacy on numeracy, inflation,
compound interest, money illusion, risk and return, share market, banking, insurance,
taxes, credit and diversification. Several considerations is made in the selection of
questionnaire items for the study.

A full-fledged questionnaire is constructed covering five areas namely personal

information of respondents, financial behavior, financial influence, financial attitude
and financial knowledge with reference to Jorgensen (2007). Along with demographic
information, survey participants are asked 21 questions including multiple-choice
questions on their knowledge of finance, and multiple answer questions and opinion
of different aspects of financial literacy.The questionnaire is distributed among 125
employees. 108 were received out of 125. So the response rate is 86.4 percent. 108
entries were taken as usable entries. Data are described by frequency, percentage,
mean and standard deviation and three hypothesesare tested using ANOVA and
logistic regression analysis. The pilot test is conducted among ten prospective
 53

respondents and opinion of two experts is taken to refine and finalize the
questionnaire. Data are put in excel file and process through SPSS.

The study found that employees are more knowledgeable in advance level of finance
while they are less familiar with money illusion, diversification and insurance (4.6
percent, 22.2 percent and 23.1 percent). Most of the employees do not like to buy
jewelry, lend to friends or relatives, invest in own business (1.9 percent, 0.9 percent
and 12 percent). They neither work extra hour to manage money problem (4.6
percent) nor buy an insurance policy (3.7 percent) when they have additional income.
Income, education level, education stream and financial behaviour are significant with
financial knowledge at 10 percent and 1 percent significance level however, other
variable such as gender, age, financial influence and financial attitude do not have any
relationship with financial knowledge.

The study showed that most of the employees like to deposits money (57.4 percent)
while they have excess money and more knowledgeable employees like to invest in
their own business (24.2 percent) and go for travel and vacation (24.2 percent). They
maintain adequate records (42.4 percent). Most of the employees are influenced by
their life experience with mean value 3.61 and parents regarding (3.43) financial
literacy however school, friends and internet don’t have more impact with mean value
2.31, 2.52 and 2.43 respectively.

5.2 Conclusions

The study finds that employees in Chitwan District has average level of knowledge on
advance concept while low in Basic concept, Chen and Volpe (1987). The study
shows that there is significant relationship between financial knowledge and income,
education level and education stream at 10 percent level and 1 percent level and
financial behavior at 10 percent level. Income, level of education and education
stream is consistent with Nidar and Bistari (2012), Thapa and Nepal (2014),
Henkenda (2014). Which means with the increase in income, education level,
education stream and financial behaviour, the level of financial knowledge also
increases and vice versa. However, it shows insignificant relationship between
financial literacy and gender, consistent with Shari et al. (2013), financial influence
and financial attitude. However, gender is not consistent with Henkenda (2014).
 54

Volpe et. al. (2002) study found that ages of 50 or more than 50 were more
knowledgeable, female had lower level knowledge than male and graduated are found
more knowledgeable. The study clearly implies that due to low level of financial
literacy, individuals invest their money in traditional financial products with Bhushan
(2014). The study showed that most of the employees like to invest in their own
business, like to deposit, go for travel and vacation and maintain adequate records.
There is significant difference in knowledge among various income, education level,
education stream. Financial influence and financial attitude are statistically
insignificant which means these variables have no significant impact on the financial
knowledge.

The study may give the conclusion that with the increase in income level, level of
financial literacy is increase and vice-versa. Similarly with the increase in education
level, education stream and financial behaviour, level of financial literacy is also
increase. However, level of financial literacy is not affected by gender, age, financial
influence and financial attitude.

5.3 Implications

1. This study can be a good reference for banking institutions and other those
institutions which are working to enhance financial literacy.

2. The study has considered only nine factors. Further research can be conducted
considering more factors.

3. This study is concentrated only in Chitwan District for employees, further

research can be conducted considering for different areas and participantsin
Nepal.

4. The study shows that significance relationship with education level, education
stream and income level.Different organization working towards financial
literacy can conduct the literacy program with having reference to this study.

5. The study can be useful for local Nepal Rastra Bank, stakeholders, Banking
and Financial Institutions, researcher, general public.
 55

6. Further research area may be businessman, college students, bankers, youth,

employees in other areas, labors.

5.3 Recommendation for future Researchers

1. It can be increased by sample size and area.

2. It can be increased by number of respondents.

3. It can be increased by using structural equation model.

4. It can be taken as an independent variable not as only demographic

characteristics but also social characteristics and economic characteristics.

