Personal Finance - the Forgotten Yet Important Part of Finance - Research Proposal Example

Proposed Topic: Personal Finance: The Forgotten (Yet Important) Part Of Finance? Student’s Name: Grade Course: Tutor’s Name: Date: Personal Finance: the forgotten (yet important) part of Finance? Relevant Research Studies As has been observed by Tyson (2006), most people whose financial knowledge is inadequate are “probably not at fault” (p.1). The bulk of the blame for the inadequate knowledge probably lies with schools (high schools, colleges and even graduate programs) since they rarely offer comprehensive personal finance courses. Following Tyson’s (2006) argument, it would be expected that scholarly research articles on personal finance-related subjects would be uncommon. Rightly so, tracing such papers is a time consuming task. However, the following are some of the relevant papers identified for use in this proposal. 1. Schuchardt et al. (2007). Personal Finance: An interdisciplinary profession. Financial Counselling and Planning, 8(1): 61-69. Research Methods and research processes This study by Schuchardt et al. (2007) uses an inductive method of research, where the writers starts by observing the current scenario, then establishing a pattern, and forming tentative hypothesis which they latter tried to support using theory. The researchers also use qualitative methods of research, which accommodates the types of reasoning (i.e. subjectivity and meaning), which are used in the research. The researchers do not engage any respondents or any quantitative data; rather, they have relied extensively on existing knowledge from other researchers. Further, the researchers have used narrative description to analyse the state of knowledge in personal finances, and have thus come to the conclusion that personal finance needs to be taken more seriously as a subject if the masses are to become better decision-makers and managers of their own finances. Strengths and weaknesses The main strengths of this article is arguably contained in the flexible way it applies research from other studies to form a conclusion. As indicated by Hayes, Heit and Swendensen (2010), inductive reasoning’s principal strength is contained in “its flexible application of difference knowledge structures: (p. 286). The article’s main weakness is however related to the concept of “knowledge selection”, which according to Hayes et al. (2010) refers to how researchers select (or discard) specific representations when reviewing past knowledge for incorporating in their research (p. 286). Another weakness is contained in the limitations of the inductive research approach, where probabilities established during research, may need to be proven or disapproved with further research. In Schuchardt et al. (2007) for example, the conclusion that schools need to incorporate personal finance courses in their curriculums may need to be proven through further research regarding the benefits or lack thereof of such courses towards not only increasing people’s individual literacy on personal finance matters, but may also need to prove that such literacy has had a positive effect in how people make financial decisions. Insights gained From Schuchardt et al. (2007), this writer has learnt that the inductive reasoning approach to research has its benefits and shortcomings. As such, the writer would need to determine if it is appropriate for use in this essay by comparing it with the deductive reasoning approach. 2. Robb, C.A. &Sharpe, D. L. (2009). Effect of personal financial knowledge on College students’ credit card behaviour. Journal of Financial Counselling and Planning, 20(1): 26-43. Research methods and processes Robb and Sharpe (2009) use a quantitative research approach to determine whether consumers do indeed require personal finance knowledge to “make utility maximising choices” (p. 26). The research article by Robb and Sharpe (2009) start by reviewing existing literature regarding the use of credit cards by college students. It also reviews literature about financial knowledge exhibited by the same demographic segment. The researchers then formed two hypotheses which they sought to approve or disapprove through the 6500 respondents. Robb and Sharpe (2009) appear to have adopted a deductive approach to research, where they started with theory attained from different literature sources and formed hypotheses. Through quantitative data, they were then able to form conclusions which logically followed the facts established during the research. In the methodology, it is evident that the researchers factored objectivity and causation through the use of outcome-oriented questions. In line with the quantitative research methodology, the researchers used statistical inference to analyse the research findings. Strengths and Weakness The approach adopted by Robb and Sharpe (i.e. deductive research approach), which allowed the use of quantitative data has strengths in that the results were independent and thus had statistical significance. Additionally, and in line with the strengths of quantitative research, the approach adopted by Robb and Sharpe (2009) may appear more credible, especially since the research would have been used