Some Insights Into Financial Literacy Among Undergraduate Students: A Case of Bosnia and Herzegovina

The purpose of this research is to provide some insights into financial literacy among undergraduate students focusing primarily on the relationship between financial knowledge, financial attitudes and financial behavior and on possible gender and financial education gap in financial literacy. Using the purposive sampling technique, data collection was carried out from April to June 2020, yielding a sample of 1,046 valid responses. To gain a better understanding of the relationship between financial behaviour, financial attitudes and financial knowledge, we, primarily, use exploratory factor analysis and multiple regression model. The research findings have revealed several important issues. First, findings have suggested that financial knowledge, financial attitudes and gender may be considered as an antecedent of the financial behaviour of undergraduate students. Second, findings have also suggested a statistically significant difference between the financial literacy of undergraduate students concerning their exposure to formal financial education.


Introduction
Consumers living in a complex financial environment need financial literacy to improve financial decision making (Atkinson & Messy, 2012;Huston, 2010). Generally speaking, to achieve financial well-being, financial literacy has played a fundamental role in encouraging young women and men to make responsible decisions. In that respect, financial literacy has been recognized as an essential life skill (OECD, 2017). Individuals with a low level of financial literacy exhibit overconfidence, risk-loving and impatience-financial behaviour that is recognized as a major cause of the financial crisis (Mudzingiri, Mwamba, & Keyser, 2018). That being said, the low level of financial literacy might harm individuals and nations. More complicated environments require individuals to be more knowledgeable about different aspects of life such as health, technology, finance etc. The concept of financial literacy is very complex. In this regard, as pointed out by Aren and Dinç Aydemir (2014), researchers study the concept of financial literacy from different angles. Academicians use financial literacy to explain economic wellbeing, financial decisions and behaviour, but they rarely deal with two important issues, such as governance and social well-being. RO3. To examine a difference in financial literacy of undergraduate students concerning their exposure to formal financial education.
The paper is intended to produce valuable pieces of information from a policy perspective that may be beneficial to government decision-makers in the process of designing unique financial education initiatives targeted for young people and aimed at increasing their financial literacy. The paper is organized as follows. Following the introduction, part two offers a summary of the literature review that is important to the paper's main objective. Part three discusses the methods of data and analysis. The core of the paper is part four which involves review and discussion of initial empirical findings. Some final remarks and conclusions are found in the last chapter.

Literature Review and Hypothesis Development
The initial results of financial literacy were reported by Lusardi and Mitchell (2009) and Lusardi (2008a, 2008b, 2012a, 2012b. Financial literacy has varying definitions and approaches because this concept has been loosely used (Remund, 2010). Warmath and Zimmerman (2019) argue that financial literacy encompasses three domains of knowledge, namely financial skill, self-efficacy and explicit knowledge. Zait and Bertea (2014) view the concept of financial literacy as a combination of five dimensions: financial knowledge, financial communication, financial ability, financial behaviour and financial confidence. In this study, we will use the definition given by the OECD INFE (2011) and Atkinson and Messy (2012), where financial literacy is defined as a combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing. This definition is the starting point of a financial literacy measurement tool consisting of financial knowledge, behavior and attitude (Atkinson & Messy, 2012).