5. It can be used for investment behavior.

 REFERENCES

Ade, D. P. (2013). The Effect Of Financial Literacy On Pension Preparedness Among

Members Of The Informal Sector In Kenya, Unpublished MBA project,
University of Nairobi.

Agarwalla, S. K., Barua, S. K., Jacob, J., & Varma, J. R. (2013). “Financial Literacy
among Working Young in Urban India.”Indian Institute of Management
Ahmedabad, Working Paper, No. 2013-10-02.

Agnew, J., Szykman, L., & Young, J. (2007). Literacy, Trust and 401(k) Savings
Behaviour.Centre for Retirement Research. Retrieved June 15, 2013, from
https//:institutional.vanguard.com/iip/p.f.CCRSavingsBehavior.pdf

Agunga, M. A.(2016).Effect of Financial Literacy on Financial Preparedness for

Retirement among Permanent and Pensionable Employees in state Owned
Corporations in Nairobi, Kenya (Unpublished master's thesis). Kenyatta
University, Nairobi, Kenya.

Alhabeeb, M. J. (1999). Allowances and the economic socialization of children.

Journal of the Association for Financial Counseling and Planning Education,
10(2), 1-9.

Ali, A., Rahman, M. S., & Bakar, A. (2013). Financial Literacy and Satisfaction in
Malaysia: A Pilot Study. International Journal of Trade, Economics and
Finance, 4(5), 319-329.

Ando, A., & Modigliani, F. (1963). The "Life Cycle" Hypothesis of Saving:
Aggregate Implications and Tests. The American Economic Review, 53 (1),
55-84.

Ansong, A. (2011). Level of knowledge in personal finance by university freshmen

business students, African Journal of Business Management, 5(22), 8933-
8940. RetrievedJanuary12,2012 from http://www.academicjournals.org/AJBM

Ansong, A., & Gyensare, M. A. (2012). Determinants of University Working-

Students’ Financial Literacy at the University of Cape Coast, Ghana.
International Journal of Business and Management, 7(9), 126-135.
Barberis, N.,& Thaler, R. (2003). A Survey of Behavioral Finance.Handbook of the
economics of finance. Volume 1B. Financial markets and asset pricing, 1053-
1123.

Bhushan, P. (2014). Relationship between Financial Literacy and Investment of

Salaried Individuals. Journal of Business Management & Social Sciences
Research, 3 (5), 1-7.

Britt, S., Jariah, M., Husniyah, A. R., & Laily, P. (2004). “Financial Behavior and
Problems among University Students: Need For Financial Education.” Journal
of Personal Finance3(1): 82–96.

Chen, H., & Volpe, R. P.(1998). “An Analysis of Personal Financial Literacy among
College Students.”Financial Services Review 7(2), 107-128.

Dahlia, I., Rabitah, H., & Zuraidah, M. I. (2009). A study on financial literacy of
Malaysian degree students. Cross-Cultural Communication, 5(4), 51-59.

Danes, S. M., & Hira, T. K.(1987). “Money Management Knowledge of College

Students.”Journal of Student Financial Aid 17(1), 4-16.

Fogel, O.,& Berry, T. (2006). The disposition effect and individual investor decisions:
the roles of regret and counterfactual alternatives. Journal of Behavioral
Finance, 7 (2), 107–116.

Githui, T., & Ngare, P. (2014). Financial Literacy and Retirement Planning in the
Informal Sector in Kenya, International Journal of Education and Research,
2(1).

Greenspan, A. (2002). Financial Literacy: A Tool for Economic Progress. The

Futurist, 36 (4), 37-41.

Grifoni, A., & Messy, F. (2012).“Current Status of National Strategies for Financial
Education:A Comparative Analysis and Relevant Practices.” OECD Working
Papers on Finance, Insurance and Private Pensions, No. 16, Paris: OECD

Heenkenda, S. (2014).Inequalities in the Financial Inclusion in Sri Lanka: An

Assessment of the Functional Financial Literacy. MPRA Paper No. 54419.
Hilgert, M. A., Jeanne, M., Hogarth, J. M.& Beverly, S. G. (2003). Household
Financial Management: The Connection between Knowledge and Behavior.
Federal Reserve Bulletin, 89 (7), 309-322.

