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The Influence of Spending Behaviour Among University Students in Malaysia

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DOI: 10.55057/ajafin.2022.4.3.3

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 Asian Journal of Accounting and Finance
e-ISSN: 2710-5857 | Vol. 4, No. 3, 30-43, 2022
http://myjms.mohe.gov.my/index.php/ajafin

The Influence of Spending Behaviour Among University Students

in Malaysia
Darshini Sundra Kumar1, Hafizah Sudin1, Jaizah Othman1*, Shahrullizuannizam
Salehuddin1
1
Faculty of Business Management and Professional Studies, Management and Science University, Shah Alam,
Malaysia

*Corresponding Author: jaizaho@yahoo.com

Accepted: 15 August 2022 | Published: 1 September 2022

DOI: https://doi.org/10.55057/ajafin.2022.4.3.3
_________________________________________________________________________________________

Abstract: The number of insolvencies in Malaysia is rising rapidly, especially among the youth.
According to the Malaysian Insolvency Authority, the number of bankruptcy declarations has
been steadily increasing since 2015. Indebtedness and overspending are the main causes of this
condition, and they could be caused by a lack of financial capability. This study focuses on
university students because they are the future stars of the country. The objective of this study
is to investigate what factors influence the spending behaviour of university students in
Malaysia. The study uses primary data collected through structured questionnaires from a
sample of 300 university students in Malaysia. The data were analysed using Statistical
Package of Social Science (SPSS) 28.0 software and descriptive survey method. In this study,
three independent variables are used to determine the relationship between spending behaviour
of university students in Malaysia: Financial Management Knowledge (KFM), Parental Income
(PI), and Peer Influence (P). Descriptive statistics, normality test, correlation and regression
analysis were used to analyse the data. The results show that, with the exception of financial
management knowledge, all independent factors have a significant relationship with university
students' spending behaviour. This study also offers suggestions and critiques on how to
address the problem of excessive spending among university students, especially Malaysian
students. Therefore, the focus of this study is to discuss these characteristics and the spending
behaviour of university students.

Keywords: spending behaviour, knowledge of financial management, parental income, peer

influence, university students, Malaysia
___________________________________________________________________________

1. Introduction

The uncontrolled spending behaviour of the younger generations in Malaysia is becoming more
common. Compared to previous generations, they tend to place a lower value on money when
it comes to spending. Esmail Alekam et al. (2018) found that due to the significant increase in
the cost of living in Malaysia, younger generations like to spend their money lavishly, which
has led to changes in lifestyle and spending behaviour in Malaysia. According to Carter (2014),
spending is the act of investing money in something a person wants or needs; this can be in the
form of goods or services. Food, shelter, clothing, health care, and transportation are just a few
examples. People's spending habits differ based on a number of conditions. Age, income,
gender, ethnicity, family history, personality, and a host of other variables play a role.
Therefore, it is very important for us to know to what extent the youth of our country are aware

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of different financial practices and services. It is not only important that students have financial
knowledge, but also that it is implemented in their daily lives. Therefore, it is critical to explore
the extent to which students are financially literate and how to promote financial awareness.

According to AsiaNews.it (2018), one of the most pressing concerns of Malaysians today is the
spending habits of university students, which has led to an increase in bankruptcies and social
difficulties among the younger generation, often related to their financial capabilities. Rakow
(2019) claims that poor money management is the cause of university students' lack of financial
understanding. This leads to reckless spending, bankruptcy, debt, and financial disasters. For
example, the Malaysian Parliament reported that in the past five years, about 64k Malaysians
aged 18 to 44 had been declared bankrupt. As a result, young people are working 24 hours a
day, 7 days a week just to get out of debt.

Nowadays, the young generation spends more money on online shopping, convenience, travel,
socialising, and online gaming than on homes and cars compared to previous generations. This
bad habit affects spending behaviour as the young generation tries to follow trends and buy
anything they want without thinking twice. When this bad habit occurs, it will cause problems
such as not being able to afford enough to pay for PTPTN loans, rent, car loans, and more.
Therefore, this problem needs to be focused on so that the younger generation, especially
students, do not develop bad habits.

The main objective of the study is to investigate the influence of the spending habits of
Malaysian university students. The objective of the study is to find out if there is a relationship
between the three independent variables of financial management knowledge, parental income,
peer influence and the dependent variable (spending behaviour).

