Effect of Financial Literacy on the Personal Financial Management of Kenya Revenue Authority Employees

Abstract

This study sought to establish the effect of financial literacy on the personal financial management of Kenya Revenue Authority employees based in Mombasa County. Specifically, personal financial management was measured by personal savings and personal debts. Adopted measures of financial literacy included savings/investing literacy, retirement plan literacy, debt & other liabilities literacy and personal characteristics. The research study utilized descriptive design as its research design which was found suitable for objective accomplishment. Stratified random sampling (SRS) technique was adopted to ensure that there is equal representation of labour force. In terms of data collection, the study utilized primary data which was collected from electronically distributed semi-structured questionnaires. Findings of the descriptive statistics showed that on the facets of financial literacy, the participants were to a ‘Great extent’ financially literate and mostly aware such financial aspects influence their personal financial management practices and decisions. On the literacy level of retirement plans, the findings mostly showed that majority of the respondents were ‘to a moderate extent’ literate and did not deem it to be highly important and this was mainly attributed to the age of the participants. On the aspect of debt & other liabilities as well as personal debt and personal savings, the participants were literate to a high extent. The results similarly revealed that savings/investing literacy, retirement plan literacy and debt & other liabilities literacy had a strong and positive effect on personal financial management and the effects were statistically significant at 5% level of significance. Personal characteristics’ effect on personal financial management was weak and not significant at 5% level of significance. In general, the overall regression analysis model for estimation of personal financial management was considered to be strong with F (2.620), t (6.830), p-values <0.05 and R2 = .707) which implies that the four independent variable measures are responsible for 70.7% variation in personal financial management. The study recommends the need for introducing financial literacy training programs where trainers should impart comprehensive knowledge on aspects of investing, saving, consumption as well as facets of credit/debt. It also recommends that debtors should have appropriate expenditure plans in place in order to guide their expenditure patterns and fulfil their financial obligations.