A RESEARCH REPORT

ON

“A Study of an Individual Perception on Personal Financial Planning”

Submitted in partial fulfilment of the requirement of Bachelor in Commerce

2019-2022

UNDER THE GUIDANCE: SUBMITTED BY:

Mr. Kamal Batra Abhishek Thakur

Assistant Professor B.COM(H) 6thsem

CPJ-CHS 01321588819

(SESSION 2019-2022)

CHANDERPRABHU JAIN COLLEGE OF HIGHER STUDIES &

SCHOOL OF LAW
An ISO 9001:2008 Certified Institute (Approved by the Govt. of NCT of Delhi
Affiliated to Guru Gobind Singh Indraprastha University, Delhi) Plot No OCF
Sector A-8, Narela New Delhi -40

1
 DECLARATION

This is to certify that Research Project entitled “A Study of an Individual

Perception on Personal Financial Planning”which is submitted by me in
partial Fulfilment of the requirement for the award of degree B.Com(H) to
GGSIP University, Dwarka, Delhi comprises only my original work and
due acknowledgement has been made in the text to all other material used.

Date: Name and Signature of

Student

Approved By:

Name of Subject Teacher/ Supervisor

2
 CERTIFICATE

This is to certify that Research Project/ Project Report entitled “A Study of

an Individual Perception on Personal Financial Planning” which is
submitted by Abhishek Thakur in partial fulfilment of the requirement for
the award of degree B.Com (H) to GGSIP University, Dwarka, Delhi is a
record of the candidate own work carried out by him under my/our
supervision.

Date: Signature of Guide

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 ACKNOWLEDGEMENT

I offer my sincere thanks and humble regards to Chanderprabhu Jain

College of Higher Studies & School of Law, GGSIP University, New Delhi
for imparting us very valuable professional training in B.Com(H)

I pay my gratitude and sincere regards to Mr Kamal Batra, my project

Guide for giving me the cream of his/her knowledge. I am thankful to him
as he has been a constant source of advice, motivation and inspiration. I am
also thankful to him for giving his suggestions and encouragement
throughout the project work.

I take the opportunity to express my gratitude and thanks to our computer

Lab staff and library staff for providing me opportunity to utilize their
resources for the completion of the project.

I am also thankful to my family and friends for constantly motivating me

to complete the project and providing me an environment which enhanced
my knowledge

Abhishek Thakur

(01321588819)

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 CONTENTS
SNO. TOPIC P.NO. REMARKS
DECLARATION 2

CERTIFICATE 3

ACKNOWLEDGEMENT 4

1. Chapter 1: INTRODUCTION 10

1.1 Definition of Personal Financial

Planning. 11
1.2 Need for Personal Financial Planning. 11
1.3 Components of Personal Financial
Planning (PFP). 13
1.4 Process of PFP. 14
1.5 Definition and Concepts of Financial
Literacy. 14
1.6 Need of Financial Literacy. 15
1.7 Approaches to Calculate Financial
Literacy. 15
1.8 Rationale of the Study. 16
1.9 Personal Financial Planning Process. 17
1.10 Components of PFP in Details. 18
1.10.1 Money Management. 18
1.10.2 Insurance Planning. 20
1.10.3 Investment Planning. 23
1.10.4 Retirement Planning. 33
1.10.5 Estate Planning 35
1.11 Financial Planning Strategies based
on Life Cycle Stage. 36
2. Chapter 2: LITERATURE 40

REVIEW.

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 2.1 Prelude 41
2.2 Literature Review- Financial Literacy &
Overall Personal Financial Planning. 41
2.2.1 Importance of Financial Literacy &
Financial Planning. 41
2.2.2 Researches done on Financial Literacy
and Financial Planning across the
World. 43
2.2.3 Researches done in India. 46
2.3 Literature Review related to various
Components of Personal Financial
Planning. 48
2.3.1 Money Management. 48
2.3.2 Investment Management. 49
2.3.3 Mutual Funds. 50
2.3.4 Insurance. 50
2.3.5 Retirement & Estate Planning. 51
2.4 Research Gap. 52
3. Chapter 3: RESEARCH 54

METHODOLOGY.
3.1 A Brief Overview 55

3.2 Research Methodology 55

3.3 Objectives of the Study 55

3.4 Research Questions 56

3.5 Research Hypothesis 56

3.6 Scope of the Study 57

3.7 Type of Research 58

3.7.1 On the basis of Application- Pure and
Applied. 58

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 3.7.2 On the basis of Purpose- Exploratory,
Descriptive and Causal.
3.8 Research Design 59
3.8.1 Methodology used for Data Collection 59
3.8.2 Sources of data used in this project 60

3.9 Methodology used for Data Analysis 60

3.9.1 Population 60
3.9.2 Sample 61
3.9.3 Sample Size 61
4 Chapter 4: ANALYSIS AND 62

INTERPRETATION OF DATA.
4.1 Introduction 63

4.2 Data Analysis 63

4.3 Interpretation 63

4.4 Section1.- Demographic Profile of

Respondents: 64
4.4.1 location 64
4.4.2 Job Type 65
4.4.3 Age 66
4.4.4 Gender 67
4.4.5 Education 68
4.4.6 Experience 69
4.4.7 Income 70
4.4.8 Marital Status 71
4.4.9 Savings 72
4.5 Section 2.- Financial Literacy of the
Respondents: 73
4.5.1 Literacy for savings bank account 73
4.5.2 Literacy regarding concept of inflation 74

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 4.5.3 Literacy regarding the concept of time
value of money
4.5.4 Literacy regarding concept of
diversification
4.5.5 Literacy regarding basics of financial
planning
4.5.6 Literacy regarding basics of risk &
return relationship
4.5.7 Literacy regarding relationship of
bond price & interest rates
4.5.8 Literacy regarding returns generated
by financial assets in log run
4.6 Section 3.- Awareness of Financial
Products with Respondents: 81
4.6.1Savings Account 81
4.6.2 Fixed Deposits 82
4.6.3 Equity Shares 83
4.6.4 Bonds 84
4.6.5 Derivatives 85
4.6.6 Mutual Funds 86
4.6.7 PPF 87
4.6.8 Post Office Schemes 88
4.6.9 Life Insurance 89
4.6.10 Money Market 90
4.7 Attitude and Factors Influencing PPF. 91

5 Chapter 5: FINDINGS AND 95

SUGGESTIONS.
5.1 Introduction 96

5.2 General Findings 96

5.3 Findings Related to Financial Literacy 96

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 5.4 Findings Related to Awareness of 97
Investment Avenues
6 Chapter 6: CONCLUSION. 99

6.1 conclusion 100

6.2 Limitation of the study 100

6.3 implications of the study 101

6.4 scope of the future research 101

 BIBLIOGRAPHY 102

Books 103

Articles 103

Websites 105

 ANNEXURE 106

Questionnaire 107

 LIST OF ABBREVIATIONS 114

 LIST OF TABLES 115

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 CHAPTER I:

INTRODUCTION

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1.1 Definition of Personal Financial Planning:

“Financial Planning is the process of meeting one’s life goals through the proper
management of personal finances”. (Kapoor, 2008). Proper Personal Financial Planning
leads to Financial Satisfaction and Well– being. As Every person, family, or household
has a unique needs and financial position, their financial planning must also be carefully
planned to meet specific needs and goals.

According to Hallman and Rosenbloom, Personal Financial Planning is “The

development and implementation of total coordinated plans for the achievement of
one's overall financial objectives”. Individuals and families have many goals or
objectives in life to fulfil. For the same they will have to save, accumulate and grow
their money. The common life goals of individuals are: Education and Marriage of
Children, Buying a house and a Comfortable Retirement. Other short-term goals may
include funding vacations, purchasing a car and fulfil debt (home loan, car loan), etc.
For achievement of short term or long-term goals, proper management of Personal
Finance is essential. Financial Planning is all about managing finances of an individual
or a family. It means Proper Management of Income, Expenses, Assets, Liabilities,
Insurance, Taxation and Estate, so that one can successfully achieve all their desired
goals and enjoy financial well-being and hence financial satisfaction.

1.2 Need for Personal Financial Planning:

India, post liberalization has experienced much change in terms of Economic Growth
and Social Structure. Basically, it serves as a base for the need of robust Personal
Financial Planning. Major factors which are relevant and important for the need of
Personal Financial Planning are discussed below.

• Longer life span and lack of social security:

According to economic survey 2012-13, the average life expectancy which was around
60 years in 1980-81, has increased to 64.6 (for males) and 67.6(for females in 2010-
11). People live longer now as compared to the earlier generations. Few generations
ago, someone would start earning by the time one reached the age of 20 years, work till
the age of 58 years and live till around 65 years. In such a case, one earns for 38 years
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and lives off the retirement savings for the next 7 years. In recent times, one starts
working at 25 years of age. Retire at age of 60 years and life span of 80 years. So an
individual works and earns for 35 years to support post retirement life of 20 years.
Government of India has withdrawn Pension Plans for government employees and
introduced New Pension Scheme (NPS), which is defined contribution plan.

• Proliferation of numerous products:

Post 1991, after implementation of LPG, many new products and services have been
introduced by the Life Insurance Industry, Banking industry and other NBFCs. New
financial products like Mutual Funds, Derivatives, Commodities, Portfolio
Management Schemes, Non-Convertible Debentures and Unit Linked Insurance Plans
have been introduced for the investors. It is difficult for investors to select financial
product to tailor their needs.

• Increasing income and savings levels:

Indian Economy has been growing at a 6% - 9% rate of GDP growth driven mainly by
domestic consumption. According to data, average Gross Domestic Saving was
Rs.1067.30 Billion in 1980-81 which has increased to 24819.31 in 2010-11 (RBI). Per
Capita Personal Disposable Income was Rs. 23712 in 2004-05 which has increased to
Rs. 66281 in 2012-13 (CSO). The educated and urban middle class has experienced
increase in income levels. At the same time, unlike our counterparts in many of the
developed countries, Asians, and especially Indians believe in saving money. India has
a considerable household savings ratio which is more than 25%. Here again investors
need guidance to channelize their savings.

• Increasing level of borrowings:

In today’s financial markets, there is an easy access to loans resulting in increased levels
of borrowings by people. If not managed carefully, this may lead to a serious mismatch
in earnings and repayment leading to problems in cash flow. Leveraging the low interest
rates is a critical aspect which needs to be explained to the borrowers.
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• Inflation:

Indians are wise savers but poor investors (Visa 2012). Indians save money into
traditional risk-free products like Bank FD, Saving Bank Account, Insurance. This may
not be sufficient to overcome the impact of increase in inflation. Therefore, a well-
balanced Financial Plan is required to protect the investors from the impact of inflation.

• Nuclear families & Change in Life Style:

Traditional Indian social system of Joint families provided great safety net for most
individuals as it shared the resources and difficulties. Growing urbanisation during the
past decades have led to the birth of nuclear families. These smaller families have a
need to plan better. They can no longer depend on the support of the larger family since
they might be geographically distant. So, one needs a comprehensive financial plan to
meet the contingencies and to attain the short term and long-term goals.

1.3 Components of Personal Financial Plan (PFP):

According to Garman and Forgue (1988) & CPFA – NISM (2009), Personal
Financial Plan is the balance of following components:

 Planning Personal Finances

 Managing Personal Finances

 Managing Expenditure

 Protecting Income & Assets

 Managing Tax Planning

 Planning Investments

 Retirement Planning

 Estate Planning

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1.4 Process of PFP:

According to Gitman & Joehenk ( 1990) The financial planning process is a logical,
six-step procedure. The steps involved are listed below:

 determining your current financial situation

 developing financial goals

 identifying alternative courses of action

 evaluating alternatives

 creating and implementing a financial action plan, and

 re-evaluating and revising the plan.

1.5 Definitions and Concept of Financial Literacy:

Various researchers and organizations have provided different definitions of financial

literacy. Some of the definitions are discussed here. Financial Literacy is a combination
of awareness, knowledge, skill, attitude and behaviour necessary to make sound
financial decisions and ultimately achieve individual financial well-being. (OECD
INFE, 2011). Financial Literacy is concerned with the understandings of basic financial
concepts, principles, skills and ability to understand key financial products to make
good financial choices. (Jariwala H., 2013). According to PACFL, ―Financial Literacy
is the ability to use knowledge and skills to manage financial resources effectively for
a lifetime of financial well-being‖. Lusardi & Mitchell (2007) have defined it as the
most basic economic concepts needed to make sensible savings and investment
decisions. ANZ Bank (2008) has defined it as the ability to make informed judgements
and to take effective decisions regarding the use and management of money.

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1.6 Need of Financial Literacy:

Need of financial literacy is increasing significantly with deregulation and globalization

of financial markets. More choices are available for investment avenues with easy
access to credit cards and personal loan. According to one survey ―Indians are wise
saver but poor investors. Saving rate in the country is increasing year by year and on
the other hand increase in spending on consumption and change of life style have led
to increase in personal and household debt levels. Countries like India with almost nil
social security system provided by government, corpus saved by investors are not
sufficient enough to meet the expenses and maintain same life style post retirement.
The one reason for the same is, though there are many diversified options available for
investors to invest their money, Indian investors still prefer safe options like Bank FD,
Post office schemes. Returns generated by these instruments do not beat the increasing
rate of inflation. So investors’ financial wellbeing is hampered. So, it is required that
investors should not only be aware about financial 5 market and its different
components and be more informed about economic variables impacting their financial
decisions, they should be able to plan their finances carefully, keeping into mind their
own financial goals and objectives. Beal and Deltahedra (2003) had stated that, ―the
need for financial literacy has grown rapidly over the last decade because financial
markets have been deregulated and credit has become easier to obtain, as financial
institutions compete strongly with each other for market share.‖ Financial literacy is
important because well informed, well-educated consumers should make better
decisions for their families; increase their economic security and well-being; contribute
to vital thriving communities; and foster community economic development‖.(Hogarth,
2002)

1.7 Approaches to Calculate Financial Literacy:

As discussed, financial literacy is associated with financial well-being and financial

satisfaction of an individual. Increase in Financial Literacy will help investors to make
informed choices, which, in turn, helps nation to build strong financial system and will
help to achieve goal of Financial Inclusion. Many government bodies like SEBI & RBI
15
have realized the value of financial literacy and to increase that, they have started
various financial education programmes. To design the program for investors, one
really needs to know what is the current level of financial literacy that investors possess
and then course can be designed to suit their literacy level. There are different methods
adopted by researchers and certain organizations to measure the current level of
financial literacy of the investors. Definitions on Financial Literacy provided by
different researchers serve as the basis for items to be included in research instrument
to measure the financial literacy. Some researchers have developed the scale for Self-
Assessment of Respondents and some have given performance test. Basic items
covered in different researches are Time value of Money, Calculation of Interest Rate,
Relation between Risk & Return, Inflation, Diversification etc. Scale used in the present
study is adopted from Lusardi & Mitchell (2008) and modified according to Indian
context. 6 1.8 Rationale of the Study Financial well-being of the individual depends
upon Financial Attitude and Financial Behaviour which, in turn, depends upon
Financial Literacy of an Individual. Many researches have been done in area of
Financial Literacy and some of the aspects of investment decision making in India, but
there is no comprehensive study so far that deals in the overall personal financial
planning aspects of the individual decision-making process and/or which has attempted
to measure the awareness of overall personal financial plan, attitude of the respondents
for the same and factors influencing personal financial planning of an Individual. The
present study attempts to fill this gap in the current research.

