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Factors Affecting Financial Literacy of Vietnamese Adults: A Case Study for

Hanoi and Nghe An

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DOI: 10.25073/2588-1108/vnueab.4084

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VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

Factors Affecting Financial Literacy of Vietnamese Adults:

A Case Study for Hanoi and Nghe An

Nguyen Dang Tue*

School of Economics and Management, Hanoi University of Science and Technology,
No. 1, Dai Co Viet Road, Hai Ba Trung Dist., Hanoi, Vietnam
Received 8 August 2016
Revised 19 April 2017, Accepted 26 June 2017

Abstract: This research examines the factors affecting the financial literacy of Vietnamese
adults. Using a sample of 266 observations of adults in two big cities in Vietnam (Hanoi and
Vinh in Nghe An Province), the author evaluates the literacy level of adults in these urban
areas. The financial literacy of the interviewed people is low. The multiple regression results
show that lower financial literacy levels associate with higher age and married status and
higher financial literacy levels associate with higher education, more family members, the
person making financial decisions and the person attending a useful financial course. This
research also explores the association between financial literacy and financial behaviors of
individuals employing logistic models. It is found that higher financial literacy associates with
less probability of overspending and higher probability of saving money and careful spending.
Higher financial literacy is also found to associate with higher probability of opening a
savings account and making various investments.
Keywords: Financial literacy, financial behavior, Vietnamese adults.

1. Introduction  financial wellbeing [1]. Financial literacy helps

1
people make effective use of financial products
In their lifetime, individuals have to make and services and plan for their short-term and
various financial decisions such as borrowing, long-term financial goals. For example, the
investing, and preparing for retirement. study of Klapper and Panos (2011) shows that
Besides, with the complexity of the incessantly better financial literacy is positively related to
developing financial market, individuals should retirement planning [2] while the study of
gain knowledge about various financial Beckmann (2013) shows that there is a positive
products being offered to them. INFE (2011) association between financial literacy and better
defines financial literacy as a combination of saving and diversification [3]. In this way,
awareness, knowledge, skill, attitude and financial literacy improves the well-being of
behavior necessary to make sound financial each person. At the country level, financial
decisions and ultimately achieve individual literacy improvement helps to enhance the
quality of financial services and contribute to
_______ economic growth and development of a

ĐT: 84-1287193535.
Email: tue.nguyendang@hust.edu.vn
country. On the other hand, a low level of
financial literacy may hinder a country’s
https://doi.org/10.25073/2588-1108/vnueab.4084
development. Indeed, the research of Morton
(2005) shows that a large number of those with
59
60 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

low financial literacy will seriously affect the between the level of financial literacy and the
prosperity of the whole [4]. financial behavior of the respondents.
Many developed countries such as the
United States of America, Australia and
Singapore established national financial 2. Literature review
education strategies. Developing countries such
as Poland, Thailand or Malaysia are also in the Previous studies have addressed the issue of
process of establishing national financial an inadequate level of financial literacy in
literacy programs. In those developing developed countries. Lusardi and Mitchell
countries, new financial risks lead to the need (2011) use the 2009 National Survey as part of
for diversification; longer life induces more the National Financial Capability Study and
retirement precautions and newly available found that a large majority of Americans fail to
financial products require more vigilant understand critical financial concepts including
financial decisions. Financial knowledge is thus interest compounding, inflation, and risk
essential for individuals in those countries and diversification [5]. These shortcomings are
especially important for urban people. The most severe for women, the less educated and
reason is that when the economy grows, urban older individuals.
people have to deal with new financial products Kehiaian (2012) surveyed 500 adults in the
and services. This is due to the fact that Middle District of North Carolina to examine
financial institutions concentrate more in the factors that influenced financial literacy in U.S.
big cities and the financial products and households [6]. A questionnaire including 63
services that they offer are now more affordable questions was used to measure financial
with the increasingly higher incomes of urban knowledge and behavior of debtors and non-
people. Financial literacy improvement in the debtors. The author developed 149 independent
urban areas of developing countries may lead to variables broken up into demographic factors,
two desirable consequences: (1) Financial psychological factors, and financial behaviors.
literacy increases welfare by inducing rational The author found 125 significant factors of
financial behavior (e.g. to diversify risks and to financial literacy in 16 different categories. In
ease the proper use of credit cards); and (2) terms of demographic determinants, the study
Financial literacy mobilizes saving which in found that age, experience in financial training,
turn encourages financial service development education, race, type of work, career and
and economic growth. parental background have the most impact on
Improving the financial knowledge, financial literacy.
financial literacy and financial capability of For developing countries, there have been
individuals is possible with appropriate quite a few researches seeking to determine the
financial education programs targeted at the factors influencing people’s financial literacy
right people and at the right time. For financial level. Bhushan and Medury (2014) surveyed
education to be effective it is vital to clearly 516 salaried individuals of Himachal Pradesh
understand the level of financial knowledge, (in India) using a questionnaire of 13 items to
attitudes and behavior of individuals as well as measure respondent’s knowledge in the areas of
factors affecting their financial literacy level. financial numeracy, savings and investments,
In this study, the author aims to enrich the borrowings, insurance, risk and return [7]. Their
existing literature by (1) Evaluating the findings indicate that financial literacy level is
financial literacy levels of adult urban dwellers affected by gender, education, income, nature
in Vietnam; (2) Determining the factors of employment and place of work. The study
affecting the financial literacy of Vietnamese also concludes that the overall financial literacy
individuals; (3) Examining the association level is low in India and necessary measures
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 61

