Relationship Between Financial Literacy and Retirement Planning in Nairobi County, Kenya

Abstract

The aim of the study was to establish the influence of financial literacy as well as retirement planning in Nairobi, Kenya. The study adopted descriptive research design. The population of the study were all the SMEs in Nairobi, Kenya. Nairobi as a county consists of 42,798 SMEs. This was sampled to 396 SMEs. The type of data needed for this investigation was primary information, gathered by utilization of structured questionnaire. Information gathered was analyzed through descriptive plus inferential statistics. Mean and SD was used to present the analysis output. Regression analysis was executed through multiple regression model. The research was carried out with the aim of assessing the extent to which financial literacy had an impact on the retirement planning. Findings from the study reveal that 13.1% of the variation in retirement planning could be explained by financial literacy. The findings further show that if all variables are held constant then retirement planning has a constant value of 1.875. Financial literacy was found to have a positive and significant influence on retirement planning as shown by the beta value of 2.114. The study concluded that financial literacy had a positive impact on retirement planning. This implied that the more people were financially literate the more likely they were likely to engage in activities and planning that would enable them to have a concrete retirement plan in future. The study recommends that the government be more proactive in engaging people through special programs that educate people on financial literacy. Through financial knowledge gained from such programs people would be able to better prepare and plan for their retirement. The study also recommends that the government comes up with affordable and reliable pension schemes that members of SMEs can be incorporated. This would enable more people to engage in a retirement scheme to prepare for their future. The study also recommends that the various SMEs to come up with pension schemes for their employees. This will enable their employees to save up for retirement from the onset of their employment term.