1.8 Rationale of the Study:

Financial well-being of the individual depends upon Financial Attitude and Financial
Behaviour which, in turn, depends upon Financial Literacy of an Individual. Many
researches have been done in area of Financial Literacy and some of the aspects of
investment decision making in India, but there is no comprehensive study so far that
deals in the overall personal financial planning aspects of the individual decision-
making process and/or which has attempted to measure the awareness of overall
personal financial plan, attitude of the respondents for the same and factors influencing
personal financial planning of an Individual. The present study attempts to fill this gap
in the current research.
16
1.9 Personal Financial Planning Process:

Personal Financial Planning is the management of Personal Finance of Households. It

includes management of Debt, i.e., Personal Loan, Credit Card etc., Money
Management, maintaining liquidity for emergency; obtain short term & long term goals
through proper investments (keeping into mind the taxation, i.e., Tax Planning),
managing risk of life with Insurance, Planning for safe/comfortable retirement and
proper planning of transference of one‘s assets after the death. Steps for Personal
Financial Planning are listed below:

(1) Determine your current financial position.

(2) Identify financial goals.

(3) Evaluate all the alternatives available.

(4) Create financial plan and make it into action.

(5) Revaluate it periodically and revise, if necessary.

Step 1: Determine Your Current Financial Position:

This step includes preparing a personal financial budget. One will list down all their
income and expenses, savings, investments and debts. This will create a base to prepare
your financial plan.

Step 2: Identify financial goals:

Next step involves identifying financial goals of the life. One should remember that
goals should be realistic and quantifiable in terms of money. Also attach timelines to
the goals. Some of the major and minor goals in an individual‘s life are listed below:

Major Long-Term Goals in Life can be:

• Children’s Education, Children‘s Marriage, Purchasing a House, An Independent

Retirement

Short Term Goals in Life can be:

• Vacations, purchasing a Car, purchasing electronic gadgets, paying off the loans.

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Step 3: Evaluate all the alternatives available:

Taking into consideration one’s current financial position and objectives to attain; one
needs to decide the allocation of money in to various alternatives available. There are
different 10 investment vehicles available in Indian Capital Market, like equity shares,
FD, Bonds, Mutual Funds, Futures & Options, etc. One can choose the investment
vehicle according to once objective, tenure of investment and risk profile of the
individual. One should also consider opportunity cost of selecting a particular
alternative. Opportunity cost is what you give up by making another choice.

Step 4: Create financial plan and make it into action:

Next step is to prepare a written Financial Plan. Here, the allocation of money will have
to be spelled and written clearly. To implement financial plan, one can take help of
Investment brokers, agents or certified financial planners to purchase stocks, mutual
funds, insurance etc.

Step 5: Revaluate it periodically and revise, if necessary:

Financial planning is a dynamic process that does not end when you take a particular
action. One need to regularly assess their plan and check whether it is aligned with
objectives or not. Changing personal, social, and economic factors may require more
frequent assessments.

1.10 Components of PFP in details:

1.10.1 Money Management:

Money management is the day-to-day financial activities needed to manage personal

economic resources, while working toward long-term financial security.(Kapoor J.,
2008). Money Management includes:

 Storing and maintaining personal financial records and documents:

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One can prepare home file. In that, one can maintain the records which are often
required and can be referred when needed. For example, employment records, tax
returns, financial services records, investment statements, copy of insurance policies,
bills of consumer purchase, statement of loans etc. Some documents can be kept at Safe
deposit lockers, e.g., Birth Certificate, Marriage Certificate, Mortgage Papers, Wills,
Insurance policy, Certificate of investments. One can also keep computerized records
of personal budget, bank statements, investment statements, tax returns, etc.

 Creating a personal balanced sheet and cash flow statements:

Personal balanced sheet will include: List of Assets one has, like, liquid assets, real
estate, investment assets; Liabilities one has, like, Personal loans, credit card, debts, 11
Home loans etc. Net worth is difference of one‘s assets and liabilities. Personal
balanced sheet determines your current financial position. Cash flow statements will
record inflow of income through various sources like salary, dividends etc. and outflow
of income like fixed and variable expenses.

 Creating a personal budget Budget:

Budget is a plan for spending in the future, such as for the next month, next quarter or
next year. Budgeting helps a person to live within their income, reach their financial
goals, prepare for financial emergencies, and develop positive attitude towards financial
management. Effective budget will help one to achieve their financial goals. Steps to
prepare personal financial budget:

1. One can list all their future financial goals.

2. Estimate Income from all the sources.

3. Calculate the amount required for emergency purpose, periodic expenses and
financial goals.

4. Calculate the amount required for fixed expenses like home loan installments and
variable expenses like normal household expenses.

5. Set budget for savings.

6. Compare budgeted amount of inflow and outflow with actual amount, and determine
variance. Take necessary corrective actions in spending pattern to reduce the variance.
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1.10.2 Insurance Planning:

Insurance Planning is determining the amount of insurance cover required by the

individual to cover the risk associated with one‘s life, medical emergencies and assets.
In case of pre-mature death of the primary earner of the family, the family‘s income
will stop. In that case, the family will need some source of money which can generate
income to cover the expenses and liabilities for the rest of their life. One can purchase
Life Insurance policy to protect their family in the event of death of primary earner.
One need to calculate amount required for Insurance Coverage.

One can take up health insurance popularly known as Mediclaim to meet with medical
emergency. Assets like house, automobiles and other assets can be protected under
Property Insurance. Health & Property Insurance are covered under General Insurance.

Different Types of Life Insurance Products:

1.10.2.1 Endowment Plan:

It is a policy with a savings feature. At maturity or in case of death of policy holder, a

lump sum amount is paid equal to the sum assured and bonuses. It is considered as more
expensive than whole life or term plan. One can choose the term from 5 to 30 years.
Endowment insurance is a popular policy, which provides protection to self and family.
It also acts as a good tool for retirement planning.

1.10.2.2 Whole Life insurance:

It is designed to provide life insurance cover for the entire life of the insured. Insured
person pays the premium throughout the lifetime. Generally premium amount remains
the same throughout the tenure. It is generally used when the need of the life insurance
is life- long. The benefits of whole life policies are guaranteed death benefits, fixed
annual premiums. The drawback of the same is that, the internal rate of return generated
by the policy may not be competitive with other investment options available.

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1.10.2.3 Money Back Insurance:

Under this policy certain percentage of sum assured is returned to policy holder on regular
interval. At the maturity the remaining amount is paid as the maturity amount. It is a savings
plan with the added advantage of life cover and regular cash inflow.

1.10.2.4 Children’s Plans:

Children’s plans are taken on life of parents for benefit of children. It ensures that, in
case of death of the parents, the child gets the sum assured and the insurance company
may fund future premiums so that the child can get the value accumulated at the end of
the term. Children’s plans are suitable for passing on a financial asset to a child.

1.10.2.5 Pension Plans:

Pension Plans or annuities are Plans used for Retirement benefits. An individual can
invest as a lump sum amount or periodical amount till age of retirement. Maturity
amount can be taken as a monthly payment (annuity) from the accumulated funds. One
can also withdraw one third of total accumulated amount once the person has retired.
There are two types of Annuities: Immediate and Deferred. In Immediate Annuity Plan,
one pays premium in Lump sum mode and retirement benefits starts soon after the
retirement. In Deferred Annuity Policy, insurer regularly pays premiums to Insurance
Company till the vesting age or date. Annuity starts after the age of retirement.

1.10.2.6 ULIP:

It is a combination of investment and insurance. Corpus of ULIP is invested in a basket of

market linked securities. The major advantages of market-linked plans are that they leave the
asset allocation decision in the hands of investors themselves. They are in control of how to
distribute the funds among the broad class of instruments. ULIPs are little expensive than pure
term plans or endowment plans. There are charges like Premium Allocation charges, fund
management charge, policy administration charge, and mortality charge etc. which are levied
to insurers. One should consider their own risk appetite, tenure for investment before
purchasing ULIP plan.

1.10.2.7 Term Insurance:

Term insurance is an insurance product, which covers only risk there is no element of
investment associated with it. It pays the sum assured only when the policy holder dies

21
during the period for which is determined. Term insurance is the cheapest form of life
insurance. Term life insurance provides for life insurance coverage for a specified term
of years for a specified premium. If insurer survives the tenure, then he receives
nothing.

Different Types of Non-Life Insurance Products:

1.10.2.8 Property:

Insuring property means insurance of buildings, machinery, stocks etc. against risks to
fire, theft etc. It covers the protection of building against natural and man-made
disasters. 14 Property insurance covers Fire Insurance, Burglary Insurance, and Marine
Insurance etc. Things which are not covered in property insurance are wilful destruction
of property, damage due to wear and tear and Art and antiques.

1.10.2.9 Health – Medi-claim policy:

Health insurance / Medi-claim protect insurer and their family members against any
financial contingency arising due to a medical emergency. This policy provides for
reimbursement (Many policy have cashless options also these days) of hospitalisation/
domiciliary treatment expenses for illness/ disease or accidental injury. Medical
expenses incurred during period of 30 days prior to and period of 60 days after
hospitalisation are covered. Normal exclusions include all diseases/ injuries which are
pre-existing at the time of taking the cover. There are many variants and riders available
on simple health insurance plan. Facility like group health insurance and family floaters
are also available, which cover the group of employees and all the family members
respectively.

1.10.2.10 Motor Insurance:

Under this Insurance, the company indemnifies the insured in the event of accident
caused by or arising out of the use of the motor vehicle anywhere in India against all
sums including claimant’s cost and expenses which the insured shall become legally
liable to pay in respect of (i) death or bodily injury to any person, (ii) damage to the
property other than property belonging to the insured or held in trust or custody or
22
control of the insured. The insurance of motor vehicles against damage is not made
compulsory but the insurance of third-party liability arising out of the use of motor
vehicles in public places is made compulsory.

1.10.3 Investment Planning:

Investment Planning defines optimum asset allocation of funds based on risk appetite,
financial objectives and time horizon of investor. Plethora of investment options are
available today to park surplus money. There are many different financial products
available under different asset class; one should carefully choose the Financial Products
so that they can achieve their financial goals within stipulated time. Things to be
considered while choosing the investment products are discussed below:

Returns generated by the product:

The Rate of return generated by the investment product can be in the form of capital
gains, or regular cash flows, or both. A retired person may be more interested in regular
cash flows to cater for his day-to-day needs, where as a younger person in accumulation
phase may be more concerned with growth of his investment for creating a corpus for
his retirement.

Capital Protection:

Protecting the capital is the important criteria while selecting an investment avenue.
Each investment avenue has risk and return associated with it. Risk and Return goes
hand in hand. Higher the risk, more is the expected return. One must understand risk
and return associated with any product before investing his money in any of the
investment products.

Inflation:

Inflation is the rise in general price levels of goods and services in an economy over a
period of time. Inflation erodes purchasing power of money. The objective of
investment is to get returns in order to increase the value of the money. Investment
product should be able to beat inflation.

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Taxation

Return generated from investment assets is liable to taxation. The real return from any
investment product would be the return after taxation.

Liquidity:

Liquidity is the ability to convert an investment product into cash quickly. The amount
needed for any emergency should be invested in instruments having higher liquidity.

Different Investment Avenues:

Investment Avenues can be classified as Financial Assets and Non- Financial Assets.

Financial Assets:

Financial Assets can further be classified into Cash instruments, Equity Instruments and
Debt Instruments.

Cash Instruments:

Money in the Cash is the most Liquid asset available. But the cash in hand can‘t
generate any return so over a period of time because of inflation value of money can be
eroded. One can keep money in cash form for the purpose of emergency expenses. On
an average three to six months of our average monthly expenses should be kept in cash
instruments. Various cash instruments could be:

i) Cash in Hand
ii) Cash in Bank

Debt Instruments:

Investing money in debt instrument is like one lends their money. One may get
stipulated interest periodically on the capital invested. The capital is returned after the
designated period. Capital is relatively protected than equity instruments; returns are
normally lower than equity. Different debt instruments are: Small Saving Schemes,
Government and Corporate Debt Securities, Bank Fixed Deposits.

Small Saving Schemes can be further classified as:

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1. Public Provident Fund

2. National Savings Certificates

3. Post office Monthly Income Scheme

4. Senior Citizen Saving Scheme

5. Post Office term deposit

6. Post office savings Accounts

7. Post office recurring deposit

8. Kisan Vikas Patra

9. Sukanya Samriddhi Account

1.10.3.1 Public Provident Fund (PPF):

The PPF account can be opened in branches of State Bank of India, Some Nationalized
banks and Post Offices. It can be opened by an individual for himself/herself, and or on
behalf of a minor of whom he/she is a guardian. Tenure of the PPF is 15 years. One can
invest minimum amount of Rs.500/- in the account maximum of Rs. 1, 50,000/-. One
can invest a lump sum amount or can invest in instalments not exceeding 12 per year.
Amount invested in PPF per year is eligible for deduction under sec 80C of Income tax
Act 1961. The interest earned by PPF is completely tax free in hand of investors.
Interest rate is notified by the Central Government in official gazette from time to time.
Loan facility is also available on PPF. Though maturity period is of 15 Years, one can
partially withdraw the amount from 7th year and every year thereafter. An account
holder can withdraw 50% of his balance at the end of the 4th or the 1st previous
financial year, whichever is lower. Main benefit of PPF is that it is 17 not subject to
attachment (seizure of the account by Court order) under any order or decree of a court.
A person can have only one account in his name. Two accounts even at different places
anywhere in India are not permitted.