2. Literature Review

Spending Behaviour
Spending behaviour is the behaviour of customers to spend available money, money from debit
card and credit card to satisfy their needs or wants. No customer has a stable and fixed spending
behaviour. People's spending behaviour varies and differs according to people's race, religion,
family background, ethnicity, and where they live. It is very common for male students to
gravitate towards masculine items such as expensive gadgets, watches, and purses, while female
students may be interested in decorative items such as makeup or cosmetic products, as well as
jewellery. There are many factors that influence spending habits. These include understanding
of financial management, parental income, and peer influence. There are many researchers who
have shared their ideas and thoughts about customer spending behaviour. According to Kamis
et al (2021), spending behaviour is the act of distributing money in response to an activity,
atmosphere or person to satisfy needs.

According to Obagbuwa and Kwenda (2020), a person is classified as a poor spender if he or

she has poor discipline in terms of constant spending behaviour. Researchers Kamis et al (2021)
said that when spending increases, demand also increases. In addition, Sorooshian and Seng
Teck (2014) said that university students in Malaysia tend to spend more compared to other
Asian countries, which accounts for a large proportion of consumer spending. According to
Ismail and Khalid (2016), this is due to the sudden shock that expatriate students experience
from their family members. Obagbuwa and Kwenda (2020) found that students who have good
financial management spend a larger proportion of their money on purchasing durable goods.
Durable goods can be items related to education and housing. According to Obagbuwa and

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Kwenda (2020), this is more for the purpose of investment. There are different types of
spending habits such as impulse buying, shopping as a basic habit, spending very frequently on
small items, and forgetting to save.

In addition, according to Gulati (2017), peer influence can have an impact on students' spending
habits. This is because students today spend more time in school. Teenagers will follow the
trend that the majority of their peers pretend to follow in order to fit into a group or be liked by
their peers. This will have an impact on teen buying habits. According to Duflo and Saez (2002),
on the other hand, people who have similar preferences are more likely to have similar spending
behaviour because peers influence each other. According to Laible et al. (2004), teenagers are
directly or indirectly influenced by their friends.

Relationship between knowledge of financial management and spending behaviour

According to Falahati et al. (2012), success in life requires the ability to regulate one's financial
behaviour. One of the most important indicators of a person's financial satisfaction and
spending behaviour is financial literacy. Based on the research of Kamis et al. (2021), it was
found that financial management knowledge is strongly correlated with university students'
spending behaviour. In short, according to Chang et al. (2019), students are able to think wisely
before making a decision in spending money if the knowledge is available.

At the end of 2018, the Malaysian Department of Insolvency reported 303,415 cases of
bankruptcy. Empirical research in various Asian countries has found that increased financial
management knowledge has a negative impact on spending behaviour. For example,
Sorooshian and Seng Teck (2014) claim that a lack of financial understanding among the
younger generation would lead to financial inefficiency once they reach adulthood, resulting in
financial illiteracy. According to Bona (2018), a similar study found that young people who are
taught about finances during childhood have the greatest chance of being debt-free in adulthood.

An earlier study was conducted by researchers Kamis et al. (2021). It was found that there is a
positive correlation between financial management knowledge and spending behaviour among
university students (Chang et al., 2019). Following Gutter et al. (2010), financial knowledge
was found to have a direct and negative relationship with financial behaviour. It led to an
increase in financial awareness, which is a means to achieve personal responsibility and
improve the quality of life. As a result, students who have a better understanding of the concept
of financial management are able to make better financial decisions. This can be seen in their
ability to manage their personal finances and properly plan their investments.

Relationship between parental income and spending behaviour

Because university graduates do not yet work themselves to earn their own income, they still
rely on their parents' income. According to Chang et al. (2019), most university students aged
18 to 25 who live far away from their family tend to study full-time. Therefore, in this case,
parents' income plays a big role in how students spend their money. And the higher the parents'
income, the higher the students' spending. According to the research conducted, there is a close
relationship between parents' income and students' spending behaviour. According to Nano et
al. (2015), an increase in parental income corresponds to an increase in student spending.
Students whose parents have higher incomes spend more and save less. This is due to the fact
that spending money (provided by parents) is an indicator of children's purchasing power.
According to Nano et al. (2015), students with higher parental income save less and spend more
because they believe that money flows freely to them. Students with higher family incomes are
more likely to have poor financial habits because they spend carelessly and unpredictably.