to convince schools to offer more comprehensive personal finance courses to students. Finally, the approach was ideal for the large number of respondents targeted by the survey (i.e. the initial target group was 25,000 students although only 6,500) agreed to participate). The strengths aside, the deductive approach (and especially when quantitative research is used) has weaknesses that include lack of representation of all constituents of a targeted population. For example, the overwhelming female participation in the Robb and Fischer (2009) survey did not reflect the actual gender makeup in the subject university. The use of hypotheses is also likely to make researchers prone to confirmation bias, hence making the research project inflexible. In Robb and Fischer (2009) for example, the two researchers focus was on proving or disapproving the two hypotheses formed based on their understanding of existing literature at the time. Insights gained From Robb and Fischer (2009), this writer has learnt that some research methodologies are desirable where specific type of data is needed. Additionally, the writer has learnt that different research methodologies have weaknesses and strengths, and researchers therefore have to choose the methodology whose benefits are weightier than the weakness; however, even such choices have to be made in consideration of other factors. 3. Ahmad, Z., Khan, M.S., Javaid, M. U., & Ijaz, A. T (2012). Assessment of investment knowledge preferences of commerce students in Lahore. European Journal of Economic, Finance and Administrative Sciences, 45: 61-70. Research Methods and Processes Ahmad et al. (2012) use survey and questionnaire research techniques to obtain quantitative data for their research article. The article by Ahmad et al. (2012) shares several similarities with article 2 above in that it uses literature review to lay a theoretical understanding of the researched subject. Additionally, it uses deductive reasoning where two hypotheses are formed. The researchers then seek to prove or disapprove the hypotheses by obtaining data through questionnaires distributed among 300 students (only 140 responses were fit to be factored in the research analysis). The researchers then used deliberate sampling to ensure that all respondents had or were at the time of the research undertaking commerce courses. In other words, the respondents needed to have some amount of literacy in personal finance. The analysis was done through statistical inference, which enabled the researchers to form several conclusions. Strengths and Weaknesses Like Article 2 above, the use of deductive reasoning and quantitative research methodologies by Ahmad et al. (2012) attracted benefits, mainly related to the two approaches. For example, the researchers were able to understand the differences represented in various demographic segments represented in the respondents. The strength in numbers (or lack thereof) phenomenon therefore appears to be the resultant of the methodology used by Ahmad et al. (2012). However, like other quantitative research approaches, Ahmad et al. (2012) experienced logistical difficulties associated with handling large numbers of respondents. For example, only 140 (approximately 47%) of the circulated questionnaires were found to be fit for analysis. This in turn meant that the research sample initially targeted by the researchers decline with more that 50%, something that would compromise the validity or even the projectability of the research findings. Insights gained From Ahmad et al. (2012), this writer has understood that depending on the specific requirements of the research subject, one can engage in a more deliberate sampling method in order to make the findings more relevant. The writer has also realised that sometimes the targeted respondents do not always cooperate, in which case the validity of the research findings may be compromised. 4. Xiao, J. J., Serido, J., & Shim, S. (2010). Financial education, financial knowledge and risky credit behaviour of college students. Working Paper, 05: 1-26. Research methods and processes Though quantitative research methodology, Xiao et al. (2010) sought to find out whether education and knowledge on finances had any effect of the risky credit behaviour exhibited by students. The research article also relies on literature review, from which they establish that “college students in general have limited financial knowledge”. Xiao et al. (2010) recruited 1,206 who owned a credit card into their respondent base, and used several measures to gauge their personal finance literacy rates. The measures included personal financial courses taken by respondents, financial knowledge (subjective- self-rated, and objective- through a quiz), and the presence or absence of risky credit behaviour as portrayed by individual respondents. Data analysis was done using t-tests to deduct potential differences in the knowledge possessed by respondents and their behaviours. Strengths and weaknesses The strengths of the quantitative research methodology as used as used by Xiao et al. (2010) is that it allowed the research results to be viewed against identified measures. Again, deductive reasoning was used, and this meant that