25
1.10.3.2 National Saving Certificates:

NSC has a Five-year term with tax benefits under section 80-C of Income Tax Act,
1961. Minimum investment is Rs.500/- and there is no maximum limit for investment.
It can be bought by an individual or jointly. NRI, HUF, Companies, trusts, societies, or
any other institutions are not allowed to purchase the National Saving Certificates.
Certificates can be used as collateral to get loan from banks. Current interest rate is
7.9% p.a. One can avail NSC from Post office.

1.10.3.3 Kisan Vikas Patra:

One can invest minimum Rs.1000/- in KVP and it doesn‘t have any maximum limit on
investment. Amount will be matured in 113 months. Current Interest Rate on KVP is
7.6%. Tax will not be deducted at source and one can withdraw the amount after two
and a half years of investment. It can be used as a collateral security for raising money.
It can be purchased from any departmental Post office.

1.10.3.4 Senior Citizen Savings Scheme:

Investor age of 60 years and above is eligible for the same. It has 5 years maturity
period. NRIs and HUF are not eligible to invest in this scheme. Maximum limit on
investment is Rs.15, 00,000/-(Rupees fifteen Lac only. Any Post Office in India having
the facility of savings bank account, or an office or banking company or institution
authorized by Central Government, can operate this scheme. An investor can open more
than one account subject to the condition, that amount in all accounts taken together
does not at any point of time exceed Rs.15 Lac. The current interest rate is 8.4 % p.a.
payable quarterly. The benefit of section 80C is available on investment but interest is
taxable at source.

26
1.10.3.5 Post Office Monthly Income Scheme (POMIS):

This scheme provides a regular monthly income to the depositors and has a term of 5
years. 18 Minimum investment amount of investment is Rs.1500/- and maximum
amount in case of single account is Rs.4,50,000/-, and in case of joint account is Rs.9,
00,000/-. Current Interest rate is 7.6 % p.a. payable monthly. Nomination facility is also
available.

1.10.3.6 Post Office Time Deposits (POTD):

This is similar to FD of Banks. It can be opened at Post office by an individual. Any

amount of account can be opened by any individual in any of the post office. It can be
open for 1 Year, 2 Years, 3 Years and 5 Years. Investment in 5 Years TD qualifies for
deduction under Section 80 C of Income Tax Act 1961. Interest rates are calculated half
yearly and withdrawals are permitted after six months. Accounts can be pledged as a
security for availing a loan. Also, nomination facility is available for this account.

1.10.3.7 Sukanya Samriddhi Account:

It is a small deposit scheme, which can be opened in Post office. It has started in 2015
with the objective of accumulating fund for Girl Child for her marriage and education
purpose. Amount invested in scheme is exempted under sec 80 C of Income Tax Act
1961. A legal / Natural guardian can open the account in name of the Girl Child.
Account can be opened upto the Age of 10 Years and mature at the age of 21 years.
Minimum Investment amount is Rs 1000 per year and Maximum is Rs. 1,50,000 per
year. Current rate of interest is 8.4% p.a.

The Government and Corporate Debt securities include Government Securities,

Treasury Bills, Commercial Papers, Certificate of Deposits, Government Bonds, and
Non-Convertible Debenture etc.

27
Equity Instruments:

1.10.3.8 Mutual Funds:

Mutual Fund is a financial intermediary, which mobilise money from investors to

various avenues like equity, Bonds, G –Sec etc., in line with the investment objectives
of the scheme. Through mutual funds, one can invest in different class of assets. The
fund mobilized through Mutual Funds is handled by professional fund managers and
they are parked in diversified assets. The investor gets units of full amount they have
invested. There is much transperacy in the process and no hidden charges. One can
transfer their money from one scheme to 19 another scheme also. And Mutual Fund
units can be redeemed easily so it provides reasonable liquidity too.

Different types of Mutual Funds are described below:

Money Market / Liquid Funds:

These categories of funds invest the corpus in Money Market instruments like T- Bills,
Certificates of deposit, Commercial papers etc. As these instruments are highly liquid
funds invested in MMMF, these can be redeemed at a very short notice. As money is
invested in the debt instruments capital is safe and so returns are low. But returns can
be higher than Savings Bank Account. These are suitable for investors looking to invest
their short-term surplus with an objective of high liquidity with high safety.

Debt or Income Funds:

These schemes invest the money in fixed income generating debt securities, issued by
different agencies like government, private companies, banks, financial institutions, and
other entities such as infrastructure companies/utilities. The main aim of these schemes
is to generate regular income at a low risk. As compared to the Liquid funds, these debt
funds have a higher risk of default by their borrowers and can generate higher return
also. There are varieties of debt funds available. Like Gilt Fund, FMP etc. Gilt Funds
These funds invest the corpus in G- Sec. As G – Sec is issued by GOI, there is no credit
risk associated with the investments. But returns generated by G – Sec are low, so the
returns of the Gilt Funds are also low. Interest Rate risk is associated with the funds.
These funds are also known as Government Securities Funds or G-Sec Funds.
28
Fixed Term Plans or Fixed Maturity Plans (FMPs):

FMPs are similar to Bank FDs. They are close ended funds. FMPs have a defined maturity
period; say 3 months, 6 months, 1 year, 3 years, etc. The maturity of the debt securities in which
the fund is invested, and the maturity of the scheme are almost the same. Hence, when the
scheme matures and money has to be returned to the investors, the fund does not have to sell
the bonds in the market, but the bonds themselves mature and the fund gets maturity proceeds.
The units of the FMPs are traded on stock exchange, so it provides liquidity to 20 investors
also. These funds are suitable for investors who don‘t want to take much risk and know the time
when they will need the money.

Equity Funds:

These schemes invest almost 65% of their corpus in equity market. Depending upon
the type of shares fund have selected, these funds can been classified as, Growth funds,
Value funds, Large Cap funds, Mid Cap or Small Cap funds, Sector funds, Equity
Diversified funds, Index funds. Certain equity diversified funds have tax benefit under
section 80C of the Income-tax Act, 1961 and have a lock in period of three years. These
are Equity Linked Savings Scheme (ELSS).

Growth funds:

These funds invest in the money in growth stocks, which are stocks that are expected
to earn above average returns.

Value funds:

Value funds invest in value stocks. That is stocks are out of favour with most investors
in the market and the market price is low compared to the value of the business. The
value style managers generally hold the stocks for longer time horizon than their growth
style counter parts.

Large cap funds / Mid. cap funds / Small cap funds:

Fund investing in stocks of large companies are called Large Cap Funds and those
investing in stocks of midsized and small sized companies are called Mid Cap and Small
Cap Funds.

29
Speciality / sector funds:

These schemes invest money in specific sectors or industry, e.g., Pharma Funds, FMCG
Funds Infrastructure Fund. High risk is associated with this kind of fund so these are
suitable for aggressive investors.

Diversified equity funds:

These funds invest in stocks from across the market irrespective of market
capitalization, Industry or style. The fund manager chooses stocks from a wider
selection. As it invests money in diversified sectors, it is less risky than sector funds.

Index funds:

It invests the money in stocks which constitute the index. So fund managers don’t play
that active role. They just replicate the index they have selected.

Hybrid Funds:

They are combinations of equity and debt funds. They can be further classified as
Balanced funds, Monthly Income Plans (MIP).

Balanced funds:

As the name suggests balanced funds invest equally between equity and Debt securities.
To get an advantage of the provisions of the prevailing tax laws, these funds invest more
than 65% of their assets into equity and remaining in Debt securities.

Monthly Income Plans (MIPs):

This scheme invests majority in fixed income securities with marginal exposure to
equity. The Debt securities provide stability to the portfolio and equity provides
appreciation of capital over period of time. Normally 80% of the scheme AUM is
invested in fixed income securities and the balance 20% in equity stocks.

Exchange Traded Funds (ETFs):

The units of these funds are traded on designated stock exchange. It combines features
of open and closed mutual fund schemes, and trade like a single stock on stock
exchange. Gold ETFs are very popular in India.

30
1.10.3.9 Equities:

Investment in equity shares means becoming a shareholder in the particular company.

One also gets the voting rights of his share in the company. Higher risk is associated
with higher potential of returns. If company does well and makes profit, the investor is
benefited as he is part owner of the profit. However, if the business goes in loss, the
investor would lose capital proportionately. Returns from equities can be in the form of
capital appreciation and/ or dividends. One can do all fundamental and technical
analysis before investing into direct equities. One should analyse the market size,
business of the company, its competitors, regulations etc.

1.10.3.10 Derivatives:

Derivatives are contract between two or more parties, which derive their value form the
underlying assets. Traders in the derivative segments are Hedgers, Speculators, and Arbitragers.

Hedging:

It is basically protecting assets from losses. It is basically taking reverse position to protect the
funds against any odds in the market. This may compensate for any losses in cash market from
fall of the stock price.

Arbitraging:

It is taking the advantage of difference in prices in different markets and earning the profits.
Say stock price in spot market is lower than the futures price. One can buy the stock in spot
market and sell the same in futures markets and can generate profits. On the day of expiry, the
prices converge. Stock may move in any direction but profit is booked.

Speculation:

It is taking positions in futures markets based on the expectations regarding the price
movements of the underlying assets without having a position in cash markets.

Various derivatives instruments in use are Forwards, Futures, Options and Swaps.

Forwards are tailor made contracts between two parties. They are not standardized
contracts and hence they are not traded on exchange. Normally traders trading in
currency market use forwards contracts to hedge against fluctuations of exchange rate.

31
Futures are standardized exchange traded contracts. Contracts are available for the
period of 3 months, 6 months, 1 year etc. Last Thursday of every month is the expiry
of every contract. Futures are available on single stock, Index and commodities. One
needs to keep margin in the account for the trading purpose. Futures can be traded only
in lots.

Options are categorized as Call Option and Put Option. Call option gives the buyer a
right to buy the underlying security at a predetermined price in predetermined period.
Call option gives the buyer a right to buy the shares/underlying asset at a price which
is below the market price and vice versa for seller. Put Option gives the buyer a right to
sell the underlying security at a predetermined price during a predetermined period. Put
option gives the buyer 23 the right to sell the shares/ underlying asset at a price which
is above the market price. Option buyer has to pay the price to the seller to buy this
option, it is known as Option Premium.

Non-Financial Assets:

1.10.3.11 Commodities:

Commodities are the real physical assets like, agricultural products, precious metals
like Gold, silver, oil etc. Futures and Options contracts on these products are traded on
commodities exchanges like, MCX and NCDEX in India. The working of the derivative
contracts are discussed in the above segments.

1.10.3.12 Real Estate:

The rapid rise in the price of the property in recent years, have made the real estate as
one of the most lucrative investment avenue. The benefits of investing in real estate can
be appreciation of capital, rental income, safety etc. Investment in Real estate can take
following modes:

a) Residential Property.

b) Commercial property.

c) Industrial real estate

d) Agricultural land.
32
e) Semi urban land.

f) Time share in a holiday resort.

Residential Property:

This investment provides return in the form of rental income and appreciation in capital.
Tax shelters are available on interest paid and principal repayment, provided the
investment is done through the route of a loan. Commercial property Buying a shop or
office in a commercial complex may offer rental income and capital appreciation over
a time period. 24 Agricultural land Agricultural income from agricultural land is not
taxable. Further, agricultural land is exempt from wealth tax too.

1.10.3.13 Other Non-Conventional Investment Avenues:

Investments in Precious Metals, coins and other collectibles and Art objects are illiquid
investments. They are the riskiest investment avenues. As organized exchanges are not
available for these instruments, one should be very careful while investing in these
instruments.

1.10.4 Retirement Planning:

Changing Family structure from Join to Nuclear, increase in life expectancy and
absence of robust Social Security system have increased the importance of Retirement
Planning. Retirement Planning is determining how much amount will be required to
fund the expenses during the retirement years and how that amount can be accumulated
during the preretirement tenure. Ideally, one should start retirement planning with the
starting of their first job. One can invest their money in employer initiated schemes like
Employee Provident Fund (EPF), gratuity, superannuation, etc. Apart from that, there
are other alternatives available like; PPF Account, NPS, Pension & Annuity Plans, and
Reverse Mortgage etc. in which one can invest as a part of Retirement Planning.
According to CPFA- NISM (2012) there are two methods to calculate Retirement
Corpus. They are Expense Protection method and Income Replacement Method. In
Expense protection method, one lists down his/ her total monthly or annually expenses,

33
then, those amounts are adjusted for inflation. Amount which then arrives, indicates the
corpus required by person post retirement, which will be generating regular income
equal to calculated expenses. Income Replacement Method calculates person‘s income
just before retirement.

Tools for Retirement Planning:

1.10.4.1 Provident Fund:

It is the traditional and most popular product for Retirement Planning. A certain
amount is deducted from employee’s salary every month and invested in Provident
Fund by their employers. Provident fund is a debt instrument, pool generated by
employees 25 are invested in debt products. Employers also contribute their share in
the employee’s account. On maturity investor gets total amount invested by him and
his employer and interest earned on that.

1.10.4.2 National Pension System (NPS):

NPS is a Defined Contribution Scheme and it is regulated by PFRDA (Pension Fund

Regulatory and Development Authority). The investment in NPS is to be maintained
until the age of sixty. On retirement, a part of the corpus can be withdrawn as lump
sum, and the balance would be paid as annuity. Government of India has started this
scheme in 2004 for Government Employees. From 2009, it was made available to all
citizens of age group 18 – 60 Years, except individuals who are covered under
Provident Fund and Miscellaneous Provisions Act, 1952, Government employees who
have joined services before Jan ‘2004, Employees of Armed forces. It offers various
investment options and choice of fund managers to their investors. Investors also have
flexibility to switch over from one fund manager to another. Returns on this scheme are
not definite; it is market linked product so return varies with performance of underlying
assets. Amount invested under this scheme get exemption from income tax under Sec
80 C.

1.10.4.3 Reverse Mortgage:

A reverse mortgage is a kind of Home loan. Any senior citizen having own house can
avail it. Basically, working of Reverse Mortgage is opposite to Home Loan. Loan
34
Amount is divided in small monthly / quarterly / yearly instalments and paid to the
lender by Bank. The loan is typically settled after the death of the owner/co-owners.
Some additional features of NPS are discussed below:

1. The maximum tenure of the loan is 20 years.

2. Normally the owner of the property and spouse are borrowers in this scheme. If one
of the borrowers dies then other may continue to avail the instalments.

3. The maximum monthly payments under the scheme is Rs.50, 000/-.

4. Settlement of loan after tenure will be done in two ways. If legal heirs settle the full
amount of loan then property will be transferred to them, and if they don‘t, then Bank
will sell the house property mortgaged will settle the loan amount and if any amount is
remaining then it will be passed on to legal heirs.

