Emergency fund provision among young student adults in Malaysia : a behavioural perspective
Financial behaviour is complex and difficult to measure. Existing literature on the emergency fund remains lacking in terms of its theoretical testing and modelling, not to mention its accurate definition of emergency fund behaviour itself. Prior studies also suffer from providing sufficient country-contextual evidence on emergency fund behaviour, notably in the instance of Malaysia. Compounding this, the question of how young student adults allocate their emergency fund has yet to be adequately explored by existing studies, primarily due to data limitations. The issues of financial behaviour, financial problems and financial stresses among young adults are still being addressed by many studies. These tend to argue that young adults have less ability to allocate or achieve the recommended adequate level of emergency fund holding. It is these gaps that this thesis will address. This research uses modified theory of planned behaviour as a research conceptual framework to investigate and understand the emergency fund behaviour among young student adults in Malaysia. The data were collected using online questionnaires and survey interviews. The emergency fund behaviour measurement and Emergency Fund Formation Behaviour (EFFB) models were developed. The Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA) and Structural Equation Modelling (SEM) were adopted as data analysis tools for this research. The definition of emergency fund behaviour was positioned in relation to two main financial behaviours: saving and investment. The results from the modelling revealed that attitude and propensity to plan were found to significantly contribute to emergency fund formation intentions and behaviour. The subjective norms and perceived behaviour controls were found not to be significant to fund formation intentions and behaviour. The emergency event from young student adults’ perspective was explored and contributes to additional current literature. This research also found that not all young student adults achieved the total three months expenses recommended adequacy level of emergency fund holding. Previous experience of emergency events was found to be the factor that prompted them to achieve the recommended adequacy level. Their intention was to continue to borrow from informal channels, such as family and friends,if they lacked emergency funds in future. Other factors, such as financial aid, did not necessarily determine their ability to achieve the adequacy level. This research also found that a significant proportion of young student adults chose to use savings accounts and current accounts as their emergency fund. Some also used their student loan (PTPTN) money as source of emergency fund allocation. In addition, the use of gold as an emergency fund financial instrument was also found to be relevant to the Malaysian context. The holding of gold was a behaviour found not to be gender-related. In terms of the financial instruments categories, most of the young student adults in this research were found holding intermediate fund rather than other emergency fund categories. The modelling and deeper understanding of emergency fund behaviour revealed overall of emergency fund formation behaviour and preference for financial products in response to future emergencies. This finding will help financial service providers and financial educators to offer more effective advice and fulfil the needs of their clients. Moreover, this research makes a significant contribution to the field of personal financial planning by improving our understanding of the application of behavioural finance theory, and suggesting that behavioural factors contribute to an individual’s financial planning and actions.
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