should be taken by the government to increase 3. Methodology and data

awareness about financially related matters.
Krah et al. investigated the financial 3.1. The financial-economic background of
management practices of 286 selected Vietnam and the two cities in the survey
households in the Greater Accra Regions of
Ghana (2014) [8]. They examined the Vietnam belongs to the group of rapidly
budgeting and budgetary control practices of developing economies. Vietnam’s economic
the households to identify the relationships that growth per capita since the early 1990s
exist between the budget culture of a household averaged 5.5% a year and has been among the
and their educational level, stage, income, and fastest in the world. Its pace of poverty
savings/investment stock and found that most reduction is almost unprecedented as can be
households do not prepare a budget for various seen in Figure 1.
reasons. The study also detected a significant
relationship between household budgeting and
the level of saving, educational level, income
level and age of household. Most households do
not seek the assistance of finance experts in
financial planning and decision making.
The financial knowledge poorer areas in
developing countries are also covered in a study
of Xu and Zia (2012) [9]. However, no research
focused specifically on studying the financial
literacy levels of people living in urban areas of
developing countries.
There are not many studies about financial
literacy levels and the determinants of financial
literacy levels in Vietnam. Dinh and Nguyen
proposed a framework to measure financial Figure 1. Vietnam reduction in poverty.
literacy levels and financial capability for Source: World Bank, 2016.
Vietnamese people [10]. However, the authors
Vietnam’s economic expansion reflects a
did not apply this framework to evaluate the
steady acceleration in private consumption
financial literacy of Vietnamese people. growth. Foreign investment, especially in the
Nguyen and Tran sought to determine the export oriented electronics sector, is predicted
financial literacy levels of university students to continue to accelerate with an average annual
[11]. The study found that students’ financial increase of 13.4% in exports of goods and
literacy level is affected by their gender and services in 2014-18, benefiting from the
whether they study for an economics and relocation of low-cost export manufacturing
finance related degree. from China [12].
There have been no studies about factors The financial sector of Vietnam has kept
affecting individuals’ financial literacy. The aim pace with the overall economy. Vietnam
of this paper is to fill this gap by assessing banking and non-banking sectors both account
financial literacy and its determinants in some for high proportions of GDP in comparison
urban areas in Vietnam. This seeks to help policy with other countries in the South East Asian
makers and regulators devise appropriate region. This can be seen in Figure 2.
strategies in order to increase the level of financial Financial services such as insurance are
literacy among the population in urban areas. prospering rapidly and the growing trend
62 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