5. Facility of early repayment of loan is also available.

Normally senior citizens who don’t have steady inflow of income post retirement can
opt for the same.

Apart from these schemes, plans discussed earlier like annuity, Pension Funds are also
used for Retirement Planning purpose.

1.10.5 Estate Planning:

The next stage in Personal Financial Planning is Estate Planning. Estate can be defined
as all assets a person owns. Basic objective behind estate planning is to protect, preserve
and manage one‘s assets during and post one‘s life. Estate of the estate owner should
be passed on to estate owner‘s intended beneficiaries. (C. Jayaram, 2007). For the
purpose of Estate Planning, one can create their will or they can take route of trusts
also.

1.10.5.1 Wills:

It is a declaration made by a person clearly mentioning the manner in which one likes
his or her property to be distributed after the death. It is a legal written document. It

35
comes in power only after the death of the person. So till then it can be changed
according to situation. As a part of Estate Planning, one should create their wills at early
age only. This is to avoid any hardships to the family in case of death of the owner of
the property.

1.10.5.2 Trusts:

Trusts is a mechanism by which owner of property can pass the legal title of that
property to another person to hold on trust for the benefit of the beneficiary. They are
used as mechanisms to hold asset for present or /and future needs of legal heirs and
other family members and designed in a manner to reduce the burden of tax. Trusts are
used to accumulation of income and capital for specified children. Some terminologies
related to trusts are discussed below.

Grantor:

It is the person who creates the trust. One who is an owner of the property.

Trustee:

This is the person or an institution that will follow wishes of grantor as per the legal
document to manage the trust upon the death of the grantor.

Beneficiaries:

They are persons who will be benefited by the trust property. There are many financial
institutions and Professionals, who work as a trustee for the fees.

1.12 Financial Planning Strategies based on Life Cycle Stage:

Financial Planning of an individual depends upon his/her financial goals – short term
& long term, number of dependants, stage of Lifecycle, risk appetite and many more. It
is assumed that persons in the similar stage of life cycle have almost common financial
goals. Life cycle of the individual can be divided in following four segments. Stage of
the life cycle determines their future goals and risk taking capabilities. Depending on
these factors, their financial planning strategy can be determined.

 Young Unmarried Investor

36
 Young Couple with small children

 Mature Couple with grown up children

 Post Retirement Stage

• Young Unmarried Investor:

Any one, who is young and single may have goal of wealth creation with long term
investment horizon. He needs to give more importance on capital appreciation because
he has to fund for all future responsibilities along with planning for healthy retirement.
As the person is not married, he may not have much of the family responsibilities and
his risk-taking capability can be on peak at this stage. So one‘’s focus can be the pay-
offs for any loans which he has and start investing aggressively into Equity and very
small portion into fixed income asset class. If there are no dependants, then taking
Insurance cannot be of paramount Importance. Also, one can start investing into PPF,
NPS, Annuity Plans or other Retirement Planning tool for Comfortable Retirement. It
is advisable that one should start Retirement Planning from the first job itself.

 Young Couple with small children:

Any one, who is married and has small children has long term focus and capital growth
is of utmost importance for him. A person in this stage, may start thinking about buying
his home. As the person has dependants on him, he may start taking good Life insurance
policies, which may give protection to his dependants in case of any eventuality. One
should take health insurance of own and family members. Investment should be done
majorly into Blue Chip equity stocks which are not too volatile or they may take root
of Mutual Funds to get advantage of diversification and Professional management, as
also they can save tax by investing into ELSS. Contributions towards Fixed Income
Securities should also be increased to balance their portfolio.

 Mature Couple with grown up children:

A person in their mid-aged with grown up children have responsibilities towards higher
education of their children or marriages. As their responsibilities are higher with years
to retirement are less, they will have low risk appetite and objective will be maximum

37
wealth creation before retirement. Portfolio should be revised in a manner to have exact
balance between equity and fixed income securities. One can invest in balanced fund
of Mutual Funds which is combination of Equity and Fixed Income Securities. Also, as
a part of Estate Planning, one can create a legal will or can create a trust to transfer the
asset to their intended beneficiaries in event of death.

 Post Retirement Stage:

In this stage, a person may not have a salaried income, at the same time, their children
are independent and settled. His responsibility towards his children has decreased. One
needs to have fixed flow of income to fund their routine household expense, healthcare
expense and expenses towards leisure. Capital preservation with fixed flow of Income
is their prime importance. A little holding in equity with higher exposure in fixed
income securities like bond, Post office MIS, Post Office Senior Citizen Schemes are
desirable. One can also take route of Reverse Mortgage for fund their post retirement
expenses.

Every individual has different risk appetite and different goals, according to their own
life conditions. Therefore, the strategy and asset allocation will change accordingly.
One may take help of Certified Financial Planners and Advisors to create a balanced
Financial Plan. 29 After implementation of it, one should periodically review the same
and make changes if it is necessary.

38
39
 CHAPTER II:

LITERATURE REVIEW

40
2.1 Prelude:

A review of prior literature is an essential feature of any academic research. An

effective review lays foundation for advanced research. It facilitates new theory
development and uncovers the areas where research is needed (Jane, 2002). The
chapter has been divided in two parts. In the First Part, the literature on Financial
Literacy and Personal Financial Planning has been discussed and in the Second
one, Literature related to components of Personal Financial Planning has been
reported.

2.2 Literature Review – Financial Literacy & Overall Personal Financial

Planning:

The section is divided in three major parts. First part is related to importance of
Financial Literacy and Personal Financial Planning, Second Part is related to researches
done on the same across the world. Third part is related to research done in India.

2.2.1 Importance of Financial Literacy and Financial Planning:

1. According to Hung A. et. al. (2012), there is a positive impact of financial

literacy on financial attitude, behaviour and financial well-being. Financially
literate people do better at budgeting, saving money and spending, handling
mortgages, participating in other financial markets, do better at retirement
planning and successfully accumulate wealth. Higher financial literacy leads to
greater financial well-being and less financial concerns. (Taft M, 2013)
2. Capuano, A., & Ramsay, I. (2011) had done project in Australia on Financial
Literacy. According to them Financially Literate consumers can have more
savings, they can actively manage debt, they can be realistic regarding their
future goals, they can be more financially 31 confident, can be more active in
financial markets, they can choose more carefully financial products that are
suitable to their needs, they can plan their finances, budget and know how to be
financially efficient. They have also stated that in a way financially literate
people benefit financial system and economy too. They can help in achieving

41
 the target for Financial Inclusion in the economy. Financially literate people can
better understand the financial policies framed by any government.
3. Gallery N, Newton C.& Palm C ( 2010) had presented the model on variables
which influences Financial Well Being. It is evident from model that Financial
Well- Being is dependent on Personal Financial Behaviour which in turn
depends upon Financial Literacy.

4. Lusardi A. (2009) in her paper stated that Financial Literacy has positive causal
impact on wealth holdings and saving behaviour. From this research, it has been
found that financial literacy increases the awareness for importance of savings
and planning for retirement.
5. Andreas Oehler & Christina Werner (2008) has stated that financial literacy
is important in life stages when some important decisions are made, and
financial education at this stage may alter the behaviour related to Retirement
Planning & Saving.
6. Nag R. (2007) in his speech delivered at CITI- FT Financial Education summit
at Delhi has stated that Financial Literacy allows people to increase and manage
their earnings and so they can better manage their life events like education ,
retirement, loss of job , illness etc.
7. Martin M. (2007) has discussed variables which influence Financial
Behaviour. They are Financial Knowledge, Attitude, Income, and Financial
Safety

42
2.2.2 Researches done on Financial Literacy and Financial Planning across the
world:

Following section discusses studies conducted worldwide to assess financial literacy,

financial awareness, attitude towards PFP and Factors influencing the same.

1. Kebede, M., & Kuar, J. (2015) has done literature survey to find association
of financial literacy with Personal Finance behaviour. Survey suggested that
developed and developing both the worlds lack in financial literacy. Study even
suggested that low level of financial 41 literacy is related with Gender, Age,
employment status, education level, Income and area of residence (Urban or
Rural). Study suggested from previous literatures that there is an impact of
financial literacy on financial behaviour and financial inclusion.
2. Mien, N. T., & Thao, T. P. (2015) has done study to investigate Personal Financial
Management Behaviour. Study was conducted in Vietnam; around 400 respondents of
Age group of 18 – 30 were selected for the same. With the help of Exploratory Factor
Analysis, Confirmatory Factor Analysis and SEM, they have derived a model that
Personal Financial Management Behaviour depends upon Financial Knowledge and
Financial Attitude and locus of control. Financial Attitude was checked with respect to
Financial Attitude towards Saving Plan, daily Financial Behaviour, Financial
Management and Future Financial Ability. Financial Attitude and Financial
Knowledge were significantly positively related to Financial Behaviour whereas
external locus of control is negatively related to Financial Behaviour.
3. Ciumora T. (2014) has done excessive literature survey to identify factors
influencing individual financial decisions. From the literature survey, the
researcher divided factors in two parts. Internal Factors affecting financial
decisions and External Factors affecting financial decisions. Internal Factors are
Financial Education & Literacy, Age or Positioning in a life cycle, Focus on
Financial matters, cognitive functioning, Family dynamics, Household
structures, Psychological elements, Gender and health. External Factors are
National Culture, Religion, Stereotype threats, Income uncertainty, Access to
financial advice, Geography, Demographics, Financial system development,
and Economic environment.
4. Jalil, M. et.al (2013) has explored the critical factors that influence Personal
Financial Planning after retirement. Study was conducted in Malaysia in Klang
43
 Valley region. Survey method was used to take data from 170 Malaysian
citizens. From Exploratory Factor Analysis, Confirmatory Factor Analysis and
Structural Equation Modeling, three factors were found which influence PFP
after retirement. These are: Income / Salary, Culture and Attitude. Income /
Salary have the highest influence on PFP followed by attitude and culture.
Ramasawmy, D. et.al (2013) has done study in Mauritius on students of
Management to assess their level of awareness regarding financial literacy.
Primary data was collected with the help of questionnaire. Questionnaire was
designed to collect the information related to 39 level and importance of
financial literacy, definitions and theories, constrains and measures to improve
the financial literacy. Study was also aimed to identify any significance of
association between demographic variables and level of awareness. Chi square
test of association and factor analyses were used for analysis of the data. Results
of Chi square test suggest that Age group has significant association with level
of importance attached with Financial literacy, other variables like Gender,
Income Level did not have any association with the same. Factor analysis was
run to measure perception of respondents with regards to definition of Financial
Literacy, sources of Financial Information and financial education. Four factors
were extracted with help of Principal Component Analysis. They were
Analytical skills, Awareness of financial issues, Ability to make financial
decisions, and Awareness of financial risks.
5. Ali, A., Rahman, M. S., & Bakar, A. (2013) had done research to find factors
contributing to level of financial literacy and its relation with financial
satisfaction. Study was done in Malaysia. Researcher had hypothesized model
on financial literacy. Model postulated that financial literacy of the person can
determine financial satisfaction of the person. To measure the financial literacy,
five different aspects were assessed. They were: Basic money management,
financial planning, investment know how, attitude to money and financial
activities. Model hypothesized by researcher is shown in Figure 2.2.

44
6. Pillai, Carlo, & D’souza (2012) have tried to study youth of Asia regarding their
financial literacy, their spending behaviour and approach towards Personal Financial
Planning. Study was carried out in Asia through judgmental and Quota sampling.
Study comprised to check four major areas of financial prudence of youth covering
financial literacy, spending and saving behaviour, credit card usage and borrowing
and Financial Planning. Study revealed that respondents had considerable level of
financial literacy but they did not have prudent Personal Financial Plan to work for
them. This is the gap identified by the study that youth of Asia possess financial
literacy but do not take an extra effort to work for their financial future.
7. Altintas, K. M. (2011) in his study tried to find variables that significantly
affect the financial literacy of the respondents. Study was carried in Turkey on
University Students. Independent variable was financial literacy score and
dependent variables tested were Age, Rank in class, Gender, Academic
Discipline, Family Income, Education level of Father, Education level of
Mother and Participants discussion with their parents about Financial Matters.
Multiple Regression method was used to find out factors affecting Financial
Literacy score. The most important variables that affect the financial literacy
are Class Rank, Age, Education level of Father and Participants discussion
with their parents regarding financial Matters and Family Income.

45
2.2.3 Researches done in India:

There are many surveys conducted by various agencies to assess the level of financial
literacy and planning in India. Some of them are discussed here.

1. Agrawal S. (2010) had done survey to check financial literacy and financial
planning of Indian investors. Study found that majority of the respondents
replied correctly for question related to numeracy, inflation and diversification.
But there were many variations with different demographic variables. Males
tend to know better than the females, educational level also had a positive
relation with financial literacy, and people with more goals are well informed
compared with people with less number of goals. As the number of goals
increases, there is increase in financial instruments, that means increase in
insurance, number of investments and liabilities too. Male tends to take more
risk than females. Aggressive growth individual have more insurance policies,
which contradicts with previous study which found that insurance are preferred
by conservative investors. More aggressive the investor more financially literate
he is.
2. Ranjani K. & Chpora A. (2011) have done empirical study to find financial
awareness of working women of Mumbai City. 225 women were selected from
the age group of 21- 55 years. Primary data was collected with the help of
questionnaire. Questionnaire was designed 43 to collect the data on parameters
like financial awareness, perception towards investments, preference for various
investment avenues, self-assessment as an investor and perception regarding
riskier investments. The findings of the research were: respondents accepted
that they don‘t have expertise in financial knowledge; they have only basic
financial knowledge. Majority of the respondents have assertive attitude
towards investing their money. Female Respondents preferred Investment
avenues with lower risk & higher liquidity. Majority of the respondents have
stated that they have not adequately planned for their retirement.
3. Preeti Kulkarni ( 2012 ) has written in Economic Times , based on the survey
done by HDFC and Value Notes. According to survey, Young India ( age group
of 20 – 30 ) years score low on financial awareness and Planning. There is lack
of awareness of financial planning, and also points that their financial planning

46
 is not aligned with their financial goals. This is a result of poor awareness about
financial events.
4. Agarwalla S. et. Al ( 2013) have done survey in India on 1000 samples to assess
their financial literacy, financial attitude and financial behavior. Study had
focused on working youth in Urban India. Data was collected from sox major
cities of India. OECD approach was used to measure the financial knowledge
of the respondents. Around 24 % of the respondents 44 had scored high financial
knowledge, which was lower than OECD study done on 13 countries earlier.
Family Income, Gender had significant impact on financial literacy. Around 68
% of the respondents possessed positive financial behavior; the particular result
was in line with OECD survey. Around half of the respondents have shown
positive attitude toward financial management, which was again in line with
results obtained in OECD survey. Gender, Family Income and decision making
by self has significant impact on the financial attitude.
5. Altaf N. (2014) had done study to assess the financial literacy of the students
studying in the Central University of Kashmir. Samples size was 100 students
of different post graduate courses. Primary data was collected with the help of
structured questionnaire designed with balanced five point Likert scale.
Financial literacy was assessed in four parts, first part was measurement of
perception towards definition and theories, second part was measuring the
ability of respondents to manage personal finance, third part was related to
measurement of constraints of financial literacy, and fourth part was on
measurement of respondents view towards way to improve financial literacy.
Mean analysis was used to analyze the data. From the results, it is evident that
students don‘t have the satisfactory level of financial literacy.

