Low financial literacy and its impact on your personal financial management.  

 

 Title: Low financial literacy and its impact on your personal financial management

 

Authors:

Saloni Parab

Neeraj Pathak

Shubham Agavane

Aditya Aute

 

Introduction: Low financial literacy refers to a limited understanding of key financial concepts, such as budgeting, saving, investing, and managing debt. This lack of knowledge can lead to poor financial decisions, such as overspending, accumulating unnecessary debt, or missing opportunities for wealth growth. As a result, individuals with low financial literacy may struggle to achieve financial stability, which can impact long-term goals like homeownership, retirement, or emergency preparedness. Increasing financial literacy is crucial for making informed decisions and securing a healthier financial future.

 

Objective:  To understand the underlying issues of Low financial literacy and its impact on your personal financial management.

 

Literature review:  We read two articles, 1st one is about “The study investigated the financial literacy of Kenya Revenue Authority (KRA) employees and its impact on their saving practices and social security planning. It found that while financial literacy significantly influences personal financial management, respondents showed limited understanding of crucial areas like retirement, estate, insurance, and tax planning, as well as managing credit and liabilities. The findings highlight the need for enhanced financial education programs targeting these gaps”.

2nd article is about “The study investigates the perceptions of 286 Business Management students in South Africa, focusing on their financial literacy and desire for financial education. The results show that many lack confidence in managing money and express a need for more financial knowledge. The findings suggest that improved financial literacy could boost entrepreneurial activity and reduce the high failure rate of new ventures in South Africa”.

Data collection: The following 5 questions are framed on Likert’s frame 1. I am confident in managing my personal finances.2. I regularly use financial planning tools.3. I understand financial concept.4. I have faced difficulties due to my lack of financial knowledge.5. I was interested in attending financial lite these 5 questions were surveyed by ITM students, family & friends

 

Data analysis: 

 

Question 1

Question 2

Question 3

Question 4

Question 5

Mean

3.12

3.43

3.51

3.15

3.56

Standard deviation

1.19

1.28

1.22

1.21

1.37

Standard error

0.119

0.128

0.122

0.121

0.137

Z

1.00

0.33

4.18

1.23

4.08

Results

Agree

Neutral

Strongly agree

Agree

Strongly agree

 

Conclusion:

  1. Students are confident in managing personal finances
  2. Students are neutral towards regularly use of financial planning tools
  3. Students confidently understand financial concept
  4. Students have faced difficulties due to lack of financial knowledge
  5. Students are interested in attending financial literacy workshops

 

Reference:

GA Chango, D. M. (2014). Effect of financial literacy on personal financial management practices: a case of employees in finance and banking institutions in Kenya (Doctoral dissertation, University of Nairobi).

 

Olima, B. (2013). Effect of financial literacy on personal financial management on Kenya Revenue Authority employees in Nairobi (Doctoral dissertation, University of Nairobi).

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