continues. For example, total insurance was estimated at 7.7 million people with the
premiums nearly doubled between 2007 and population growth rate of 3.5% per year.
2011 driven by robust economic growth, the The city is both a major metropolitan area
rising middle class, rapid urbanization and of Northern Vietnam, and also the country’s
better access to insurance products (Figure 3). political center. It is located in the northern
The financial sector is well developed making region of Vietnam, situated in the Red River
access to sophisticated financial products easier delta, nearly 90 km away from the coast line.
than ever. Hanoi is divided into 12 urban districts, 1
Financial services such as insurance are district-level town and 17 rural districts.
prospering rapidly and the growing trend Hanoi has the highest Human Development
continues. For example, total insurance Index among the cities in Vietnam and is
premiums nearly doubled between 2007 and expected to be one of the fastest growing
cities in the world in terms of GDP growth
2011 driven by robust economic growth, the
from 2008 to 2025. In the year 2013, Hanoi
rising middle class, rapid urbanization and contributed 12.6% to GDP, exported 7.5% of
better access to insurance products (Figure 3). total exports, contributed 17% to the national
The financial sector is well developed making budget and attracted 22% of the investment
access to sophisticated financial products easier capital of Vietnam. The city's nominal GDP
than ever. at current prices reached 451,213 billion
In Vietnam, the cities of Hanoi and Vinh VND (21.48 billion USD) in 2013, which
provide a suitable field to study the factors made per capita GDP stand at 63.3 million
affecting financial literacy levels in a VND (3,000 USD) [13]. The economic
structure underwent important shifts, with
developing country.
tourism, finance, and banking now playing an
Hanoi is the capital and the second largest
increasingly important role.
city in Vietnam. Hanoi’s population in 2015
;

Figure 2. Financial Sector Composition (% of gross domestic product (GDP)).

Sources: World Bank, 2014; Asian Bonds Online, http://asianbondsonline.adb.org/
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 63

Figure 3. Insurance premiums (% of GDP).

Source: World Bank Global Financial Development Database, 2014.
Vinh is the biggest city and economic and collection was carried out in a one-month
cultural center of the Central Coast of Vietnam. period from July to August 2015. Interviews
Vinh is the capital of Nghe An Province, and is were conducted face to face by a group of
a key point in the East-West economic corridor student volunteers. Locations were decided to
linking Myanmar, Thailand, Laos and Vietnam. ensure a balanced sample with respect to
The city is situated in the south-east of the income, education and wealth. Each volunteer
province, and is located on the main north- interviewer attended a training session on this
south transportation route of Vietnam, easily specific survey. Each interviewer approached
accessible by highway, railroad, boat and air. his or her respondent one at a time. Participants
Vinh is about 300 kilometers south of Hanoi were informed that the information obtained
and 1,400 kilometers north of Ho Chi Minh from the survey would be used only for
City. The total area of Vinh city is 104.97 academic purposes. Each interview took 15 to
square kilometers, and includes 16 urban wards 20 minutes. 200 residents in Hanoi were
and 9 suburban communes. The population of sampled and 173 valid answers were collected.
Vinh was estimated in 2015 to be 490,000 150 residents in Vinh were sampled and 93
people. The service sector comprises the largest valid answers were collected. The total sample
part of Vinh's economy, with around 55% of the size is 266. The invalid answers were due to
working population being employed in this missing data and/or the respondents refusing to
area. Vinh is an important transportation hub, answer important questions in the survey.
having a key position on the route between the Primary data from the respondents was
northern and southern parts of the country, and collected by using a structured questionnaire
is also a notable port. designed by the Science and Service
3.2. Data collection Department - Association of Vietnam
Universities and Colleges. It contains 36
For the purpose of the study, a survey was
questions divided into four sections:
conducted amongst individuals in Hanoi and
1. Demographic information: 4 questions.
Vinh with a random sample technique. The
2. Personal finance: 9 questions.
places selected to conduct the survey were in
3. Financial behavior of individuals: 13
the main streets where there is a high
questions.
concentration of people so as to get a
4. Financial knowledge of individuals: 10
representative sample of the population. Data
questions.
64 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

