1.0 Introduction
Analyzing the ways in which Klang Valley’s students spend their money is highly important since it coincides with the period they start to handle their finances, and therefore, their spending practices have immense repercussions on their general welfare and future financial security. The primary purpose of this literature review is to get in-depth knowledge about what influences how much students from this age group spend. To begin with, the chapter looks at the underlying theories that provide a basis for studying consumer behaviour and spending patterns, such as the Theory of Planned Behavior, Life Cycle Hypothesis and Prospect Theory, among others, in order to examine psychological and economic causes of making decisions on purchasing. As a result, it offers a thorough review of variables including socio-economic background, financial literacy, peer influence, lifestyle preferences and attitudes towards money as well as student living habits, thereby identifying key drivers behind student expenditure habits. Moreover, the chapter presents some theoretical or conceptual frames that can enable examination and prognosis concerning university students’ purchases, incorporating various concepts and models so as to offer a total approach towards appreciating this phenomenon.
2.0 Underlying Theories
2.1.1 Theory of Planned Behaviour
Sansom’s (2021) Theory of Planned Behavior posits that behavioural intention derives from three main factors: attitude toward behaviour, subjective norms, and perceived behavioural control. When it comes to student spending patterns, TPB explains how attitudes toward money spending among students, perceptions of family and peers’ pressure on the issue, as well as control over their resources affect their real spending(Mohd et al., 2020). For example, a student who likes unnecessary expenditures is likely to display more impulsive or even excessive buying habits when they believe that their friends do the same things and they feel that they have power over money. This is why TPB can be considered a helpful tool in understanding how cognitive and social forces impact the choices made by students in colleges regarding their expenses.
2.1.2 The Life Cycle Hypothesis
The Life Cycle Hypothesis (Pettinger, 2019) argues that people decide on their consumption and saving habits based on what they expect to earn throughout their lives. This idea can help explain how college students behave when it comes to spending money; in most cases, they do not have much income at present but are hopeful for more in the future as they go into the job market. The LCH suggests that young undergraduates may tend to spend a higher proportion of their incomes and run into debt because they anticipate that their earnings will shoot up with time. In other words, this action is informed by the belief that they will earn enough money later to save for retirement and redeem themselves from debts while still in college. Through its application, LCH can help understand why current students at universities make different choices about loans across institutions and during academic periods compared to those already employed after graduation.
2.1.3 Maslow’s Hierarchy of Needs
Maslow (Swifterm, 2023) puts forward a theory known as Maslow’s Hierarchy of Needs, which suggests that human needs can be grouped into a range from low-level physiological needs to high-level self-actualization needs. With limited financial resources, this theory can help determine how university students prioritize their spending by fulfilling their basic needs before thinking about higher-level requirements(Moore et al., 2021). For instance, students may prefer paying for physiological and safety needs such as housing, food, and education bills over other social activities like belongingness or personal growth. Recognizing the student’s financial choice under Maslow’s hierarchy helps to explain why they allocate monies in certain areas differently based on individual circumstances or life stages
2.1.4 Prospect Theory
Prospect theory is based on gains and losses rather than outcomes. These risk-taking behaviours can be explained using the theory, as well as young people’s decision-making when it comes to spending. For some students, they may see expenses as something that can gain them something thereby evaluating them differently from expected losses. On hundreds of financial decisions, prospect theory deals with subjective probability assessment and the value assigned to gains versus losses, which often leads to what appear to be irrational financial decisions. It can enable one to have an idea of a student’s choice in terms of their spending habits based on underlying factors, especially in situations where there is a high level of uncertainty or risk involved.
2.1.5 Social Learning Theory
Individuals learn behaviours through observing and imitating others in their social environment, a tenet of the Social Learning Theory (McLeod, 2024). This theory is also useful for explaining how university students’ spending habits are shaped by their peers, family members, and the media. For example, students may consciously or unconsciously adapt to spending patterns they notice from their circles of friends. If a person’s associates have acquired a habit of impulse buying expensive items or luxuries, more often than not, this pattern might be followed, and it will happen irrespective of whether it does not go well with their financial abilities or aspirations. Also, social learning has been exacerbated by the rise of social networks, where students can observe influencers’ spending habits as well as those of their peers (Barysevich, 2020). Recognizing these processes in social learning aspects such as culture & society, among other determinants, play a role in individual student choices about money spending.
