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CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Spending is referred to the total expenditure of an individual, government or an organization. Having said this, government can spend money for projects like building of schools, construction of roads, establishments of electricity, etc. and these erupt development in our country.  Parents also cater for the need of their children and enrich them with huge sums of money as pocket money.  Some of the student’s need which propels them to spend could be enumerated thus: school fees, hotel fees, feeding, transport fares, drinks and educational materials, etc. Taking you years back, Nigeria had a good economy.  Government and parents spent much of their money without any pains.  Students at that time used money recklessly because there was a good economy and balanced with monetary value in the market. From 1980 till now, we have been experiencing our increasing an unexpected inflation of goods. By carrying out this study within the context of a tertiary institution, this paper contributes to the growing body of literature on the analysis of student’s expenditure. To my knowledge, there has been no prior research of personal finance habits conducted on a tertiary institution’s population. Previous studies such as that of Cummins et al. (2009), indicates a geographic factor that may play into the development of financial habits. Certain regions may encourage particular behaviors, resulting in location-specific effects, especially if students selected to participate are mostly from that homogenous population. The implementation of this study specifically using individuals from various ethnicities allows for greater applicability that is representative of colleges with a diversified student body representation. This paper highlights the impact of cultural norms that inevitably impact the establishment of spending behaviors, many of which are all appropriated based on differing social norms across the globe. As this topic is relevant across various continents, there is increasing desire to further the examination of financial habits among college-aged individuals. A majority of the literature reviewed focuses on demographic factors or socially constructed models of consumption to explain spending behavior. However, there is very limited knowledge on the applicability of existing economic theories that explain consumers’ spending habits, particularly within the setting of college students. As such, contributions can be made from this study’s attempts to draw connections between university level spending and theories of Hyperbolic Discounting and the Permanent Income Hypothesis. Subsequent sections of this paper are organized in the following manner: Section II provides a framework of pertinent literature to contextualize the existing findings on college students’ spending and saving habits; Section III includes methodology and data, where a description of the survey questionnaire is provide along with data collection methods; Section IV provides results from the regression analysis; Section V is a discussion, which draws conclusions and relates findings from the study back to existing literature; and Section VI concludes with final remarks and policy implications.