The last section of 10 questions is to applied to determine the factors affecting

evaluate the financial literacy levels of the literacy levels.
interrogated individuals. Specifically, the The regression equation for the whole
questions ask the individuals to calculate the sample is as follows:
simple interest rate, time value of money, FLC = β0 + β1*Age + β2*Age2 + β3*gender
credit, foreign exchange and insurance; test + β4*higher_education + β5*marital_status +
their knowledge about the relationship between β6*family_member + β7*financial_decision +
inflation - profits, inflation - prices, inflation - β8*high_expenditure + β9*high_income +
risk and the role of diversification in reducing β10*course_affect + ε (1)
risk. The total score for each respondent is Where:
calculated by giving one mark for each correct - FLC: Financial literacy score
answer and zero for an incorrect answer. The - Age: Age of the interviewee
total score on that test was used to determine - Age2: Square of Age
the level of financial literacy. Among the 10 - Gender: Gender of the interviewee
questions, there are 3 questions comparable to - Higher_education: Whether the
previous study of Lusardi and Mitchel testing interviewee has completed higher education or
the knowledge of the respondents about interest not (1 if yes, 0 if no).
rate, inflation and risk [14]. This would allow - Marital_status: Whether the interviewee is
for comparison with previous studies. currently married or not (1 if yes, 0 if no).
3.3. Research questions and hypotheses Family_member: The number of members in
the interviewee’s family.
The purpose of this research was to
- Financial_decision: Whether the
determine the relationship between financial
interviewee makes the financial decision in the
literacy, demographic characteristics of
family or not (1 if yes, 0 if no).
Vietnamese households, and other social - High_expenditure: Whether the interviewee
factors. This paper develops a list of factors and has high expenditure or not (more than 9 million
behaviors that may influence financial literacy. VND per month) (1 if yes, 0 if no).
The demographic variables include age, gender, - High_income: Whether the interviewee
type of job, education, marital status, the has a high income or not (more than 9 million
number of family members and income. The VND per month) (1 if yes, 0 if no). In Vietnam,
social factors include whether the person is 9 million VND is the threshold at which a
making financial decisions in the family and person has to pay income tax.
whether the person has attended any financial - Course_affect: Whether the interviewee
management program. The authors tested the has participated in a financial training course
hypothesis whether these variable affect the and has found it useful (1 if yes, 0 if no).
financial literacy levels of the interviewed people. The second model applied in this research is
This research also aims to find the association the logistic model. Logistic regression measures
between the financial literacy level and financial the relationship between the dependent
behaviors of individuals. It is assumed that people variables and independent variables by
with higher financial literacy levels would tend to estimating probabilities using a logistic
use financial products and services and have good function, which is the cumulative logistic
financial habits such as saving or living within distribution. A logistic regression model is an
their means. equation that relates the conditional probability
3.4. Model of an event Y occurring to a weighted
combination of values for variables x1, x2, x3,
The author employed 2 models in this
..., xN. Y is called the response variable while
research. First, a multiple regression model is
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 65