the accuracy of the results (especially since deliberate sampling took place) was enhanced. Like all quantitative approaches however, Xiao et al. (2010) experienced statistical challenges especially since not all the intended respondents participated (or gave valid responses), thus reducing the research sample significantly. Additionally, and as Xiao et al. (2010) indicated in the conclusion part of the research article, the results of the research were more suggestive than conclusive. In other words, the research did not come up with definite conclusions; rather it gave suggestions that could contribute to better research outcomes in future. Insights gained From Xiao et al. (2010), this writer has learnt that in some cases, a researcher may find inconclusive evidence, in which case, he/she may suggest future research on specific subject areas. The writer has also learnt that some methodologies adopted for a research project must support the mission and objective(s) of the research. 5. Peng, T. M., Bartholomae, S., Fox, J. J., & Cravener, G. (2007). The impact of personal finance education delivered in high school and college courses. Journal of Family and Economic Issues, 28:265-284. Peng et al. (2007) share similarities with articles 2, 3, and 4 above in that they use quantitative methods for data collection, and use deductive reasoning to formulate theories that guide their respective research projects. In a different approach (which corresponds with deductive reasoning) Peng et al. (2007) use previous studies to make models that link personal finance knowledge to savings. In the models, it is evident that apart from personal finance knowledge, Peng et al. (2007) are aware that there are factors that influence people’s willingness or ability to engage in financial saving practices. Instead of ‘re-inventing the wheel’, Peng et al. (2007) identify a 46-question survey used by Bernheim et al. (2001), and replicates it. They however add college-level financial education as a variable. Their respondent selection is random among alumni of a specific university. Strengths and Weaknesses The strengths of the Peng et al. (2007) are arguably linked to the evidence provided by the numbers. Through statistical inference, the researchers were able to give convincing projections regarding the probable impact that high school and college education of personal finance has on people’s ability to engage in prudent financial management processes on a personal level. The most dominant weakness in the methodology used in Peng et al. (2007) is arguably related to the use of alumni of a university only. From the sample, it is thus evident that the results do not reflect the situation in the general population. Additionally, sending the questionnaires via email introduced a selection bias, which made it hard to include potential respondents without email addresses. Insights gained From Peng et al. (2007), this writer has learnt that while quantitative research gives a researcher the chance to include a large number of respondents in the survey, it can also be inflexible and/or artificial. The insight was developed owing to the selective process where all respondents were from the subject university’s alumni thus making it hard to fathom whether the same results would be applicable in the larger society. Overall, the five research articles indicated above reflect Matsuo’s (2005) opinion that “qualitative and quantitative methods can complement each other” (p. 75). For example, while qualitative research is effective in theory generation, quantitative research is not. As such, a researcher who wants to generate theory while enjoying the advantages of quantitative research can use the two methods. Proposed research title: Personal Finance: the forgotten (yet important) subsection of finance? Purpose and Aim of the study Personal finance is one among the four main subsections of finance. The other three subsections are: corporate finance, financial regulation, and tax law. Notably, personal finance has been a neglected subject in scholarly circles; maybe because it does not directly concern the masses as would be the case in corporate finance, financial regulation and tax law. The proposed study seeks to bring to the fore just how neglected the topic is, and the consequences that such neglect is having on the financial decision-making powers of individuals. Hypothesis 1: The lack of personal finance knowledge leads to poor financial decisions by individuals Hypothesis 2: People with personal finance knowledge are more likely to save, invest or take up insurance to protect their wealth when compared to those who do not have personal finance knowledge. Research Paradigm Taylor, Kermode and Roberts (2006) define a paradigm as “A broad view or perspective of something” (p. 5). Weaver and Olson (2006) on the other hand observes that “paradigms are patterns of beliefs and practices that regulate inquiry within a discipline by providing lenses, frames and processes through which investigation is accomplished” (p. 460). In others words, describing a research paradigm is necessary because a researcher clarifies the methodological choices and structure of the research to the reader. In the proposed