Factors contributing to vietnamese adults intentions and behaviors towards personal financial planning

FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’ INTENTIONS AND
BEHAVIORS TOWARDS PERSONAL FINANCIAL PLANNING

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In International Business
By
Ms: Nguyen Thi Phuong Trang

ID: MBA06036

International University - Vietnam National University HCMC


August 2014
FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’ INTENTIONS AND
BEHAVIORS TOWARDS PERSONAL FINANCIAL PLANNING

In Partial Fulfillment of the Requirements of the Degree of
MASTER OF BUSINESS ADMINISTRATION
In International Business
By
Ms: Nguyen Thi Phuong Trang
ID: MBA06036
International University - Vietnam National University HCMC
August 2014
Under the guidance and approval of the committee, and approved by all its members, this
thesis has been accepted in partial fulfillment of the requirements for the degree.
Approved:

---------------------------------------------Chairperson
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--------------------------------------------Committee member
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Committee member
---------------------------------------------Committee member

Committee member
--------------------------------------------Committee member


INTERNATIONAL UNIVERSITY

SOCIALIST REPUBLIC OF VIETNAM

SCHOOL OF BUSINESS

Independence - Freedom - Happiness

ASSURANCE QUALIFIED THESIS

Student’s Name:

NGUYEN THI PHUONG TRANG

Student ID:

MBA06036

Title of Thesis:

FACTORS CONTRIBUTING TO VIETNAMESE ADULTS’
INTENTIONS AND BEHAVIORS TOWARDS PERSONAL
FINANCIAL PLANNING

Advisor:

Ph.D PHAN TRIEU ANH

I assure that the content of this thesis has been qualified all requirements for a research
paper and able to participate in the final thesis defense.

Approved by

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Acknowledge
I would like to express my very great appreciation to my advisor – Ph.D Phan Trieu
Anh with all my respect and gratitude. I have been fortunate in receiving his insightful
guidelines, recommendations and feedbacks during this research.
I am grateful to all the researchers stated in my study, especially Dr. Yasser Alhenawi
who has provided me with further information related to his research. I appreciate the
research participants for taking time to answer my questions as their inputs are very
valuable to my thesis. I am also sincerely thankful all my friends for their willingness to
encourage and motivate me fulfilling the research.
Most especially to my mom, thank you for giving me strengths and love to overcome

all the difficulties.
Without all of your help and support, I could not have completed this thesis.

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Plagiarism Statements
I would like to declare that, apart from the acknowledged references, this thesis either
does not use language, ideas, or other original material from anyone; or has not been
previously submitted to any other educational and research programs or institutions. I
fully understand that any writings in this thesis contradicted to the above statement will
automatically lead to the rejection from the MBA program at the International University
– Vietnam National University Ho Chi Minh City.

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Copyright Statement
This copy of the thesis has been supplied on condition that anyone who consults it is
understood to recognize that its copyright rests with its author and that no quotation from
the thesis and no information derived from it may be published without the author‟s prior
consent.
© Nguyen Thi Phuong Trang/MBA06036/2014

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Table of Contents
PLAGIARISM STATEMENTS ....................................................................................... III
COPYRIGHT STATEMENT ........................................................................................... IV

CHAPTER ONE – INTRODUCTION ........................................................................ - 14 1.

INTRODUCTION ....................................................................................................... - 14 -

2.

BACKGROUND OF THE PROBLEM ............................................................................ - 15 -

3.

STATEMENT OF THE PROBLEM ................................................................................ - 16 -

4.

RESEARCH QUESTIONS............................................................................................ - 16 -

5.

RESEARCH OBJECTIVES AND LIMITATIONS ............................................................ - 16 -

6.

RESEARCH RATIONALE ........................................................................................... - 17 6.1.

Importance of the research ............................................................................ - 17 -

6.2.

Beneficiaries of this research ........................................................................ - 17 -

CHAPTER TWO – LITERATURE REVIEW .......................................................... - 18 1.

THE THEORY OF REASONED ACTION (TRA) ......................................................... - 18 -

2.

THE THEORY OF PLANNED BEHAVIOR (TPB) ....................................................... - 19 -

3.

PERSONAL FINANCIAL PLANNING ........................................................................... - 20 -

4.