Hogarth, J. M. (2002). Financial Literacy and Family and Consumer Sciences.

Journal of Family and Consumer Sciences, 94 (1), 14-28.

Husnan, S., & Pudjiastuti, E. (2006), Dasar-Dasar Manajemen Keuangan.,

Jogjakarta, Indonesia.

Huston, S. J. (2010). Measuring Financial Literacy. Journal of Consumer Affairs , 44

(2), 296-316.

Illeris, K. (2004). Three dimensions of learning. Malabar, FL: Krieger Publishing.

International Journal of Business and Management, 7(9), 126-135.

Jorgensen, B. L. (2007). “Financial Literacy of College Students: Parental and Peer

Influences”. Master Thesis Submitted to Virginia Polytechnic Institute and
State University in Master of Science in Human Development. Blacksburg,
Virginia.

Kahneman, D. (2003). Maps of Bounded Rationality: Psychology for Behavioral

Economics. American Economic Review, 93 (5), 1449-1475.

Kahneman, D., & Tversky, A. (1974). Judgment under uncertainty: heuristics and
biases, Vol: 185,1124−1131.

Kahneman, D., & Tversky, A. (1979). Prospect Theory: An analysis of decision

making under risk, Econometrica, 4(2): pp 263-29.

Kim, J., Kwon, J., & Anderson, E. A. (2005). Factors related to retirement
confidence: Retirement preparation and workplace financial education.
Financial Counseling and Planning, 16(2), 77-89.

Klapper, L., & Panos, G. A. (2011). Financial Literacy and Retirement Planning in
View of a Growing Youth Demographic: The Russian Case. Centre for
Research on Pensions and Welfare Policies Working Paper.

Klemme, D. (2002). National jumpstart coalition for financial literacy benchmarks:

Curriculum inclusion and pedagogical practice in Wisconsin. Journal of
Family and Consumer Sciences Education, 20(2), 12-19.
Lachance, M. J., & Choquette-Bernier, N. (2004). College students consumer
competence: A qualitative exploration. International Journal of Consumer
Studies, 28(3), 433-442.

Lubega, S. M. (2012). Pschological preparation for retirement, Perceived

organizational support, Financial preparation for retirement, Employee
engagement and organizational citizenship behaviour in Uganda Revenue
Authority, Unpublished MBA Dissertation, Makerere University Business
School.

Lusardi, A., & Mitchell, O. S. (2006). Financial Literacy and Retirement

Preparedness: Evidence and Implications for Financial Education. Business
Economics, 42 (1), 10.

Lusardi, A., & Mitchell, O. S. (2013). The Economic Importance of Financial

Literacy: Theory and Evidence. Netspar Discussion Papers DO04/2013-009

Lusardi, A., & Mitchell, O. S.(2011). “Financial Literacy and Retirement Planning in
the United States.”Journal of Pension Economics and Finance 10(4): 509-525.

Lusardi, A., &Tufano, P. (2009).Debt literacy, financial experience and over

indebtedness. NBER Working Paper No. W14808, National Bureau of
Economic Research. Retrieved from www.mrrc.isr.umich.edu

Lusardi, A., Mitchell, O.S., & Curto, V. (2010). Financial literacy among the young.
Journal of Consumer Affairs, 44(2), 358–380. Retrieved January 11, 2011
from www.mrrc.isr.umich.edu

Lusardi, A., Olivia, M. S., & Vilsa, C. (2010).“Financial Literacy among the Young:
Evidence and Implications for Consumer Policy.”CFS Working Paper
2010/09.

Lusardi, A., & Mitchell,O.S. (2014). The Economic Importance of Financial Literacy:
Theory and evidence. Journal of economic literature, 52 (1), 5-44.

Mahdzan, N. S., & Tabiani, S. (2013).“The impact of Financial Literacy on Individual

Saving: An Exploratory Study in the Malaysian Context.” Transformations in
Business & Economics12(1):41–55.
Murugiah, L. (2016). The Level of Understanding and Strategies to Enhance Financial
Literacy among Malaysian.International Journal of Economics and Financial
Issues, 6 (3), 130-139.

Mwangi, I. W.,& Kihiu, E. N.(2012). Impact of Financial Literacy on Access to

Financial Services in Kenya. International Journal of Business and Social
Science Vol. 3 No. 19; October2012.