2.2 Review of Variables
2.2.1 Socioeconomic Background
A student’s socioeconomic background determines their spending habits. The factors that have been found to affect students’ expenditure include parental income, family financial standing, and employment status of students (Obagbuwa & Kwenda, 2020). The children of rich parents may have more money available for buying things as they wish or getting help from their parents in the form of money. Conversely, those with poor origins may not be able to spend much due to lack of money. Furthermore, part-time working learners can have different ways of spending and budgeting instead of depending on only family aid or loans. Understanding the socio-economic dynamics involved provides valuable insights into the diverse spending behaviours exhibited by university students
2.2.2 Financial Literacy
Financial literacy is a term that refers to the financial knowledge and awareness possessed by any individual, as per the study of Amagir et al. (2017). It significantly influences students’ spending habits. A number of research studies have shown that university students with high levels of financial literacy engage in rational consumption decisions and better-informed financial choices (Rapina Rapina et al., 2023). The development of Budget decision-making regarding debts and expenditure priorities is very important for those who have a good understanding of finances. On the flip side, people who are ignorant about money management tend to buy things impulsively and spend beyond their means, hence amassing huge debts without considering future consequences on their lives. Hence, this gives one answer –financial literacy is crucial in shaping good money behaviours among college students as well as their general fiscal health.
2.2.3 Peer Influence
University students’ spending habits are largely shaped by their peers. Several studies have shown that, in most cases, students conform to the spending conventionalities and tendencies of their friends (Bona, 2018). Social acceptance yearning and fear of being seen as an outsider can make learners overspend or buy impulsively to fit in with certain groups. Different ways peer pressure may be expressed include but are not limited to imitating what’s popular at the moment, eating outside the home often, or being involved in sports and other activities. This power is at its peak during the college years when interpersonal bonds and memberships are given high value. Comprehending how peer influence operates becomes vital for dealing with any negative consequences on students’ financial wellness and encouraging them to utilize finance responsibly.
2.2.4 Lifestyle and Consumption Behaviour
According toChen Yun et al. (2018), Lifestyles and consumption behaviour among university students greatly affect their spending. Where one lives, what extracurricular activities are attended, and personal preferences all control how money is channelled. In contrast to on-campus residents, those staying off-campus may have elevated transportation bills as well as higher housing costs. And sports clubs, for instance, will lead you into incurring more expenses. The choice to dine out, go on vacations, or participate in events is an example of a discretionary expenditure. Understanding these kinds of lifestyles and desires necessitates the identification of potential areas for overspending and the need to establish student-targeted financial education programs that suit their demands as well as their priorities and plans. Discussing this aspect can help young people become more mindful when it comes to their spendthrift habits related to material things and focus on better ways of making savings.
2.2.5 Financial Attitudes
University students’ spending habits are determined by their financial attitudes and behaviours. Students who have good financial attitudes, which involve valuing responsible money management and long-term planning, tend to spend cautiously (Sabri et al., 2022). Conversely, when individuals have bad attitudes concerning budgeting, saving, or debt avoidance, it may lead to impulsive or extravagant spending. Some of these behaviours include budgeting, expense tracking, and self-discipline, among others. Some students need to gain such skills that could enable them to spend according to their financial means and plans. To be well aware of how much they spend during their studies in particular colleges, young people should start thinking more seriously about personal finance education that provides them with a set of knowledge necessary to make smart decisions on where their funds should go while in college and beyond it.
2.3 Proposed Theoretical framework
2.3.1 The Integrated Behavioural Model
The Integrated Behavioral Model (IBM) integrates the components of various psychological theories with other behavioural models to provide a complete outline for apprehending and forecasting behaviours (Arevalo & Brown, 2019). For instance, regarding student spending habits, IBM can be modified to consider factors such as attitudes to spending, perceived social norms, perceived behavioural control, and environmental constraints like financial resources and availability of credit. In this way, IBM is holistic because it examines the interplay between different influences on student spending decisions and acts.