47
2.3 Literature Review Related to various Components of Personal Financial
Planning:

In this section, Literature review related to different components of Personal Financial

Planning i.e. Money Management, Insurance Management, Investment Management,
Retirement Planning and Estate Planning has been discussed.

2.3.1 Money Management:

1. R. Mathivanan and K. Mohanranjani (2013) had tried to analyse the gap

between financial literacy and saving behaviour of working women in
Coimbatore city. Objectives of the study were to determine financial decision
making capacity & financial literacy of women, and to analyse gap between
financial literacy and actual saving practices. Study revealed that women are
shifting their asset allocation from traditional avenues to more risky avenues.
With the help of t- test researcher has concluded that there exist a close
relationship between financial literacy and saving / investment practices.
2. Rekha Attri ( 2012) has done survey in Indore to analyze spending and saving
behavior of youths in the age group of 14 -30 years. In western country,
normally this age group is emotionally and financially free while in India,
children are dependent on their parents till the age of 24 – 25. Still it has been
observed from the study that youth doesn‘t believe much in saving. Rather, they
spend more on entertainment, gadgets, eating out and personal grooming. There
is huge influence of peer group while taking purchase decision on youth below
age of 19 years.
3. Wang, L. et. al. (2011) had done study on Chinese credit card holders to study
consumer credit card behaviour in correlation with demographics, attitude,
personality and credit card 48 features. Study revealed that credit card features
and demographic variables have little explaining power on credit card behaviour
compared to attitude of card holders and personality variables. Interesting
finding was that some features of credit card have easily led to illusion of
income, which affected consumer credit card behaviour.

48
2.3.2 Investment Management:

1. Rani R. (2014) had done literature survey on factors affecting decisions related
to investment in stock market. According to the findings of this research, factors
which play major role for investor’s behaviour in stock market are: herding,
over reaction, cognitive bias, confidence, age, income, education, risk factor,
dividends, influence of people, past performance of the company, accounting
information, ownership structure and expected corporate earnings.
2. Bashir T. (2013) had done study on Pakistani Investors to find factors
influencing individual investor decision making behaviour. Sample size was
125 investors. Study revealed that factors influencing individual investor’s
decision making behaviour are Firm‘s Image, Accounting Information, Neutral
Information, Advocate Recommendations and Personal Financial needs.
3. Das Sanjay (2012) has examined investment attitude, preference and
knowledge about capital market. Study revealed that High income class people
invest in capital market and low 50- and middle-income class people prefer
more of insurance and Banks. Majority of the respondents prefer insurance
policies for the reason of tax benefits, life protection and average profitable
investment avenue.
4. Gaur A. et. al.(2011) had done gender based survey to identify the difference
in Investment Decision making process between Males and Females. The data
was collected with structured questionnaire from 200 respondents of Hyderabad
city. Convenience sampling technique was used to select the sample. Findings
of the study were: Males were comparatively more aware then females for
Investment Avenues. Female respondents had low confidence level in their
investment decisions. So, they had lower financial satisfaction than their male
counterparts.
5. Manish Sitlani, Geeta Sharma, Bhoomi Sitlani (2010) found that there exists
a direct relation between demographic factors (like age, gender, profession,
qualification, marital status of occupants) and investment choice of Investors.

49
2.3.3 Mutual Funds:

1. Joshi, J. R. (2013) had tried to find out perception of Investors for their
investments in Mutual Funds. Objectives of the study were to find investment
preference of the investors and identifying factors motivating investors to invest
in Mutual funds. The study was conducted in Anand city of Gujarat, India and
100 investors were selected with the help of convenience sampling method. 34
% of the respondents do invest in Mutual funds. While choosing investment
avenues, respondents look at higher returns, and tax benefits provided by the
products. Respondents preferred open ended mutual funds than close ended one.
Factors motivating investors to invest in Mutual funds are portfolio
diversification, lower risk, higher liquidity and better return provided by Mutual
funds.
2. A.Venilla, R. Nandhagopal (2012) in their article ―Investors‘ preference
towards Mutual Funds in Coimbatore City‖ have observed attitude of investors
investing in Mutual funds. Study concluded that most of the investors rely on
investment consultant to choose the right fund for them. They monitor their
investment periodically.
3. N.S. Santhi, K.Balanga Gurunathan (2011) has tried to analyze investor‘s
attitude towards tax saving mutual funds. Study finds that participants in tax
saving mutual fund is less than 51 other safer investment areas like, insurance,
postal deposit schemes, and fixed income schemes. The study also revealed that
majority of the investors do not have knowledge regarding schemes of mutual
funds and regulating authorities. They are satisfied with overall benefits of tax
saving mutual funds.

2.3.4 Insurance:

1. Deb B. (2013) had done study on consumer’s preference towards Life Insurance
Companies. Study was conducted in Guwahati. Main objectives of the study
were to assess client’s perception, purchase behaviour and awareness regarding
Life Insurance Industry in Guwahati. To identify factors affecting choice of Life
Insurance Policy. A sample of300 respondents were selected with non-random

50
 sampling. Findings of the study were, 30 % of the respondents did not have any
life insurance policy. Factors which motivate respondents to purchase policy is
to cover the future risk. 53% of the respondents had preferred LIC over any
other life insurance company. Respondents considered low premium and high-
risk coverage while selecting a particular policy.
2. Yadav B. & Tiwari. A (2012) in their research paper tried to find factors
affecting customers investment towards Life Insurance Policies. Primary data
was collected with the help of structured questionnaire. Study was conducted in
Jabalpur; sample size was 150 policyholders. Chi- Square and correlation test
were used to analyse the data. From the analysis, it is inferred that Age plays
major role in buying life insurance. Respondents between Age group of 30 – 40
years are more interested in buying life insurance than respondents of other Age
groups. Respondents prefer LIC than any other private insurance company.
While selecting company for insurance, respondents look for trusted name,
good plans, friendly service and accessibility. While selecting policy,
respondents look for company reputation, money back guarantee, risk coverage,
low premium and easy access to agents.
3. Sabhya R and Panwala M ( 2011) have done study on factors affecting buying
decision for Life Insurance. The other objective of the study was to find
preference for insurance company, i.e., investors preferred LIC or private
insurance company. Study found that investors prefer LIC over private
insurance company. Age, income, awareness of insurer, type of insurer are most
affective factors for buying life insurance in Surat city.

2.3.5 Retirement & Estate Planning:

1. Pant G. (2013) had done study to assess the level of awareness and attitude of
female faculties towards Retirement Planning. For the study, 50 female faculties
of Bansathali University were selected. Study revealed that marital status of the
samples was major determinant towards awareness and preparedness of
retirement. Married females were more aware & prepared for retirement than
unmarried females

51
 2. Gallery.N et. Al (2011) did literature survey on financial literacy &
Superannuation Investment choice decision. Study was conducted in Australian
context and Superannuation choices available in Australia are linked with
financial literacy of the Australians. The researcher had identified series of
factors that influence financial literacy and which, in turn, had impact on
decision making related to investment choices. The factors which influence
financial literacy are demographic factors such as Age, Gender, Educational
Attainment, work type & status, household income and socio economic factors
such as sources of advice and information. Risk preference of individuals had
impact on their investment choices. Researcher also found that respondents who
were financially literate, actively sought for the other options available for their
superannuation investments, while respondents with low level of financial
literacy generally choose default options which are available.
3. Noone, J. H. (2010) had presented thesis on psychological and socioeconomic
factors influencing Retirement planning. Study suggested that physical health
and psychological health are major predictors for retirement satisfaction. Study
also suggested that men tend to have better psychological health than women.
Thus, gender is predictive of well-being whereas education, ethnicity, age, job
satisfaction are not predictors of well-being.

2.4 Research Gap:

The current Researches show that Financial Literacy is associated with financial
attitude and behaviour which, in turn, is associated with financial well - being and
satisfaction. To attain the objective of financial inclusion and strengthening of financial
system and financial markets in any country, financial literacy of the investors is quite
important. Many researches have been done in developed countries to assess the
financial literacy. Majority of the studies are done on graduate or Post Graduate
Students. Researches done in past are confined to measurement of financial literacy,
where in scales developed by OECD and /or Lusardi & Mitschell had been used. These

52
scales normally assess numeracy skills and knowledge of individuals regarding saving,
inflation, diversification related concepts & assess awareness related to investment
choices available. But very few studies have been done to assess awareness related to
overall Personal Financial Planning. i.e. not only Investment avenues but also
awareness related to Money management, Insurance, Tax Planning, Retirement
Planning & Estate Planning. From the literature review it is evident that majority of the
studies in the area of financial literacy and Personal Financial Planning have been done
in western countries, and in countries like Malaysia has contributed a lot in the same
field. But in India and particularly in Delhi, very few comprehensive studies have been
done on Personal Financial Planning. This provides the researcher with the opportunity
to take up the comprehensive study that will assess the financial literacy and awareness
related to personal financial planning, measure the attitude of the investors related to
same, and will also find association between financial literacy and awareness amongst
Investors of Delhi.

53
 CHAPTER III:

RESEARCH METHODOLOGY

54
3.1 A Brief Overview:
This chapter basically describes the objectives of study. It also focuses on how study
has been conducted, the research design used for the study, methods of selecting and
approaching the samples, sources used for the collection of data. It also describes
hypothesis used to identify the relationship between variables and tests applied with the
help of statistical tools. Five research objectives were identified from the research gap
obtained from literature review. They are as follow:

3.2 Research Methodology:

Research is defined as human activity based on intellectual application in the

investigation of matter. The primary purpose for applied research is discovering,
interpreting, and development of methods and systems for the advancement of human
knowledge on a wide variety of scientific matters of our world and the universe.
Research can use the scientific method, but need not do so.

Scientific research relies on the application of the scientific method, a harnessing of

curiosity. This research provides scientific information and theories for the explanation
of the nature and the properties of the world around us. It makes practical applications
possible. Historical research is embodied in the historical method. Scientific research
can be subdivided into different classifications according to their academic and
application disciplines.

3.3 Objectives of the Study

 To assess the financial literacy among residents of NCT-Delhi.
 To study and to analyse the awareness of Personal Financial Planning among residents
of NCT-Delhi.
 To study and to analyse the attitude regarding Personal Financial Planning among
residents of NCT-Delhi.

 To identify the factors influencing personal financial planning behaviour.

 To examine the need of Financial Planner by investors.

55
3.4 Research Questions:
 What is the level of financial literacy of residents of NCT-Delhi?
 Is there any impact of demographic variables on financial literacy of the respondents?

 Are respondents aware about different Investment avenues available for Personal
Financial Planning (PFP)?
 Do respondents have positive attitude towards PFP?

 Is there any impact of demographic variables on attitude towards PFP?

 Is there any association between financial literacy and attitude towards PFP?
 Which are the factors influencing PFP?

3.5 Research Hypotheses:

H01: There is no significant association between Age and financial literacy of the
respondents.
H02: There is no significant association between Gender and financial literacy of the
respondents.
H03: There is no significant association between Education and financial literacy of the
respondents.
H04: There is no significant association between Experience and financial literacy of
the respondents.
H05: There is no significant association between Job Type and financial literacy of the
respondents.
H06: There is no significant association between Income and financial literacy of the
respondents.
H07: There is no significant association between Marital Status and financial literacy
of the respondents.
H08: There is no significant association between Location and financial literacy of the
respondents.
H09: Awareness of different Investment avenues does not differ significantly with
respect to gender of the respondents.
H010: Awareness of different Investment avenues does not differ significantly with
respect to Age of the respondents.
H011: Awareness of different Investment avenues does not differ significantly with
respect to Education of the respondents.

56
H012: Awareness of different Investment avenues does not differ significantly with
respect to Job Type of the respondents.
H013: Awareness of different Investment avenues does not differ significantly with
respect to Experience of the respondents.
H014: Awareness of different Investment avenues does not differ significantly with
respect to Income of the respondents.
H015: Awareness of different Investment avenues does not differ significantly with
respect to Marital Status of the respondents.
H016: Awareness of different Investment avenues does not differ significantly with
respect to Location of the respondents.
H017: Attitude towards PFP does not differ significantly with respect to gender of the
respondents.
H018: Attitude towards PFP does not differ significantly with respect to Location of
the respondents.
H019: Attitude towards PFP does not differ significantly with respect to Age of the
respondents.
H020: Attitude towards PFP does not differ significantly with respect to Education of
the respondents.
H021: Attitude towards PFP does not differ significantly with respect to Job Type of
the respondents.
H022: Attitude towards PFP does not differ significantly with respect to Experience of
the respondents.
H023: Attitude towards PFP does not differ significantly with respect to Income of the
respondents.
H024: Attitude towards PFP does not differ significantly with respect to Marital Status
of the respondents.
H025: Awareness of different Investment Avenues does not differ significantly with
respect to Financial Literacy of the respondents.

3.6 Scope of the Study:

Study is designed to find awareness and attitude of investors for Personal Financial Planning.
Study also tries to identify factors influencing Personal Financial Planning for investors. To
conduct the study, a sample of 100 respondents has been chosen from NCT-Delhi.

57
3.7 Types of Research:

3.7.1 On the basis of application: Pure or Applied,

Pure Research: Aims to advance technology mainly concerned with generalization and
formulation of a theory. It is conducted without a particular goal in mind. It is futuristic
in nature and results in universal principles through new ideas and innovative ways of
thinking. Time dimensions for pure research is flexible timescales.

Applied Research: Aims at finding a solution for an immediate and specific problem
related to real life. It is conducted with a certain goal in mind. It Focus on problems at
hard rather than the ones that can rise in future and the results are in solution to the
problem. Time dimensions for applied research is tight timescales.

