Financial Literacy And Retirement Planning In Kenya

Researchjournali’s Journal of Finance

Vol. 5 | No. 4 October | 2017 ISSN 2348-0963 1

www.researchjournali.com

Asenath Maobe

Faculty member, Deparment of Accounting and

Finance, School of Business and Economics, Kisii

University, P.o. Box 408- 40200, Kisii, Kenya

Financial Literacy

And Retirement

Planning In Kenya




ABSTRACT

At least 90 pc of Kenyans are not planning for retirement and the trend if un-reversed is worrisome. Retirement

a period following immediately after exiting from active employment and a major transition in a worker’s life

requires appropriate financial planning. Conventionally, in Africa, the risks arising from old age and retirement

have been shared by family and the community; however, this practice is on the decline due to present economic

conditions in Africa where the family safety nets are low. This is compounded by the nature of the Kenya’s

economy which is largely depended on traditional agriculture. The study focused on workers in the informal

sector in Kenya commonly known as ‘Jua Kali’. Given that they are not subject to government’ compulsory

contributions towards retirement, then a homegrown model needed to be formulated through establishing their

level of financial literacy and how it influences retirement planning. And which platform can facilitate their

attitudes towards saving for retirement. Results showed that financial literacy levels remain low, and yet they

positively impact on retirement planning. The Mpesa mobile network was also considered by the planners as a

convenient medium to send their savings to pension firms.

Keywords: Retirement Planning, Jua Kali, informal workers, Financial Literacy

1. INTRODUCTION

1.1 BACKGROUND

A report by Alexander Forbes shows that at least 90 pc of Kenyans are not planning for retirement (Okoth,

2016). This statistics points to the reality that majority of these workers are from the informal sector given that

from the Economic Review (2011), 80 pc of the total workforce in Kenya are informal workers. The trend is

likely to lead to financial anxiety for Kenyans who would be sleep-walking to their sunset years without a

sufficient retirement package. As Kee- Lee and Chow (2005) aptly posit, retirement a period following

immediately after exiting from active employment and a major transition in a worker’s life, requires appropriate

financial planning.

Knowing that the informal sector plays a crucial role in world economies (World Bank, 2006), then the attention

of policy makers and planners needs to be drawn to this sector. As it stands in Kenya, the informal sector

workers are not enjoying any government retirement incentives as their counterparts. This paper sought to

develop a home-grown model of integrating the informal workers into a retirement system, as to secure their

financial future.

Conventionally the risks arising from old age and retirement have been shared by family and the community;

however, this practice is on the decline due to present economic conditions where the family economic safety

nets are low in Kenya. This is compounded by the nature of the country’s economy which is largely depended




on unpredictable traditional agriculture (Mugenda, 2014).This state requires that each individual plan well

toward their retirement.

In an effort to involve individuals’ participation in their pension plans, there have been reforms across the world

with the disappearance of “Defined Benefit (DB) and the introduction of “Defined Contribution” (DC). DB is

a retirement plan where the employee receives a certain amount of money from the employer which is secured

by the government and based on their years of service and remuneration. On the other hand, with DCplans,

employees are required to be actively involved in the process of selecting their investment portfolios. The

portfolios are not fixed but rather subject to losses, expenses, and gains (OECD, 2005).Although the defined

contribution seems insecure, it grants individuals an opportunity to take charge of their retirement plans by

determining the amount of money they will actually need during retirement and this definitely necessitates the

possession of some financial skills.

Despite the global efforts aimed at reforming retirement systems, the RBA (2007) report indicates that only

10% of Kenyans have made financial plans for retirement. Why? Given that retirement planning is significantly

influenced by financial acumen, financial literacy has been cited as the reason behind the low uptake of pension

plans. This has then become a top agenda for policy makers, researchers, national regulators, pension firms,

international organizations such as world banks and private financial institutions (Miller et al. 2014).

Certainly, in many countries, the results of financial illiteracy are considered to be horrendous as evidenced by

Schwab (2008) who believes that the financial crisis of 2008 in the United States was largely triggered by low

financial literacy levels among other factors. A large number of individuals entered the mortgage industry with

a little understanding of its operations and cost implications. Schwab (2008) acknowledge that many Americans

are not able to access the vibrant economic opportunities due to lack of basic financial skills such as budgeting,

or saving towards retirement.