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On the other hand, Mayer (2002) came to a different conclusion. In this study, a negative
relationship was found between these two factors. Children's spending tends to decrease when
parents' income increases. The majority of students still rely on their parents' financial support
during their university years. Thus, Mayer (2002) found that children's spending does not
necessarily increase at the same rate when family income increases. This is because their
behaviour and mindset have been conditioned since childhood, leading children to prefer saving
more and spending less even as their parents' wealth increases. As a result, the parents' income
and their spending habits develop in opposite directions.

Relationship between peer influence and spending behaviour

According to our research, peer influence is one of the elements that affect students' spending
behaviour. As a child matures into a young adult, certain patterns of purchasing intentions and
behaviours emerge and change. According to Makgosa and Mohube (2007), peers play a critical
role in shaping one's attitudes, beliefs, and behaviours, as students spend the majority of their
time in university with peers. Peer pressure has become a social phenomenon.

A young teenager will also seek information or advice from a friend before making a purchase.
According to Gulati (2017), people spend more money when they shop with their friends than
when they shop alone. This is because when people shop with friends, they seek expertise, adapt
to others' tastes, and use each other's values to guide their purchasing decisions.

Based on their study, Laursen and Veenstra (2021) claim that there is a high correlation between
peer influence and university students' shopping behaviour. In agreement with Chang et al.
(2019), this is due to the fact that the mental state and maturity level of university students is
still low as they have just entered puberty. Researchers Mohamad et al. (2016) mention that
there has been shown to be a strong relationship between peer influence and student spending
behaviour (Laursen & Veenstra, 2021).

3. Methodology

The target population of the study was students from public and private universities. The
respondents in this survey are university students. Due to the ease with which responses could
be obtained, this study focused on universities in Malaysia. This survey is conducted entirely
online. To complete the sample, stratified random sampling divides the total population into
smaller groups. In this study, data is collected using a stratified sampling strategy based on
gender, age, education level, type of institution, and parents' income. The reason for this is that
it facilitates data collection and reduces the possibility of a low response rate.

In this survey, researchers mainly used measurement scales such as the Likert-Five scale. Using
a questionnaire is recommended because this study has a large sample size. By using an online
survey, the study can be completed faster and more successfully. The questionnaire will be
shared on Instagram, Facebook, and WhatsApp groups and distributed to all students on campus
who meet the requirements. The core data for this study was collected by sending questionnaires
to the intended respondents. In addition, the questionnaire is divided into three (3) sections:
i. Demographic Information
ii. Dependent Variable (Spending Behaviour)
iii. Independent Variable (Knowledge of financial management, parental income and peer
influence

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In this study, data were coded and analyzed using Statistical Package for Social Sciences
(SPSS) version 28.0. Appropriate descriptive statistics, normality analysis, reliability analysis,
correlation analysis, and correlation analysis were used in the analysis phase. The statistical
method chosen depended on the measurement scale, the number of variables, and the type of
questions. Keller and Warrack (1997) noted that it is important to know the nature of the data
being measured because this will determine the type of statistical procedures used. In analyzing
the data, this study focused on testing the hypothesis developed for the research.

Theoretical Framework and Hypothesis Development

Based on our review of existing literature and ideas, we discovered numerous aspects that may
influence university students' spending behaviour. However, to determine students' spending
behaviour, we selected these three (3) independent factors among many others as the most
important independent variables in our research: Literacy knowledge, parental income, and peer
influence. The conceptual framework we use to test the association between the independent
and dependent variables is shown in the figure below.

Knowledge of Financial
Management
H1

Parental Income
H2

Spending
Peer Influence H3
Behaviour

Figure 1: Conceptual framework

3.1.1 Knowledge of financial management

According to Herawati et al. (2018) and Falahati et al. (2012), there is a positive relationship
between financial management and spending behaviour, although Vyvyan et al. (2014) claimed
that financial literacy does not affect spending behaviour. A study by Kamis et al. (2021) found
that there is a positive relationship between financial management knowledge and spending
behaviour among university students. Following Gutter et al. (2010), financial knowledge was
found to have a direct and negative relationship with financial behaviour. It leads to an increase
in financial awareness, which is a means of gaining personal responsibility and improving
quality of life. As a result, students who have a better understanding of the concept of financial
management are able to make better financial decisions. This can be seen in their ability to
manage their personal finances and plan their investments properly. Hypotheses H 01 and HA1
were developed to determine whether knowledge of financial management predicts spending
behaviour.