2.3.2 The Price Elasticity of Demand
Students’ spending behaviours could be determined by the price elasticity of demand, an economic theory. It can help researchers to understand how students spend about varying costs or income(Dean et al., 2020; Moore et al., 2021). Therefore, researchers can determine the priorities of student spending and how they are affected by the economy by examining the price elasticity of differing goods and services. Necessities such as food and housing usually have low price elasticity because students keep the quantity demanded for these goods the same when prices change. Conversely, discretionary items like entertainment or luxury goods tend to be more price elastic with students being quick to respond to changes in their respective prices.
2.3.3 Peer Pressure
To investigate how peer pressure determines the spending habits of University students, one can design an abstract model(Bankole Adeyemi, 2019). The presented framework might include conformity, social comparison, and normative influence. Conformity means compliance with peers’ behaviours to be accepted or avoid exclusion. Social comparison entails appraising one’s spending habits in terms of other people within similar social groups(Cherry, 2022). Normative influence is an invisible or open coercion that forces individuals to adhere to certain expectations and views on expenses held by their peers. With these three factors, the framework explains more about how students spend money than any other approach would have done.
2.3.4 Theoretical Model of Financial Literacy
A theoretical model that connects financial literacy and decision-making processes can be suggested to explore the intertwining of knowledge, attitudes, and actions in the process of shaping student spending patterns(Bai, 2023). This model may integrate some features such as financial knowledge, risk perception, time preferences, and decision heuristics. Financial knowledge is an understanding of concepts such as budgeting, saving, and handling credit. Risk perception involves evaluating the possible effects of financial action. Time preferences reflect the trade-off between current and future consumption. Decision heuristics are simplifications designed by the mind to deal with complex decisions in finance. In its entirety, this model, therefore, explains how spending choices underpinning university students’ behaviour are affected by their level of financial literacy.
2.3.5 Life Course Perspective
The use of a life course perspective to comprehend why University students are wasteful is one way, among others, of analyzing the entirety of their lives. It views matters from a standpoint that observes past events and socio-economic trends as well as personal experiences with money matters. Researchers can look into how family background, education experiences and future career prospects shape young people’s financial habits by using this approach(Koçak et al., 2021). The changing spending patterns may be due to time or life cycle stages that were paramount in these learners’ lives simply because economic conditions alter over different periods of life. “Life course” is an all-inclusive term that pertains to university students’ consumption behaviour, which is both dynamic and holistic.
2.4 Hypotheses development
Based on the literature review and the proposed theoretical or conceptual frameworks, the following hypotheses can be developed to investigate the factors affecting the spending habits of university students in the Klang Valley, Malaysia:
H1: Higher Discretionary Spending among Students from Wealthy Families.
H2: Higher Financial Literacy among University Students and Their Responsible Spending Habits
H3: Influence of Peers and Social Norms on University Students’ Expenditure Figures; More Peer Influence Leading to Increased Conformity in Spending Patterns
H4: Budgeting Practices, Money Management Skills, and Responsible Spending Behavior among University Students
H5: Price Elasticity of Demand for Different Goods and Services in Universities.
These hypotheses are based on a literature review that looked into aspects such as socioeconomic attributes, financial literacy, peer pressure, financial beliefs, and economic concepts like price elasticity. Empirical research can help in the evaluation of these assumptions, thereby offering an understanding of the determinants of student expenditure within the Klang Valley area.
Conclusion
The Literature review utilizes a wide range of theories to study the factors that influence spending habits among university students in the Klang Valley, Malaysia. A groundwork has been laid for further empirical inquiries by exploring underlying theories, reviewing relevant variables, proposing conceptual frameworks, and developing hypotheses. The review shows student spending as a multi-dimensional construct involving socioeconomic factors, financial literacy level, peer influences, lifestyle preferences, as well as financial attitudes and behaviours. Further still we have different theoretical or conceptual models that provide insight into how this population group may carry out their expenditures. On this note, therefore, it is important to continue with research so that these hypotheses developed through literature can be tested empirically and the proposed frameworks can be confirmed about the Klang Valley region context. In turn, improving awareness of what affects student spending patterns will help educational institutions, policymakers, and stakeholders design necessary interventions and strategies geared towards promoting financial literacy as well as responsible expenditure and general financial wellness in colleges. This review paves the way for a more comprehensive and evidence-based approach to addressing the financial challenges and opportunities faced by university students in the Klang Valley, ultimately contributing to their long-term financial stability and success.
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