Similarly, empirical studies by Klapper et al. (2012) link the subprime housing crisis in the USA to a lack of

financial literacy among the consumers. Besides that, there is compelling evidence by Lusardi and

Mitchell(2012) from across the world that people have challenges in grasping the basic economic concepts

which would translate to poor personal financial planning.

Despite the low levels of financial literacy from the foregoing, and in an effort to get the Jua Kali workers

covered for retirement, Kenya set up a specific pension known as MBAO plan in June/2011. The plan has

unique features targeting the workers to save for retirement. A report by RBA (2012) however, shows that the

uptake of this plan has been dismal with only 15pc of the population participating. This then raises the question

on ‘why are Kenyans not saving for retirement’? The paper aimed at establishing whether financial literacy is

a contributing factor towards retirement planning.




Towards this end, a number of research have been undertaken that link financial literacy to increased savings,

diversification, debt and credit management, mortgage performance, and investment in shares (Behrman et al.

2012; Akin et al. 2012; Van- Rooij et al. 2011; Gerardi et al. 2010; Ding et al,2008; Lursardi and Mitchel, 2011;

2007; Quercia and Spader, 2008; Bucher-Koenen and Lusardi, 2011).

However, not many evidence- based inquiries have been carried out to study the impact of financial literacy on

retirement planning in developing countries. Most empirical studies on financial literacy are done in the US and

Europe (Dijk, 2012; Klapper et al. 2011; Berhman et al. 2012; Klapper, 2012; Miller et al. 2014; Zia et al. 2012;

Akin et al. 2012; Van- Rooij et al. 2011;Ding et al,2008; Lursardi and Mitchel, 2011; 2007; Quercia and Spader,

2008; Bucher-Koenen and Lursadi, 2011). In Africa for instance, the financial literacy surveys that have been

carried out by Finscope have focused on financial deepening and inclusion and failed to study the level of

financial capabilities of the populace (Sayinzoga et al. 2013). Whilst all these studies show the importance of

financial literacy, there is no known study that relates financial literacy and demographic factors on retirement

planning in the Jua Kali sector in the western part of Kenya.

1.2 OBJECTIVES OF THE STUDY

1.2.1 GENERAL OBJECTIVE

To study the relationship between financial literacy and retirement planning

1.2.2 SPECIFIC OBJECTIVES

To establish the levels of financial literacy and retirement planning among the Jua Kali workers

To ascertain any differences between the workers’ demographic factors and its influence on financial

literacy and retirement planning

To determine whether financial literacy, demographic factors, and modes of funds remittance are

correlated to retirement planning

1.3 HYPOTHESIS

Ho: There are no significant differences in demographic factors on retirement planning

Ho: There are no significant differences in demographic factors on financial literacy

H0: Financial literacy is not positively correlated to retirement planning

H0: Demographic factors are not positively correlated to retirement planning

H0: Modes of fund remittance are not positively correlated to retirement planning

H0: Demographic factors are not positively correlated to financial literacy

1.4 SIGNIFICANCE OF THE STUDY

This study will sensitize the workers on their retirement preparedness. Further, the study is expected to prepare

policy briefs for the policy makers to design financial literacy programs meant to address retirement planning

in the informal sector.




1.5 PAPER OUTLINE

The paper is organized into five sections. Section one is the introduction. The next section provides a review of

existing empirical literature on financial literacy and retirement planning. Sections three and four describe study

methodology and data analysis/interpretation respectively. Finally, section five present discussions and policy

recommendations.

2. REVIEW OF RELATED LITERATURE

The review of literature is arranged using a thematic approach. To start with, the concept of retirement planning

and its measurement was discussed, which is the dependent variable. Subsequently, the independent variables

(financial literacy, demographic factors, and modes of fund remittance) that are linked to retirement planning

were also discussed. The discussion of these variables with the theoretical model supports the hypothesized

relations in the conceptual framework.

2.1 OVERVIEW OF RETIREMENT SYSTEMS AND PLANNING

Retirement planning by governments arose from the need to improve the economic well-being of workers and

at the same time reduce inequality in society. The movement commonly known as Social Security (SS) started

in German and was referred to as Bismarckian SS targeting full-time industrial workers in the 19th century

(Overbye, 2006). The US also implemented their SS through an Act of 1935 while the UK enacted theirs in

1942. In Africa, retirement systems were initiated by the colonialists, while other systems were born on the

strength of the International Labour Organization (Justino, 2003).