Nepal Rastra Bank. 2011. NRB with Students: Financial Literacy for Children and
Youths.Kathmandu: Nepal Rastra Bank.

Nepal Rastra Bank. 2012. Monetary Policy 2012/2013. Kathmandu: Nepal Rastra
Bank.

Nepal Rastra Bank. 2012. NRB Strategic Plan 2012-2016. Kathmandu: Nepal Rastra
Bank.

Nepal Rastra Bank. 2014. Nepal Rastra Bank: Now, Then and Ahead. Kathamndu:
Nepal Rastra Bank.

Nidar, S. R., & Bestari, S. (2012). “Personal Financial Literacy among University
Students: Case Study at Padjadjaran University Students, Bandung,
Indonesia.” World Journal of SocialSciences 2(4): 162-171.

Nidar, S. R., & Bestari, S. (2012). Personal Financial Literacy Among University
Students (Case Study at Padjadjaran University Students,
Bandung,Indonesia),World Journal of Social Sciences Vol. 2. No.4. July 2012.
Pp. 162 – 171.

Njuguna, A. G., & Otsola, J. (2011). Predictors of Pension Finance Literacy: A

Survey of Members of Occupational Pension Schems in Kenya. International
Journal of Business Management, 6(9), 101-112.

OECD. (2005). Improving Financial Literacy: Analysis of Issues and Policies. Paris,
France:OECD.

OECD-INFE.2011. “Measuring Financial Literacy: Core Questionnaire in Measuring

Financial Literacy.”Questionnaire and Guidance Notes for Conducting an
Internationally Comparable Survey of Financial Literacy.Paris: OECD
International Network on Financial Education(INFE).
Ormrod, J. E. (1995). Human learning. Englewood Cliffs, NJ: Prentice Hall.

Peng, T., Bartholomae, S., Fox, J., & Cravener, G. (2007). “The Impact of Personal
FinanceEducation Delivered In High School and College Courses.” Journal of
Family and Economics, 28(2): 265-284.

President’s Advisory Council on Financial Literacy (PACFL) (2008).2008 Annual

Report to the president. Accessed March 11, 2009 at
http://www.treas.gov/offices/domesticfinance/financialinstitution/fineeducatio
n/council/index.shtml.

Ramasawmy, D., Thapermall, S., Dowlut, S. A., & Ramen, M. (2013). “A Study of
the Level of Awareness of Financial Literacy among Management
Undergraduates.”Proceedings of 3rd Asia-Pacific Business Research
Conference 25 - 26 February 2013, Kuala Lumpur, Malaysia.

Remund, D. (2010). Financial Literacy Explicated: The Case for a Clearer Definition
in an Increasing Complex Economy. Journal of Consumer Affairs, 276-295.

Securities and Exchange Commission (1999,November 22). Special study: Online

brokerage:Keepingspaceofcyberspace.Available:http://www.sec.gov/news/stu
dies/cybrtmd.htm[2000,November 6].

Shaari, N. A., Hasan, N. A., Mohamed, R. K. M., & Sabri, M. A. (2013). Financial
Literacy: A Study Among the University Students. Interdisciplinary Journal
of Contemporary Research in Business, 5 (2), 279-299.

Shefrin, H., & Statman, M. (1994). Behavioral Capital Asset Pricing Theory. Journal
of Financial and Quantitative Analysis, 29 (3), 323-349.

Thapa, B., & Nepal, S. R. (2015). Financial Literacy in Nepal: A Survey Analysis
from College Students. Journal NRB Economic Review, 4(9),49-74.

The annual report of the council of economic advisers (2006).Economic Report of the
President of US.Retrieved from http://www.gpoaccess.gov/eop/index.html.

U.S. Courts Bankruptcy Filings. (2006). Bankruptcy filings rose: Quarterly filings
lowest since mid-80’s. Retrieved from university students Economic Paper: A
Journal of applied economic and policy, 22(1), 65-78.
Van Rooij , M., Lusardi, A., & Alessie, R. J. (2007). “Financial Literacy and Stock
Market Participation.” Journal of Finance and Economics 101 (2): 449-472.

Van Rooij, M., Lusardi, A., & Alessie, R. J. (2008).Financial literacy, retirement
planning, and household wealth. Paper presented at the ECB-CFS Conference
on Household Finances and Consumption, FrankfurtamMain, Germany,
September 4-5, 2008. Retrieved January 11, 2012 from
www.dnb.nl/.../PhDThesis%20Maarten%20van%20Rooij_tcm47-211...

