Chapter 2

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter presents the review of different literatures and studies done by

foreign and local authorities that are related to the present research. The chapter also

presents the conceptual framework as well as research paradigm.

Related Literature

Foreign

According to Child, L. M. (2004), the practice of giving children allowances

developed in the early twentieth century when children's purchases of movie tickets,

candy, and toys raised concerns about their spending habits. During the Progressive

Era (1890s–1920s), allowance advocates recommended giving children a regular but

fixed supply of money to inculcate respect for money. Child had endorsed allowances to

encourage benevolence and fiscal responsibility. Progressive-era child-rearing

authorities joined a much larger chorus calling for new money training regimes in

women, magazines and parental advice literature.

However, despite the benefits gained by the students of having allowance, there

are problems and disadvantages present. For example, a student has poor spending

habits. They tend to think that this is their money and they can do whatever they want

with it. Students have the tendency to spend their allowances on their recreational
activities such as, renting a computer unit for fun and games, buying items at the

shopping mall, and spending money for the peers. As a study, the proponents seek the

effects in line with the daily allowances of students to their academic performance.

(Achim, 2009, p.33), the budget is a planning document which contains a number

of financial and / or non financial information that refers to the activities that will take

place in the future. Budgeting is the activity of recording financial and / or non-financial

elements into the budget.

Blumentritt (2006) defines budgeting as “the process of allocating an

organization's financial resources to its units, activities and investments”.

(Horngren et al., 2004) states the budget as the quantitative expression of a

proposed plan of action by management for a specified period and an aid to

coordinating what needs to be done to implement that plan.

(Ekholm and Wallin, 2000, Merchant and Van der Stede, 2003). Budgets have

always played a key role in managing an institution, both private and public, being an

important control system in many companies.

The overall objective of the budget is to keep control of the activity done in the

company by providing a roadmap for future activities and to set a series of goals to be

achieved and the means by which to achieve those goals. Therefore the management

efficiency can be appreciated by the achievement of predefined objectives and the

means used to their achievement.

 Riley (2012), managers are responsible for the realization of the indicators within

their budgets and for any variance from the estimated values, cases in which they are

required to take remedial action. Budgets are used by management for different uses

such as Control income and expenditure (the traditional use), Establish priorities and set

targets in numerical terms, Assign responsibilities to budget holders and allocate

resources and lastly Improve efficiency.

According to Turkish authors Ali Uyar and NecdetBilgin, the reasons for

budgeting, in the order of their importance are: control expenses, profitability, aid long-

term planning, aid short-term planning.

Local

“Remember, the purpose of an allowance is to give your children the opportunity to

learn how to manage money through their own successes and failures and the input of

their parents.”- McCurrach (2012). This means that if parents let their children to have

allowance and give them permission to spend it, they will encounter different situation on

money.

Cuento (2011) states that almost all students are responsible enough to try to

save money and create a budget plan, and tend to follow it. Both female and male

students understand that saving money is important. Student spends a lot based on the

data and on which priority they are following and they spend a big amount of money on

their priorities which is either food or transportation.

 Bocales (2010) confirmed that the highest monthly expenditure of the

respondents went to foods, followed by transportation. The problems met by the

respondents were the following: delayed allowance, inadequate allowance, high cost of

commodities and high transportation cost. Majority of the students had problem on

delayed allowance followed by inadequate allowance.

According to the Allowance Consumption and Expenditures (2014), given the

allocation of allowances, this may now serve as a budget constraint for the students.

Since every student has different kinds of needs and wants, may it be for academic

purposes or for personal satisfaction, their responses to budget restrictions with respect

to their consumption of various commodities may vary with each other. Students are

subjected to a budget constraint that limits them to get the most of their needs and

wants.

According to Mapua (2016) budgeting is a challenging task for anyone, even

more so for students. Especially if you are studying in the city, say a university in

Manila, the fact remains: money management is still a part of everyday life. You have to

calculate the amount of money you need for food, commute, dorm fees, and school-

related expenses while having little to no income.

Knowing how much money you should spend and where you should spend it on

is very important. Being able to manage your finances is a sign of maturity and has its

rewards. It is better to start learning it early.

Philstar (2014) states that, the frequency of giving the allowance is another issue.

Students who live with their parents usually receive their allowances daily or weekly.
Students who move to study away from their homes receive their allowance weekly or

monthly. Consider the cost in terms of time and transaction charges when deciding the

frequency of remitting allowance for children who live away from home.

It is a good idea to teach kids budgeting skills as early as when they are high

school. There is nothing more real than the pain of a grumbling stomach to teach them

about handling their finances well.

Related Studies

Foreign

Bruin et al. (2000), study on Differences in spending Habits and Credit use of

College Students, affective credit attitude and gender influenced college students’ credit

purchasing. This attitude predicted in consuming expensive clothing, electronic gadgets,

entertainment, gasoline, travel and food away from their homes. Females purchased

clothing on the other hand electronic gadgets for online games purchased by males.

Gender were likely to be influential in predicting financial management practices that

was affective credit attitude, with female students employing a greater number of

financial practices. A path analysis that was used by Bruin and his company showed

gender differences in the relationship between financial practices, financial stress,

affective credit attitude, and the number of credit cards with a balance.

Wiley et al. (2017) suggest on Making Budget under the International Student,

suggesting the following in order to manage students’ allowance:

 Keep your family involved. In budgeting, if your family is paying for a part of your

college expenses, you will want to work with them on creating your budget. You must

work together when it comes to how much money will be distributed, or how much

leeway you will have in making financial decisions.

