Statistical Analysis Of Students’ Expenditure In Tertiary Institutions

Project and Seminar Material for Statistics

Statistical Analysis Of Students’ Expenditure In Tertiary Institutions


The aims of this project are to describe the various ways in which students spend their money and to advise them on how to spend their money judiciously.

About three hundred and sixty questionnaires were distributed randomly to six schools and one hundred and forty valid returns of questionnaires were gathered.

From the analyses, it was discovered that despite the hard earned income of parents, most students insist on spending their money extravagantly. This is mostly found commonly the female students. According to the data age was identified as one of the major factors which influence the spending habit of students. Students below twenty – five years spend higher than students above twenty-five years. We also noted that students whose parents are wealthy spend much higher than students whose parents are averagely rich.

Finally, students should judiciously spend money only on important items and should avoid ostentations spending.

Chapter One


1.1 Background of the Study

Spending is referred to the total expenditure of an individual, government or an organization.

Having said this, government can spend money for projects like building of schools, construction of roads, establishments of electricity, etc. and these erupt development in our country. Parents also cater for the need of their children and enrich them with huge sums of money as pocket money. Some of the student’s need which propels them to spend could be enumerated thus: school fees, hotel fees, feeding, transport fares, drinks and educational materials, etc.

Taking you years back, Nigeria had a good economy. Government and parents spent much of their money without any pains. Students at that time used money recklessly because there was a good economy and balanced with monetary value in the market.

From 1980 till now, we have been experiencing our increasing an unexpected inflation of goods

By carrying out this study within the context of a tertiary institution, this paper contributes to the growing body of literature on the analysis of student’s expenditure. To my knowledge, there has been no prior research of personal finance habits conducted on a tertiary institution’s population. Previous studies such as that of Cummins et al. (2009), indicates a geographic factor that may play into the development of financial habits. Certain regions may encourage particular behaviors, resulting in location-specific effects, especially if students selected to participate are mostly from that homogenous population. The implementation of this study specifically using individuals from various ethnicities allows for greater applicability that is representative of colleges with a diversified student body representation. This paper highlights the impact of cultural norms that inevitably impact the establishment of spending behaviors, many of which are all appropriated based on differing social norms across the globe. As this topic is relevant across various continents, there is increasing desire to further the examination of financial habits among college-aged individuals.

A majority of the literature reviewed focuses on demographic factors or socially constructed models of consumption to explain spending behavior. However, there is very limited knowledge on the applicability of existing economic theories that explain consumers’ spending habits, particularly within the setting of college students. As such, contributions can be made from this study’s attempts to draw connections between university level spending and theories of Hyperbolic Discounting and the Permanent Income Hypothesis.

Subsequent sections of this paper are organized in the following manner: Section II provides a framework of pertinent literature to contextualize the existing findings on college students’ spending and saving habits; Section III includes methodology and data, where a description of the survey questionnaire is provide along with data collection methods; Section IV provides results from the regression analysis; Section V is a discussion, which draws conclusions and relates findings from the study back to existing literature; and Section VI concludes with final remarks and policy implications.

1.2 Problem Statement

There is a limited amount of research that has investigated students expenditure in tertiary institutions in regard of being efficient, productive, and accountable in the use of financial resources. There are some measurable goals that are commonly used as indicators of student’s financial management performance such as first-year and six-year (Promades, 2012). There is a need to explore how much the different components of institutional expenditure affect such performance indicators. This study aimed at fulfilling this need and providing a better understanding of resource allocation patterns that might be related to improved financial management among students in different types of tertiary institutions in Nigeria.

1.3 Objectives of the Study

  1. To figure out the factors that influence students expenditure in tertiary institutions
  2. To identify the patterns of student’s expenditure in tertiary institutions?
  3. To study the effect that different levels of student’s expenditure have on their academic performance?

1.4 Research Questions

  1. What are the factors that influence student’s expenditure in tertiary institutions?
  2. What are the patterns of student’s expenditure in tertiary institutions?
  3. What effect do the different levels of student’s expenditure have on their academic performance?

1.5 Significance of the Study

In an environment of economic challenges and budgetary constraints, students of tertiary institutions are required to reconsider their patterns of resource allocation in order to achieve their goals and improve their performance within the available financial resources. This study investigated the impact of resource allocation on student’s performance. Results of the study may be utilized as guidelines for new resource allocation patterns that help improve management of finances. The findings of this study will provide information that would help students, parents and decision makers to set up a system that will aid in adequate management and allocation of resources among students in campus.

1.6 Limitations

This study is limited to the targeted population students of tertiary institutions characterized by institutional control (public or private-not-for-profit) and colleges. The findings of this study may not apply to institutions of other categories such as community colleges, private-for-profit institutions, associate colleges, special focus institutions, and tribal colleges.

1.7 Definition of Terms

It is the social or professional position of somebody in relation to others:


This is the earning of an individual in taking part in production of goods and services.

Expenditure is broken into meaningful and logical categories namely:

A Food:

It is anything we eat for the nourishment and growth of the body.

