Effect of Financial Literacy on Financial Decision of the Youth at Youth Enterprise Development Fund in Mombasa County

Abstract

The purpose of the study was to examine financial literacy effect on financial decisions among Youth at Youth Development Enterprise Fund in Mombasa County. The theoretical framework of the study comprised of the dual process theory, planned behavioural theory and the theory of social learning. The study adopted a descriptive research design, used a population 1000 youths from which a sample of 50 participants was selected through random sampling methods. Data was collected by use of questionnaires and analysed using descriptive statistics and multiple regression. Financial literacy has a statistical and significant relationship to financial decisions. The Regression analysis shows the Model R to be 0.741a which indicates that there is a strong relationship between financial literacy and financial decision. F-test Conducted shows an F-value of 3.602 and P-value of 0.023 ,the model shows that the relationship of the study variables is significant and the variables have a positive influence on financial decisions. All the variables had a p-value of less than 0.05 that is Financial Literacy, Education levels, marital status and Gender hence, this proves that all variables are statistically significant. The youth have a have level of literacy in terms of savings, expenditure, budgeting, retirement plans and loan management.. Youth literacy affects their financial decisions; with high levels of financial literacy youth registered with Youth Enterprise Development Fund repaid their loans in time. The youth have a mean average of more than half showing that the youth have financial literacy and skills in terms of savings, expenditure, budgeting, retirement plans and loan management in interns enables them to make reliable decisions enhancing their financial performance such as repaying of their loan. Financial literacy has an effect in financial decisions, the higher the literacy the better the performance of financial decision. This study finds that financial literacy has a positive effect on financial decisions among Youth at Youth Development Enterprise Fund in Mombasa County.It is recommended that Youth Enterprise Development Fund need to come out with a policy to roll out more training policy on financial literacy and provide more training to those youth still affected by poor financial decisions. They should develop a policy that will enable all the youths who are underrated in their financial literacy and be able to develop their literacy to better their financial decision. The study recommend that youth should attend more training programs so as to develop their literacy on financial affairs that would intern enhances their financial decision. They should engage with more financial learning programs and workshops that would improve their knowledge and awareness on financial concerns and they would be able to make better financial decisions. The study suggested that further studies on other variables which affects financial decisions of the youth at youth Enterprise development fund should be conducted to be able to determine their impacts on their financial decisions as Adjusted R Square was low (32%). This will enable to determine what effect other variables have on the youth financial decisions which were not part of this study objective. This study suggested further studies on youths at other youth’s loan program level such as county government loans to the youths and loans from banks since this study was based on youths at Youth Enterprise Development Fund,. This will also capture all other youths at other loan youths programs and be able to conduct a relative study on the effect financial literacy has on their financial decisions.