Knowledge of Financial Spending Behaviour

Management
H1
Figure 2: Hypothesis 1

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H01: There is no significant relationship between knowledge of financial management and

spending behaviour among university students in Malaysia.
HA1: There is a significant relationship between knowledge of financial management and
spending behaviour among university students in Malaysia.

Parental Income
Based on the research conducted, there is a strong relationship between parental income and
spending behaviour of university students. According to Nano et al. (2015), an increase in
parental income corresponds to an increase in student spending. Students whose parents have
higher incomes spend more money and save less. This is because the allowance children receive
from their parents is indicative of their spending power. According to Nano et al. (2015),
students with higher parental income save less and spend more because they believe that money
flows freely to them. Students with higher family incomes are more likely to have poor financial
habits because they spend carelessly and unpredictably.

On the other hand, Mayer (2002) came to a different conclusion. In this study, a negative
relationship was found between these two factors. Children’s spending tends to decrease when
parents’ income increases. The majority of students still rely on their parents’ financial support
during their university years. Hypotheses H02 and HA2 were developed to determine if parental
income predicts spending behaviour.

Parental Income Spending Behaviour

H2

Figure 3: Hypothesis 2

H02: There is no significant relationship between parental income and spending

behavior among university students in Malaysia.
HA2: There is a significant relationship between parental Income and spending
behaviour among university students in Malaysia.

Peer Influences
Based on the research study of Laursen and Veenstra (2021), it is claimed that there is a high
correlation between peer influence and the spending behaviour of university students.
According to Chang et al. (2019), this is because the mental state and maturity level of
university students is still low as they have just entered puberty. Researchers Mohamad et al.
(2016) mentioned that it has been proven that there is a strong relationship between peer
influence and the spending behaviour of university students (Laursen & Veenstra, 2021).
Moreover, based on the information obtained from the research study through the distribution
of the questionnaire, it was found that customers usually spend more when they are with friends
than when they are alone (Winingsih et al., 2018). On the other hand, only one researcher,
Abdul Jamal (2015), found that the relationship between peers and spending behaviour should
be negative. Hypotheses H03 and HA3 were developed regarding the influence of peers on
spending behaviour.

Parental Income Spending Behaviour

H2
Figure 4: Hypothesis 3

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H03: There is no significant relationship between peer influences and spending

behaviour among university students in Malaysia.
HA3: There is a significant relationship between peer influence and spending
behaviour among university students in Malaysia

4. Data Analysis and Results

Demographic Analysis
Table 1: Summary of Demographics
Category Items Frequency Percent
Gender Male 129 43
Female 171 57
Age 17 – 20 54 18
21 – 24 197 65.7
25 – 28 47 15.7
29 – 32 2 0.6
Ethnicity Malay 58 19.3
Chinese 131 43.7
India 111 37
Current year of study Year 1 2 0.7
Year 2 49 16.3
Year 3 109 36.3
Year 4 95 31.7
Foundation 45 15
Type of Institution Public 144 48
Private 156 52
Parent’s salary range <RM2500 13 4.3
RM2501-RM5000 26 8.7
RM5001-RM7500 100 33.3
7501-10000 124 41.3
RM10000 37 12.3
How much allowance do you RM 0 - RM 1000 289 95.8
receive per month from your RM 1001 – RM 2000 8 3.2
parents? RM 2001 – RM 3000 3 1
Do you work part-time Yes 91 30.3
No 209 69.7
If yes, how much do you earn RM 100 – RM 400 6 2
per month from your part- RM 401 – RM 700 49 16.4
time job? RM 701 – RM 1000 18 5.8

In terms of demographic characteristics, the gender of the respondents in the study is more
female than male: 57 percent of female respondents and 43 percent of male respondents. The
majority of respondents are between 21 and 24 years old. Chinese respondents are the most
numerous, accounting for 43.7 percent of the total ethnic group. In addition, 36.3 percent of the
respondents are in their 3rd year of study and 31.7 percent are in their 4th year of study, with 4th
year students being the most numerous. Of the public university students, only 48% responded,
while of the private university students, 52% responded. The parents of 124 of the 300
respondents have incomes ranging from about RM7501 to RM10,000 and mostly received an

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allowance of RM0 to RM1,000. Of the 300 respondents, 91 (30.3%) work part-time and 49
have a salary between RM401 and RM700.