the various x’s are called explanatory variables. percentage of male respondents is 54.1% and
The regression equation has the following form: female respondents is 45.9%. Among the
Pr(Y|x1, x2, x3,..., xN) ∼ β0 + β1x1 + β2x2 + β3x3 interviewed individuals, 51.9% are in the age
+ ... + βNxN (2) group of 20-35 years, 34.6% in the age group of
In this article, the author uses the financial 36-55 years and only 13.5% are older than 55
literacy score as the main explanatory variable years. The majority of the respondents in our
and other variables such as age, sample have finished their higher education
gender, higher_education, marital_status, with a university degree (61.3%), college
family_member, financial_decision, degree (6.4%) or post-graduate degrees (4.5%).
high_expenditure, high_income as controlled The fraction with no higher education degree
variables in the logit model. These variables are account for a small number with 22.9%
described in the multiple regression model. graduated from high schools and 4.9%
The dependent variables for each logit model graduated from vocational schools. Most of
are different financial behaviors of individuals. respondents work as office staff (60.9%) or
Those variables are described below: freelance laborers (25.6%).
- Book keeping: Whether the interviewee Most respondents are married (81.2%) and
has the habit of book keeping his/her income have 3-5 family members (82.3%). The
and expenditure or not (1 if yes, 0 if no). proportion of respondents earning a monthly
- Careful spending: Whether the income of over VND 9 million, VND 6-9 million
interviewee has the habit of spending carefully and VND 3-6 million is 31.6%, 34.6% and 27.1%
or not (1 if yes, 0 if no). respectively. The proportion of respondents with a
- Overspending: Whether the interviewee monthly expenditure of over VND 9 million,
has ever overspent (i.e. spending so much that VND 6-9 million and VND 3-6 million is 11.7%,
he/she has to cover for the expenditure by 22.9% and 36.5% respectively. The fact that
borrowing or getting financial support) or not expenses seem to be lower than income might
(1 if yes, 0 if no). reflect the tradition of the Northern Vietnamese
- Saving money: Whether the interviewee has people in spending and saving.
the habit of saving money or not (1 if yes, 0 if no). Table 2 gives the statistics of some
- Savings account: Whether the interviewee variables according to the survey results. 80.5%
has a savings account or not (1 if yes, 0 if no). of the respondents take part in the financial
- Other investments: Whether the decision process in their family. Only 1.5% of
interviewee has made other investments them receive financial support from outside,
besides saving money in a bank or not (1 if such as the government or their relatives,
yes, 0 if no). besides their own income. More than half of
- Life insurance: Whether the interviewee them have experienced overspending while
purchases life insurance or not (1 if yes, 0 if no). 70.7% have faced financial problems. 39.1% of
- Credit card: Whether the interviewee has a the people keep track of their income and
credit card or not (1 if yes, 0 if no). expenditure while 77.8% of them consider
themselves as careful spenders. 78.2% of them
4. Results and discussion have a saving habit while 50.8% of them
maintain a saving account in a bank and 56% of
4.1. Statistics of collected data them use other types of investment. Only 7.5%
Table 1 gives the summary of the of the respondents use credit cards while the
demographic and socio-economic percentage of life insurance users is at 47.4%.
characteristics of the respondents. A look at the 26.3% of the respondents have attended training
demographic and socio-economic courses related to finance and most of them (i.e.
characteristics in detail shows that the 87.6%) found the course beneficial.
66 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

Table 1. Demographic and socioeconomic details of the respondents

Frequency Percentage (%)

Male 144 54.1
Gender
Female 122 45.9
20-35 138 51.9
Age 36-55 92 34.6
Over 55 36 13.5
High school 61 22.9
Vocational school 13 4.9
Education College 17 6.4
University 163 61.3
Postgraduate 12 4.5
Type of work Office staff 162 60.9
Teacher/lecturer 18 6.8
Factory worker 18 6.8
Freelance laborer 68 25.6
Marital status Single 46 17.3
Married 216 81.2
Divorced 4 1.5
1-2 9 3.4
Number of family members 3-5 219 82.3
More than 5 38 14.3
Under VND 3 million/month 77 28.9
VND 3-6 million/month 97 36.5
Expense
VND 6-9 million/month 61 22.9
Over VND 9 million/month 31 11.7
Under VND 3 million/month 18 6.8
VND 3-6 million/month 72 27.1
Income
VND 6-9 million/month 92 34.6
Over VND 9 million/month 84 31.6

Source: Author’s calculation.

Table 2. Mean value of some selected variables

financial_decision .8045 credit_card_using .0752

support_receiving .0150 saving_habit .7820
overspending .5301 saving_account .5075
financial_problem .7068 other_investment .5602
high_expenditure .1165 Life_insurance .4737
high_income .3158 course_participation .2632
book_keeping .3910 course_benefit .8759
careful_spending .7782 course_affect .2406
Source: Author’s calculation.
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 67

4.2. Financial literacy results

20
The overall literacy level of the
respondents is not high. The average financial
literacy score of the whole sample is 5.56 out

15
of 10 with a standard deviation of 2.48.
Around 60% of the people managed to answer
correctly 4 to 6 questions. There are more than

Percent
20% of the people who can get at least 8/10

10
points in terms of financial literacy knowledge
but at the same time there are more than 20%
who can get only 3/10 points.

5
The results of the responses to the financial
literacy questions are shown in Table 3. The
pairwise correlations of the 3 questions are
shown in Table 4. Because none of the
correlations exceeds 0.3, it is proof that each 0
question measures a different element of 0 2 4 6 8 10
literacyscore
financial literacy.
The results from the 3 questions are
consistent with that of the whole set of 10 Figure 4. Financial literacy level
questions. The percentage of people who can Source: Author’s calculation.
answer all the three questions is rather low.