Financial Knowledge, Financial Attitudes and Financial Behaviour
According to OECD (2013), the most significant dimension of financial literacy is financial behaviour. This is also acknowledged by Setyawati and Suroso (2016) who claim that behaviour is essential and the most important element of financial literacy. Similar, financial attitude is usually outlined as a factor which motivates the behavior of an individual (Moore, 2003). Finally, and as suggested by Lusardi and Mitchell (2014), financial knowledge is measured through a few questions that measure key financial concepts. Similar, Atkinson and Messy (2012) state that financial knowledge encompasses knowledge about key financial concepts whereas the way individual behaves significantly impacts on financial wellbeing. The authors view attitudes and preferences as factors that have direction role regarding behaviour. According to Cucinelli, Trivellato and Zenga (2019) individuals may show different financial attitudes and financial knowledge as a result of regional, social and economic characteristics. Evidence of the effect of financial knowledge and attitude on financial behaviour can be found in the recent literature (Atkinson & Messy (2012) Following the previous discussion, we propose the following hypotheses: H1a: Financial knowledge influences the financial behaviour of undergraduate students.
H1b: Financial attitudes of undergraduate students influence their financial behaviour.  Hasler & Lusardi (2017), etc. have shown that there is a potential gender gap in terms of financial literacy. Following that, we propose the following hypothesis: H2: Gender may be considered as an antecedent of the financial literacy of undergraduate students.  Kadoya and Khan (2020) found a positive relationship between financial education and financial literacy. Hanson and Olson (2018) argue that family talks about financial issues produce valued financial knowledge and may be an important factor in designing a financial literacy program. Based on a systematic literature review  have found evidence shows that school-based financial-education programs can improve children's and adolescents' financial knowledge and attitudes.

Education and Financial Literacy
Therefore, following the recent findings, we propose the following hypothesis: H3: There is a difference in the financial literacy of undergraduate students concerning their exposure to formal financial education.

Data Source and Sample
Using the purposive sampling technique, data collection was carried out from April to June 2020, yielding a sample of 1,046 valid responses from students enrolled in undergraduate programs at one of the following eight public universities in Bosnia and Herzegovina: University of Tuzla, University of Sarajevo, University of Zenica, University of Banja Luka, University of Bihać, University of Mostar, University Džemal Bijedić of Mostar and University of East Sarajevo. The data collection instrument is a structured questionnaire with closed questions, divided into several sections. The first section addresses the financial attitudes, financial behaviour and financial knowledge, whereas the second section considers specific socio-economic characteristics of the respondents.
To determine the level of financial knowledge, two groups of questions were created. The first group refers to basic financial knowledge and it consists of seven questions related to financial exchange rates, interest on a loan and the time value of money. The second group refers to advanced knowledge and it consists of six questions that measure the knowledge of simple and compound interest, inflation and risk diversification.
As suggested by Potrich, Vieira and Mendes-Da-Silva (2016), each correct answer from the first group of questions was awarded a score of 1.0. Similar, each correct answer related to the second group of questions was given a score of 2.0. Table 2 contains an overview of the basic parameters of descriptive statistics for the financial knowledge score. When it comes to basic financial knowledge, 56.41% of respondents did not know that it is less likely that they will lose all of their money if they save it in more than one place. Most of the respondents (55.16%) did not know the practical meaning of the EUR/USD quotation. Surprisingly, 52.87% of the respondents did not know that in their homeland, i.e. Bosnia and Herzegovina, stock exchange even exists. Speaking of another group of financial knowledge questions, 94.17% of the respondents did not give a correct answer in case of compound interest and 69.02% of respondents do not understand the relationship between inflation and interest rates. Similar findings are reported by Babajić, Okičić and Kokorović Jukan (2018). On the other hand, most of the respondents gave the correct answer in case of simple interest (75.72%), risk diversification (51.82%). Table 3 shows all variables used in each scale, with the respective means, and standard deviations. The data in the previous table present the used latent variables, their codes, items, as well as the results of the mean and standard deviation. When observing financial attitude, the highest mean was registered for the FA2. When it comes to financial behaviour, the highest mean was registered for the FB4.

Methods
Besides independent samples t-test, we primarily use exploratory factor analysis and, based on the similar research of Potrich, Vieira and Mendes-Da-Silva (2016) and Hayhoe et al. (2005) following multiple regression model: (1) In the previous model, FB is the notation for financial behaviour; FKS refers to financial knowledge score; FA refers to financial attitude; Gen is a dummy variable (D = 1 for female students, 0 otherwise), Edu is a dummy variable (D = 1 for being exposed to formal financial education, 0 otherwise).

