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Natalie Chu Kit Ying

Student ID: 124118


ENG 212, Section 21
8 May 2014
The Investment Decisions of University Students in Hong Kong
In Hong Kong, improper financial management of university students is a serious
issue. For example, some university students misuse grants or loans to invest without
basic knowledge of investment while some complain they cannot invest to accumulate
wealth because they lack savings. This research is to explore the reasons for the low
incentive and lack of awareness on investment of university students in Hong Kong.
Methodology
A survey was conducted from 10 April to 1 May 2014. Totally 30 university
students in Hong Kong were interviewed. The questionnaire is about their main
sources of income, perceptions on investment, factors affecting their investment
incentive, current investments in university study and future investments after
graduation.

Major sources of income

Major sources of income of university students


100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Percentage (%)

According to the questionnaire, most university students (67%) earn income


from doing part-time job, such as being private tutor and salesperson. Their average
monthly salary is $2,000. Another major source is from parents. 15% of respondents
reflected that they receive $1,500 pocket money every month. There were 8% of
respondents rely on subsidies/scholarship and grants/loans respectively.
However, only 2% of respondents reflected that they have returns from
investment as their major source of income. It is because most university students do
not have the idea of investment. They rare invest with the fear of loss.
Perceptions on investment
A majority of university students (80%) think that making investment is risky
and unstable. Some respondents such as medical, psychology, history students
reflected that they can hardly learn investment knowledge since they are not business
students and have never taken the courses about financial management. Therefore,
they even do not have the awareness and basic idea of investment. Besides, the
Financial Tsunami in 2007 and instability in the stock market caused many people
suffering loss. Since the investment capital constitutes a large proportion of their

savings, the lack of investment knowledge and fluctuations in stock market


discourage university students to invest. As a result, many university students regard
making investment as a risky decision and they are not likely to take risk.
On the other hand, it was found that 10% of respondents have never thought of
making investment. It is because their peers and parents rare invest. Thus, they do not
have the awareness about the importance of investment.
Despite of the risk brought by making investment, 10% of university students
regarded making investment as a good way to help them accumulate wealth when
they are studying in school. As being a student, they have to give consideration to
both their studies and supporting of living expenditure. Making investment, like
buying bonds and shares allows university students to balance their studies and living
matters. Through buying bonds or shares, university students can receive interests or
dividends regularly as a return of investment. As a result, they can utilize the spare
time to concentrate on their studies instead of doing part-time job frequently to
support their lives.
Factors affecting the investment incentive of university students
Firstly, the amount of savings will affect the desire of university students to
invest. There is a positive relationship between the amount of savings and investment
incentive of university students. Their savings mainly come from part-time job,
pocket money, scholarship and grants or loans. From the survey, it was found that the
more savings the university students have, the higher incentive they have to invest. It
is because students have enough savings to support their daily expenditure, and thus
want to make use of the savings to generate more income. For example, it is reported
that many university students get $40,000-$50,000 grants from the government to
make investment for high rate of return. In contrast, because of the large daily

expenditure for transportation, dining and entertainment, many university students


complained that they even cannot cover these expenditures by doing part-time job.
They only have little savings, which are insufficient for making investment.
The number of sources of financial management information is another factor to
influence the investment incentive of university students. The 2001 Americans for
Consumer Education and Competitions study indicated that youngsters learned about
money primarily from their parents and family (Beverly and Clancy 2001). When
children are very young, family is the major socialization unit for learning about
finances. The advice from parents serves as a filter for the information from the
outside world (Danes, 1994). The next is from school. Classroom education has had a
substantial influence in the continuing development of students financial socialization
(Bartholomae & Fox 2002). Then, there are personal experiences and the media.
Youngsters with financial experience, such as owning bank and investment accounts
and observing parents savings habits, are more conscious about the importance of
savings and investments (Varcoe et. al. 2005). In addition, financial knowledge and
investment behavior are closely related (Hilgert & Hogarth 2003). Youngsters who
have more financial experience have higher savings rates than those with less
experience. Financial knowledge learned from financial management classes will
enhance the youngsters awareness of savings for investments. With more sources of
financial management information, university students can obtain more financial
advice and thus have higher incentive to invest. On the contrary, university students
who have no peers or parents are making investments can hardly obtain financial
advice and learn related knowledge. Therefore, their incentive to invest is lower.
The third factor to affect university students investment incentive is the
economic conditions. When there is economic prosperity, it is expected higher returns