, you will want to list all the potential categories and amount of your income. For

example for college students usually includes: financial aid such as scholarship, grants,

work study, and loans, savings and income from part time job.

List all of your expenses. List all of your potential categories and amount of

expenses. If you are not sure what your expenses are, just try tracking them for a week,

month or more. Recording everything you spend can be a great way to determine what

your future expenses are while trying to save more for that.

Save up for big expenses. If your planning for a trip with your friends, or have

your eye on a new trend, you will need to start saving up for that expense as soon as

you know about it. Considering your budget to attempt in increasing the amount you

save every month.

Make sure your budget is balances. This means that you are not spending more

than you are making. You must total your income and your expenses, and make sure

your budget “balances”. If your budget does not balance then reduce your expenses or

locate a way to bring you in a more income.

Local

The students spend their allowance on food, mobile phone load and

transportation but their adviser said that there are ways to maximize their daily

allowance.

According to Duplito (2013), spending daily allowance takes efforts and discipline

and requires small changes in daily routine. There are two ways to have a big impact of

finance which are increasing income or reducing expenses. If you want to maximize

your daily allowance, you have to do both, the increasing income or reducing expenses.

Duplito (2013) suggest in maximizing a daily allowance in mobile phone load,

food and transportation, but a financial adviser said there are numbers of smart ways to

maximize their daily allowance. Maximizing a daily allowance takes effort and discipline,

and may require small changes in your daily routine.

Bringing cooked food. Bringing cooked food instead buying expensive meals in

canteen can be a tool to lessen the expenses. It is a good practice to allocate your

money by means of minding the food cost in menus.

Duplito was doing research on 20 case studies of women. She saw three

similarities like they allot time to plan their finances, shun debt and knowing where and

how to shop. She was surprised about the third finding, at first Duplito thought the

similarities would be about where they put their money, or which investing strategies

they would follow.

Theoretical Framework

The study would use the theory of Ron Lieber that explains about

importance of budgeting allowance among students.

Ron Lieber work as a columnist in New York Times. He writes that upon creating

a word cloud of traits that are the opposite of spoiled, “I realized that every last one of

those attributes — from generosity and curiosity to patience and perseverance — could

be taught using money.” Lieber realized that it is precisely by teaching kids about

money.

According to Lieber we must not let a rotten economy spoil our goals. Lieber says

these lessons are more important than ever before. Aside from peer pressure, children

today will face ever greater financial pressures as adults. But their first great financial

decision comes when they decide where to go to college.

Lieber says, “If you haven’t been making real financial decisions in the previous

decade, starting with two-digit decisions and then three-digit decisions and then four-

digit decisions leading up to the big one, it’s very difficult to get all this right.”

As described in his astute book filled with interesting anecdotes and wise

lessons, here are seven ways you can use money to raise children who are financially

smart and the opposite of spoiled.

1. Use an allowance as a teaching tool.

He considers an allowance a teaching tool, like art supplies or musical

instruments. “In the same way we don’t take them away when kids don’t do their chores

or don’t do them well, we shouldn’t take money away either,” he says, adding that

parents should leverage whatever the child likes more than his or her allowance.

2. Have them split their allowance into three jars: give, save and spend.

Lieber says these jars mimic a grown-up budget. Financially healthy adults will

spend about 80% of what they earn, save 15%-20%, and give the remainder — and

each jar serves as a stand-in for the values and virtues that are the opposite of spoiled.

“Spending is about modesty, thrift and prudence, and having the prudent

decision-making skills that allow you to spend or splurge on the things that make you

happiest while avoiding the mindless wallet dives that we engage in as adults. Saving is

about patience — the patience that kids will need to deploy as adults to put money

away or leave it alone afford down payments or retirement or college for their own kids.

The give jar is about generosity, and ultimately about gratitude too,” he says.

3. Let your children make their own spending decisions.

If you want your kids to make smart financial choices, they need autonomy.

“They’ll inevitably make mistakes or spend money on trinkets and regret it later when

they don’t have money for things they truly want,” says Lieber. “So letting them make
mistakes — spectacular ones even — is a great way to go, because then they learn,

and they’re not making mistakes.”

4. Explain how you distinguish between wants vs. needs.

Every family will have its own threshold for this, but even more important than

how you define a want vs. a need is that you communicate why you set the line there.

Lieber suggests creating a Want/Need continuum on paper using horizontal lines with

needs on the left and Wants on the right.

“It’s not that there are right answers for where anything ought to be,” he says,

“but what is definitely wrong is not to be narrating along and explaining to your kids, ‘We

don’t really spend more than this amount on X, because we’d much rather spend on Y.”

5. Involve them in your giving decisions.

6. Have your kids work.

7. Practice gratitude.

A number of studies have found high correlations between gratitude and higher

grades, life satisfaction and social integration.

The New York Times' columnist and author Ron Lieber has some wise counsel

for young people: Spend your money on experiences rather than things, and remember

that what you use your money for shows what's really important to you.
 All of the best psychological research on money and happiness tell us that

spending money on experiences brings more (and more lasting) happiness than

spending money on material objects, especially if we do those things with people that

we care about a lot. The sooner kids become aware of this fact, and use it to govern the

trade-offs that they make with their own money; they better choices they'll be able to

make sooner as young adults. It should be obvious that you spend money on the things

that you value.