Volpe, R. P., Kotel, J. E.,& Chen, H. (2002).A survey of investment literacy among
online investors.Financial Counseling and Planning, 13 (1), 1-13.

Wachira, M. I.,& Kihiu, I. (2012), Impact of financial literacy on access to

financial services in Kenya. International Journal of Business and
Social Science, 3, 42-50.

Wamae, J. N. (2013). Behavioral Factor Influencing Investment Decision in Stock

Market: A survey of Investment Bank in Kenya. International Journal of
Economics and Finance, 1 (6), 68-83.

Waweru, M. N., Hoque, Z.,& Uliana, E. (2003). Management accounting change in

South Africa: Case studies from retail companies, Accounting, Auditing and
Accountability Journal, Vol. 17 (5), pp. 675-704.

Worthington, A. (2005). Debt as a Source of Financial Stress in Australia Households.

International Journal of Consumer Studies, 2, 201-222.
 APPENDIX

Questionnaire on financial literacy among private and public sector, small

entrepreneurs and big enterprises employees in Chitwan district.

This survey is conducted for academic research work which has to be submitted at
Central Department of Management (CDM), TU, Kirtipur. I assure you that this
information will be exclusively used for the academic research purpose. Thank you so
much for your cooperation.

Section I: Respondents’ Profile

Name (optional): ………………………………………………………..……………

Gender: Male 65 Female 43

Age (in years):

Below 18 3 18-20 2 21-24 20 25-29 49 30 and above 34

Monthly Income Range:

Below Rs.20,000 12 Rs.20,000-30,000 21

Rs.30,000-50,000 49 More than Rs.50,000 26

Education Stream: Management 68 Non-management 40

Education Level: Under SLC 22 High School 18

Under Graduate 43 Graduate 24

Employed On: Private 43 Public Services 24

Small Entrepreneurs 20 Big Enterprises 21

Organization and designation: ……………………..................................................

Section II: Basic Information

Financial Behavior
1. How economical/spending oriented are you? (Please select only one option)
a. Very economical 12

b. Somewhat economical 43

c. Neither economical nor spending oriented 21

d. Somewhat spending-oriented, rarely saving money 23

e. Very spending-oriented, hardly ever saving money 9

2. In what manner do you maintain financial records?

a. Maintain adequate records 16

b. Maintain minimal records 58

c. Maintain very detailed records 20

3. If you (your family) has/have any money left right before the next income arrives,
what would you usually do with it? (Select the most appropriate option).

a. Spend it on consumer goods 4

b. Keep it in cash 21

c. Deposit it into bank account 62

d. Invest it in the capital market 5

e. Lend it to friends or relatives 1

f. Invest it in our own business 13

g. Buy gold and jewelry 2

h. Others (Please specify)… 0

4. What do you usually do when you (your family) run(s) out of money before the
next income arrives?
a. Cut down expenses and save 22
b. Borrow money from relatives, friends and acquaintances 39

c. Spend our savings 26

d. Use a credit card or bank loan 16

e. Work extra hours or do additional jobs 5

f. Other (Please specify) 5

5. Let’s assume that in addition to your regular income your family got some money
in the amount of Rs50,000- Rs200,000. What would you do with this money most
likely?
9
a. Purchasing of household goods like furniture, clothes etc.
b. Fixed deposit for future saving for meeting contingency 26

c. Repay earlier debts 9

d. Go for travel or vacation 25
e. Investment in own business 14

f. Buy an insurance policy 17

 g. Buy shares 4
2
h. Other (Please specify)…
6. Rate the following statements on a scale of 1-4 (1, not at all true for me; 2,
somewhat not true for me; 3, somewhat true for me, 4, very true for me)
Statements 1 2 3 4
a. I budget and track my spending 8 37 45 18
b. I contribute to a bank saving account regularly 6 29 54 19
c. I compare prices when shopping for purchases 9 27 33 39
d. I have a life insurance policy 42 12 16 38
e. I invest in the shares under IPO 40 10 28 30
f. I read to increase my financial knowledge 9 31 52 16
g. I maintain adequate financial records 9 46 48 5
h. I spend less than income 6 28 48 26
i. I maintain adequate insurance coverage 33 15 25 35
j. I plan and implement a regular savings/investment program 10 28 54 16