3.7.2 On the basis of purpose: Exploratory, Descriptive and Casual,

Exploratory Research: To analyze the data and to explore the possibilities of obtaining
as many relationships as possible between different variables without knowing their
end applications. It is flexible or unstructured. Researcher's skill is observing and
recording all possible information and impression.

Descriptive Research: To describe the characteristics of objects, people, groups,

organizations, environment, situations, phenomenon or program. It is planned and
structured. It is also known as statistical research.

Causal Research: To explain the cause-and-effect relationship. They are conducted

through the use of experiments. They are highly structured and sequential. Researcher's
strong knowledge of theoretical background is required.

On the basis of measurement: Quantitative and Qualitative,

Quantitative Research: It refers to the one that describes, infers and resolves problems
using numbers. The emphasis is placed on the collection and summary of data and

58
drawing inferences from data. The main objective is to develop and employ
mathematical models, theories.

Qualitative Research: It is an inquiry process that helps in-depth understanding of the

problem or issues in their natural settings. Qualitative research is based on words,
feelings, emotions, sounds and other non-numerical and techniques. It is heavily
dependent on the researcher's experience and the questions asked for an investigation.

On the basis of research method: Conceptual or Empirical,

Conceptual Research: It is the study related to some abstract ideas or theory which is
conducted by observing and analysing already present information on a given topic.
The methodology is breaking down a theorem or concept into its constituent parts to
gain a better and deeper understanding of the issue concerning the theorem. The purpose
is to develop new concepts or to reinterpret existing ones in some new light.

Empirical Research: It relies on experiences or observation alone. The objective is to

come up with conclusions which are capable of being verified by observation or
experiment. Hence these studies are often called experimental research. Evidences
gathered through experimental and empirical studies are today considered to be the
most powerful support for particular research. Empirical research is appropriate when
proof is sought that certain variables affect other variables in some way.

3.8 Research Design:

Descriptive Research

3.8.1 Methodology used for data collection:

There are basically 2 sources of data:

 Primary Data

59
  Secondary Data

Primary data: It is that data which is collected by a researcher from first-

hand sources, using methods like surveys, interviews, questionnaire or
experiments. It is collected with the research project in mind, directly from
primary sources.

Secondary data: The term is used in contrast with the term secondary data.
This data is collected by someone else for some other purpose (but being
utilized by the investigator for another purpose).This data is gathered from
studies, surveys or experiments that have been run by other

people or for other research. Ex: Books, magazines, newspaper, trade

journals and public records.

3.8.2 Sources of data used in this project:

Here, under this project PRIMARY SOURCE OF DATA is used & method selected
under primary source of data is Questionnaire where pre-determined set of questions
are made in sequential format which is designed to suit the respondent's understanding
and language command.

SECONDARY SOURCE OF DATA was also used to gather the information about
Personnel Recruitment Policy through internet and newspaper articles.

3.9 Methodology used for Data Analysis:

3.9.1 Population:

Population is a collection of items of interest research. The population represent a group

that you wish to generalize your research to. The symbol 'μ' represents the population
mean.

Under this study, population includes each colleague I worked with.

60
3.9.2 Sample:

It is a group of people, objects, or items that are taken from a larger population for
measurement. It should be representative of the population to ensure that we can
generalize the findings from the research sample to the population as a whole. The
symbol x represents the sample.

3.9.3 Sample Size:

The sample size constitutes the number of total elements to be drawn. The (n) number
of observations taken from a population through which statistical inferences for the
whole population are made.

The sample size under this study is of 100 respondents.

61
 CHAPTER IV:

ANALYSIS AND INTERPRETATION OF

DATA

62
4.1 Introduction:

This Chapter deals with the Descriptive and inferential statistical analysis of data
collected from the NCT-Delhi. Data were collected from 100 respondents.

Analysis of the data has been divided in four major sections

 Section I: Demographic Profile of the respondents.

 Section II: Financial Literacy of the respondents

 Section III: Awareness of Financial Products within respondents

 Sections IV: Attitude and Factors influencing Personal Financial Planning

4.2 Data Analysis:

The analysis of the data is done as per the survey finding. The percentage of the people
opinion were analyzed and expressed in the form of chart and have been placed in the
next few pages

4.3 Interpretation:

A questionnaire was prepared for the purpose of getting feedback from respondents
regarding “A Study of an Individual Perception on Personal Financial Planning”

100 respondents are selected from different localities and were distributing
questionnaire from the purpose of the study.

The observation is done in the next few pages:

63
4.4 Section I: Demographic Profile of the respondents:

4.4.1 Location:

TABLE 4.1 Location of Respondents

Number of
Location Percentage (%)
Respondents
North Delhi 25 25
South Delhi 25 25
East Delhi 25 25
West Delhi 25 25
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the responses obtained from different areas of Delhi. The data
from 100 respondents from each area (North Delhi, South Delhi, East Delhi and West
Delhi) have been obtained for analysis purpose

Location

25 25

25 25

North Delhi South Delhi East Delhi West Delhi

64
4.4.2 Job Type:

TABLE 4.2 Job Type of Respondents

Number of
Job Type Percentage (%)
Respondents

Public Sector 30 30
Private Sector 50 50

Government 20 20
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.2 shows the job type of the respondents. For the purpose of the study, only
salaried employees of Public Sector, Private Sector and Government employees were
chosen. Thus, 30 respondents from Public Sector, 50 respondents from Private Sector
and 20 Government employees have been selected for the study:

Job Type

20
30

50

Public Sector Private Sector Government

65
4.4.3 Age:
TABLE 4.3 Age of Respondents

Number of
Age Percentage (%)
Respondents
20-35 46 46
36-58 34 34
59 and Above 20 20
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.3 show the Age of the respondents. Age categories are classified as: under
20-35, 36-58 and 59 and above. 46 percent of the respondents belong to 20-35 age
group, 34 percent of the respondents belong to 36-58 age group and remaining 20
percent of the respondents belong to 59 and above age group.

Age

20

46

34

20-35 36-58 59 and Above

66
4.4.4 Gender:
TABLE 4.4 Gender of Respondents

Number of
Gender Percentage (%)
Respondents

Male 55 55
Female 45 45
Total 100 100
Source: Primary Data

Interpretation:

From Table 4.4, it is evident that there are 55 Percent Male and 45 Percent Female
respondents.

Gender

45

55

Male Female

67
4.4.5 Education:
TABLE 4.5 Education of Respondents

Number of
Education Percentage (%)
Respondents
High School 20 20
Graduation 35 35
Post-Graduation 45 45
Total 100 100
Source: Primary Data

Interpretation:

It can be seen from Table 4.5 that about 35 % of the respondents were Graduates, 45 %
of the respondents were Post Graduate and 20% of the respondents were High School
pass.

Education

20

45

35

High School Graduation Post Graduation

68
4.4.6 Experience:

TABLE 4.6 Experience of Respondents

Experience Number of Respondents Percentage (%)

Less than 5 years 12 12

5-15 years 37 37
16-25 years 36 36
25 and above 15 15
Total 100 100
Source: Primary Data

Interpretation:

Table 4.6 shows that 37% respondents had 5 – 15 years of experience, around 36%
respondents had 16 -25 years of experience, around 15 % respondents had experience
of 25 years and above and 12 % respondents had less than 5 years of experience.

Experience

15 12

37
36

Less than 5 years 5-15 years 16-25 years 25 and above

69
4.4.7 Income:

TABLE 4.7 Income of Respondents

Number of
Income Percentage (%)
Respondents

Less than 5 Lakhs 13 13

5-10 lakhs 45 45
10-15 lakhs 23 23
more than 15 lakhs 19 19
Total 100 100
Source: Primary Data

Interpretation:

From Table 4.7, one can observe that 45% of the respondents had income between 5 –
10 Lakhs, 23 % of the respondents had income between 10 -15 Lakhs, 13% of the
respondents had income less than 5 Lakhs and 19% of the respondents had income more
than 15 Lakhs.

Income

19 13

23
45

Less than 5 Lakhs 5-10 lakhs 10-15 lakhs more than 15 lakhs

70
4.4.8 Marital Status:

TABLE 4.8 Marital Status of Respondents

Number of
Marital Status Percentage (%)
Respondents
Married 69 69
Unmarried 22 22
Widow/Widower 6 6
Divorcee 3 3
Total 100 100
Source: Primary Data

Interpretation:

Table 4.8 shows that 69 % of the respondents were married, 22 % respondents were
unmarried, 6 % were widow/ widower and 3 % were divorcee.

Marital Status

6 3

22

69

Married Unmarried Widow/Widower Divorcee

71
4.4.9 Savings:
TABLE 4.9 Savings of Respondents

Number of
Savings Percentage (%)
Respondents
Less than 10% 25 25
10-30 % 65 65
More than 30% 10 10
Total 100 100
Source: Primary Data

Interpretation:

From Table 4.9, it is noteworthy that 65 % of the respondents could save 10 – 30% of
the income, 25% respondents have savings of less than 10% of the income and 10 % of
the respondents could save more than 30% of their income.

Savings

10
25

65

Less than 10% 10-30 % More than 30%

72
4.5 Section II: Financial Literacy of the respondents:
4.5.1 Ques- Suppose you had Rs. 1000 in Saving Bank account and interest rate was
2% per year, after 5 years how much do you think you would have earned in saving
account, if you had left your money to grow:

TABLE 4.10 Literacy for Savings Bank Account

Number of
Option Percentage (%)
Respondents
TRUE 95 95
FALSE 5 5
Total 100 100
Source: Primary Data

Interpretation:

The particular question is being asked to check basic financial literacy about cumulative
interest percentage calculations. From Table 4.10, it is evident that 95 % of the
respondents have given correct answer for the same. Only 5% of the respondents have
given false answer.

Literacy regarding concept of Inflationle

95

1 2

73
4.5.2 Ques- Imagine that interest rate on your saving bank account was 1% per year and
inflation was 2% per year. After 1 year would you be able to buy.

TABLE 4.11 – Literacy regarding concept of Inflation

Number of
Option Percentage (%)
Respondents
TRUE 80 80
FALSE 20 20
Total 100 100
Source: Primary Data

Interpretation:

Particular question was asked to check general financial literacy for economic concept
like inflation. Table 4.11 shows that around 80% of the respondents had given correct
answer for the same and 20 % had given incorrect answer.

Literacy regarding concept of Inflation

20

80

1 2

74
4.5.3 Ques- Assume that a friend inherits Rs. 10000 today and his sibling inherits Rs. 10000,
3 years from now. Who is richer because of Time Value of Money?

TABLE 4.12 – Literacy regarding concept of Time Value of Money

Number of
Option Percentage (%)
Respondents
TRUE 85 85
FALSE 15 15
Total 100 100
Source: Primary Data

Interpretation:

Question was asked to check the knowledge regarding time value of money. From Table
4.12, it is evident that 85% of the respondents possess fair knowledge of time value of
money. Only 15% of the respondents had given incorrect answer.

Literacy regarding concept of Time Value of Money

15

85

1 2

75
4.5.4 Ques- Buying a single company stock usually provide safer return than a stock mutual
fund?

TABLE 4.13 – Literacy regarding concept of Diversifications

Number of
Option Percentage (%)
Respondents
TRUE 70 70
FALSE 30 30
Total 100 100
Source: Primary Data

Interpretation:

As a part to check the knowledge regarding concept of diversification, the particular

question was asked. The answers have been classified as either True or False and are
tabulated in Table 4.13. From the Table, it is evident that 70% of the respondents gave
correct answer that Mutual funds give safer return than a single company stock. 30 %
of the respondents failed to give correct answer.

Literacy regarding concept of Diversifications

30

70

1 2

76
4.5.5 Ques- Financial Planning is all about buying enough insurance?

TABLE 4.14 – Literacy regarding basics of Financial Planning

Number of
Option Percentage (%)
Respondents
TRUE 90 90
FALSE 10 10
Total 100 100
Source: Primary Data

Interpretation:

The question is asked to check basic awareness regarding Financial Planning. It is

generally observed that people conceptualize Financial Planning as investing only into
insurance. Whereas, a Balanced Financial Plan is composed of Insurance, Investments,
Debt, Retirement, Taxation and Estate Planning. From Table 4.14, it is evident that 90
% of the respondents have given correct answer for the same while 10 % of the
respondents gave incorrect answers.

Literacy regarding basics of Financial Planning

10

90

1 2

77
4.5.6 Ques- Any investment opportunity which claims higher returns usually carries lower
risk.?

TABLE 4.15 – Literacy regarding basics of Risk & Returns Relationships

Number of
Option Percentage (%)
Respondents
TRUE 98 98
FALSE 2 2
Total 100 100
Source: Primary Data

Interpretation:

From Table 4.15, it is evident that 80% of the respondents have given correct answer
for the same. 20 % of the respondents failed to give correct answer.

Literacy regarding basics of Risk & Returns Relationships

98

1 2

78
4.5.7 Ques- If interest rate falls, what will happen to price of the bond?
TABLE 4.16 – Literacy regarding relationship of Bond Price & Interest Rates

Number of
Option Percentage (%)
Respondents
TRUE 90 90
FALSE 10 10
Total 100 100
Source: Primary Data

Interpretation:

Particular question deals with economy ‘s concept of relationship between price of the
bond and interest rate in the market. If interest rate in economy will go down, the price
of bond will go high and vice-a versa. Table 4.16 shows that majority i.e. 10 % of the
respondents fails to give correct answer, only 90% of the respondents were aware about
the relationship between interest rate in economy and price of bond .

Literacy regarding relationship of Bond Price & Interest

Rates

10

90

1 2

79
4.5.8 Ques- Considering the long-term tenure (10 to 20 Years), which assets normally gives
the highest return??

TABLE 4.17 – Literacy regarding returns generated by financial assets in long

run

Number of
Option Percentage (%)
Respondents
TRUE 75 75
FALSE 25 25
Total 100 100
Source: Primary Data

Interpretation:

Particular question was asked to check awareness regarding different financial

instruments available in the economy and their normal features. From Table 4.17, it is
evident that 54 % of the respondents failed to give correct answer, which is equity which
generates higher return in the long run. 46 % of the respondents gave correct answer. It
is interesting to note that majority of the respondents have chosen bond as an
instruments which provides higher return in the long run.

