Effect of financial literacy on financial independence among retirees of public Universities in Western Kenya region

Abstract

Financial Independence (FI) means an individual’s capacity to control own finances, make decisions regarding money, support oneself financially through a job, savings, investments, or a combination of all three; without financial assistance from the government, family, friends, or credit card companies, supported by level of knowledge about how to manage finances to allow for competent decisions. Whereas the Pension schemes continue to improve investment opportunities for pension funds for retirees, it still remains unclear how pre and post retirement financial literacy programmes contribute to the retirees’ Financial Independence. Financial Independence is measured by economic, psychological and family factors, in terms of income generation capacity of assets, money management efficiency, problem solving ability and socio-economic welfare. Existing literature points to Financial Literacy (FL); constituting skills, financial awareness, knowledge, attitude, financial awareness, and behaviours necessary to make sound financial decisions and ultimately achieve individual financial well-being as a significant determinant of Financial Independence. Retirees, especially from Universities remain a social focus in rural settings to offer opinions and guidance to socioeconomic and welfare progression. The purpose of this study was therefore to analyse the effect of financial literacy on financial independence among retirees from Public Universities in Western Kenya region. The specific objectives of the research were; to determine the association between financial literacy aspects and financial independence among retirees of public universities in Western Kenya Region, establish the effect of financial literacy on asset ownership among retirees of public universities in Western Kenya Region and to evaluate the contribution of financial literacy to savings adequacy among retirees of public universities in Western Kenya Region. The study adopted correlational research design, to allow for quantitative association and contribution of variables. The study area was Western Kenya Region with area coverage of 19,877.5km2 and with six public universities. The study target population constituted approximately 160 retirees from the six Public Universities in Western Kenya for the years 2016 to 2020. Stratified Random sampling method was used to select sixty (60) respondents. The study was guided by the identity capital theory of financial independence and the continuity theory of retirement. Structured questionnaires were administered to collect information on financial literacy and financial independence. Validity and reliability of the questionnaire was established through pilot testing and Cronbach’s alpha test respectively. ANOVA, multiple linear regression and correlation were employed in analysing the data collected. The results of the study were presented in terms of tables and figures. The study established that there is a strong positive correlation between financial literacy aspects and financial independence. The study also found out that financial literacy aspects significantly affect asset ownership and savings adequacy. The findings of this study contributes to the pension sector and to the existing knowledge body on financial independence.