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ABSTRACT
The purpose of this study is to investigate consumers' preferences in different financial information sources and their impact on financial literacy. This study also aims to examine the impacts of financial literacy on the amount of income allocated for investment, as well as the hiring of a financial planner. A large-scale survey was conducted in Malaysia, and a total of 2000 usable responses were collected. The results showed that (1) there is a negative effect of preference in media, family and peers as financial information sources on financial literacy; (2) there is a positive effect of preference in financial planners as a financial information source on financial literacy; (3) consumers who use the Internet as their main financial information source exhibit higher financial literacy; (4) financial literacy positively influences the amount of income allocated for investment; and (5) financial literacy is negatively related to the likelihood of hiring a financial planner. This study provides empirical evidence for practitioners to improve financial literacy by encouraging the use of appropriate financial information sources. This study also offers an understanding on consumers' financial behaviors, which result from different levels of financial literacy.
Keywords: Financial literacy; Financial planner; Information sources; Internet; Investment; Malaysia.
1. INTRODUCTION
Following the increase in financial market complexity, financial literacy has become more important than ever. Thus, more financial decision-making responsibility, such as investing and saving has shifted from financial institutions to consumers (Garg & Singh, 2018; Lusardi & Mitchell, 2014), thereby requiring consumers to possess a sufficient level of financial literacy. Unfortunately, suboptimal financial literacy levels have been reported in many developed or developing countries. Taking Malaysia as an example, a Bank Negara Malaysia (BNM) survey revealed that three out of four Malaysians find it difficult to raise even RM1,000 for an emergency. In addition, bankruptcy due to car loans has risen from 2007 to 2015 as declared by the Malaysian Department of Insolvency (Malaysian Financial Planning Council, 2018). The situations above clearly indicate the inadequacy of financial literacy among Malaysian consumers.
Several lines of evidence suggest that financial literacy is linked to economic decisions. Generally, financial literacy enables consumers to engage in positive financial practices, such as budgeting, saving, and making sound investments (Chu, Wang, Xiao, & Zhang, 2017; Loke, 2017)....