Literacy regarding relationship of Bond Price & Interest

Rates

25

75

1 2

80
4.6 Section III: Awareness of Financial Products within respondents:

4.6.1 Saving Account:

TABLE 4.18 – Awareness of Savings Account

Number of
Option Percentage (%)
Respondents
Unaware 2 2
Moderately Aware 12 12
Completely Aware 86 86
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the frequency and its percentage regarding the awareness about
the Savings account. 86 percent of the respondents are completely aware about the
Savings Account. 12 percent of the respondents are moderately aware regarding the
Savings Account and remaining 2 percent of the respondents are not aware about
savings account.

Awareness of Savings Account

2
12

86

1 2 3

81
4.6.2 Fixed Deposit:

TABLE 4.19 – Awareness of Fixed Deposit

Number of
Option Percentage (%)
Respondents
Unaware 11 11
Moderately Aware 12 12
Completely Aware 77 77
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the frequency and its percentage regarding the awareness about
the Fixed Deposit. 77 percent of the respondents are completely aware about the Fixed
Deposit. 12 percent of the respondents are moderately aware regarding the Fixed
Deposit and remaining 11 percent of the respondents are not aware about Fixed Deposit.

Awareness of Fixed Deposit

11

12

77

1 2 3

82
4.6.3 Equity Shares:

TABLE 4.20 – Awareness of Equity Shares

Number of
Option Percentage (%)
Respondents
Unaware 20 20
Moderately Aware 30 30
Completely Aware 50 50
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the frequency and its percentage regarding the awareness about
the Equity Shares. 50 percent of the respondents are completely aware about the Equity
Shares. 30 percent of the respondents are moderately aware regarding the Equity Shares
and remaining 20 percent of the respondents are not aware about Equity Shares.

- Awareness of Equity Shares

20

50

30

1 2 3

83
4.6.4 Bonds:

TABLE 4.21 – - Awareness of Bonds

Number of
Option Percentage (%)
Respondents
Unaware 25 25
Moderately Aware 65 65
Completely Aware 10 10
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the frequency and its percentage regarding the awareness about
the Bonds. 10 percent of the respondents are completely aware about the Bonds. 65
percent of the respondents are moderately aware regarding the Bonds and remaining 25
percent of the respondents are not aware about Bonds.

Awareness of Bonds

10
25

65

1 2 3

84
4.6.5 Derivatives:

TABLE 4.22 – Awareness of Derivatives

Number of
Option Percentage (%)
Respondents
Unaware 35 35
Moderately Aware 60 60
Completely Aware 5 5
Total 100 100
Source: Primary Data

Interpretation:

The Table below shows the frequency and its percentage regarding the awareness about
the Derivatives. 5 percent of the respondents are completely aware about the
Derivatives. 60 percent of the respondents are moderately aware regarding the
Derivatives and remaining 35 percent of the respondents are not aware about
Derivatives.

Awareness of Derivatives

60

1 2 3

85
4.6.6 Mutual Funds:

TABLE 4.23 – Awareness of Mutual Funds

Number of
Option Percentage (%)
Respondents
Unaware 15 15
Moderately Aware 45 45
Completely Aware 40 40
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.23 shows the frequency and its percentage regarding the awareness about the
Mutual Funds. 40 percent of the respondents are completely aware about the Mutual Funds.
45 percent of the respondents are moderately aware regarding the Mutual Funds and
remaining 15 percent of the respondents are not aware about Mutual Funds

Awareness of Mutual Funds

15

40

45

1 2 3

86
4.6.7 PPF:

TABLE 4.24 – Awareness of PPF

Number of
Option Percentage (%)
Respondents
Unaware 30 30
Moderately Aware 35 35
Completely Aware 35 35
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.42 shows the frequency and its percentage regarding the awareness about
the Public Provident Fund. 35 percent of the respondents are completely aware about
the PPF. 35 percent of the respondents are moderately aware regarding the PPF and
remaining 30 percent of the respondents are not aware about PPF.

Awareness of PPF

30
35

35

1 2 3

87
4.6.8 Other Post Office Schemes:

TABLE 4.25 – Awareness of Other Post Office Schemes

Number of
Option Percentage (%)
Respondents
Unaware 25 25
Moderately Aware 45 45
Completely Aware 30 30
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.25 shows the frequency and its percentage regarding the awareness about
the Other Post Office Schemes. 25 percent of the respondents are completely aware
about the Other Post Office Schemes. 45 percent of the respondents are moderately
aware regarding it

- Awareness of Other Post Office Schemes

1 2 3

88
4.6.9 Life Insurance:

TABLE 4.26 – - Awareness of Life Insurance

Number of
Option Percentage (%)
Respondents
Unaware 8 8
Moderately Aware 35 35
Completely Aware 57 57
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.26 shows the frequency and its percentage regarding the awareness about
the Life Insurance. 57 percent of the respondents are completely aware about the Life
Insurance.351 percent of the respondents are moderately aware regarding the Life
Insurance and remaining 8 percent of the respondents are not aware about Life
Insurance.

Awareness of Life Insurance

35
57

1 2 3

89
4.6.10 Money Market:

TABLE 4.27 – Awareness of Money Market

Number of
Option Percentage (%)
Respondents
Unaware 22 22
Moderately Aware 52 52
Completely Aware 26 26
Total 100 100
Source: Primary Data

Interpretation:

The Table 4.27 shows the frequency and its percentage regarding the awareness about
the Money Market. 26 percent of the respondents are completely aware about the
Money Market. 52 percent of the respondents are moderately aware regarding the
Money Market and remaining 22 percent of the respondents are not aware about Money
Market.

Awareness of Money Market

1 2 3

90
 4.7 Sections IV: Attitude and Factors influencing Personal Financial
Planning:

To analyze the attitude of the respondents for Personal Financial Planning, the
statements related to Personal Financial Planning pertaining to various components
were presented before the respondents and they were asked to rate these statements on
a Five Point Scale. The different components were: Money Management, Insurance
Planning, Investments, Retirement planning, Taxation Planning, Estate Planning and
overall PFP. Attitude for each individual component and Overall attitude of PFP had
been checked. The descriptive statistics of the statements are given below. The number
in each cell indicates the frequency of responses for each statement. Along with that
Mean for every item is tabulated.

Where 1 -Strongly Disagree, 2 – Disagree, 3 –Neither Agree or Disagree, 4 – Agree, 5

– Strongly Agree

TABLE 4.28 – Descriptive Statistics for Attitude of Personal Financial Planning

Sr. No. Particulars 1 2 3 4 5

Budgeting and keeping financial
1 records are 2 8 25 35 30
very essential
I should save more before spending the
2 5 5 30 40 20
balance.
3 I spend my money very carefully 4 6 10 30 50
I payoff the full credit card outstanding
4 7 13 10 40 30
amount every month
5 I spend more when I use a credit card 12 14 26 30 18
Insurance is a forced saving to ensure
that family gets continue stream of
6 14 6 20 30 30
flow of income to your family in event
of death or accident
I have an adequate insurance to ensure
7 that if I were to passes away or become 0 10 10 60 20
sick or disabled, my family and I will not
suffer financially
I have Life Insurance but no other type
8 of insurance i.e Health, Personal 0 12 12 46 30
accident, Property etc.
9 I do not have any Insurance 60 20 10 10 0
91
 I consult an insurance agent for
10 20 20 10 35 15
purchase of an insurance
I take advise of my family, friends
11 5 15 10 50 20
before investing into insurance
I consider the coverage offered by
12 insurance company before purchasing 12 14 26 30 18
it
I often feel difficulty for purchasing
13 12 14 26 28 20
financial products
Long term savings with a regular saving
14 0 10 10 60 20
pattern is important
Investing is becoming important
15 19 14 24 30 13
nowadays
Investment is commitment of funds to
16 2 8 25 35 30
achieve long term goals or objectives
I understand my risk profile- high risk
17 taker, medium risk taker, or low risk 12 14 26 30 18
taker
I invest in different investment
instruments i.e shares, mutual fund,
18 0 0 26 66 8
real estate, bonds with minimal
knowledge and research on it.
If I were given an amount of equal to
19 six month salary to invest, I would 5 15 10 50 20
know exactly what to do with it.
I know how taxes would be applied on
20 0 10 10 60 20
my different investments avenues
1 I utilize the various tax rebates that
21 I‘m entitled to when filing my tax 12 14 26 30 18
returns.
I know the amount I need to fund a
22 2 8 25 35 30
comfortable retirement
I have started planning for my
23 17 12 14 25 32
retirement.
Retirement planning should be started
24 12 14 26 30 18
at early working age
My Retirement plan provides for
25 inflation and standard of living changes 2 26 24 25 23
that will occur over a period of time
26 I have a will 60 20 10 10 0
27 I understand what a trust is. 19 14 24 30 13
I know what income my family would
28 2 8 25 35 30
receive from proceeds of my estate
29 Estate planning is important to me 12 14 26 30 18
I am aware about overall financial
planning: i.e Money Management,
30 12 14 26 30 18
Investments, Insurance, Retirement
planning, estate planning, tax planning
92
 I feel that my financial plan is well
balanced, keeping into the mind all
31 aspects: Money Management, 25 24 15 17 19
Investments, Insurance, Retirement
planning, estate planning, tax planning
I set financial goals and objectives in my
32 19 41 32 6 2
life
I gather relevant data and analyze my
33 current financial position before I make 12 14 26 28 20
financial decision
I freely discuss with others ,regarding
34 19 17 15 14 35
financial planning
35 I need expert for planning my finances. 5 15 10 50 20
I am actively involved in managing my
36 Financial Plan, I review my plan 12 14 26 30 18
periodically after the implementation.
37 I need to keep cash reserve in case of 12 14 26 30 18
an emergency
My willingness to take risk is factor I
38 2 8 25 35 30
consider before planning my finances.
I try to take information from all
39 authenticated sources and then invest 19 14 24 30 13
my money
I get influenced by my friends and
40 2 26 24 25 23
relatives while taking financial decisions
I look at Economic factors such as
41 prevailing inflation and interest rates 4 28 32 12 24
for financial planning
I look for Service provided by the
42 12 14 26 30 18
company before investing into that
My decisions on planning also depend
43 upon knowledge of the representative 2 8 25 35 30
of the particular company.
I consider Future Responsibilities- Like
44 purchasing home, child‘s education, 12 14 26 28 20
marriage etc.
Expected Return on investment
45 60 20 10 10 0
products is important to me
I consider Tax benefits linked with the
46 12 14 26 30 18
products
I look for Liquidity provided by the
47 12 14 26 30 18
products
I consider stage of my life cycle before
48 5 15 10 50 20
taking any financial decisions.
Regular Cash flow for managing my
49 routine expenses is important factor to 2 8 25 35 30
me.
93
 Objective behind my planning is to
50 minimize inconvenience to my family 60 20 10 10 0
members in case of my death.

94
 CHAPTER V:

FINDINGS & SUGGESTIONS

95
5.1 Introduction:
This Chapter discusses Objective-wise major findings of the study based on the analysis
of data collected from 100 respondents of Delhi.

5.2 General Findings:

Out of 100 respondents,
 Four major areas of Delhi, namely; North Delhi, South Delhi, East Delhi and West
Delhi have been covered for the present study and 100 respondents were interviewed
from each of the above areas for collection of data using the structured questionnaires.

 From 100 respondents in each city, 20 respondents were government employees, 30

respondents were Public Sector and 50 were Private Sector employees.
 Around 46% respondents were from age group of 20 – 35 years, 34% from age group
36 – 58 years and 20% were from age group 59 years and above.
 55 % respondents were male and 45% were female.

 35 % respondents were Graduates, 45 % were post-graduates and 20% were High

School passed out.
 37% respondents have 5 – 15 years of experience, 36% respondents have 16 -25 years
of experience, 15 % respondents have experience of 25 years and above and 12 %
respondents have less than 5 years of experience.
 45% of the respondents have income between 5 – 10 Lakhs, 23 % of the respondents
have income between 10 -15 Lakhs, 13% of the respondents have income less than 5
Lakhs and 19% of the respondents have income more than 15 Lakhs.
 69 % of the respondents are married, 22 % respondents are unmarried, 6 % are
widow/ widower and 3 % are divorcee.
 65 % of the respondents save 10 – 30% of the income, 25% respondents save less
than 10% of the income and 10 % of the respondents save more than 30% of their
income.

5.3 Findings related to Financial Literacy:

To assess the financial literacy of the respondents, they were asked certain questions
related to different financial concepts. To identify the basic level of financial literacy,
respondents were asked questions related to compounding of Interest Rate, Inflation,
and Diversifications. To identify advanced level of financial literacy, respondents were
asked questions related to Risk Return Relationship, concept of Time Value of Money,
relationship between interest rate and bond price etc. Major findings related to them are
discussed below:
96
 95 % of the respondents know the working of cumulative interest rate %age
calculation. Only 5% of the respondents have failed to give correct answer for the same.
 80% of the respondents have basic idea regarding impact of inflation on purchasing
power. 20 % have given incorrect answer for the same.
 85% of the respondents possess fair knowledge of time value of money. 15% of the
respondents failed to give correct answer for the same.
 70% of the respondents have fair idea related to concept of diversification. 30 % of
the respondents don’t have idea about diversification. When asked, they replied that
Single Company Stock provides generally more returns than Mutual Funds.
 90 % of the respondents have idea regarding balanced financial plan. They believe
that Financial Planning is not only buying insurance. 10 % of the respondents have
misconception that Financial Planning is all about buying insurance. Advanced
Financial Literacy

 98% of the respondents understand that risk and return go hand in hand. 2 % of the
respondents failed to give correct answer for the same.
 Only 90 % of the respondents gave correct answer for the relationship between Bond
Price and Interest Rate. 10% of the respondents are not aware about the relationship
between interest rate in economy and price of bond.

 75 % of the respondents have idea regarding financial literacy related to awareness

of financial products and returns generated by them. 25 % of the respondents failed to
give correct answer.

5.4 Findings related to Awareness of different Investment Avenues:

 86% of the respondents are completely aware about the Savings Account. 12 % of
the respondents are moderately aware regarding the Savings Account and remaining 2
% of the respondents are not aware about savings account.
 77 % of the respondents are completely aware about the Fixed Deposit. 12 % of the
respondents are moderately aware regarding the Fixed Deposit and remaining 11 % of
the respondents are not aware about Fixed Deposit.

 50 % of the respondents are completely aware about the Equity Shares. 30 % of the
respondents are moderately aware regarding the Equity Shares and remaining 20 % of
the respondents are not aware about Equity Shares.
 10 % of the respondents are completely aware about the Bonds. 65 % of the
respondents are moderately aware regarding the Bonds and remaining 25 % of the
respondents are not aware about Bonds.

97
 5 % of the respondents are completely aware about the Derivatives. 60 % of the
respondents are moderately aware regarding the Derivatives and remaining 35 % of
the respondents are not aware about Derivatives.