In Kenya, retirement programs were brought about by the British colonial regime.Since then there has not been

a harmonized policy in the pension system. Currently, the structure comprises of the Civil Service Pension

Schemes, the National Social Security Fund (NSSF) and the Private Occupational Schemes both of which

operate under different Acts of Parliament.

During the British colonial regime, the retirement age was 55 years in a bid to manage the unsustainable public

service manpower after a proposal by the International Monetary Fund and the World Bank (World Bank,

2006). However, the current retirement age was reviewed to 60 years through an amendment to the constitution

in 2010. This was done for the reason that public servants at 55 years still had considerable capacities to continue

working.

After the colonial period and to streamline retirement schemes in Kenya, a Retirement Benefits Authority

(RBA) was formed. This body was formed as a response to the widespread inefficiencies facing retirement

schemes as: scams and lack of legal frameworks. RBA was created to protect all workers contributing to

National Social Security Fund (NSSF) (RBA, 2007). Despite the existence of RBA which is tasked with the




protection of the worker’s pension contributions, Okoth (2016) reports that the uptake of pension plans by

Kenyans is only at 10%.

The uptake of retirement plans by individuals is low because not many Kenyans have warmed up to the idea of

saving for the future (Njuguna and Otsola 2011). Even with the introduction of MBAO plan, which targets the

informal sector workers, enrollment for the plan is dismalRBA (2011). This indicates that the government needs

to encourage its workforce to start saving for the future by initiating friendly retirement models.

2.1.1 MEASURING RETIREMENT PLANNING

The main interest of this study was to establish the variables that affect retirement planning. Given that

retirement planning is the dependent variable, then understanding its measurement is invaluable. Questions as

for how much one thinks of retirement are useful in measuring retirement planning. Lusardi and Mitchell (2007)

confirm that thinking about retirement is positively related to the amount of accumulated wealth by the

respondents. Those people who are concerned about their retirement have not only thought about it but also put

in place schemes to use in their old age. This is in anticipation of a retirement lifestyle that is similar or better

than their present one. Other indicators used include awareness of pension plans, having a plan in place,

knowing how much is needed for retirement (OECD, 2005) in addition, other variables as preparing a budget

and ability to monitor the budget and seeking financial expertise when planning one’ finances were included.

2.2 FINANCIAL LITERACY

Financial literacy concept has not earned one standard definition. Houston (2011) notes that from 71 types of

research, different definitions of financial literacy have been used. Other closely related terms to financial

literacy are; financial knowledge, financial education, financial awareness, good financial behavior or financial

experiences. Despite the lack of consensus on the definition of the term, many studies focus on the ability to

make financial decisions, the knowledge one has and the outcome in form of a well-informed financial/

investment decision. It is for this reason that this study emphasized financial literacy alongside two dimensions:

the understanding of its knowledge and its application in the lives of the informal sector workers.

2.2.1 MEASURING FINANCIAL LITERACY

Since financial literacy does not have a standard definition, it has received different opinions on how it should

be measured. Besides a lack of standardized definition, the measures that have been applied do not integrate

both financial knowledge and its application. Additionally, there has not been a clear guide to determining who

is financially literate or illiterate (Houston, 2011).

The other challenges in measuring financial literacy are the lack of sufficient information to determine the level

of literacy. This is because, a majority of studies focus on a particular group of people, mostly retirees which

makes it hard to validate the results of the study to other groups (Hung et al. 2009).




Despite these indications of no standard measurement of financial literacy, other researchers disagree and argue

that measuring of three pertinent questions among respondents has been generally accepted as the standard way

of measuring financial literacy (Lusardi et al. 2005, 2007, Van Rooij et al. 2011). Indeed, the availability of

different financial products in different countries also complicates the effort of having a standardized tool to

measure financial literacy.

2.3 FINANCIAL LITERACY AND RETIREMENT PLANNING

There is interest from policymakers and other stakeholders on understanding the role of financial literacy in

retirement planning. According to Rooij (2011) individuals with high levels of financial literacy are more likely

to participate in pension schemes/ plans. Similarly, Lusardi and Mitchell (2011) show that once a person is able

to calculate their saving needs after retirement, then they are keen to follow through that program. The ability

to calculate no doubt requires numerical acumen and so low levels of financial knowledge, negatively impacts

on retirement planning. This is because of lack of confidence to make pension plans.

