ISSN: 2222-6990
Open access
The degree of Malaysian household debt remains high, at present among the highest in Asia, raising concerns about its sustainability. Based on that existing issue and results of the several studies the question is arisen regarding what needs to be done to address the high levels of financial vulnerability experienced by the Malaysians, especially the young adults. Therefore, major objective of the current study was to examine the major determinants that affect financial vulnerability, and allow policymakers to address the above issue. A multi stage random sampling method was performed to draw a representative sample of Malaysian young adults, and 651 duly filled responses were received through the self-administered questionnaire. As stated by the multiple regression results, 53.1% of the total variance of financial vulnerability was explained by the model. Determinants of financial vulnerability examined by this study comprise financial socialization, financial behavior, locus of control, and financial stress; all of them were significantly related with the financial vulnerability and except financial stress, all other three determinants were shown negative relationships. Therefore, current study has both the theoretical and practical contributions, and offers experts with actionable insights regarding the determinants of young adults’ financial vulnerability when designing policies to prevent them from moving from a state of lower to higher financial vulnerability overtime.
Abdullah, N., Fazli, S. M., & Arif, A. M. M. (2019). The Relationship between attitude towards money, financial literacy and debt management with young worker’s financial well-being. Pertanika Journal of Social Sciences and Humanities, 27(1), 361-387.
Akseli, O. (2012). Vulnerability and access to low cost credit. In: Devenney, J. & Kenny, M. (Eds), Consumer Credit, Debt and Investment in Europe. Cambridge: Cambridge University Press.
American Psychological Association. (2018). Stress in America: Generation Z. stress in America TM survey. Retrieved on 5/07/2021 from https ://www.apa.org/news/press/releases/ stress/2018/stress-gen-z.pdf.
Anderloni, L., & Vandone, D. (2011). Risk of over-indebtedness and behavioral factors. In: Risk tolerance in financial decision making. Palgrave Macmillan: London.
Anderloni, L., Bacchiocchi, E., & Vandone, D. (2012). Household financial vulnerability: An empirical analysis. Research in Economics, 66(3), 284-296.
Babiarz, P., & Robb, C. A. (2014). Financial literacy and emergency saving. Journal of Family and Economic Issues, 35(1), 40–50. https://doi.org/10.1007/s10834-013-9369-9.
Baker, S. M., Gentry, J. W., & Rittenburg, T. L. (2005). Building understanding of the domain of consumer vulnerability. Journal of Macromarketing, 25(2), 128-139.
Bemel, J. E., Brower, C., Chischillie, A., & Shepherd, J. (2016). The impact of college student fnancial health on other dimensions of health. American Journal of Health Promotion, 30(4), 224–230. https://doi.org/10.1177/0890117116639562.
Boonsiritomachai, W., & Pitchayadejanant, K. (2019). Determinants affecting mobile banking adoption by generation Y based on the Uni?ed Theory of Acceptance and Use of Technology Model modi?ed by the Technology Acceptance Model concept. Kasetsart Journal of Social Sciences, 40(2), 349-358.
Bridges, S., and R. Disney. (2004). Use of credit and arrears on debt among low-income families in the United Kingdom. Fiscal Studies, 25,1–25.
http://dx.doi.org/10.1111/fisc.2004.
Brüggen, E., Hogreve, J., Holmlund, M., Kabadayi, S., & Lofgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research, 79, 228–237. https://doi.org/10.1016/j.jbusres.2017.03.013
Cardarelli, R., Elekdag, S., & Lall, S. (2011). Financial stress and economic contractions. Journal of Financial Stability, 7(2), 78-97.
Carlson, B. L., Hall, J., CyBulski, K., & Strouse, R. (2012). Health Tracking Household Survey Methodology Report 2010 (Round Six). Center for Studying Health System Change.
Central Bank of Malaysia. (2016). Bank Negara Annual Report 2016. Central Bank of Malaysia, Kuala Lumpur. CFPB Financial Well-Being Scale: Scale Development Technical Report. Retrieved on 25/06/2021 from http://www.sjdm.org/dmidi/files/CFPB_Financial_Well Being_Scale_ Technical_Report.pdf
Cooley, T. F., & Quadrini, V. (2006). Monetary policy and the financial decisions of firms. Economic Theory, 27, 243-270
Co?kuner S. (2016). Understanding factors affecting financial satisfaction: The influence of financial behavior, financial knowledge and demographics. Imperial Journal of Interdisciplinary Research, 2(5), 377-385.