 40 % of the respondents are completely aware about the Mutual Funds. 45 % of the
respondents are moderately aware regarding the Mutual Funds and remaining 15 % of
the respondents are not aware about Mutual Funds. Age Gender Income Experience
Marital Status Job Type Financial Literacy98
 35 % of the respondents are completely aware about the PPF. 35 % of the
respondents are moderately aware regarding the PPF and remaining 30 % of the
respondents are not aware about PPF.

 30 % of the respondents are completely aware about the Post Office Schemes. 45 %
of the respondents are moderately aware regarding it.
 57 % of the respondents are completely aware about the Life Insurance. 35 % of the
respondents are moderately aware regarding the Life Insurance and remaining 8 % of
the respondents are not aware about Life Insurance.

 26 % of the respondents are completely aware about the Money Market. 52 % of the
respondents are moderately aware regarding the Money Market and remaining 22 %
of the respondents are not aware about Money Market.

98
CHAPTER VI:

CONCLUSIONS

99
6.1 Conclusion:
Strengthening of any economy depends upon the financial well-being of the residents
of the country. Past researches show that financial well-being of an individual depends
upon their financial behaviour, which in turn depends upon attitude towards personal
financial planning and the Financial Literacy of an individual. Balanced Personal
Financial Plan also plays vital role for Financial Well Being of an individual. Many
studies have been done in the area of financial literacy in Indian context but very few
studies have been conducted on Overall Personal Financial Planning, especially in
Delhi. The present study had focused on Financial Literacy, Awareness of overall PFP
and Attitude of the respondents towards PFP.
100 Salaried employees from four major areas of Delhi had been selected for the
purpose of the study. Study revealed that Respondents possess fair financial literacy.
This shows that respondents are quite informed and aware about financial terms,
concepts and its working. Awareness related to traditional Investment Avenues like FD,
Saving Bank Account, Post Office Schemes and PPF is quite high. Still awareness of
new age Investment Avenues like Derivatives, Non-Conventional Avenues - Precious
Coins, Paintings is still very low among respondents, so they are not able to reap
advantages associated with these products. Interesting finding of the research is: though
awareness of all the components of PFP is not that high, attitude towards PFP is positive
among the respondents. They understand the importance of balanced Financial Plan and
they feel that they require an expert to help them in sketching a Financial Plan. Overall,
the study has created a base for the future detailed research to be done in the field of
Personal Finance.

6.2 Limitations of the Study:

Following are limitations and constraints of the present research:
 The present study was confined to Delhi. Sample Size was 100 and only salaried
employees were considered for the research purpose. So, Findings of the present study
can‘t be generalized for the entire Nation.
 The study was all about the Financial Planning of the respondents, there may be the
possibility of biasness in the responses given by them.
 There were abundant literatures available in the area of Financial Literacy and
Awareness of Investment Avenues. But there was absence of studies specifically in the
area of Awareness of overall PFP, Attitude and Factors influencing PFP. There was
absence of some model or developed scale in the particular area. If some published
research study had been available, it would have helped the current study to gauge still
better results.

 Some of the findings of the study suggest that there may be chance of lack of
understanding of some of the concepts by respondents.

100
6.3 Implications of the Study:
 The current study suggests that Respondents possess Basic Financial Literacy.
Respondents are lacking awareness regarding new investment avenues, Retirement
Planning and Estate Planning. So, SEBI, RBI and Other Government Agencies, Banks
& Other financial Institutions may focus on increasing literacy regarding advanced
financial concepts.
 Study will help financial planners and Investment Advisors, to better understand
attitude of investors regarding Personal Financial Planning and Factors which may
influence the decision for PFP.

 Study provides comprehensive idea about Personal Financial Planning concept,

Process and the different components of the same. Study also provides idea about how
to plan finances through different stages of life cycle. So, it can be used as a ready
reckoner by normal investor for understanding concepts of PFP.

6.4 Scope of the Future Research:

 As present study was confined to Delhi, scope of the study can be extended towards
other states.
 The present study has focused only on salaried employees. The same can also be
extended towards responses of Businessmen and Professionals.

 Linkages between Financial Literacy and Awareness of different Investment Avenues

have been established in the present study. Further linkages can be established between
Financial Literacy and Attitude. Past Researches suggest that Financial Well-being
depends upon the Financial Attitude of the respondents. So further studies can be done
to establish the linkage between Financial Attitude and Financial Well-being of the
respondents.

101
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exploration of financial literacy, social influences and behavioural economics.

 Chatterjee Surojit, Indians are wise savers but poor investors: Survey, International
Business Times, posted on 11 feb2008.

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Websites:
 https://nse-india.com/content/ncfm/Revised_workbook_SMBM.pdf

 https://www.indiapost.gov.in/Financial/Pages/.../Post-Office-Saving-Schemes.aspx

 http://www.fpsbindia.org/Scripts/FinancialPlanning

 https://www.valueresearchonline.com/funds/

 http://investor.sebi.gov.in/sebiweb/investors/financial_literacy.jsp

 https://www.rbi.org.in/scripts/FS_Overview.aspx?fn=2754

 http://indiabudget.nic.in/es2012-13/estat1.pdf. Retrieved December 13, 2013

 http://mospi.nic.in/central-statistics-office-cso-0

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QUESTIONNAIRE

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Dear Respondent, you are requested to participate in research study on Personal
Financial Planning. Your responses and views are very important for the success of the
study. Please note that all data provided by you will be used for academic purpose only
and shall not be divulged to anyone else.

Section-A: Demographic Profile:

1. Age in Years:
a). 20-35 ( )
b). 36-58 ( )
c). 59 and Above ( )
2. Gender:
a). Male ( )
b). Female ( )
3. Education:
a). High school ( )
b). Graduation ( )
c). Post Graduation ( )
4. Job Type:
a). Public Sector ( )
b). Private Sector ( )
c). Government ( )
5. Work Experience:
a). less than 5 years ( )
b). 5-15 years ( )
c). 16-25 years ( )
d). 25 ad above ( )
6. Income Per Annum:
a). less than 5 lakhs ( )
b). 5-10 lakhs ( )
c). 10—15 lakhs ( )

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 d). 15 and above ( )

7. Marital Status:
a). married ( )
b). unmarried ( )
c). widow/widower ( )
d). divorcee ( )

8. How much percent of your income you save regularly?

a). less than 10% ( )
b). 10-30% ( )
c). more than 30% ( )

Section-B: Financial Literacy:

1. Suppose you had Rs. 1000 in saving Bank account and interest rate was 2%
per year, after 5 years how much do you think you would have earn in
saving account, if you have left your money to grow:
a). More than Rs. 1020 ( )
b). Exact Rs. 1020 ( )
c). Don’t know ( )

2. Imagine that interest rate on your saving bank account was 1% per year
and inflation was 2% per year. After 1 year would you be able to buy:
a). More than today ( )
b). Less than today ( )
c). exactly the same ( )
d). Don’t Know ( )

3. Assume a friend inherits Rs. 10000 today and his sibling inherits Rs. 10000,
3 years from now. Who is richer because of inheritance?
a). Friend ( )
b). His sibling ( )
c). they are equally rich ( )

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 d). Don’t Know ( )

4. Buying a single company stock usually provide safer return than a stock
mutual fund:
a). true ( )
b). false ( )
c). don’t know ( )
5. Financial Planning is all about buying enough insurance:
a). true ( )
b). false ( )
c). don’t know ( )
6. Any investment opportunity which claims higher returns usually carries
lower risk:
a). true ( )
b). false ( )
c). don’t know ( )
7. If interest rate falls what will happen to price of the bond?
a). rise ( )
b). fall ( )
c). don’t know ( )
8. Considering the long-term tenure (10 to 20 Years), which assets normally
gives the highest return?
a). Saving Account ( )
b). stocks ( )
c). bonds ( )
d). don’t know ( )

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 Section-C: Several investment avenues are listed below, select appropriate column
according to level of awareness where: 1= Unaware, 2= Moderately aware, 3=
Completely Aware:

Section-D: Kindly rate your opinion for the following statements: Where 1 -
Strongly Disagree, 2 – Disagree, 3 –Neither Agree or Disagree, 4 – Agree, 5 –
Strongly Agree:

Sr. No. Particulars 1 2 3 4 5

Budgeting and keeping financial
1 records are
very essential
I should save more before spending the
2
balance.
3 I spend my money very carefully
I payoff the full credit card outstanding
4
amount every month
5 I spend more when I use a credit card
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 Insurance is a forced saving to ensure
that family gets continue stream of
6
flow of income to your family in event
of death or accident
I have an adequate insurance to ensure
7 that if I were to passes away or become
sick or disabled, my family and I will not
suffer financially
I have Life Insurance but no other type
8 of insurance i.e Health, Personal
accident, Property etc.
9 I do not have any Insurance
I consult an insurance agent for
10
purchase of an insurance
I take advise of my family, friends
11
before investing into insurance
I consider the coverage offered by
12 insurance company before purchasing
it
I often feel difficulty for purchasing
13
financial products
Long term savings with a regular saving
14
pattern is important
Investing is becoming important
15
nowadays
Investment is commitment of funds to
16
achieve long term goals or objectives
I understand my risk profile- high risk
17 taker, medium risk taker, or low risk
taker
I invest in different investment
instruments i.e shares, mutual fund,
18
real estate, bonds with minimal
knowledge and research on it.
If I were given an amount of equal to
19 six month salary to invest, I would
know exactly what to do with it.
I know how taxes would be applied on
20
my different investments avenues
1 I utilize the various tax rebates that
21 I‘m entitled to when filing my tax
returns.
I know the amount I need to fund a
22
comfortable retirement
I have started planning for my
23
retirement.
Retirement planning should be started
24
at early working age
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 My Retirement plan provides for
25 inflation and standard of living changes
that will occur over a period of time
26 I have a will
27 I understand what a trust is.
I know what income my family would
28
receive from proceeds of my estate
29 Estate planning is important to me
I am aware about overall financial
planning: i.e Money Management,
30
Investments, Insurance, Retirement
planning, estate planning, tax planning
I feel that my financial plan is well
balanced, keeping into the mind all
31 aspects: Money Management,
Investments, Insurance, Retirement
planning, estate planning, tax planning
I set financial goals and objectives in my
32
life
I gather relevant data and analyze my
33 current financial position before I make
financial decision
I freely discuss with others ,regarding
34
financial planning
35 I need expert for planning my finances.
I am actively involved in managing my
36 Financial Plan, I review my plan
periodically after the implementation.
I need to keep cash reserve in case of
37
an emergency
My willingness to take risk is factor I
38
consider before planning my finances.
I try to take information from all
39 authenticated sources and then invest
my money
I get influenced by my friends and
40
relatives while taking financial decisions
I look at Economic factors such as
41 prevailing inflation and interest rates
for financial planning
I look for Service provided by the
42
company before investing into that
My decisions on planning also depend
43 upon knowledge of the representative
of the particular company.

112
 I consider Future Responsibilities- Like
44 purchasing home, child‘s education,
marriage etc.
Expected Return on investment
45
products is important to me
I consider Tax benefits linked with the
46
products
I look for Liquidity provided by the
47
products
I consider stage of my life cycle before
48
taking any financial decisions.
Regular Cash flow for managing my
49 routine expenses is important factor to
me.
Objective behind my planning is to
50 minimize inconvenience to my family
members in case of my death.

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List of Abbreviations:
 CFA- Confirmatory Factor Analysis
 CSO- Central Statistics Office

 ELSS- Equity Linked Saving Schemes

 EFA- Exploratory Factor Analysis
 EPF- Employee Provident Fund

 ETF- Exchange Traded Funds

 FD- Fixed Deposits

 FMP- Fixed Maturity Plans

 F & O -Futures & Options

 GDP- Gross Domestic Product

 G- Sec -Government Securities

 KVP -Kisan Vikas Patra

 MCX -Multi Commodity Exchange of India Ltd.
 MF- Mutual Funds

 MIP- Monthly Income Plans

 MMMF- Money Market Mutual Funds

 NCA- Non Conventional Avenues

 NCD- Non Convertible Debentures

 NCDEX- National Commodity & Derivatives Exchange Ltd.

 NPS- National Pension System
 NSC- National Savings Certificate

 PACFL -Presidents Advisory Council on Financial Literacy

 PFP- Personal Financial Planning

 PFRDA- Pension Fund Regulatory and Development Authority

 PPF- Public Provident Fund

 RBI- Reserve Bank of India

 SEBI- Securities and Exchange Board of India
 ULIP- Unit Linked Insurance Plan
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List of Tables:
TABLE 4.1- Location of Respondents……………………………………………..64
TABLE4.2- Job Type of Respondents ……………………………………………..65
TABLE 4.3- Age of Respondents ………………………………………………….66
TABLE 4.4 - Gender of Respondents………………………………………………67
TABLE 4.5 – Education of Respondents…………………………………………...68
TABLE 4.6 – Experience of Respondents………………………………………….69
TABLE 4.7 – Income of Respondents……………………………………………...70
TABLE 4.8 – Marital Status of Respondents………………………………………71
TABLE 4.9 – Savings of Respondents……………………………………………..72
TABLE 4.10 – Literacy for savings bank account…………………………………73
TABLE 4.11 – Literacy regarding concept of inflation……………………………74
TABLE 4.12 – Literacy regarding the concept of time value of money…………...75
TABLE 4.13 – Literacy regarding concept of diversification……………………...76
TABLE 4.14 - Literacy regarding basics of financial planning…………………….77
TABLE 4.15- Literacy regarding basics of risk & return relationship……………..78
TABLE 4.16 - Literacy regarding relationship of bond price & interest rates……..79
TABLE 4.17 - Literacy regarding returns generated by financial assets in log run...80
TABLE 4.18 – Awareness of savings account………………………………………81
TABLE 4.19 - Awareness of Fixed Deposit…………………………………………82
TABLE 4.20 - Awareness of Equity Shares…………………………………………83
TABLE 4.21 - Awareness of Bonds…………………………………………………84
TABLE 4.22 - Awareness of Derivatives……………………………………………85
TABLE 4.23 - Awareness of Mutual Funds…………………………………………86
TABLE 4.24 - Awareness of PPF……………………………………………………87
TABLE 4.25 - Awareness of Post Office Schemes………………………………….88
TABLE 4.26 - Awareness of Life Insurance………………………………………...89
TABLE 4.27 - Awareness of Money Market………………………………………..90
TABLE 4.28 – Descriptive statistics for attitude of Personal Financial Planning…..91

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