Sayinzoga et al. (2013) note that most research on financial literacy and retirement planning across the world

show low levels of financial literacy (Lursadi, 2007,2008, Xu and Zia 2012, Rooij, 2011, Lursadi and Mitchell,

2011). Whereas in Africa, literature on financial literacy are few, with other countries having none. This study

then aimed at contributing to the existing literature on retirement planning from the informal sector in Kenya.

On students, Djik (2012)studies the relationship between financial literacy and retirement planning among the

Dutch students. The findings indicate that the less illiterate tend to have under-diversified investments. This is

attributed to a lack of basic financial knowledge on risk transfers, diversification and the construction of optimal

investment. In Kenya, despite the greater saving potential of university students, their expenditure is higher

compared to their savings (Kinoti, 2012). This mismatch would be attributed to a lack of knowledge on critical

aspects of financial management, such as interest rates and risk diversification.

Gonzalez (2014) shows a lack of knowledge in financial matters and retirement planning among the

respondents. The report shows that respondents do prepare budgets; however, the budgets never cover all

expenses. When asked how long they can maintain themselves after an abrupt stop to their source of income,

the answer was only three months. This implies that individuals do not save nor invest for the future and

therefore they cannot absorb shocks such as employment termination or any other abrupt disruptions.

Berhman et al (2012) contribute to existing literature on financial literacy and retirement planning by

developing a more comprehensive set of questions on financial literacy. The findings indicate that financial

literacy is significantly related to household wealth accumulation, retirement planning being one aspect of it.

To stress the importance of financial literacy, Ben Bernanke the Chairman of the Federal Reserve in 2010 noted

that; helping people to understand the basic economics of borrowing and investing wisely is central to economic




growth in the general economy. The discourse implies that both authors agree that financial literacy is primary

in retirement planning.

Elsewhere, Klapper et al. (2012) study the relationship between financial literacy and retirement planning. The

results indicate that higher financial literacy levels are significantly related to greater savings and spending.

Given that financial crises are real, individuals require the financial acumen to navigate through the shocks that

may result during the crisis.

Besides that, Miller et al. (2014) in a meta- analysis study posit that financial literacy can have a positive effect

on the individuals’ savings and proper financial recording. What is more, to effectively measure financial

knowledge or literacy, it should not only be focused on an individual's ability for numeracy skills but should

also have a healthy combination of awareness and altitudinal questions (Zia et al. 2011). This then calls for the

formulation of financial literacy programs that are useful in impacting on the individuals’ financial behaviors.

To build on Zia et al. (2011), Houston (2011) posit that extant literature on financial literacy has been studied

mainly on three approaches: measuring individuals' levels of financial understanding; assessing their perception

on financial literacy and using objective or tests to identify their levels of financial literacy. In both approaches,

the most studied groups are employees, bank clients, financial professionals, students, the young, the old and

baby boomers. It is also notable that in all the studies there is not one agreed definition of financial literacy;

Houston (2011), then recommends for a common definition of financial literacy that incorporates all the

variables that influence it.

Indeed, issues regarding retirement planning and pension investment have been in existence for many years,

however as Lursadi and Mitchell (2007) note, even in countries with pension systems in existence for so long

still, its populace is under- informed of its benefits. For instance, in Chile, the pension system has been in place

for over 30 years and yet the Chileans are not well informed about saving for pensions. Lursadi and Mitchell

(2007) reveal that many households arrive close to retirement without enough savings for retirement to cushion

them against the shocks of retirement. One variable that is attributed to less saving is the lack of financial

literacy. Since financial illiteracy is widespread, individuals do not possess the basic skills required to plan for

retirement, mortgages and other forms of investments.

In a similar study, Lursadi and Mitchell (2006) state that financial illiteracy is widespread among people aged

50+ and majority of Americans are not able to answer questions on the interest rate, inflation, risk diversification

nor able to prepare a budget or a retirement plan since the calculations seem difficult and incomprehensible.

After all, only one-fifth of the respondents were able to prepare a successful retirement planning. From the

foregoing, it is clear that financial literacy is a key issue that requires the attention of policy makers to design

literacy programs to address the issue.




In Kenya, the level of financial literacy is worrisome. Njuguna and Otsola(2011) note lack of understanding of

pension fund matters hinders the participation in pension investment decisions by investors. There is the need

for a pension literacy program that is geared toward pension laws, investments design, and computation of

retirement benefits while financial literacy programs to focus on investment 3and debt management. The key

challenge to effective uptake of both pension and financial literacy programs is attributed to a lack of finances,

access to courses, heavy work-load and the feeling that those programs are not useful.