TPB IN PERSONAL FINANCIAL PLANNING .............................................................. - 25 4.1.

Attitudes .......................................................................................................... - 25 -

4.2.

Subjective Norms ............................................................................................ - 27 -

4.3.

Perceived behavioral control ........................................................................ - 28 -

4.4.

Behavioral intentions ..................................................................................... - 30 -

4.5.

Behavior.......................................................................................................... - 30 v


5.

RESEARCH MODEL .................................................................................................. - 32 -

6.

RESEARCH HYPOTHESES ......................................................................................... - 34 -

CHAPTER THREE – RESEARCH METHODOLOGY ......................................... - 35 1.

RESEARCH DESIGN .................................................................................................. - 35 -

2.

RESEARCH PROCESS ................................................................................................ - 35 -

3.

SAMPLE AND DATA COLLECTION METHOD ............................................................. - 36 3.1.

Sample statistics ............................................................................................. - 36 -

3.2.

Sample size ..................................................................................................... - 37 -

3.3.

Data collection method .................................................................................. - 38 -

4.

OPERATIONALIZATION OF VARIABLES ................................................................... - 38 -

5.

MEASUREMENT ....................................................................................................... - 41 -

6.

Q UESTIONNAIRE DESIGN ........................................................................................ - 43 -

7.

DATA ANALYSIS ...................................................................................................... - 43 -

CHAPTER FOUR – DATA ANALYSIS AND DISCUSSIONS .............................. - 45 1.

SAMPLE DEMOGRAPHIC .......................................................................................... - 45 -

2.

OVERALL OF COLLECTED DATA ............................................................................. - 47 -

3.

TESTING RELIABILITY OF THE MEASUREMENT SCALE ........................................... - 50 -

4.

EXPLORATORY FACTOR ANALYSIS (EFA) ............................................................ - 55 -

5.

STRUCTURAL EQUATION MODEL (SEM) ................................................................ - 63 5.1.

Accessing the measurement model (Confirmatory Factor Analysis) .......... - 64 -

5.1.1.

Goodness-of-fit ........................................................................................... - 65 -

5.1.2.

Construct validity ....................................................................................... - 67 -

5.2.

Accessing the structural model ..................................................................... - 71 vi


6.

7.

5.2.1.

Goodness-of-fit ........................................................................................... - 71 -

5.2.2.

Significant and meaningful structural relationships ................................ - 72 -

TEST FOR DIFFERENCES IN THE MEANS OF THE BEHAVIORS .................................. - 76 6.1.

Gender ............................................................................................................ - 76 -

6.2.

Marital status ................................................................................................. - 77 -

DISCUSSIONS ........................................................................................................... - 78 -

CHAPTER FIVE – CONCLUSIONS, RECOMMENDATIONS AND
LIMITATIONS ............................................................................................................... - 82 1.

CONCLUSIONS ......................................................................................................... - 82 -

2.

RECOMMENDATIONS .............................................................................................. - 82 -

3.

LIMITATIONS ........................................................................................................... - 83 -

REFERENCES ................................................................................................................ - 85 APPENDIX 1 ................................................................................................................... - 93 APPENDIX 2 ................................................................................................................... - 99 -