Table 3. Responses to financial literacy questions

Minimum Maximum Mean Std. Deviation

Interest rate 0.00 1.00 .4323 .49633
Inflation 0.00 1.00 .6654 .47274
Diversification 0.00 1.00 .5000 .50094
Lusardi & Mitchell
0.00 3.00 1.5977 1.03515
financial literacy scores

Source: Author’s calculation.

Table 4. Pearson correlation

Interest rate Inflation Diversification

**
Interest rate 1 .265 .220**
Inflation .265** 1 .247**
Diversification .220** .247** 1

Note: ** Correlation is significant at the 0.01 level (2-tailed).

Source: Author’s calculation.
68 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

The respondents perform best with the derivative with respect to variable age, then
inflation question where 66.5% gave the from equation (1) we have:
correct answer. This can be partly explained by
the effect of the recent economic slow-down in
Vietnam when inflation stayed at a high level
Making the left hand-side equal to 0, we
for a long time and affected people’s lives. The
percentage of respondents who correctly can solve for Age = 30. This is the turning
answered the questions about interest rates and point for variable Age. It means when the
diversification are 43.2% and 50%, people in the sample have a higher literacy
respectively. The overall results are lower than level they are older (0.179 point higher with
for people from other countries such as in 1 year older). But that relationship holds only
Grohmann (2014) [15]. if the individuals are 30 years old or younger.
If they are older than 30, their financial literacy
4.3. Factors affecting financial literacy levels level will be 0.003 point lower with each
1 year older.
Table 5 shows the results of multiple Males have significantly higher levels of
regressions with the financial literacy level as financial literacy level than females. Also,
the dependent variable. All the coefficients for keeping other things unchanged, on average
independent variables are statistically people with higher education degrees have
significant at least a 90% confidence level. 2.156 points of financial literacy level higher
Thus, it can be concluded that there is strong than people with no higher education degree.
correlation between independent variables and This is evidence that higher education
the dependent variable. significantly contributes to people’s financial
For variables age and square of age, literacy level.
according to the result, if we take the
Table 5. Factors affecting financial literacy level

Variable Coefficient Std. error t-statistic p-value

Age 0.179 0.082 2.18 0.03
Age2 -0.003 0.001 -2.96 0.00
Gender 1.151 0.246 4.67 0.00
higher_education 2.156 0.280 7.69 0.00
marital_status -1.155 0.339 -3.41 0.00
family_member 0.482 0.098 4.94 0.00
financial_decision 1.174 0.317 3.71 0.00
high_expenditure -0.707 0.396 -1.79 0.08
high_income -1.243 0.287 -4.34 0.00
course_affect 1.033 0.295 3.50 0.00
Constant -1.094 1.752 -0.62 0.53
Adjusted R-squared 0.46
Prob. (F-statistic) 0
Number of observations 266
Source: Author’s calculation.
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 69

Also, married people have lower financial the financial literacy score is positively
literacy levels than the unmarried with 1.155 associated with a higher probability of using
lower points on the financial literacy score on savings accounts and making other types of
average keeping other factors unchanged. One investments (e.g. investing in stocks or real
possible explanation is that a person may be estate). On the other hand, no evidence of the
relieved of taking responsibility for his or her association between the literacy score and the
own budget after getting married, thus paying probability of using life insurance and a credit
less attention to maintaining their financial card was found.
literacy knowledge. On the other hand, if the To interpret the results from the logit
respondent is involved in decision making model, odd ratios were calculated. The results
within the family, he or she will have a higher in Table 7 indicate that 1 point higher in the
financial literacy level, other things financial literacy score is associated with 1.28
unchanged. The number of family members points higher in the odd ratio (the ratio
also has a significant association with people’s between the probability of using saving
literacy score. The more people in the family, accounts and the probability of not using
the higher the financial literacy score. saving accounts). Similarly, 1 point higher in
Besides, if the person attends some the financial literacy score is associated with
financial course and finds it useful, his or her 1.34 points higher in the odd ratio of making
financial literacy level is higher by 1.033 other types of investments.
points on average. Whether people’s income
4.5. Financial literacy and its effect on
and expenditure is high or not might have an
financial behavior
effect on financial literacy levels. The
regression results show that at a 90% Last, the author examines the financial
significance level, the people with higher literacy level’s effect on the financial
expenditures have a 0.707 lower financial practice of respondents. Table 8 presents the
literacy score than lower expenditure people. logistic regression results with financial
Similarly, people with higher incomes have literacy as the main independent variables
lower financial literacy scores than those with and different financial behavior as dependent
lower incomes. This is evidence that richer variables. Other variables such as age,
people may have less knowledge about gender, higher education, etc. are also
personal finance than the poor. included as control variables.
There are associations between financial
4.4. Financial literacy and its effect on usage
literacy represented by the financial literacy
of financial products
score and the financial practices of the
Next, the author examines the possible respondents. Higher financial literacy levels
effect of financial literacy on the usage of associate with the higher probability of having
financial products. Binary logistic regression is good financial habits. The coefficient for the
used to examine the probability that the literacy score in the regression with careful
respondents have financial habits such as book spending and savings habits as dependent
keeping, careful spending, good habits relating variables are both positive and statistically
to overspending and saving money and use significant at a 99% confidence level. The
financial products including credit cards, coefficients for book keeping and
saving accounts, life insurance and other types overspending have the expected signs but are
of investment. It can be seen from Table 6 that not statistically significant.
70 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