Danes, S. M. (1994). Parental perceptions of children’s financial socialization. Journal of Financial Counseling and Planning, 5, 27–146.
Daud, S. N. M., Marzuki, A., Ahmad, N., & Kefeli, Z. (2019). Financial vulnerability and its determinants: Survey evidence from Malaysian households. Emerging Markets Finance and Trade, 55(9), 1991-2003. https://doi.org/10.1080/1540496X.2018.1511421
De Sena Abrahão, R., Moriguchi, S. N., & Andrade, D. F. (2016). Intention of adoption of mobile payment: An analysis in the light of the Unified Theory of Acceptance and Use of Technology (UTAUT). RAI Revista de Administração e Inovação, 13(3), 221-230.
Delafrooz, N., & Paim, L. H. (2013). Role of financial stress on relationship between financial problem and financial wellness among Malaysia workers. African Journal of Business Management, 7(20), 1966-1972.
DeNavas-Walt, C., & Proctor, B. D. (2014). Income and poverty in the United States: 2013. US Government Printing Office.
DeVaney, S. A. (1994). e usefulness of financial ratios as predictors of household insolvency: Two perspectives. Journal of Financial Counseling and Planning, 5, 5-24.
Drever, A. I., Odders-White, E., Kalish, C. W., Else-Quest, N. M., Hoagland, E. M., & Nelms, E. N. (2015). Foundations of financial well-being: insights into the role of executive function, financial socialization, and experience-based learning in childhood and youth. Journal of Consumer Affairs, 49, 13–38. http://dx.doi.org/ 10.1111/joca.12068.
Eisenberg, N., Losoya, S., Fabes, R. A., Guthrie, I. K., Reiser, M., Murphy, B., Shepard, S. A., Poulin, R., & Padgett, S. J. (2001). Parental socialization of children’s dysregulated expression of emotion and externalizing problems. Journal of Family Psychology, 15, 183–205. https://doi.org/10.1037/0893-3200.15.2.183.
Employee Financial Wellness Survey. (2016). Retrieved on 5/07/2021 from https://assets. ctfassets.net/vv3ti973ux47/5x6tzTTytSPOJMLVDFNRLL/6899f0e70e2a16d4f085ed76be683c1e/pwc-2016-employee-wellness-survey.pdf.
Fei, C. K., Sabri, M. F., Mohamed, N. A., Wijekoon, R., & Majid A. Z. A. (2020). Determinants of financial vulnerability among young employees in Malaysia. Journal of Critical Reviews, 7 (15), 3097-3107. http://dx.doi.org/10.31838/jcr.07.15.425.
Financial Conduct Authority. (2015), Consumer vulnerability, Retrieved on 25/06/2021 from www.fca.org.uk/publications/occasional-papers/occasional-paper-no-8-consumer-vulnerability.
FINRA IEF. (2013). Financial capability in the United States: Report of financial capability in the United States.
http://www.usfnancialcapability.org/downloads/NFCS_2012_Report_Natl_Findings.pdf.
Ganster, D. G., & Fusilier, M. R. (1989). Control in the workplace. In: C. L. Gooper & I. T. Robertson (Eds.), International review of industrial and organizational psychology. Ghichester, England: Wiley. 235-280.
Garman, E., & Forgue, R. (1997). Personal Finance. Boston, MA: Houghton Mifflin Company.
Greninger, S. A., Hampton, V.L., Kitt, K. A., & Achacoso, J. A. (1996). Ratios and benchmarks for measuring financial well-being of families and individuals. Financial Services Review, 5(1), 57-70.
Gudmunson, C. G., & Danes, S. M. (2011). Family financial socialization: Theory and critical review. Journal of family and economic issues, 32(4), 644-667.
Gudmunson, C. G., Zuiker, V. S., Katras, M. J., & Sabri, M. F. (2015). Enhancing personal and family finance courses using case studies. College Student Journal, 49(3), 321-330.
Hakkio, C. S., & Keeton, W. R. (2009). Financial stress: What is it, how can it be measured, and why does it matter. Economic Review, 94(2), 5-50.
Hanna, S., & Wang, H. (1995). The adequacy of emergency funds to cover household expenditures. Consumer Interests Annual, 41, 224-225.
Hayes, D. A., & Finney, A. D. (2013). The Genworth Index (volume 5): Measuring Consumer Financial Security and Vulnerability.