vii


List of Abbreviations
Acronym

Definition

AMOS

Analysis of MOment Structures

ANOVA

Analysis of variance

AVE

Average variance extracted

CFA

Confirmatory factor analysis

CFI

Comparative fit index

CMIN

Chi-square significant

CR

Construct reliability

DF

Degree of freedom

EFA

Exploratory factor analysis

GFI

Goodness of fit

KMO

Kaiser-Meyer-Olkin

PBC

Perceived behavioral control

RMSEA

Root mean square error of approximation

SEM

Structural equation model

SIC

Squared interconstruct correlations

TLI

Tucker – Lewis index

TPB

Theory of Planned Behavior

TRA

Theory of Reasoned Action

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List of Tables
Table 1: Research hypotheses .......................................................................................... - 34 Table 2: Respondent selection criteria ............................................................................. - 37 Table 3: Operationalization of variables .......................................................................... - 40 Table 4: Measurement of the variables ............................................................................ - 41 Table 5: Data analysis ....................................................................................................... - 43 Table 6: Attitudes .............................................................................................................. - 48 Table 7: Subjective norms ................................................................................................ - 48 Table 8: Perceived behavioral control ............................................................................. - 49 Table 9: Intentions............................................................................................................. - 49 Table 10: Behaviors .......................................................................................................... - 49 Table 11: Reliability statistics for Attitude variables...................................................... - 50 Table 12: Item-Total Statistics for Attitude variables..................................................... - 51 Table 13: Reliability statistics for Attitude variables after removing Attitude5 ........... - 52 Table 14: Item-Total Statistics for Attitude variables after removing Attitude5 .......... - 52 Table 15: Reliability statistics for Behaviors variables .................................................. - 53 Table 16: Item-Total Statistics for Behaviors variables ................................................. - 53 Table 17: Reliability statistics for Behaviors variables after removing Behaviors6..... - 54 Table 18: Item-Total Statistics for Behaviors variables after removing Behaviors6 .... - 54 Table 19: KMO and Bartlett's Test .................................................................................. - 56 Table 20: Total Variance Explained ................................................................................ - 57 Table 21: Pattern Matrix ................................................................................................... - 59 ix

Table 22: Pattern Matrix after removing Information5 .................................................. - 61 Table 23: Fit indices for the test model result (CFA) ..................................................... - 66 Table 24: Standardized Regression Weights ................................................................... - 68 Table 25: Average variance extracted (AVE) and construct reliabilities (CR) ............. - 69 Table 26: Discriminant validity ........................................................................................ - 70 Table 27: Covariances....................................................................................................... - 70 Table 28: Correlations....................................................................................................... - 70 Table 29: Fit indices for the test model result (SEM) ..................................................... - 71 Table 30: Regression Weights ......................................................................................... - 72 Table 31: Standardized regression weights ..................................................................... - 75 Table 32: Squared Multiple Correlations ........................................................................ - 75 Table 33: Covariances....................................................................................................... - 75 Table 34: Correlations....................................................................................................... - 75 Table 35: One-way Anova test for gender ....................................................................... - 76 Table 36: One-way Anova test for marital status ............................................................ - 77 Table 37: Supported research hypotheses........................................................................ - 81 -

x


List of Figures
Figure 1: Theory of Reasoned Action (Ajzen & Fishbein, 1980) .................................. - 18 Figure 2: The Theory of Planned Behavior (Ajzen, 1991) ............................................. - 20 Figure 3: Implement a plan for making personal financial decisions ............................ - 21 Figure 4: Components of personal financial planning .................................................... - 21 Figure 5: The financial planning process......................................................................... - 24 Figure 6: Research model ................................................................................................. - 33 Figure 7: Research process ............................................................................................... - 36 Figure 8: Participants' gender ........................................................................................... - 45 Figure 9: Participants' marital status ................................................................................ - 45 Figure 10: Participants' education level ........................................................................... - 46 Figure 11: Participants' employment status ..................................................................... - 46 Figure 12: Participants' total annual net income ............................................................. - 47 Figure 13: The diagram of variables in CFA................................................................... - 66 Figure 14: Structural equation model............................................................................... - 71 -

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Abstract
Financial literacy, especially personal financial planning, has been caught people‟s
attention in recent years because poor financial management and unwise decision making
can definitely lead to lower living standard, credit card debts, financial crisis and prevent
families from achieving important long-term goals such as buying a home and raising
kids as their wishes. This thesis examines the factors contributing to adults‟ intentions
and behaviors towards personal financial planning which could be important to newly
affluent young Vietnamese adults for responsible financial behaviors.
Quantitative research method is used for testing Structural Equation Model rooted
from the model from the Theory of Planned Behavior (TPB) of Fishbein and Ajzein.
Using the convenience sample of 382 Vietnamese people participating into online survey,
the research tries to answer one question and explore eight hypotheses.
Through analysis of practical data via using SPSS 16 and AMOS 20 software, the
results show that TPB is significant to predict to intentions and behaviors towards
personal financial planning. Future research is needed to further investigate more deeply
on how personal financial knowledge affects the financial planning behaviors for
motivating planning practices from Vietnamese adults.
Keywords: Theory of Planned Behavior, personal financial planning, structural
equation model, Vietnamese adults.