Independent Samples T-Test
In respect to our second and third hypothesis, we performed an independent samples t-test to examine possible gender and education gap when it comes to all three dimensions of financial literacy. First, we examined the possible gender gap when it comes to financial knowledge. Based on the results of independent t-test, evidence of a statistically significant difference between the financial knowledge score and gender (t(667.968) = -6.749, p =.000) has been found. Particular gender gap is present when it comes to questions related to simple interest (t(878.377) = -7.980, p =.000), compound interest (t(958.359) = 3.727, p =.000), inflation (t(573.647) = -3.253, p =.000), financial exchange rates (t(609.811) = -2.237, p =.000) and risk diversification (t(636.878) = -5.289, p =.000). Next, we examined the possible gender gap when it comes to financial attitudes. Based on the results of independent t-test, a statistically significant difference between the financial attitude score and gender (t(1042) = -.943, p =.346) has not been confirmed. Finally, possible gender gap when it comes to financial behaviour is investigated. Based on the results of independent t-test, evidence of a statistically significant difference between the financial behaviour score and gender (t(1042) = 2.015, p =.044) has been found. Particular gender gap is present when it comes to sticking to weekly and monthly budget (t(1042) = 3.983, p =.000), paying bills on time (t(479.123) = 4.709, p =.000), and keeping a close personal watch on financial affairs (t(1042) = 2.906 p =.004).
In respect to our third hypothesis, a possible formal financial education gap when it comes to financial literacy is investigated. Based on the results of independent t-test, evidence of a statistically significant difference between the exposure to formal financial education and financial knowledge (t(178.726) = -6.668, p =.000), financial attitude (t(1042) = -3.407, p =.001), and financial behavior (t(1042) = -3.824, p =.041).
Presented results are generalised in the following table. The exploratory factor analysis was performed on variables related to financial behaviour and financial attitudes using principal component analysis (Varimax rotation). Financial knowledge was not included in the exploratory factor analysis because it is measured as a score. Initially, the factorability of the 15 items, presented in Table 3, was examined. In that respect, we used a few well-known criteria. Firstly, a statistically significant correlation between 14 of the 15 items was found, suggesting a reasonable factorability. Finally, the communalities for two items, FA2 and FB8, were very low and that is why these items were excluded from further analysis. The results show two factors accounting for 45.11% of the variance. The Kaiser-Meyer-Olkin sampling adequacy measure is .807, which is higher than the usually recommended value of .6. The.Bartlett's test of sphericity was significant (χ2 (45) = 3150.70, p < .05). Based on the items, these factors can be considered as financial attitudes and financial behaviour. Table 5 International Journal of Financial Research Vol. 12, No. 3, Special Issue;2021 Published by Sciedu Press 108 ISSN 1923-4023 E-ISSN 1923 shows the factor analysis results. a. Rotation converged in 3 iterations. Source: Authors' work Next, we tested the internal consistency of the identified factors (Table 6). Cronbach's Alpha measures reliability in the range of 0 to 1, where a value of 0.60 to 0.70 is considered the lower limit of acceptability (Hair, Black, Babin, & Anderson, 2014). Having that in mind, it may be concluded that both scales, financial behaviour and financial attitude, had an acceptable level of reliability.

Multiple Linear Regression Model
Before running a multiple linear regression model, we examined the correlation between financial knowledge, financial attitudes and financial behaviour. Results of the Pearson correlation indicated that there was a small, but significant, positive association between financial attitudes and financial behaviour, (r = .483, p = .000) and between financial knowledge and financial behaviour, (r = .129, p = .000).
Following assumptions regarding outliers, data collinearity, independent errors, random normal error distribution, homoscedasticity and data linearity, and non-zero variances, prior estimation of a multiple linear regression model were investigated:  Outlier analysis was based on the analysis of standard residuals and it indicated that two respondents needed to be removed. After that, the same procedure was carried out once again, which showed that the data contained no outliers (Std. Residual Min = -3.253, Std. Residual Max = 3.188).
Multiple regression was conducted to see if financial knowledge, financial attitudes, gender and exposure to formal financial education predicted financial behavior. Selected independent variables explain a certain amount of the variance in the financial behaviour (F(4, 1039) = 55.09, p < .001, R2 = .175, Adjusted R2=.172).
The individual predictors were examined further and indicated that financial knowledge (Beta = .108, p = .000), financial attitudes (Beta =.378, p = .000), gender (Beta= .092, p = .002), were significant predictors in the model. At the significance level of 5%, that was not the case when it comes to exposure financial education (Beta= .053, p = .070).