Financial Influence
7. Rate the following items of influences on a scale of 1-4 (1, none; 2, not much; 3,
some; 4, a lot). How much did you learn about managing your money from the
following?
Items 1 2 3 4
a. Parents 2 10 36 60
b. Friends 22 39 38 9
c. School 8 46 44 10
d. Books 7 39 47 15
e. Media 1 28 60 19
f. Job 6 10 41 51
g. Life experiences 2 1 34 71
h. Internet 25 28 39 16

8. Which of the following items did you learn about in your home while growing up?
(Check all that apply)

a. Budgeting 34 b. Investing 42

c. Taxes 7 d. Insurance 27

e. Loans 25 f. Saving 72

g. Interest rates 24 h. Keeping records 33

Financial Attitude
9. Rate the following items on a scale of 1-4 (1, not at all true for me; 2, somewhat
not true for me; 3, somewhat true for me, 4, very true for me)
Statements 1 2 3 4
a. I feel in control of my financial situation 15 24 55 14
b. I feel capable of using my future income to achieve my 2 42 52 12
financial goals
c. I worry to manage my finance 15 24 50 19
d. I am uncertain about where my money is spent 18 46 34 10
e. I feel credit cards are safe and risk free 36 14 24 34
f. I feel capable of handling my financial future (e.g. buying 32 17 35 24
insurance)
g. I am afraid of loan 24 16 30 38
h. I give importance to saving money from my monthly income 5 35 39 29
i. I feel having life insurance is an important way to protect loved 12 12 41 43
ones
j. I enjoy thinking about and have interest in reading about money 10 31 56 11
management
k. I enjoy talking to my peers about money related issues (i.e. 9 43 42 14
taxes)

Financial Knowledge
Please select only one answer option for question no. 10 to question no.27.
10. Suppose you had Rs.1000 in a savings account and the interest rate was 2% per
year. After 5 years, how much do you think you would have in the account if you
left the money to grow?
a. More than Rs.1020 68 b. Exactly Rs.1020 3
c. Less than Rs.1020 8 d. Do not know 29
11. Suppose you had Rs.1000 in a savings account and the interest rate is 20% per
year and you never withdraw money or interest payments. After 5 years, how
much would you have on this account in total?
a. More than Rs. 2000 30 b. Exactly Rs. 2000 18

c. Less than Rs. 2000 7 d. Do not know 53

12. Imagine that the interest rate on your savings account was 1% per year and
inflation was 2% per year. After 1 year, how much would you be able to buy with
the money in this account?
a. More than today 25 b. Exactly the same 9

c. Less than today 29 d. Do not know 45

13. Suppose that in the year 2018, your income has doubled and prices of all goods
have doubled too. In 2018, how much will you be able to buy with your income?
a. More than today 5 b. The same 39
c. Less than today 18 d. Do not know
14. Investing in higher return security has:
12
a. Higher risk 73 b. Lower risk
c. No relation between risk and return 1 d. I don’t know 22

15. A company issues shares in the:

a. Secondary markets 15 b. Primary markets 65

c. Stock exchange 22 d. Derivative markets 6

16. Who regulates the banks and financial institutions in Nepal?

6 3
a. Securities Board of Nepal c. Insurance Board of Nepal
b. Securities Exchange Commissio 4 d. Nepal Rastra Bank 95

17. In Nepal, the value of IPO is generally fixed at:

a. Rs.10 0 b. Rs.50 4

c. Rs.80 0 d. Rs.100 104

18. The main reason to purchase insurance is to

a. Protect you from a loss recently incurred 39

b. Provide you with excellent investment returns 25

c. Protect you from sustaining a severe loss 17

d. Protect you from small incidental losses 25

e. Improve your standard of living by filing fraudulent claims 2

19. What do you think deserves primary attention when one has to compare between
the banks to choose the one where to take a loan from?
a. Bank’s reputation (fame) and its reliability 18
b. View of the bank office and qualifications of its personnel 11
c. Interest rate and the other costs 58
 d. Gifts and advertising campaigns 9

e. Services given by the bank along with loans 12

20. What is the general corporate tax rate in Nepal?
a. 15% 29 b. 20% 30

c. 25% 29 d. 30% 20
21. It is usually possible to reduce the risk of investing in the stock market by buying
a wide range of stock and shares.
a. True 24 b. False 8 c. May be 60 d. I don’t know 16