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xiii


Chapter One – Introduction
1. Introduction
Financial literacy can be described as the ability to use one‟s knowledge and skills to
manage financial resources effectively. It includes the ability to recognize available
financial choices, to make financial plan for better future, to spend money wisely, and to
well-manage the challenges as well as the risks that come as life events such as loosing
job, having a family, saving for child‟s education, etc.
Visa and Kiplinger‟s Personal Finance Magazine (2012) surveyed 25,500 participants
from 28 countries, the countries with the least financially literacy were Pakistan,
Indonesia and Vietnam. Survey results shows that people in these countries have no
family budgeting, and there is no discussions with children about money management.
However, Vietnamese respondents hold the rank at 10th out of 28 in savings account
dedicated for risks.
To measure the ways people in Asia Pacific region making decisions about their
home finances, the MasterCard Index of Financial Literacy was studied with 7,756
respondents with age from 18 to 64 in 16 Asia Pacific markets. The research found out
that women in the emerging markets such as Myanmar, Vietnam and China outscored
men in financial literacy, by 7 index points, 6 index points and 3 index points
respectively. And Vietnam was at the 12th in overall financial literacy index out of 16
(MasterCard, 2013).
Financial literacy is a concern in which a large proportion of society having no

support and education that is necessary for granting a developed world. One of the

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practices of financial literacy is personal financial planning. Figuring out the factors
contributing to the intentions and behaviors of adults towards personal financial planning
in order to identify opportunities for improvement is calling for action of this research.
2. Background of the problem
Financial literacy, especially personal financial planning, has been caught people‟s
attention in recent years because poor financial management and unwise decision making
can definitely lead to lower living standard, credit card debts, financial crisis and prevent
families from achieving important long-term goals such as buying a home and raising
kids as their wishes. Having low knowledge on personal finance and having no personal
financial planning can lead to none budgeting allocation and expenses tracking which can
lead to conspicuous consumption behaviors such as lavish spending on goods and
services for impressing others. Furthermore, public education about the importance of
having savings account is critical to increase national saving rate which is an important
element for economic growth of every country.
The first part of this research is examination of the factors contribute to adults‟
intentions and behavior towards personal financial planning such as budgeting, savings,
insurance, education, investments and retirement. And then, the second part explores the
differences in levels Vietnamese‟s personal financial knowledge on behaviors towards
personal financial planning.

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3. Statement of the problem
Research indicates the objective factors such as attitudes, subjective norms and

perceived behavioral control are the important elements affecting adults‟ intentions and
behaviors towards personal financial planning.
4. Research questions
The research question that will be investigated in this study is: “What factors
contribute to Vietnamese adults‟ intentions and behaviors towards personal financial
planning?”
5. Research objectives and limitations
In order to answer the research question, the research objectives are as following:
-

Investigate the factors that influence adults‟ personal intentions and behaviors
towards personal financial planning.

-

Analyze the linkage between intentions and behaviors towards personal financial
planning.

-

Encourage public sectors and educational academia on building up personal financial
knowledge that will help adults achieve financial success in their life.
Limitations on the study can be considered as below:

-

Only Vietnamese persons who are higher educated and from 25 to 34 years old were
requested to participate in the quantitative survey. The investigations on the group of
teenagers or students or more mature adults might be the suggestions for further
researches.

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6. Research rationale
6.1. Importance of the research
The motivation for this study is based on the observations that most Vietnamese
adults have low level of personal financial knowledge and no attention to personal
financial planning. In recent years, people are disillusioned with returns getting from their
investments. They have invested in totally inappropriate channels without even being
aware of this. Personal financial literacy and personal financial planning are highly
recommended in this era of unstable economic not only in Vietnam but also in the whole
world.
During data collection steps, I have received an encouragement from a respondent
named Frederikke Lindholm as “I applaud that you've chosen a thesis topic that will
benefit society, and I enjoyed answering your questions. I work with an NGO on poverty
reduction, and I'm happy to see independent research in this area, instead of that done by
banks who are only trying to gain more customers. With your thirst for knowledge and
your polite approach to potential respondents, I'm sure you will succeed gathering
valuable data.”
6.2. Beneficiaries of this research
The research explores factors which impact adults‟ intentions and behaviors towards
personal financial planning which could be important to newly affluent young
Vietnamese adults for responsible financial behaviors. It encourages people to practice
personal financial planning for better financial management and brighter future. It also
suggests academia and public sectors to consider on monitoring and improving people‟s
positive financial intentions and behaviors towards personal financial planning.
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Chapter Two – Literature Review
A critical investigation of the relevant literature must be conducted as the background
information of this research. Literature study includes definitions and previous research
results in social sciences and economics sciences via typical publications, international
books, articles and researches. After literature review, the researcher will be able to
develop a research model and a meaningful questionnaire for answering the research
questions.
1. The Theory of Reasoned Action (TRA)
The theory of reasoned action (Ajzen & Fishbein, 1980) provides a model that has
potential benefits for predicting the intention to perform a behavior based on an
individual‟s attitudinal and normative beliefs (Southey, 2011).