from investment can be obtained. Over 80% of university students pointed out that
they will have higher willingness to invest when they forecast the economic condition
is going to be prosperous, as indicated by lower unemployment rate and higher GDP
in Hong Kong. However, when there is an economic downturn, many university
students are discouraged to invest for the fear of loss. For instance, the Financial
Tsunami in 2007 and the economic fluctuations in European countries, the financial
market is likely to be unstable. Many university students are unwilling to invest.
In addition, many university students, especially the business students want to
utilize the investment skills and financial knowledge they learnt. It encourages them
to make their first investment. There is a relationship between students financial
knowledge and taking a specific personal finance course (Nguyen 2001). After taking
the finance courses, the financial knowledge, financial behavior, and degree of
confidence of university students can be enhanced. It was found that state mandated
consumer economics or personal finance education in school increased students
exposure to personal financial management information. More importantly, the
exposure increased the likelihood of the students accumulating assets as adults
(Bernheim et. al. 2001). Furthermore, regarding to the surveys conducted by major
financial institutions, many parents said that their teenage children did not have
financial knowledge necessary to manage their money (JumpStart Coalition 2005). By
completing the financial information curriculum, university students possess the basic
investment knowledge. They want to have a practical investment experience by
utilizing the knowledge learnt in class. Then, they make their first investment.
Therefore, university students have a higher incentive to invest. Nonetheless, students
who have never taken investment courses lack awareness and basic ideas about
investment. They are not willing to take risk and thus have a lower incentive to invest.

Despite the variations in the incentive for university students to invest, many
students still use investment to increase fortune. They are making investment when
studying in university and planning to make further investment after graduation.
Major investments made when studying university
As reflected by the survey, buying debenture (70%) is the most popular way of
investment. There is a large proportion of university students expressed that they are
more willing to buy debenture because there is a lower risk of investment loss. Ibond,
issued by the HKSAR government since 2007, is the most desirable investment made
by university students. Interest revenue can be received according to Hong Kong
Composite Consumer Price Index (CPI) year-on-year inflation rate. In addition, there
is a lower limit of 1% return from Ibond. As Ibond is issued by the HKSAR
government with guaranteed return of capital upon maturity and regular interest
payment, it has a lower risk of investment. That is the reason that many university
students choose Ibond as their major investment. On the other hand, 20% of
university students choose buying shares as their major investment. Unlike buying
debenture, university students can easily buy and sell shares in the stock market and
get back the capital. They may receive dividends by investing companies. They gain
returns through arbitrage, by buying shares at lower prices and selling shares at higher
prices. With more share price fluctuations in the stock market, there is a higher risk in
buying shares with a higher return of investment. There is 7% of university students
are investing in foreign currencies. Renminbi (RMB) is the most popular foreign
currency invested by university students. According to the financial statistics, the
exchange rate of RMB had increased by 2.7% in 2013. The high return attracts many
university students to open a foreign currency savings account for RMB time deposit.
Other than the typical ways of investment, some university students choose investing

in the stalls of flower market organized by the societies in university. They design
creative and funny cushions for sale. Although there is lower return, most university
students regard it as a low risk investment for owning a business. Some may even
treat it as their first investment experience.
Further investments university students plan to make after graduation
After graduation, most university students expect that they will have higher
income for further investments. Some expressed that they want to buy a property in
Hong Kong for self-use. On the other hand, there are students wish to buy a property
for renting out. Therefore, rental income can be received as a stable return of
investment. According to the statistics from Centaline Property, Hong Kong housing
prices have been increasing by 19.1% since 2010. This increasing rate ranks the top 3
of the Global Housing Index. Because of unaffordable property price in Hong Kong,
some youngsters plan to buy property outside Hong Kong, like Japan, where the
property price is much lower. For instance, the purchasing cost of a 200 square foot
flat in Japan is $560,000 while that in Hong Kong is $2 million. Despite the lower
housing price of the flat, investors can receive rental income of $4,600/month. It is a
stable and considerable return. Other than investing in property, some university
students are interested in starting a business, such as opening a boutique or a cake
shop. They can then become the owner of the business.
Since there is no mandated financial and investment curriculum for the
university students, most of them lack the awareness and basic knowledge of
investment. Students are not conscious of the importance of savings for investment to
accumulate wealth. However, it is important for youngsters to learn the financial
knowledge and financial behavior at earlier age so that the issue of improper financial
management of university students can be addressed.

(2,200 words)

Reference:
1. Bartholomae, S., & Fox, J. J., 2002, Teacher versus parent influence on financial
efficacy and behavior
2. Bernheim, D. B., Garrett, D. M., & Maki, D. M., 2001, Education and saving:
The long-term effects of high school financial curriculum mandates
3. Beverly, S., & Clancy, M., 2001, Financial education in a children and savings
account policy demonstration: Issues and options
4. Danes, S. M., Huddleston-Cases, C., & Boyce, L., 1999, Financial planning
curriculum for teens: Impact evaluation
5. Hilgert, M. A., & Hogarth, J. M., 2003, Household financial management: The
connection between knowledge and behavior
6. JumpStart Coalition for Personal Financial Literacy, 2005, Making the case for
financial literacy 2005. Available from:
<http://www.jumpstartcoalition.com/upload/Personal20Financial%20Stats
%202005%20Letterhead.doc>
7. Tennyson, S., & Nguyen, C., 2001, State curriculum mandates and student
knowledge of personal finance
8. Varcoe, K., Martin, A., Devitto, Z., & Go, C., 2005, Using a financial education
curriculum for teens

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