2.4 DEMOGRAPHIC FACTORS AND RETIREMENT PLANNING

Demographic factors such as age, education, gender, and income are related to retirement planning (Lursadi and

Mitchell, 2007; Lusardi et al. 2010). According to Bucher- Koenen et al. (2016) women show low levels of

financial acumen than men. This is in both basic financial and economic concepts. It is argued that women

generally have a longer lifespan compared to men, for this reason, they require financial literacy skills such as

retirement planning. Hsu (2011) observes that normally if households segregate tasks and a husband is always

charged with the management of finances, they will become specialists in financial management above their

spouses.

Hsu (2011) further reveals that women are more likely to state that they do not understand the answers to

financial literacy questions, unlike men. These results indicate gender disparities on financial literacy are real

and educational programs should be tailored towards different demographics, life stages and different learning

styles. These findings are in line with Lusardi and Mitchell (2007). It is evident that as much as a lot of gender

inequalities with regard to financial literacy are linked to the costs of information acquisitions, socio- economic

dispensation of men and women, a large difference still remains unanswered.

2.5 INFRASTRUCTURE AND RETIREMENT PLANNING

Given that the informal sector workers operate in unstructured environments and comprise of workers in

different business types, targeting them for retirement can be difficult. For this reason, governments need to

use ingenious approaches to reach them (Hu, and Stewart 2009). The use of existing infrastructures as Mobile

phone network- Mpesa can be a good point of contact, because most people in Kenya own mobile phones. In

fact mobile phones possession is so high that one would theorize that they be used as a mode of convenient

voting technology in the coming general election, August/2017.

2.6. THEORETICAL FOUNDATIONS OF THE STUDY

2.6.1 LIFE CYCLE MODEL (LCM)

This study was guided by the LCM model by Modigliani and Brumberg (1954) and Friedman (1957) who posit

consumers' savings and consumption trend is a reflection of their need to sustain a particular level of living in

the course of their lives. Since the future is uncertain, people will save for later years such as retirement and




unemployment. This model makes assumptions that consumers are rational, forward-looking thinkers, planners

and that retirement is a normative lifecycle.

The model, however, is also subject to limitations. It does not, for instance, explain why some people with

higher levels of incomes are saving less or do not save for retirement. Secondly, there are consumers who do

not have enough money to even afford the basic needs leave alone save. Thirdly, there are people who generally

do not believe in the culture of saving for the future. Fourthly, some people lack the basic financial skills

required to make decisions. Finally, in contrary to what the model suggest, it not all older people who save to

utilize over their old age, some of them continue saving up for their future in an effort to bequest their families

(Mitchell, 1996; Korczyk, 1998; Lusardi and Mitchel, 2007; Hurd,1990; Weil, 1994; Goetting andMartin,

2000).

Furthermore, it is worth noting that whilst the model has limitations, it provides invaluable insights to retirement

and how different consumers plan for it. In another two- period model study by Jappelli and Padual (2011) they

show that financial literacy is strongly correlated to the accumulation of wealth over people's life cycle, with

both increasing until retirement and falling thereafter. It was for this reasons that the variables in this model

were used in this study to show how financial literacy and different demographic factors influence retirement

planning.

3. RESEARCH METHODOLOGY

3.1 RESEARCH APPROACH AND DESIGN

The study used a quantitative approach. Creswell (2005) posit that a quantitative research is appropriate where

a research problem requires a description of trends or an explanation of the relationships among the variables

under study. Given that the nature of this study seeks to establish relationships between financial literacy and

retirement planning among the informal sector workers, then a quantitative approach was the most appropriate.

The study employed descriptive correlation research design. Descriptive studies generally use surveys or other

methods of data collections that rely on existing records. According to Polit and Hungler (1993), a survey

obtains information from the respondents in form of a series of questions generated by the investigator that they

need to answer. Information from respondents was collected through self-administered questionnaires by the

researcher.

3.2 RESEARCH SETTING

The study was drawn from individuals working in a cosmopolitan town-Eldoret in the Rift Valley Province of

Kenya. This place was picked due to a large number of informal sector workers residing in this town after

Nairobi (RBA, 2007).




