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Financial Literacy and Risk Tolerance towards Saving and Investment: A Case Study in Malaysia

Author

Listed:
  • Zukarnain Zakaria

    (International Business School, Universiti Teknologi Malaysia)

  • Siti Maisarah Mohamad Nor

    (International Business School, Universiti Teknologi Malaysia)

  • Mohd Roslan Ismail

    (International University of Malaya Wales, Malaysia)

Abstract

Innovation in the financial market has provided more flexible choices of financial products and services to the consumers. Financial products and services are becoming more complex and not easily comprehendible by many consumers. Due to this, consumers with low financial literacy (FL) may face difficulties to make informed decisions on their savings and investments. Therefore, the purpose of this study is to identify the level of financial literary and its relationship with risk tolerance (RT) towards savings and investments in the context of Malaysia. A total of 172 respondents have been selected using convenience sampling method through online and manual survey. Data were analysed descriptively and statistically using nonparametric techniques, which include Chi-square and Spearman's Rank Correlation to examine the relationship between variables studied. The results suggest that the overall FL in Malaysia is at moderate level. The study also found that overall FL has a positive significant relationship with the level of RT towards saving and investment. More specific analysis, however, found that only advance FL has a relationship with RT levels. Meanwhile, basic FL was not correlated with the level of respondents' RT.

Suggested Citation

  • Zukarnain Zakaria & Siti Maisarah Mohamad Nor & Mohd Roslan Ismail, 2017. "Financial Literacy and Risk Tolerance towards Saving and Investment: A Case Study in Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 507-514.
    • Handle: RePEc:eco:journ1:2017-04-60
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    References listed on IDEAS

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    1. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Adele Atkinson & Flore-Anne Messy, 2012. "Measuring Financial Literacy: Results of the OECD / International Network on Financial Education (INFE) Pilot Study," OECD Working Papers on Finance, Insurance and Private Pensions 15, OECD Publishing.
    3. Almenberg, Johan & Säve-Söderbergh, Jenny, 2011. "Financial literacy and retirement planning in Sweden," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 585-598, October.
    4. Rob Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," CeRP Working Papers 110, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    5. Alessie, Rob & Van Rooij, Maarten & Lusardi, Annamaria, 2011. "Financial literacy and retirement preparation in the Netherlands," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 527-545, October.
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    Cited by:

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    More about this item

    Keywords

    Financial Literacy; Risk Tolerance; Malaysia; Investment; Saving;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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