Figure 1: Theory of Reasoned Action (Ajzen & Fishbein, 1980)
According to the theory, the most important determinant of a person's behavior is
behavior intention. The individual's intention to perform a behavior is a combination of
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attitude toward performing the behavior and subjective norm. TRA works most
successfully when applied to behaviors that are under a person's volitional control. If
behaviors are not fully under volitional control, even though a person may be highly
motivated by her own attitudes and subjective norm, she may not actually perform the
behavior due to intervening environmental conditions. The Theory of Planned Behavior
(TPB) was developed to predict behaviors in which individuals have incomplete
volitional control.
2. The Theory of Planned Behavior (TPB)
The Theory of Planned Behavior is an extension of the Theory of Reasoned Action
(Ajzen & Fishbein, 1980; Fishbein & Ajzen, 1975) made necessary by the original
model‟s limitations in dealing with behaviors over which people have incomplete
volitional control. As a general rule, the more favorable the attitude and subjective norm

with respect to a behavior, and the greater the perceived behavioral control, the stronger
should be an individual‟s intention to perform the behavior under consideration. The
relative importance of attitude, subjective norm, and perceived behavioral control in the
prediction of intention is expected to vary across behaviors and situations. Thus, in some
applications it may be found that only attitudes have a significant impact on intentions, in
others that attitudes and perceived behavioral control are sufficient to account for
intentions, and in still others that all three predictors make independent contributions
(Ajzen, 1991).

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Figure 2: The Theory of Planned Behavior (Ajzen, 1991)
3. Personal financial planning
Kapoor, Dlabay, and Hughes (2012) stated that “Financial uncertainty affects
everyone. However, wise choices can ease potential difficulties. Avoid the temptation of
credit card use. Identify budget items that can be eliminated or reduced. Have adequate
auto, home, health, and life insurance. Prevent becoming a victim of financial scams by
being well informed. Talk with others about your financial concerns to help reduce
anxiety. Your ability to use wise money management strategies will serve you in every
stage of your life, and in every phase of the business cycle.”
Personal financial planning is described in the below figure:

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Figure 3: Implement a plan for making personal financial decisions
The figure below presents an overview of the eight major personal financial planning
areas that must be coordinated through an organized plan and wise decision making to
achieve a successful financial situation.

Figure 4: Components of personal financial planning
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i.

Obtaining: You obtain financial resources from employment, investments, or
owner-ship of a business. Obtaining financial resources is the foundation of
financial planning, since these resources are used for all financial activities.

ii.

Planning: Planned spending through budgeting is the key to achieving goals and
future financial security. Efforts to anticipate expenses along with making certain
financial decisions can reduce taxes, increase savings, and result in less financial
stress.

iii.

Saving: Long-term financial security starts with a regular savings plan for
emergencies, unexpected bills, replacement of major items, and the purchase of
special goods and services, such as a college education, a boat, or a vacation
home. Once you have established a basic savings plan, you may use additional
money for investments that offer greater financial growth.

iv.

Borrowing: Maintaining control over your credit buying habits will contribute to
your financial goals. The overuse and misuse of credit may cause a situation in

which a person‟s debts far exceed the resources available to pay those debts.
Bankruptcy is a set of federal laws allowing you to either restructure your debts or
remove certain debts. The people who declare bankruptcy each year may have
avoided this trauma with wise spending and borrowing decisions.

v.

Spending: Financial planning is designed not to prevent your enjoyment of life
but to help you obtain the items you want. Too often, however, people make
purchases without considering the financial consequences. Some people shop
compulsively, creating financial difficulties. You should detail your living

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