B Clothing and Foot-Wears

Clothing are those things that we use to cover our body because of cold and diseases. While foot – wears are those things that we wear on our feet so as to prevent us from wound and diseases.

C. Drinks

It is either alcoholic or non-alcoholic liquor.

D. Make-ups

These include such thing as powder, pomerde, up-sticks, eye-pencil, etc.

E. Educational Materials

These are materials used for academic works like books, mathematical sets, drawing sheets, calculators, etc.

F. Projects

This includes field-works, research – work, term paper, etc.

G. Hobbies

It is occupation for one’s leisure time, for example reading, sports and listening to music.

H. Entertainment

This includes film show, parties, cinema, which we use for enjoyment and relaxation of the body.

1.8 Organization of Work

The purpose of this study is to analyze student’s expenditure in tertiary institutions in different schools characterized by institutional control (public and private-not-for-profit) and colleges. Chapter 2 included an overview of the literature and research related to institutional expenditures and performance indicators. Chapter 3 described the methods utilized to conduct the study. Chapter 4 presented the results and findings of the study. Chapter 5 presented the conclusions of the study and discussed the implications of the findings for institutional leaders.

Chapter Five

Discussion of Findings, Recommendation and Conclusion

5.1 Discussion of Findings

Much of the previous literature focuses on different variables that may influence the spending and saving habits of a college student, but few researchers develop a model that accounts for both demographic and theoretical values altogether. While age, gender and ethnicity have all shown to largely influence financial behaviors of a college student, little has been done to examine the role of certain theoretical frameworks including the theories of Hyperbolic Discounting and the Permanent Income Hypothesis. This study examines spending and saving behaviors among college students, taking into account variables of class year, gender and ethnicity in one model and the Permanent Income Hypothesis and Hyperbolic Discounting in a separate model.

In terms of planning ahead for future spending, females were more likely to plan for spending. When observing the number of responses that reported planning for spending often, 16.4% of females selected that option as compared to 7.3% of males. On average, females in this data set spend 4.1% less than males. This finding is in line with other literature. Sabri and MacDonald (2010) conclude that females employ more saving mechanisms, which included planning spending budgets. This may relate to the socialization and upbringing of females in comparison to males. In some societies, males are given the freedom to begin working at a younger age whereas females are held back until a certain age (Furnham, 1999). As males begin to earn income earlier, they have more disposable income to spend as opposed to women who are reliant on financial support from parents or guardians.

Chen and Volpe (1998) find that women, particularly those who are ranked lower among their class and with little work experience, are less knowledgeable on personal finance and therefore tend to develop wrong opinions and execute incorrect financial decisions.

However, this statement seems to be a cultural bias. To claim that an individual has “wrong opinions” is a judgment against certain cultural norms and standards that may not hold true in every societal structure. Perhaps many of these individuals were enculturated under different mannerisms, where spending is revered. Furnham’s (1999) study reviews money pathology, which shows that males report greater confidence, independence, risk taking and gambling with money matters. This may apply to findings from this study, explaining why males were found to spend more on average than females.

From an ethnicity standpoint, Cummins et al. (2009) claim that American students have cherished the use of credit more. The credit-dependent society is often discussed as a growing problem within the realm of personal finances. Relying on credit usage can lead to financial issues such as incurring large amounts of debt (Cummins et al. 2009). Many college students tend to be present oriented in that they are not concerned with covering the costs of credit card spending, mostly due to the fact that at this age, students are dependent on parents and guardians to pay off these balances (Hayhoe et al., 2000).

The regression results of class year from this study find that freshman and senior students exhibit higher spending behaviors while sophomores and juniors exhibit less spending. This finding may be in line with the fact that first year students are younger and therefore do not know how to handle finances well (Chen & Volpe, 1998). There is a learning curve that exists when making the transition from being completely financially dependent to slowly becoming financially independent. Chen and Volpe (1998) believe that participants with less work experience, many of whom are younger, also are unable to manage finances. An interesting finding from this study is the fact that fourth year students are also spending more on average. The transition from college to post may also probe more spending in preparation and anticipation of a higher income.

Within the context of the Permanent Income Hypothesis, research has found that younger individuals seem to be more optimistic about their future financial earnings, which can be a good indication of the reason why they are able to take on more debt now, expecting to pay it off later (Norvilitis et al., 2006). Similarly, Roberts and Jones (2001) find compelling evidence for the Permanent Income Hypothesis through their review of the UCLA/American Council on Education Annual Survey. Three out of four students said that one of the main reasons for going to college was to make more money (Roberts & Jones, 2001).

In an analysis of the Hyperbolic Discounting Function, David Laibson (1998) suggests that age, income, and wealth are all correlated with various levels of patience. In other words, at different stages of the life cycle, there is a certain preference of present orientation or future orientation. Accounting for age, income and wealth at the university level, Hyperbolic Discounting may not be as applicable. This study finds that, in general, most people do not display habits that are reflective of Hyperbolic Discounting. About 74.5% of participants opted for the choice to receive $20 tomorrow over $15 today. The population tended towards a later, higher reward amount, indicating future oriented thinking.