Normality Descriptive Statistics

Table 2: Normality test
N Min Max Mean Std. Skewness Kurtosis
Dev.
S 300 10.00 30.00 23.0767 2.82798 -.759 .141 2.055 .281
FM 300 11.00 35.00 24.7567 4.35208 -.545 .141 .610 .281
PI 300 11.00 30.00 22.7233 3.14001 -.940 .141 1.320 .281
P 300 6.00 30.00 22.3567 4.20099 -1.682 .141 3.122 .281

To be considered normal, the statistical values for skewness and kurtosis must be less than ±
1.0. Table 2 shows that the negative skewness of the test variables for spending behaviour,
financial management knowledge, and parental income are -0.759, -0.545, and -0.940,
respectively, indicating that the distribution of values is significantly skewed. The last variable,
peer influence, has a negative skewness of – 1.682, which is less than – 1. This means that the
data are highly skewed if the skewness is less than -1 or greater than 1. Next, we consider the
kurtosis. The test for all variables has a positive kurtosis, indicating that the distribution is
peaked and has thick tails. For spending behaviour, parental income, and peer influence, the
value is greater than 1 and are 2.055, 1.320, and 3.122, respectively. They are not outside the
normal range, but the distribution is high, it is leptokurtic, hence the positive kurtosis value. In
the case of knowledge of financial management, the value is less than 1, 0.610, which means
that it is a normal distribution.

Reliability Analysis
Table 3: Reliability Test
Construct Cronbach’s Alpa Number of items
Spending Behaviour (S) 0.631 6
Knowledge of Financial 0.799 7
Management (FM)
Parental Income (PI) 0.693 6
Peer Influence (P) 0.875 6

Table 3 illustrates the results of utilising Cronbach’s coefficient to assess the variables’
reliability, as given in the preceding table. Cronbach’s alpha for all dimensions is more than
0.60, which is the minimum value. As a result, the construct measures are regarded reliable,
and all build measurement items are kept (Hair et al., 1998).

4.4 Hypothesis Testing (Correlation and Regression)

In seeking the empirical evidences on the factors determiningspending behaviour, the
theoretical model of the study led to the development of 3 hypotheses.
Table 4: Hypothesis testing
Hypothesis Result Supported
H1: There is a significant relationship between
knowledge of financial management and P= 0.244 No
spending behavior among university students in P-value<0.05
Malaysia.

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H2: There is a significant relationship between

parental income and spending behavior among P= 0.00 Yes
university students in Malaysia. P-value<0.05
H3: There is a significant relationship between
peer influence and spending behavior among P= 0.00 Yes
university students in Malaysia P-value<0.05

First Hypothesis (H1)

H1: There is no significant relationship between the knowledge of financial management and
spending behaviour among university students in Malaysia.

Financial management competence has a minor link with university students’ spending patterns
in Malaysia, as seen in table 3. This is the situation since the important value (0.244) exceeds
the significance barrier (0.05). Financial management skill has a beta of 0.055, indicating that
financial management knowledge and spending behavior are not related. It’s in line with
research from other Asian countries, which has demonstrated that having more financial
management knowledge has a negative impact on spending habits. According to Shahryar and
Tan (2014), a lack of financial literacy among the younger generation would lead to financial
inefficiency once they reach adulthood, leading to financial illiteracy.

Second Hypothesis (H2)

H2: There is significant relationship between the parental income and spending behaviour
among university students in Malaysia.

The results show a positive relationship between parental income and spending habits. These
results are consistent with the studies of Nano et al. (2015). They show how family income
affects student spending. In addition, Nano et al. (2015) and Salikin et al. (2012) found that
parental income has a significant impact on student spending. The higher the parents’ income,
the more money students have. As a result, students are more inclined to spend money.

