THE INFLUENCE OF SOCIO-DEMOGRAPHIC AND FINANCIAL KNOWLEDGE FACTORS ON FINANCIAL MANAGEMENT PRACTICES OF MALAYSIANS

(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONIn recent years, there has been greater emphasis on empowering consumers with adequate financial knowledge and to enhance their financial capabilities as consumers are confronted with an increasing number of complicated financial decisions. This is due to several factors. Firstly, consumers are presented with a wider array of financial instruments and investments opportunities to manage their wealth. Secondly, the easier access to credit via credit cards and low interest rate pre-approved personal loans pose strong temptations for consumers to spend beyond their means. Thirdly, longer life expectancy and the erosion of the traditional family support mechanism require consumers to become increasingly responsible for their own financial security after retirement. All these demand skills in financial decisions and financial judgement (Lusardi and Mitchell, 2014; Lusardi, 2008).Adequate financial knowledge is required to provide consumers the skills needed to make sound financial decisions. Given the importance of financial knowledge, several financial literacy surveys have been carried out in various parts of the world to gauge consumers' level of financial literacy. It is found that there exist variations in the average level of financial knowledge in different countries. Further, there is mounting evidence that financial knowledge play an effective role in shaping an individual's financial decision making, such as retirement planning, stock market participation and investment (Mandell and Klein, 2007; Lusardi, 2008; van Rooij et al., 2007; Fox et al., 2005; Hilgert et al. 2003). In short, highe7r levels of financial knowledge contribute to asset building and better debt management. However, it is acknowledged that financial knowledge alone is not the sole contributory factor to poor financial decisions. Other factors such as consumers' socio-demographic factors, behavioural attributes and financial attitudes play important roles too.In 2010, Malaysia together with 13 other countries participated in the Organisation for Economic Cooperation and Development (OECD) International Network on Financial Education (INFE) pilot study on Measuring Financial Literacy. The data obtained constitute one of the most comprehensive and recent collections of data on the status of financial literacy and financial management behaviour among Malaysians. So far, related studies on the financial well-being of Malaysians are focused on selected groups of individuals such as the old (Chan, 2012; Jariah et al., 2012; Chan et al., 2010) and the youth (Sabri et al., 2012a, 2012b, 2010; Dahlia et al., 2009) rather than examining Malaysians across all age groups.There is growing concern on the the lack of good financial management practices among Malaysians. For example, the sustainability of household debt is in question as almost half of a household's disposable income goes to debt repayment. The debt service ratio (ratio of debt payments to disposable income) has risen from 39.1% in 2006 to 44.2% in 2014 (Bank Negara Malaysia, 2015) while the household debt to GDP ratio of 89.6% in 2015 is the highest among its neigbouring country in the region (Bank Negara Malaysia, 2016). In addition, Bernama (2016) reported that a total of 700,000 Malaysians from all walks of life approached the Credit Counselling and Management Agency (AKPK) since its establishment in 2006 and of which, 135,000 were enrolled in the debt management program (Bernama, 2016). Furthermore, Bernama (2016), also pointed out that among those who were enrolled in the debt management program, 23% are due to poor financial management and lack of discipline in spending, 16% due to business failures and 11% are due to poor credit card management. According to the Malaysian Department of Insolvency (2016), among the 19,575 bankruptcy cases reported in the year 2012, 20.9% (4,100) are those below 34 years old and those aged between 35 to 44 years old make up the highest percentage of total personal bankruptcy (36. …