research, the researcher will use a post-positivist paradigm, whereby the hypotheses stated above will be tested. Additionally, the researcher will rely on past finance theories, which have ideally influenced the framing of the research project. Notably, post-positivism paradigm mainly corresponds with quantitative research methods as indicated by Mertens (2005) and MacKenzie and Knipe (2006), and which the researcher intends to use in the proposed research. The aforementioned therefore explains why the researcher chose to use the post-positivism paradigm. Additionally, the paradigm will enable the researcher to use both qualitative data (attained from literature review) and quantitative data (attained from the field surveys) to come up with a more inclusive (and perhaps conclusive) research findings. As Mertens (2005) observes, quantitative methods are predominant in post-positivist paradigms, but this does not meant that qualitative methods can be used. Similar sentiments are expressed by McMillan & Schumacher (2006) and O’Leary (2004) among others. Research methods The study seeks to use a survey that will collect data regarding the personal finance decisions that individuals make, and their knowledge regarding the consequences of such decisions. Specifically, the proposed study will use a questionnaire to obtain quantitative data regarding how individuals (if at all) :I) assess their financial fitness or health, and how they make financial goals; II) spend and/or save; III) build wealth through investments; IV) protect what they have through insurance; and V) seek financial information or advice. The respondents’ personal finance knowledge will be used as a variable. The study will target approximately 2000 people with questionnaires meant to gauge their respective positions in regard to the aforementioned five aspects of personal finance. The questionnaires will be delivered via email to a diverse demographic group which will include people from different age groups (i.e. the youth, the middle-aged, and the retirees), from different income groups (i.e. from low, middle, and high-income earning groups), and genders (i.e. female and male). Such sampling is likely to come up with a better representation of the entire community. The email method has been chosen for use because as Phellas, Bloch and Seale (2011) observe, internet-based methods of data collection are likely to end up giving “more honest answers” (p. 188). Additionally, email questionnaires are fast, economical, and can go beyond geographical boundaries. The researcher will use the list of emails in his possession, and will also get other referral emails from friends, colleagues and family. During the data post-collection stage, the researcher will: group data according to age, income levels, gender, and personal income knowledge. Descriptive statistics (e.g. frequencies) will then be used, and the data tabulated. Tabulation is important since it will help summarise or condense the information. Any differences noted among people of the same gender, age group, income groups, and personal income knowledge will then be noted and used to make conclusions. This form of analysis has been chosen because it is not as complex as statistical inference is, and this means that the researcher will be able to communicate the results in a clearer and straightforward manner to the reader. Further justification of the analysis proposed herein is provided by Kass (2011), who states that analysis need to be inclusive and should emphasise “the assumptions that connect statistical models with observed data” (p.1). Ethical issues Like other e-mail research, the proposed study will probably raise ethical issues in regard to invading people’s private space through unsolicited email as indicated by Swoboda et al. (2007), Brownlow and O’Dell (2002), and Yun and Trumbo (2000) among others. To reduce the researchers incidence of contravening such ethical issues, the research will adopt “permission-based respondent contact” as indicated by Krishnamurthy (2002, para.1). In that case, the researcher will first need to obtain permission to send the questionnaire from the respondent. Strengths and weaknesses In line with quantitative studies, it would be expected that one of the core strengths of the proposed study will lie in its ability to generate numbers which will be analysed to give a reflection of whether or not personal finance knowledge is an important predictor of good or bad financial choices. Unlike previous studies (most of which has targeted a specific demographic segment), the proposed research will have a diverse demographic sample, which is ideally meant to be a representation of the diverse society people live in. In spite of such strengths, the proposed research also has weaknesses, with the most prominent one being the self-reporting bias reflected in self-report questionnaires. As Donaldson and Grant-Vallone (2002) observes, “Research participants want to respond in a way that makes them look as good as possible” (p. 247). Fortunately, the e-mail method of delivering questionnaires to respondents may mitigate the self-reporting bias thus making it less common among respondents. Selection bias is also another weakness