Third Hypothesis (H3)

H3: There is significant relationship between the peer influence and spending behaviour
among university students in Malaysia.

On the other hand, the data show that peer pressure can influence the spending behaviour of
Malaysian university students. Peer influence has a beta of 0.257, indicating a positive
relationship with purchasing decisions. These results are consistent with the study of Armaan
and Etin (2013). In addition, the current results are similar to research on the influence of peers
on spending behaviour by Khan, Kamal, and Saleem (2016), Chang & Nguyen (2018), and
Gillani (2012), all of which show that peers can have a significant influence on an individual’s
purchasing habits. This is because people frequently turn to their peers. In addition, a friend’s
buying habits only influence a person’s decisions

5. Discussion of Findings

In terms of demographic characteristics, the gender of respondents in the study is more female
than male, with 57 percent of female respondents and 43 percent of male respondents,
respectively. The majority of the responders are between the ages of 21 and 24. With a 43.7

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percent share of the overall ethnicity, Chinese people are the most numerous. Furthermore, 36.3
percent of respondents are in Degree Year 3 and 31.7 percent are in Degree Year 4, with Year
4 students accounting for the bulk of respondents in this group. Only 48% of public university
students responded in this survey, compared to 52 percent of private university students
respondents. There 124 out of 300 respondents’ parents have income around RM7501 to
RM10,000 and mostly received RM0 to RM1,000 allowance. Out of 300 respondents, 91
(30.3%) work part-time and 49 have a salary ranging from RM401 to RM700.

Normality and reliability tests are performed on the data. If the data’s skewness and kurtosis
are both less than one, the data is regularly distributed. Cronbach’s Alpha is used to assess the
study’s dependability. The Cronbach’s Alpha of 0.631 is acceptable because it met the rule of
thumb of falling between 0.5 and 0.9. All of the item-total correlations are more than 0.5. A
substantial association may be found between each variable using One-way ANOVA and
Pearson Correlation Analysis. However, in the multiple regression analysis, knowledge of
financial management was found to have no significant influence on university students’
spending behaviour.

The corrected R-squared in multiple regression analysis is 0.339. This figure indicates that the
study’s independent variables knowledge of financial management, parental income and peer
influence may be used to explain 33.90 percent of the variation in university students’ spending
behavior. In addition, there is one variable in the study that is insignificant which is knowledge
of financial management.

6. Conclusion

In summary, after examining all independent factors, only financial management knowledge
was insignificantly related to spending behaviour. The remaining variables all had a significant
impact on university students’ spending behaviour. In addition, all variables that affect
spending behaviour were found to be positively associated. Future researchers should
investigate financial management knowledge more thoroughly to ensure that it does not have a
fundamental influence on university students’ spending behaviour. Finally, the current study
achieved its goal of examining the relationship between financial management knowledge,
parental income, peer influence, and spending behaviour.

The following limitations were discovered in this study. It is important to clearly state the
limitations. It will help future researchers to identify the limitations, conduct additional studies,
and make changes. Since the samples were only from Malaysian facilities, the results may not
be generalizable to management. This survey included only 300 Malaysian respondents to
reflect the population of university students in the country. It is impossible to reflect the entire
student population of the country. Apart from that, the demographic data shows that the sample
has the highest number of Chinese students, 43.7 percent, compared to other races. Different
ethnicities and populations have different spending patterns and perspectives. Despite the fact
that the sample size met the minimum requirements established by the previous researcher, the
results obtained may be less robust and representative due to the small sample size. In addition,
the variables in this study are interrelated in such a way that the independent variables focus
solely on the dependent variable. There could be additional significant influences and causes,
called mediating variables, that affect students’ spending behaviour. However, if there are no
mediating factors, the accuracy and reliability of the study could be questioned.

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Future researchers are therefore encouraged to further explore the thoughts and concepts
discussed in the current study. Researchers should conduct their research with more
independent variables to examine students’ spending behavior because spending behavior is
influenced by a variety of circumstances. For example, lifestyle could be used as an independent
variable in a study of college students’ spending behavior. Gajjar (2013) included lifestyle as
one of the independent factors in his study. According to him, lifestyle refers to the way
individuals live in a society and is influenced by their environment. When lifestyle is of high
quality, individuals’ spending increases. Therefore, future researchers could include this
characteristic in their models to improve future studies.

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