Table 6. Associations between financial literacy score and financial product usage

Saving account Other investment Life insurance Credit card

Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Literacy_score 0.25** 0.08 0.30** 0.09 0.06 0.07 -0.61 0.32
Age 0.01 0.02 -0.03 0.02 0.05** 0.02 -0.01 0.04
Gender 0.24 0.31 -0.11 0.34 -0.66* 0.30 0.83 1.05
higher_education 0.83* 0.37 1.01* 0.40 0.58 0.35 0.00 (omitted)
marital_status -0.10 0.41 0.25 0.43 0.31 0.39 0.00 (omitted)
family_member 0.33* 0.14 0.14 0.13 -0.36** 0.12 1.42** 0.41
financial_decision 1.17** 0.41 0.32 0.41 -0.36 0.39 0.90 1.34
high_expenditure -0.87 0.49 -1.03 0.57 -0.30 0.46 3.31** 1.16
high_income 0.91* 0.37 2.63** 0.50 1.06** 0.34 -0.84 1.25
Constant -4.96** 0.89 -2.64** 0.77 -1.33 0.69 -7.37** 2.16
Pseudo R Square 0.1917 0.2685 0.0954 0.4414
Prob > Chi square 0 0 0.0001 0
Number of Observation 266 266 266 151

Note: * Statistically significant at 95% confidence level,

** Statistically significant at 99% confidence level.
Source: Author’s calculation.

Table 7. Odd ratios for financial product usage variables in logit models

Saving account Other investment

Odd ratios Std. Error Odd ratios Std. Error

Literacy_score 1.28** 0.10 1.34** 0.12

Age 1.01 0.02 0.97 0.02
Gender 1.27 0.40 0.90 0.30
higher_education 2.29* 0.85 2.73* 1.09
marital_status 0.91 0.37 1.28 0.55
family_member 1.39* 0.19 1.15 0.15
financial_decision 3.22** 1.32 1.37 0.56
high_expenditure 0.42 0.20 0.36 0.21
high_income 2.48* 0.93 13.87** 6.90
Constant 0.01** 0.01 0.07** 0.06

Note: * Statistically significant at 95% confidence level,

** Statistically significant at 99% confidence level.
Source: Author’s calculation.
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 71

Table 8. Associations between financial literacy score and financial behavior

Book keeping Careful spending Overspending Saving habit
Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error Coefficient Std. Error
Literacy_score 0.01 0.07 0.42** 0.09 -0.07 0.08 0.48** 0.10
Age 0.00 0.01 0.04* 0.02 -0.07** 0.02 -0.01 0.02
Gender -1.06** 0.30 -1.38** 0.38 -0.87** 0.32 -0.38 0.38
higher_education -0.14 0.35 -0.12 0.43 0.52 0.38 -0.04 0.43
marital_status -0.64 0.38 -0.38 0.53 -0.45 0.44 0.43 0.51
family_member -0.08 0.12 -0.12 0.15 -0.18 0.14 0.29 0.17
financial_decision -0.05 0.38 -1.38* 0.53 -0.20 0.43 0.41 0.47
high_expenditure 0.42 0.45 0.82 0.55 1.23* 0.49 0.01 0.59
high_income 0.23 0.34 0.05 0.41 -1.52** 0.39 0.35 0.49
Constant 0.92 0.70 0.38 0.92 4.83 0.89 -2.23** 0.98
Pseudo R Square 0.06 0.15 0.21 0.21
Prob > Chi square 0.01 0.00 0.00 0.00
Number of Observation 266 266 266 266