He, T., Derfler-Rozin, R., & Pitesa, M. (2020). Financial vulnerability and the reproduction of disadvantage in economic exchanges. Journal of Applied Psychology, 105(1), 80–96. https://psycnet.apa.org/doi/10.1037/apl0000427
Huang, R., Ghose, B., & Tang, S. (2020). Effect of financial stress on self-reported health and quality of life among older adults in five developing countries: a cross sectional analysis of WHO-SAGE survey. BMC geriatrics, 20(1), 1-12. https://doi.org/10.1186/s12877-020-01687-5
Ismail, S., Faique, F. A., Bakri, M. H., Zain, Z. M., Idris, N. H., Yazid, Z. A., ... & Taib, N. M. (2017). The role of financial self-efficacy scale in predicting financial behavior. Advanced Science Letters, 23(5), 4635-4639.
Johnson, D. P., & Widdows, R. (1985). Emergency fund levels of households. In: K.P. Schnittgrund (Ed.), Proceedings of the 31st Annual Conference of the American Council of Consumer Interests (pp. 235-241). Fort Worth, TX: American Council Consumer Interest.
Joo, S. H., Durband, D. B., & Grable, J. E. (2008). The academic impact of financial stress on college students. Journal of College Student Retention: Research, Theory and Practice, 10(3), 287-305.
Joo, S., & Grable, J. E. (2004). An exploratory framework of the determinants of financial satisfaction. Journal of Family and Issues, 25(1), 25-50.
Jorgensen, B. L., Rappleyea, D. L., Schweichler, J. T., Fang, X., & Moran, M. E. (2016). The financial behavior of emerging adults: a family financial socialization approach. Journal of Family and Economic Issues, 38, 57–69. http://dx.doi.org/ 10.1007/s10834-015- 9481-0
Keenan, A., & McBain, G. D. M. (1979). Effects of type a behavior, intolerance of ambiguity, and locus of control on the relationship between role stress and work-related outcomes. Journal of Occupational Psychology, 52, 277–285. http://dx.doi.org/ 10.1111/j.2044- 8325.1979
Kesavayuth, D., Ko, K. M., & Zikos, V. (2018). Locus of control and financial risk attitudes. Economic Modelling, 72, 122–131. http://dx.doi.org/ 10.1016/j.econmod.2018.01.010
Kim, D. (2007). The effect of loans on students’ degree attainment: Differences by student and institutional characteristics. Harvard Educational Review, 77, 64–100. https://doi.org/ 10.17763 /haer.77.1.n14t69l0q8292784.
Kim, J. (2004). Impact of a workplace financial education program on financial attitude, financial behavior, financial well-being, and financial knowledge. In: Proceedings of the association for Financial Counseling and Planning Education (Vol. 22, No. 1, pp. 82-89).
Kim, K., Wilmarth, M., & Henager, R. (2017). Poverty levels and debt indicators among low-income households before and after the great recession. Journal of Financial Counseling and Planning, 28(2), 196–212. https://doi.org/10.1891/1052-3073.28.2.196.
Kim, Y. I., Kim, H. C., & Yoo. J. H. (2016). Household over-indebtedness and financial vulnerability in Korea: Evidence from credit bureau data. KDI Journal of Economic Policy, 38, 53–77. http://dx.doi.org/10.23895/kdijep.2016.38.3.53
Kramer, K. Z., Andrade, F. C. D., Greenlee, A. J., Mendenhall, R., Bellisle, D., & Blanks, R. L. (2019). Periodic Earned Income Tax Credit (EITC) payment, financial stress and wellbeing: a longitudinal study. Journal of Family and Economic Issues, 40(3), 511-523.
Lanz, M., Sorgente, A., & Danes, S. M. (2019). Implicit family financial socialization and emerging adults’ financial well-being: A multi-informant approach. Emerging Adulthood, 2167696819876752.
LeBaron, A. B., Hill, E. J., Rosa, C. M., Spencer, T. J., Marks, L. D., & Powell, J. T. (2018). I wish: Multigenerational regrets and reflections on teaching children about money. Journal of Family and Economic Issues, 39(2), 220–232. https://doi.org/10.1007/ s10834-017-9556-1
Lee, D. K. C., & Teo, G. S. Z. J. (2015). Emergence of FinTech and the LASIC Principles. Journal of Financial Perspectives, 3(3), 1.
Lim, H., Heckman, S., Montalto, C. P., & Letkiewicz, J. (2014). Financial stress, self-efficacy, and financial help-seeking behavior of college students. Journal of Financial Counseling and Planning, 25(2), 148-160.
Lusardi, A., Mitchell, O. S., & Curto, V. (2010). Financial literacy among the young. Journal of Consumer Affairs, 44(2), 358-380.
