Digital Miles

Unlocking the Path to Financial Prosperity: Understanding Youth's Financial Health

This blog explores financial behaviors research findings on Pakistan’s youth and presents actionable steps. For this research, the Digital Miles team met with the students enrolled in the undergraduate and graduate programs of Fast University, Islamabad campus, between the ages of 20 – 24, one-third of whom were females.

The Financial State of Students

The research revealed that parents fully paid most of their childrens university fees averaging at Rs:100,000 per semester, through available payment options online, cash, or in cheques. A significant number of students, 90%, rely on financial support from parents for living expenses such as hostel rent, local travel, and food, while the remaining 10% manage their expenses by generating their income through freelancing. An average monthly allowance from parents ranges from Rs. 8,000 to Rs.10,000 per month, of which 70% is spent on food and the remaining on traveling and mobile top-ups. 80% of the students do not plan for their expenses and usually spend their allowance before the end of the month and rely on their parents for any financial emergency. Most students have access to mobile wallets, mostly Easy Paisa, Jazz Cash and Sada Pay but barely use them due to limited use cases.

Most expenses of students are borne by their parents, however, with the changing economic situations, there is a fast emerging trend that students have started taking responsibility of some expenses

Understanding the Financial Behavior Model

To develop a comprehensive understanding of youth’s financial health, the researchers used the Financial Behavior Model. This model consists of two sets of activities. Prioritization includes shaping income and expenses, and planning entails building reserves and cultivating receivables. These behavioral activities combined define an individual’s financial health. The Human Account, 2018

Shaping income involves establishing the size and timing of income to meet one’s needs and goals. Students are encouraged to explore independent earnings opportunities, increase income, and foster a sense of responsibility.

Shaping expenses requires taking proactive measures to lower expenses and live within one’s means. Expenses can be shaped through budgeting, monitoring, and identifying areas for savings. By shaping expenses, students can work towards achieving financial stability and predictability.

Building reserves by shaping income and expenses act as a safety net for unexpected costs or income loss. Building a reserve involves setting aside a portion of income or creating an asset for future use, such as emergency funds, retirement savings, or investments. Building reserves is a crucial aspect of financial planning, providing stability and peace of mind.

Cultivating receivables requires developing the financial standing to acquire credit in the future. The credit could be through formal and informal sources and social contributions from one’s community during periods of financial stress. Financial standing is improved through generating and securing income, building up financial reserves, and investing in social networks of family and friends. The effectiveness of this safety net depends on a person’s social standing and the size and quality of their support network, as these factors help determine the level of risk pooling and support available in critical situations.

Financial Behaviour Model lays out four categories i) shaping income ii) shaping expenses iii) building reserves and iv) cultivating receivables

Assessment of Students Through Financial Behavior Model

Parents financially support their children to focus on education. However, in the current economic conditions, parents expect students to share some expenses on their own through on-campus, freelancing, remote jobs, or on-site internships.

Students are willing and able to earn but struggle to shape their income due to academic pressure and limited opportunities. Independent earnings will augment their income and create a sense of responsibility, thus improving their ability to manage financial challenges. The same is backed by the finding of the study “A significant positive relationship between the level of income and personal finance knowledge was found.” (HECKMAN et al., 2011).


Bridging the Gap: Jobs to be Done

Universities, parents, and local businesses play a vital role in helping students address their financial challenges. Some actionable steps to improve students’ financial health are:-

Creating on-campus job opportunities and developing a job platform synced with local businesses can provide them to work on projects on a freelance basis, resulting in hands-on experience and augmented income, and this work should contribute to their GPA. This will create an opportunity for students to learn and earn. For girls with mobility challenges, online assignments should be created.

Developing a cashless campus so students develop the habit of digital transactions rather than cash and increase their efficiency at the campus through automation and build their financial knowledge that will be handy when they step into professional life.


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