Note: * Statistically significant at 95% confidence level,

** Statistically significant at 99% confidence level.
Source: Author’s calculation.

Table 9. Odd ratios for financial behavior variables in logit models

Careful spending Saving habit

Odd ratios Std. Error Odd ratios Std. Error

Literacy_score 1.53** 0.14 1.61** 0.16

Age 1.04* 0.02 0.99 0.02

Gender 0.25** 0.10 0.68 0.26

higher_education 0.89 0.38 0.96 0.41

marital_status 0.69 0.36 1.54 0.78

family_member 0.89 0.13 1.34 0.23

financial_decision 0.25* 0.13 1.50 0.70

high_expenditure 2.28 1.26 1.01 0.59

high_income 1.05 0.43 1.42 0.69

Constant 1.46 1.34 0.11** 0.11

Note: * Statistically significant at 95% confidence level,

** Statistically significant at 99% confidence level.
Source: Author’s calculation.
72 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73

To interpret the results of the logistic education degrees. Married people have lower
models, odd ratios are calculated in Table 9. financial literacy levels than the unmarried but
The results imply that 1 point higher in the a higher number of family members implies a
financial literacy score is associated with 1.53 higher financial literacy level for the
points higher in the odd ratio (i.e. the ratio of interviewee. If the person is the financial
probability the respondent will carefully spend decision maker in the family, his or her
versus the probability that the person will financial literacy level would be higher.
carelessly spend). In other words, a person Attending some useful financial course seems
with a higher financial literacy score tends to to positively affect the financial literacy level
set a financial plan beforehand or think of the respondents. The income and
carefully before making an expenditure. expenditure levels of the respondents have no
Similarly, 1 point higher in the financial effect on financial literacy levels of the
literacy score is associated with 1.61 points respondents. The policy implication of this
higher in the odd ratio of the person having the result is that attention should be paid to
habit of saving money. elderly, female, married people in designing
financial literacy improvement for the
5. Conclusion and recommendation population. Likewise, the result confirmed the
usefulness of financial short courses in
The study found that the overall financial improving people’s financial literacy.
literacy level of adults in the urban areas of Therefore, it can be concluded that financial
Vietnam is not high both in terms of financial short courses can be an efficient way to
literacy score and correctly answering basic improve people’s financial literacy and those
financial literacy questions. Although the courses should focus on female, married
notion of inflation seems to be rather familiar middle-aged individuals.
with respondents, many of them do not The results from logistic regression models
understand the concept of interest rates and show that the financial literacy score is
investment diversification. The results suggest positively associated with the higher
that financial education programs are needed probability that the respondents spend
for people living in the urban areas as their carefully and save regularly. A higher financial
financial literacy levels do not cope with the literacy score is also associated with more
development of the financial sector. Moreover, probability of saving money. Logistic
the emphasis in the financial education regression results also show that higher
program should be on interest rates and financial literacy levels are associated with
investment diversification topics. more probability of using savings accounts and
Regarding factors affecting the financial having various kinds of investments. Thus it
literacy level, it is found that there are can be concluded that financial literacy
associations between demographic variables improvement may help form good financial
and the financial literacy level. People in their behavior for individuals. People with a higher
30s have the highest literacy score while male financial literacy level may have better
people have higher financial literacy levels financial habits and may be well prepared for
than females. Also, people having higher using new financial products and services.
education are found to be more financially There are some limitations in this research.
literate than those who do not have higher First, the research was conducted in only two big
 N.D. Tue / VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 59-73 73

cities in the North and the Center of Vietnam. [6] Kehiaian, S. E., “Factors and behaviors that
Due to the limit of time and financial resources, influence financial literacy in US households”,
Doctoral dissertation, Nova Southeastern
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