Manfrè, M. (2017). Saving Behavior: Financial socialization and self-control. Retrieved on 24/06/2021 from https://siecon3-
607788.c.cdn77.org/sites/siecon.org/files/media_wysiwyg/288-manfre
McCarthy, Y. (2011). Behavioral characteristics and financial distress. European Central Bank. https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1303.pdf?4ca9f70deb4b072c54015aa30aac835b
Mian, A., Rao, K., & Sufi, A. (2013). Household balance sheets, consumption, and the economic slump. The Quarterly Journal of Economics, 128(4), 1687-1726.
Mills, M., Blossfeld, H. P. & Klijzing, E. (2005). Becoming an adult in uncertain times: A 14- country comparison of the losers of globalization, pp. 393- 411, In: H.-P. Blossfeld, E. Klijzing, M. Mills & K. Kurz (Eds.) Globalization, Uncertainty and Youth in Society. London: Routledge Advances in Sociology Series.
Mitchell, O. S., Mottola, G. R., Utkus, S. P., & Yamaguchi, T. (2006). The inattentive participant: Portfolio trading behavior in 401 (k) plans. Michigan Retirement Research Center Research Paper No.
Mudzingiri, C., Mwamba, M. J. W., & Keyser, J. N. (2018). Financial behavior, confidence, risk preferences and financial literacy of university students. Cogent Economics & Finance, 6(1), 1512366.
Narayan, D., R. Patel, K. Schafft, A. Rademacher, & S. Koch-Schulte. (2000). Voices of the poor: Can anyone hear us? New York: World Bank, Oxford University Press.
O’Connor, G. E., Newmeyer, C. E., Wong, N. Y. C., Bayuk, J. B., Cook, L. A., Komarova, Y., ... Warmath, D. (2019). Conceptualizing the multiple dimensions of consumer financial vulnerability, Journal of Business Research, 100, 421-430.
O’Neill, B., Sorhaindo, B., Xiao, J. J., & Garman, E. T. (2005). Financial distressed consumers: Their financial practices, financial well-being, and health. Financial Counseling and Planning, 16, 73-87.
Outlook, O. E. (2020). December 2020. Organization for Economic Cooperation and Development, 7.
Parrotta, J. L., & Johnson, P. J. (1998). The impact of financial attitudes and knowledge on financial management and satisfaction of recently married individuals. Journal of Financial Counseling and Planning, 9(2), 59-75.
Pearlin, L. I., & Bierman, A. (2013). Current issues and future directions in research into the stress process. In Handbook of the sociology of mental health (pp. 325-340). Springer, Dordrecht.
Poh, L. M., & Sabri, M. F. (2017). Review of financial vulnerability studies. Archives of Business Research, 5(2), 127-134.
Rabbani, A., Yao, Z., Wang, C., & John, G. (2019). Association between financial risk tolerance and locus of control, sensation seeking for pre-retiree baby boomers. Academic Research Colloquium for Financial Planning and Related Disciplines, 1-14. http://dx.doi.org/10.2139/ssrn.3256035.
Rea, J. K., Danes, S. M., Serido, J., Borden, L. M., and Shim, S. (2019). Being able to support yourself: Young adults’ meaning of financial well-being through family financial socialization. Journal of Family and Economic Issues, 40, 250–268.
Reich, J. W., & Zautra, A. J. (1983). Demands and desires in daily life: Some influences on wellbeing. American Journal of Community Psychology, 11(1), 41-58. http://dx.doi.org/10.1007/BF00898418
Rotter, J. B. (1966). Generalized expectancies for internal versus external control of reinforcement. Psychological Monographs, 80, 1–28. http://dx.doi.org/ 10.1037/h0092976
Sabri, M. F., & Wijekoon, R. (2019). The influence of gender and ethnicity on young adults’ participation in financial education programme. Journal of Management and Sustainability, 9(1), 159-170. http://dx.doi.org/10. 5539/ jms. v9n1p159.
Sabri, M. F., MacDonald, M., Hira, T. K., & Masud, J. (2010). Childhood consumer experience and the financial literacy of college students in Malaysia. Family & Consumer Sciences Research Journal, 38(4), 455- 467
Sabri, M. F., Rahim, H. A., Wijekoon, R., Zakaria, N. F., Magli, A. S., & Reza, T. S. (2020b). The mediating effect of money attitude on association between financial literacy, financial behavior, and financial vulnerability. International Journal of Academic Research in Business and Social Sciences, 10(15), 340-358.
http://dx.doi.org/10.6007/IJARBSS/v10-i15/8254
Sabri, M. F., Reza, T. S., & Wijekoon, R. (2020a). Financial management, savings and investment behavior and financial well-being of working women in the public sector. Majalah Ilmiah Bijak, 17(2), 135-153.