brought about by the use of email, thus meaning that only people who have emails can be sampled. Fortunately, email penetration is high and it thus means that the researcher can still have contact with a wide range of people. Budget, working hours and other resources The budgetary needs for the proposed research will include monies to hire a research assistant who can help with analysing and tabulating data after it is collected. Additionally, uploading questionnaires to email and downloading them afterwards will needs quite some considerable amount of internet bandwidth. Overall however, it is estimated that the budget requirements will not exceed the $750 limit since the researcher is going to handle most of the tasks without any assistance from the research assistance. The Gantt chart below will act as a guide to the working hours that the researcher will dedicate to the research. As indicated, the final report about the research will most likely be complete by the end of June 2013. Gantt chart Action Jan. 2013 Feb. 2013 Mar. 2013 Apr. 2013 May 2013 Jun. 2013 Identification of research topic, brainstorming, proposal drafting Literature review Formulate questionnaires Obtain email address, obtain participation permission from respondents, send questionnaires Follow-up with respondents Collect the filled up questionnaires Analyse Data Document Findings Write the final report Other resources may include access to diverse books and articles for purposes of conducting the literature review, and time and money to network with friends, colleagues and family with the aim of obtaining e-mail contacts, which will be used in the research subject to the e-mail address owners’ willingness to participate in the same. References Ahmad, Z., Khan, M.S., Javaid, M. U., & Ijaz, A. T (2012). Assessment of investment knowledge preferences of commerce students in Lahore. European Journal of Economic, Finance and Administrative Sciences, 45: 61-70. Bernheim, B. D, Garrett, D. M., and Maki, D. M. (2001). Education and saving: the long-term effects of high school financial curriculum mandates. Journal of Public Economics, 80(3), 435-465. Brownlow, C., & O’Dell, L. (2002). Ethical issues for qualitative research in online communities. Disability and Society, 17(6): 685-694. Donaldson, S. I., & Grant-Vallone, E. J. (2002). Understanding self-report bias in organisational behaviour research. Journal of business and Psychology, 17(2): 245-260. Hayes, Heit and Swendensen (2010). Inductive reasoning. Wires Cognitive Science, 1(March/April): 278-292. Kass, R. E. (2011). Statistical inference: the big picture. Statistical Science, 26(1): 1-9. Krishnamurthy, S. (2002). The ethics of conducting e-mail surveys. Readings in Virtual Research Ethics: Issues and Controversies. Retrieved January 18, 2012, < http://papers.ssrn.com/sol3/papers.cfm?abstract_id=651841> Mackenzie, N. & Knipe, S. (2006). Research dilemmas: paradigms, methods and methodology. Issues in Educational Research, 16(2), 193-205. Matsuo, M. (2005). The role of internal competition in knowledge creation: an empirical study in Japanese firms. Bern: Peter Lang AG. McMillan, J., & Schumacher, S. (2006). Research in education (6th Ed.). Boston, MA: Pearson Education Publishers. Mertens, D. M. (2005). Research methods in education and psychology: integrating diversity with quantitative and qualitative approaches (2nd Ed.) Thousand Oaks, CA: Sage. O’Leary, Z. (2004). The essential guide to doing research. London: Sage. Peng, T. M., Bartholomae, S., Fox, J. J., & Cravener, G. (2007). The impact of personal finance education delivered in high school and college courses. Journal of Family and Economic Issues, 28:265-284. Phellas, C. N., Bloch, A., & Seale, C. (2011). Structured methods: interviews, questionnaires, and observation. In C. Seale (Ed.), Researching society and culture (3rd ed.). (pp.181-205) London: Sage. Robb, C.A. &Sharpe, D. L. (2009). Effect of personal financial knowledge on College students’ credit card behaviour. Journal of Financial Counselling and Planning, 20(1): 26-43. Schuchardt, J., Bagwell, D. C., Bailey, W.C., DeVaney, S., Grable, J., Leech, I, Lown, J., Sharpe, D. & Xiao, J. (2007). Personal finance: an interdisciplinary profession. Financial Counselling and Planning, 18(1):61-69. Swoboda, S. J., Muehlberger, N., Weitkunat, R., & Schneeweiss, S. (1997). Internet surveys by direct mailing: An innovative way of collecting data. Social Science Computer Review, 15(3). Taylor, B.J., Kermode, S., & Roberts, K. (2006). Research in nursing and health care: evidence from practice, (3rd ed.). Sydney, Australia: Thompson. Tyson, E. (2006). Personal Finance for Dummies (5th Ed.). Hoboken, NJ: Wiley Publishing. Weaver, K. & Olson, K. (2006). Understanding paradigms using for nursing research. Journal of Advanced Nursing, 53(4): 459-469. Xiao, J. J., Serido, J., & Shim, S. (2010). Financial education, financial knowledge and risky credit behaviour of college students. Working Paper, 05: 1-26. Yun, G. W. &Trumbo, C. W. (2000). Comparative response to a survey executed by post, email, & web form. Journal of Computer Mediated Technology, 6(1). Retrieved January 18, 2012, from < http://jcmc.indiana.edu/vol6/issue1/yun.html>. Read More