3.3 THE STUDY POPULATION AND SAMPLE

The study included informal sector workers specializing in vegetables, fruits, second-hand clothes/ shoes, small

shops, commonly known as kiosks, motorbike transport- Boda Boda, saloon/barber shops, Petty trading,

welding, handicraft and wood work. As Verma (1999s) notes the informal sector surveys have been carried out

in different countries with different research designs. This is because the sector comprises of workers who are

scattered small-scale populations and there are no updated statistics that would be used as a sampling frame.

For that reason, this study used stratified sampling because the population is heterogeneous but members of

each subgroup are homogeneous.

According to the Jua Kali Sector Association report by Litu(2016) the approximate total population of the town

is 4,000 workers. Stratified sampling was used to cluster the different units within the informal sector.

Stratification was then done on the basis of the industry specialization of the workers. This design was chosen

because it is superior to random sampling for it reduces the sampling error and boosts greater levels of

representation.

3.3.1 SAMPLE SIZE

The sample size of the study was arrived at using normal distribution; the optimum sample size from a

population of 4,000 workers was 351 at a confidence level of 95%.

3.4 DATA COLLECTION

3.4.1 DATA COLLECTION INSTRUMENT

The study used a questionnaire as data instrument to obtain information from the subjects of the research.

Questions assessing knowledge and levels on financial literacy, assessment of and modes of saving for

retirement planning were asked. The questions were close ended to achieve precision in answering by the

respondents. To collect data, a variation of instruments by (Lursadi &Mitchell, 2005; Rooij, 2012 and OECD,

2011) whose Cronbach alpha was over 0.76 for both and with a good reliability test was used. Out of 351

questionnaires given out, 253 were filled up and returned- a return rate of 72.1%.

3.5 DATA ANALYSIS

Given that the questionnaire had closed- ended questions, Statistical Package for Social Sciences (SPSS) was

employed. Descriptive statistics, T-test, One- way ANOVA and Bivariate Correlation analysis were used to

analyze data.

3.6 ETHICAL CONSIDERATIONS

The study upheld honest and integrity. This was achieved by observing the anonymity, confidentiality and the

informed consent of the respondents. For the purposes of attaining confidentiality, there was no information

contained in the questionnaire that would be identifying in nature and questionnaires were only numbered after

data was collected.




4. DATA ANALYSES AND FINDINGS

4.1 DEMOGRAPHIC STATISTICS

Demographic factors were studied in regard to their association to financial literacy and retirement planning.

The study emphasized on socio-economic demographics such as age, gender, education, income, work status,

the number of children in a household and the business specialty among the informal sector workers.

Gender: The males constituted 61%, while 39 % were females. More men are into the Jua Kali sector and this

would be attributed to the nature of jobs- labor-intensive. Since the women in Africa are generally expected to

be homemakers, they stay back as the men go to work.

Age: On average over 54% of the respondents were below 40 years confirming that majority of the informal

workers are the youth and literacy programs would be just for them.

Education Levels: Amongst the respondents, 9% possess a university degree, those with tertiary college

qualifications accounted for 36%, those with high school grade were 27.3% while those with elementary

qualification were 26.9%. Close to half of the workers have attained tertiary education levels. This confirms the

inability of the formal sector to absorb all formally trained people.

Occupation: Almost 65%, of the respondents, own their own business while the rest are employed as casuals

or permanent staff. This indicates a majority of the workers own businesses. Given that most businesses are

small scale, the workers’ ability to access capital is curtailed.

Income: Only less than 25 pc of the workers earn more than Kshs. 50,000 which is an equivalent of £396 per

month. Apparently, a majority (75pc) earn well less than Kshs. 25,000 per month- a meager amount compared

to the escalating cost of living in Kenya.

Number of children: The results show that 67% of the workers have children while 65% of them have more

than four children. Family size among the informal sector workers tends to be large despite the resource

constraints that are faced by them.

Marital status: Of the workers, 37% were married, 27% single, 15% divorced while 8% and 4% were separated

and widowed respectively. Workers were spread out across all types of business because the study used

stratified random sampling.