The study comes with inherent limitations that can be addressed in future studies. First, there is the issue of endogeneity that has surfaced after conducting this study. It cannot be completely determined whether the independent variables are the variables with the confounding effects on the dependent variable. The issue, also known as reverse causality, indicates that there is a constant feedback loop to indicate if the independent variable is impacting the dependent variable, or if this relationship exists in the opposing direction as well. For instance, there is no way to completely determine whether the relationship strictly exists in the sense that average spending is affected by class year, gender, ethnicity, PIH and HD, or if the opposite could happen. It is possible that average spending can result in changes in certain variables such as the Permanent Income Hypothesis and Hyperbolic Discounting. The theoretical frameworks can have a confounding or unexpected effect based on changes in average spending. To correct for this issue, an instrumental variable can be introduced, which does not correlate with the error term but instead correlates with the independent variables.

Secondly, the sample size is small, with a total of 55 responses. As convenience sampling was used and no monetary incentive was provided, this may have decreased the probability of gaining more participants. However, while only 55 students participated, it was ensured that an equal representation of class years was present and that there were representations of gender and ethnicity reflective of the Akwapoly population.

Thirdly, there may have been some selection bias that inevitably played into this study’s design. Participants were carefully selected via convenience sampling at common spaces around campus, however, students were asked to participate in the study based on demographics. Since demographic characteristics are a large focus in this study, it was important that survey participants came from a variety of combinations in age, gender, and ethnicity. As such, students were first asked their class year and ethnicity prior to recruiting them to participate in the proposed study. Though selection bias was present, it was necessary to account for demographics, as it was a large focus in the context of this study.

5.2 Conclusion

The spending and saving habits of college students provide an insight into the financial mechanisms that are utilized by young adults. Results from this study show that there are clear patterns that have emerged, which are in conjunction with findings captured by other researchers. Conclusive evidence is present of the fact that ethnic background is a strong determinant of certain spending patterns. As deemed by other researchers, namely Chen and Volpe (1998) and Pritchard et al. (1989), students who are White tend to spend more than other demographics. Not only is this further exemplified in my study, but it is also found that Asian students also spend a significant amount more compared to other ethnic backgrounds. In an effort to find a connection to existing economic theories of spending, there was significance behind the data collected for the Permanent Income Hypothesis. If this attitude towards spending holds true and continues on an upward trend, students may start to overestimate future earnings, resulting in more financial issues to deal with at a later time.

The results of this study provide various implications and policy suggestions that can contribute to the literature of the spending and saving habits of college students. As it stands today, the breadth and depth of studies can be extended to further analyze other variables that may have significant effects on the financial habits of college students. Demographic factors such as age, gender and ethnicity seem to be most commonly studied while many theoretical frameworks of consumption and savings have not. The findings pertaining to existing economic models of Hyperbolic Discounting and the Permanent Income Hypothesis can be extended over longer periods of time. For instance, if a study was able to follow a population of students pre- college and post-college, this may give a better understanding of the changes that occur within the time frame of university education. This would come with observed perceptions prior to college that may influence financial habits as well as practices that were developed during this period.

The scope of this literature also fails to take into consideration habitual spenders, and how these individuals may affect the results. Future studies should account for categorization of types of spenders in order to compare findings and draw conclusions about financial practices among different spenders. As more focus is being drawn towards studying the financial habits of young adults, there is increasing desire to understand the issue and the main driving forces that lie behind the development of financial habits. It would be interesting to note the impact of formal education on the spending and saving habits of college students. Very minimal research has been conducted in this particular branch of the topic, and doing so could shed light on methods that allow students to develop good financial habits. Most young adults have their first sense of financial independence during their college years, and having no prior knowledge of experience may have adverse effects in the future.

5.3 Recommendations

This study investigated the relationship between student’s expenditures and other institutions granting doctoral, master’s, bachelor degrees. This study may be repeated to investigate the existence of such relationship in other types of institutions such as for-profit institutions, community colleges, associate’s granting institutions, faith-related institutions, and special-focus institutions.

Future research may also use the database to examine the impact of more institutional characteristics, other than institutional control on the relationship between expenditures and student’s performance. In addition to institutional characteristics, some student characteristics may be also investigated such as gender, race, and ethnicity. Such research would provide better understanding of the different factors that might influence the relationship between expenditures and Further research may build on the findings of this study by employing qualitative and quantitative methods to recognize the activities or expenses within some specific expenditures (such as instruction, academic support, institutional support, and student services) that might be linked to their ability to manage resources.

Institutional data sources, other than IPEDS, might provide more granular data required for future research relating institutional and student characteristics to study their expenditure pattern. For example, institutional Common Data Sets (CDS) provide more detailed information on the institutions in different areas such as enrollment, transfer admission, academic offering, instructional faculty, disciplinary areas, class size, and student life. Utilizing such type of data would help fine-tune the findings of this study.

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