Discussion
Based on the presented results the following can be concluded:  Financial knowledge and financial attitudes of undergraduate students have a positive impact on their financial behaviour. These findings are following the findings of Potrich, Vieira and Mendes-Da-Silva (2016) who found the same evidence among undergraduate students in southern Brazil. When it comes to the impact of financial knowledge and financial attitudes on the financial behaviour of undergraduate students, similar results have been reported by Felipe, Ceribeli and Lana (2017) who found a positive effect only of financial attitude on the financial behaviour of an individual. However, the impact of financial knowledge was not statistically significant in this case.
 Gender may be considered as an antecedent of the financial literacy of undergraduate students. This is mainly in accordance with the findings of Erner, Goede-Menke and Oberste (2016)

Policy Implications
As it was mentioned earlier in the paper, financial literacy has assumed a fundamental role in enabling young women and men to make responsible decisions to attain financial wellbeing. Financial literacy contributes to improving financial wellbeing, which consequently, improve the quality of life.
Different approaches to introduce financial education can be utilized. When it comes to structuring financial educational programs and positioning them within the educational system on all levels (primary, secondary or higher education) it is not clear which type of financial education programs and on which level of education will yield long term benefits for individuals when they are faced with a different type of financial decisions (i.e. retirement planning, investing in a new home, buying a car, taking a student loan, etc.) during their life cycle. Lusardi et al. (2010) find that it may be beneficial to provide financial education before individuals start to make decisions that may influence their financial position, while other research (Fernandes et al., 2014) argues that just-in-time approach has more effect on financial decision making. Having this said and in the light of obtained results on financial literacy level among the student population in Bosnia and Herzegovina, it can be argued that formal education at university level contributes to a higher level of financial literacy. In terms of policy relevance, policymakers' efforts should be directed to introduce mandatory finance courses throughout all universities and, even consider curricular reforms towards introducing financial courses in secondary education.
It would be also important to promote other initiatives in terms of non-formal financial courses with emphasis that -one-size-fits-all‖ programs are unlikely to be effective (Lusardi et al., 2010). This leads to the conclusion that due attention is needed for tailoring financial education programs respecting the specific needs of different groups of young people, especially because the gender gap was found in this particular research.

Conclusion
In Bosnia and Herzegovina, little attention has been paid to financial literacy in general and, particularly, when it comes to undergraduate students. Based on this research gap, the purpose of this paper was to provide some insights into financial literacy among undergraduate students focusing primarily on the relationship between financial knowledge, financial attitudes and financial behavior and on possible gender and financial education gap in financial literacy. The research findings have revealed the following important issues: (1) Financial knowledge and financial attitudes of undergraduate students have a positive impact on their financial behaviour; (2) Gender may be considered as an antecedent of financial literacy of undergraduate students; and (3) In terms of exposure to formal financial education, there is a possible education gap when it comes to all three dimensions of financial literacy.
From the policy perspective, policymakers' efforts should be directed to introduce mandatory finance courses throughout all universities and, even consider curricular reforms towards introducing financial courses in secondary education. Furthermore, having in mind other relevant more global research, it would be of great significance to promote other initiatives in terms of non-formal financial courses with emphasis that -one-size-fits-all‖ programs are unlikely to be effective, leading to the conclusion that due attention is needed for tailoring financial education programs respecting specific needs of different groups of young people, especially because gender gap was found in this particular research.
In terms of developing tailor-made and gender-sensitive financial literacy initiatives, this study is expected to lead to the more effective creation of evidence-informed policy decision making in Bosnia and Herzegovina. Further research should consider a greater and more representative sample of young women and men from Bosnia and Herzegovina that would lead to a creation of appropriate financial literacy index.