Sabri, M. F., Wijekoon, R., Ramli, N. N., & Dass, T. M. (2019). The impact of smart money kit on children’s financial knowledge, attitude and behavior. Journal of Social Sciences and Humanities, 3, 48-59.
Sadiq, N., & Ishaq, H. M. M. (2014). The Effect of Demographic Factors on the Behavior of Investors during the Choice of Investments: Evidence from Twin Cities of Pakistan. Global Journal of Management and Business Research, 14(3), 47-56.
Salisbury, L. C., & Zhao, M. (2020). Active choice format and minimum payment warnings in credit card repayment decisions. Journal of Public Policy & Marketing, 39(3), 284-304.
Serido, J., & Deenanath, V. (2016). Financial parenting: Promoting fnancial self-reliance of young consumers. In J. J. Xiao (Ed.), Handbook of consumer finance research (2nd ed., pp. 291–300). New York: Springer Science + Business Media. https://doi. org/10.1007/978-3-319-28887-1_24.
Spector, P. E., Cooper, C. L., Sanchez, J. I., O’Driscoll, M., Sparks, K., Bernin, P., ... & Miller, K. (2002). Locus of control and well-being at work: How generalize are western findings? Academy of Management Journal, 45(2), 453-466.
Stromback, C., Lind, T., Skagerlund, K., Vastfjall, D., & Tinghog, G. (2017). Does self-control predict financial behavior and financial well-being? Journal of Behavioral and Experimental Finance, 14, 30-38
Sumarwan, U., & Hira, T. K. (1993). The effects of perceived locus of control and perceived income adequacy on satisfaction with financial status of rural households. Journal of Family and Economic Issues, 14, 343–364.
U.S. Census Bureau. (2013). American Community Survey, 2009– 2013 and decennial census 1980, 1990, 2000.
http://www.census.gov/content/dam/Census/newsroom/cspan/2015/20150130_cspan_ younga dults.pdf
Van Daalen, H. J., Van Niekerk, E. C,. & Pottas, C. D. (1989). The validation of Furnham’s locus of control scale for Black Southern African Group. Journal of Industrial Psychology, 15(1): 12-21.
Van de Venter, G., Michayluk, D., & Davey, G. (2012). A longitudinal study of financial risk tolerance. Journal of Economic Psychology, 33(4), 794-800.
Van den Brande, W., Baillien, E., De Witte, H., Vander Elst, T., & Godderis, L. (2016). The role of work stressors, coping strategies and coping resources in the process of workplace bullying: a systematic review and development of a comprehensive model. Aggression and Violent Behavior, 29, 61–71. http://dx.doi.org/ 10.1016/j.avb. 2016.06.004.
Weisz, J. R., Rothbaum, F. M., & Blackburn, T. C. (1984). Standing out and standing in: The psychology of control in America and Japan. American psychologist, 39(9), 955-969.
Worthington, A. C. (2006). Debt as a source of financial stress in Australian households. International Journal of Consumer Studies, 30,2–15. http://dx.doi.org/10.1111/ ijc.2006.30.issue-1.
Xiao, J. J. (2008). Applying behavior theories to financial behavior. In: Handbook of consumer finance research (pp. 69-81). Springer, New York, NY.
Xiao, J. J. (2009). Applying behavior theories to financial behavior. In Handbook of consumer finance research (pp. 69-81). New York: Springer.
Xiao, J. J., Ahn, S. Y., Serido, J., & Shim, S. (2014). Earlier financial literacy and later financial behavior of college students. International Journal of Consumer Studies, 38(6), 593-601. http://dx.doi.org/ 10.1111/ijcs.12122.
Zaimah, R. (2011). Pengaruh pengetahuan, tingkahlaku dan pembuatan keputusan kewangan ke ataskesejahteraan kewangan pekerja sektor awam yang berkahwin (Unpublished doctoral dissertation), Universiti Putra Malaysia, Serdang.
In-Text Citation: (Anthony et al., 2021)
To Cite this Article: Anthony, M., Sabri, M. F., Wijekoon, R., Rahim, H. A., Abdullah, H., Othman, M. A., & Yusoff, I. S. M. (2021). The Influence of Financial Socialization, Financial Behavior, Locus of Control and Financial Stress on Young Adults’ Financial Vulnerability. International Journal of Academic Research in Business and Social Sciences, 11(19), 289–309.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode