Knowing financial terms and concepts means understanding the basic ideas behind investing and handling money to grow wealth and stay financially secure. It involves being aware of borrowing and investment options like brochures, annual statements, figuring out interest, and holding off on spending money. It is also important to realize that high-profit investments usually come with high risks, understand that market values can go up and down, and grasp the idea that things can change unpredictably. Kumari, (2020) defined financial literacy as having the expertise and abilities needed for informed and efficient money handling. It plays a crucial role in driving financial progress and economic advancement within a nation. Given these advancements, it becomes essential to evaluate whether the younger generation, particularly accounting professionals who are regarded as future investors and drivers of economic change, possess the required understanding of financial principles. Understanding financial literacy enables individuals to navigate crises and difficult times by equipping them with the knowledge of strategies to minimize risk. It also promotes behaviors such as avoiding debt (Tiongson, 2023) and ensuring timely bill payments (Turner, 2023), which help individuals maintain access to loans in tight credit markets. Financially literate individuals comprehend key concepts related to assets, taxes, insurance, banking, investments, and money management. They possess the education and knowledge necessary to make informed decisions about financial matters. Investment decision-making involves the process of effectively managing complex situations in investment scenarios (Roberts, 2023; Sayem et al., 2024). Individuals must evaluate different alternatives to determine the most suitable options. Making investment decisions goes beyond considering available resources; it entails carefully selecting the most appropriate investment types.

Understanding financial concepts equips individuals to evaluate the risks involved in various investment options and gauge the potential rewards. It enables informed decision-making by considering the balance between risk and reward in light of personal circumstances. Financial literacy fosters the establishment of realistic investment goals based on financial standing, time horizon, and aspirations. Moreover, it aids in comprehending the significance of consistent contributions, long-term planning, and the power of compounding to achieve desired financial outcomes. Financial literacy enables individuals to decipher market trends, economic signals, and financial updates with proficiency. By grasping the significance of market developments, they can make educated investment choices, identify potential openings, and steer clear of hasty decisions influenced by temporary market shifts. Moreover, financial literacy involves a comprehensive grasp of personal finance management, encompassing budgeting, saving, and debt handling (Tamplin, 2023a). These competencies form the fundamental pillars for constructing a sturdy financial foundation, which, consequently, bolsters prudent investment decision-making. In addition, Klapper and Singer, (2014) asserted that having bank accounts and using digital payments enables people to better take care of their families, save money for the future, and manage financial crises. Digital payments also play a role in reducing corruption by making transactions more transparent and empowering women to have more control over their finances.

In the age of globalization, a sound understanding of financial matters is vital not just for businesses and the economy but also for the well-being and success of the entire country. Investing money comes with uncertainties, but financial literacy empowers individuals to make prudent investment decisions. It acts as a shield against significant losses in highly unpredictable markets (Kenalty, 2023) and offers solutions to various challenges (Lee, 2021). With greater financial knowledge, individuals are more inclined to manage their finances wisely. Many studies have examined the importance of financial literacy; however, there has been limited exploration into the correlation between financial literacy and investment choices. Therefore, the objective of this research is to identify the financial literacy practices adopted by accounting professionals and determine the level of influence of these financial literacy practices on the investment decisions of the respondents.

Based on the research findings, it can be highlighted that there exist a statistically significant correlation between budgeting (r=0.924, p=0.001), saving and investing (r=0.970, p<0.001), and debt management (r=0.919, p=0.001) on investment decisions of accounting professionals. It came to light that saving and investing as financial literacy practices can be positively associated with investment decisions. In terms of budgeting, before making significant purchases, an assessment should be conducted to ensure whether they meet your needs and are within your financial means. The results show that diversification is highly valued by people for managing investment risk and increasing profits. It is suggested that even those with limited money can successfully create diversified investment portfolios. The strong emphasis on avoiding new debts among accounting professionals highlights the essential role of responsible debt management in guiding their investment decisions. Moreover, financial education is highly emphasized for improving awareness of investment risks; thus, individuals should conduct thorough research and comprehend the risks associated with various investment options before allocating their funds. Therefore, it is recommended that investors prioritize routine evaluations of their investment performance to ensure the effectiveness of their strategies and make informed adjustments to attain desired investment objectives. Investors should focus on integrating these practices to structure portfolios capable of adjusting to market fluctuations and optimizing returns through careful consideration of historical performance and trends. 

A gap in research exists for future studies to investigate how demographic variables like age, educational attainment, and income levels affect financial literacy practices and their influence on investment decisions. The researchers recommend considering other financial literacy practices to examine its influence on other indicators of investment decision. In future investigations within similar field of study, it is proposed that researchers opt for different research settings. Furthermore, examining the influence of digital financial tools and online investment platforms on investment decisions could also be beneficial.

Financial Literacy

Across the globe, only one-third of adults demonstrate a basic understanding of financial concepts. Despite the prevalence of higher financial literacy among the wealthy, well-educated, and users of financial services, billions lack the necessary skills to adapt to rapid shifts in the financial landscape. With the increasing availability of credit products, many of which come with complex terms and high interest rates, individuals face challenges in managing their finances effectively. Governments are striving to enhance financial inclusion by expanding access to banking services and other financial products. However, without adequate financial literacy, these efforts may result in increased debt, mortgage defaults, or bankruptcy. Vulnerable populations such as women, the economically disadvantaged, and those with limited education are particularly at risk due to their lower levels of financial literacy. The issue of financial literacy poses challenges for both developing and developed economies (Klapper et al., 2014). Understanding of finances significantly improves as individuals achieve higher levels of education, which is closely linked to math skills, age, and income. Worldwide, there is a notable gap of around 15 percentage points between adults who completed primary, secondary, and tertiary education. In major developed countries, 52 percent of adults who finished secondary education (roughly nine to 15 years of schooling) demonstrate financial literacy (Lusardi and Mitchell, 2014). Thus, understanding how money works is crucial for people who use various payment methods, savings accounts, credit options, and strategies to manage risks. For many, opening an account with a bank, financial institution, or mobile money service provider serves as an essential first step in getting involved with the financial system. Financial literacy enables individuals to understand the multitude of investment opportunities at their disposal. With a strong grasp of financial principles, individuals can assess and choose among various investment avenues, including stocks, bonds, mutual funds, and real estate, that match their objectives and risk tolerance (Hudiya, 2023).

In todays world, knowing about money matters is more important than ever as things get more complex. Financial literacy means being able to handle your own money well (Doty, 2024). It is a vital skill that lets you make smart decisions with your finances, stay clear of debt, and build a solid financial future. Thus, investment options awareness (Azhar et al., 2017), risk assessment (Sapiri et al., 2023), cost-effectiveness (Kaiser et al., 2020), and investment performance monitoring (Levišauskaite, 2010) are all part of being financially literate. Knowing where to put your money helps you make smart choices, keeping your finances steady and growing. Having a good understanding of finances is crucial because it gives people the power to make smart choices about money that really matter in their lives. Those who are really knowledgeable about finances tend to focus more on saving for retirement, keeping their credit scores high, and staying away from debt. People who are financially literate are more inclined to kick-start businesses, contribute to their communities, and make wise decisions about their finances (Fernando, 2023). In contrast, communities with low levels of financial knowledge often struggle with poverty, lots of debt (Lusardi, 2019), and unstable economies (Matey, 2021). Lacking financial knowledge can result in various challenges, including a higher likelihood of building up debt thats hard to manage, either due to making bad spending choices or not planning for the future. Consequently, this could lead to having a bad credit score, going bankrupt, losing your home to foreclosure, and facing other unfavorable outcomes.

Investment Decisions

In the studies conducted by (Kumari, 202; Baihaqqy and Sugiyanto, 2020; Ali Seraj et al., 2022), it was demonstrated that having adequate financial literacy significantly and positively affected the investment decisions of the respondents. The study findings of Johri et al. (2023) suggested that understanding finances significantly influences how investors make financial decisions, plan for their future, and choose financial products that shape their investment choices. Additionally, the research highlights that programs aimed at increasing financial literacy positively impact investors decision-making processes regarding investments. However, Arianti, (2018) concluded that having financial literacy does not seem to significantly influence investment decisions. Instead, what really matters is how they handle their finances and income, which strongly influences their investment choices. Numerous studies suggested that age and gender (Okamoto & Komamura, 2021; Ruiz-Palomo et al., 2023), average monthly income (Yıldırım et al., 2017; Traut-Mattausch & Jonas, 2011), work experience (Nano & Mema, 2017), and years engaged in investment activities (Balagobei & Prashanthan, 2021) significantly influence ones level of financial literacy and behavior. 

Those who are financially literate are better equipped to comprehend (Thakkar, 2023) and make decisions that help them steer clear of major mistakes, minimize losses, and make smarter financial choices, ultimately enhancing their financial stability (Silver, 2024). Consequently, investors strive to enhance their understanding and habits to improve their present and future investment decisions, aiming for greater returns. Not knowing enough about money is a big reason why many folks struggle to invest wisely and manage their budgets. Being able to handle finances is seen as a crucial skill that can really improve peoples lives. When individuals and communities lack this knowledge, they often end up making bad money choices. But if they understand how money works, they can make smarter decisions in todays complicated financial world (Johri et al., 2023). This involves understanding how much money is coming in and then figuring out how to best use that money to cover expenses (Oppong et al., 2023).

Research Questions

This research aims to determine the influence of financial literacy practices on the investment decisions of accounting professionals in Makati City. Specifically, it seeks to answer the following questions:

1. What are the financial literacy practices adopted by accounting professionals in Makati City?

         Budgeting

         Saving and Investing

         Debt Management

2. What is the level of influence of financial literacy practices on the investment decisions as assessed by the respondents in terms of:

        Risk Tolerance

        Investment Goals

        Cost-effectiveness

        Asset Allocation

3. Is there a significant relationship between financial literacy practices and investment decisions after determining their level of influence?

We express our gratitude to Almighty God for granting us the opportunity to compose this research. Our heartfelt appreciation extends to all individuals who contributed to the preparation of this study, whether through direct involvement or indirect support.

Research Design

This research applied a quantitative research methodology with convenient selection of participants. Analysis of data for correlation typically involves the utilization of Pearsons correlation model, resulting in the derivation of Pearsons Product Moment Correlation Coefficient (r). This coefficient illustrates the correlation between two variables, indicating whether the relationship is positive, negative, weak, strong, or nonexistent (Okwonu et al., 2020). In quantitative correlational research, the data collected is unbiased, ensuring the validity of the results. Since variables are not manipulated, researchers are not biased in their findings. Predicting the outcome of the hypothesis under test is straightforward due to the correlational connections among variables, providing researchers with insights into the hypothesis test outcome (Mohajan, 2020).

Respondents of the Study

In this research, the respondents consisted of Eighty (80) accounting professionals of selected firms in Makati City. The educational backgrounds of the respondents may vary widely and they can be of any gender and age, provided they have the capability to respond to the questionnaire provided. These respondents should have an understanding of the financial literacy practices being examined in this study. They should be sufficiently informed to recognize how these financial literacy practices shape their investment decisions. Thus, the respondents should be exposed and are currently involved in investing activities.

The authors declare no conflict of interest.

Financial Literacy Practices

Table 3 shows the contributing factors of “Budgeting” as a financial literacy practice. Based on the results, it clearly reveals that item 1 (I keep track of how much money I make and spend each month) got the highest mean of 3.93 interpreted as ‘Great Extent. The result implies that before making significant purchases, assess whether the expenditures align with your needs and financial capability. The result is supported by (Bona, 2018; Cecilio, 2022; Masood, 2023; Turner, 2023) asserting that prioritizing saving by establishing a routine of allocating funds for savings before other expenditures can significantly guide and shape financial planning. Make it a habit to record all your daily expenses either in a journal or through a budgeting app. When the month wraps up, take a look at where your money went. When all income is spent without any savings or investments, it becomes necessary to seek opportunities to reduce expenses. Keeping track of spending demonstrates how minor daily expenses, which may be unnecessary, accumulate over the course of a year.

In addition, in the Financial Inclusion Survey conducted by the Bangko Sentral ng Pilipinas, (2021) it was revealed that a significant number of Filipinos found themselves troubled by both their immediate and future financial situations, yet they remained hopeful overall. Nearly half of Filipino adults struggled to keep up with living expenses and worried about their finances. However, there was a prevailing optimism among many Filipinos who believed they were progressing towards their financial objectives, had a clear understanding of their financial aspirations, and felt confident about their financial future. It was also highlighted that the number of adults investing in finance rose to 36% in 2021, a significant increase from 25% in 2019. Individuals with higher education levels, aged 20 to 39, living in the National Capital Region (NCR), employed, male, and involved in business were more inclined to participate in investment activities.

Table 4 shows the contributing factors of “Saving and investing” as financial literacy practices. It clearly reveals that item 5 (I diversify my investment portfolio to manage risk and enhance potential returns) got the highest mean of 3.90 interpreted as ‘Great Extent. The result is supported by Lee et al. (2020) asserting that the absence of diversification is a major concern in investing activities, especially for ordinary individuals, as it can lead to significant drops in their investment returns. Without professional guidance, people often stick to what they know, resulting in concentrated investments that lack diversification.

Diversifying investments is a basic strategy for lowering risk (Lekovic, 2018), and the more diverse the portfolio, the lower the overall risk, even if the investments are equally distributed (Kaore, 2020). Diversification is especially vital for individual investors with modest resources, as downturns can hit them harder compared to wealthier individuals or big institutions. In addition, the research of Lee et al. (2020) concluded that even individuals facing financial constraints can still build diversified portfolios. It was revealed that an investment between $10,000 to $100,000 is adequate for assembling portfolios that are fully diversified in terms of risk. This suggests that considerable capital is not necessarily a prerequisite for accessing the advantages of comprehensive diversification.

Table 5 shows the contributing factors of “Debt Management” as a financial literacy practice. It clearly reveals that item 5 (I refrain from acquiring new debts unless absolutely necessary) got the highest mean of 3.95 interpreted as ‘Great Extent. The result implies that effective management of debt plays a significant role in the investment decisions that accounting professionals make.

According to the research findings of Hussein and Njoka, (2023) for every unit increase in debt management, investment decisions improve by 0.332 when other factors remain constant. In addition, making changes to your spending habits to save money can be challenging (Cruze, 2024) and may involve making difficult decisions (Sunil, 2023). It is about finding a balance between sustaining essential expenses while reducing or eliminating less critical but still desirable ones. The key to balancing your budget lies in taking early and proportionate actions over time. Therefore, it is essential not to spend beyond your means. Thus, individuals might avoid borrowing due to a conditioned emotional reaction to debt, which makes them less inclined to acquire it (Almenberg et al., 2020). Even professionals frequently advise against accruing debt or suggest staying debt-free (Egan, 2023; Holzhauer, 2024; Waugh, 2023). Being debt-free provides you with complete freedom to decide how and when to use your money, without any restrictions.

Table 8 shows the contributing factors of “Cost-Effectiveness” as a parameter of investment decisions. It clearly reveals that item 1 (I efficiently evaluate investments with optimal returns and minimal expenses to maximize profitability) got the highest mean of 3.95 interpreted as ‘Great Extent. For accounting professionals, this enables them to evaluate various options and determine which offers the highest return on investment. By examining both short-term and long-term impacts, accounting professionals can decide how to allocate their resources wisely. This ultimately helps them save money in both the short and long run and enhance their investment performance.

The result is supported by Levišauskaite, (2010) affirming that by checking the return on investment of capital expenses, investors can figure out which investments make sense (Mauboussin and Callahan, 2022) and which ones to avoid (Yuniningsih & Taufiq, 2019). Following an investment strategy helps investors shield themselves from the risk of putting all their money into investments at the wrong time. They do this by steadily adding new money to their investments over a long period. By investing the same amount regularly, they purchase more of an investment when its price is low and less when it is high.