4.2 LEVELS OF FINANCIAL LITERACY

4.2.1 DESCRIPTIVE STATISTICS ON LEVELS OF FINANCIAL LITERACY

The statistics show (appendix table 1) that on average only 30% of the workers were able to answer basic

questions on simple calculations, interest rate compounding and the time value of money. Overall, not more

than 11% of the respondents gave correct answers on the concept of inflation and money illusion. Moreover,

results show that the respondents gave incorrect answers to questions on numeracy (30.8%), interest rate




compounding (29.2%), inflation (44.3%), and time value (26.5%) and money illusion (27.7%).It is also notable

that, over 50% workers indicated they did not know answers to all the basic financial questions. These results

mean that the financial levels of a larger population of the workers are low. These findings are in line with

(Moorthy et al. 2012; Miller et al. 2014; Gallery et al. 2011; Van Rooij 2012; Lursadi and Mitchell 2007) who

also report low financial literacy levels in their sample sizes.

4.2.2 DESCRIPTIVE STATISTICS ON THE FINANCIAL PRODUCTS HELD BY THE JUA KALI WORKERS

The results confirm (appendix table 2) that mobile phone payment (Mpesa) is the most preferredand held

financial product amongst the workers (60.9%), followed by pension funds (13%), bank savings

account(12.6%), loans (8.7%) and stocks/shares barely at 4%. It is evident that the informal workers are largely

unbanked. This means that financial products that are linked to the mobile phone would be more appealing to

them.

4.3 LEVELS OF RETIREMENT PLANNING AMONGST THE WORKERS

4.3.1 PROPORTION OF PLANNERS AND NONPLANNERS

Fig. 1

Only 36% of the workers save towards retirement- the planners. A majority of the people do not save for

retirement. These results confirm the findings of (RBA 2007; Okoth, 2016 Njuguna and Otislo 2011) that

retirement planning in Kenya is low, a situation that is believed to be compounded by low levels of financial

literacy.

4.3.2 SOURCES OF INFORMATION FOR THE PLANNERS

From the findings, a majority of the workers saving for retirement (see table 3) were motivated by their own

experiences (58.2%). The newspapers and financial advisers also influenced the planners (22%, 11%)

respectively. This implies that the workers are realizing through their own encounters that the traditional roles

where families took care of the retired and old are no longer tenable thus the need to save for their own

retirements.

0%

10%

20%

30%

40%

50%

60%

70%

Save for retirement Do not save for retirement

Retirement Planning




4.3.3 RETIREMENT SAVING SCHEMES HELD

A majority (68.1%) of the planners (table 4) save with MBAO pension plan. A few save at the NSSF and the

individual retirement schemes. This indicates that MBAO scheme is popular among the informal workers.

What is needed is the creation of awareness for more workers to save.

4.3.4 PREFERRED MODE OF REMITTING FUNDS

From a list of: Mpesa, Bank, Airtel Money, YU cash,, Saccos, and other money transfer channels, Mpesa was

the most preferred (89.9%) , while the rest of the channels did not receive any preference except the bank that

scored a paltry (10.1%) (See table 5 in the appendix). This is an indication that Mpesa mobile money transfer

is the most preferred channel of sending money to the retirement schemes. This is attributed to its cheaper

transactions costs 71.6%, and convenient locations (See table 6 in the appendix).

4.4 COMPARATIVE DIFFERENCES

4.4.1 T-TEST BETWEEN GENDER AND CHILDREN ON RETIREMENT PLANNING

Since gender and having children has only two groups, (see appendix table 7) then T- test was used. The results

indicate significant differences between male and female with regard to retirement planning. The Sig. (2-

Tailed) values are less than .05 in the majority of the measures of retirement planning. The differences imply

that men save more than women. The findings are similar to (Lursadi et al. 2008; Hsu, 2011).

Further results show no significant differences between workers with or without children on retirement

planning. This means that to have children or not, does not significantly influence one’ decision to plan for

retirement.

4.4.2 ONE-WAY ANOVA DEMOGRAPHIC FACTORS AND RETIREMENT PLANNING

Given that the other demographic factors have more than two groups or levels, ANOVA was used. As

determined (see table 8) by one-way ANOVA (F (4,248) =7.438, p= .000) there was a statistically significant

difference between the age groups in relation to the budget preparation and willingness to save (F(4,248) =

4.233, p= .002. To establish the age group that is significantly different a Tukey post hoc test was done. Those

aged 31-40 were confirmed to prepare budgets and save more. This would be attributed to a realization of the

need to save occasioned by their mid-life phase.

Whereas there is no significant difference between workers with or without children on retirement planning,

there is a statistically significant difference between the number of children one has and their thinking about

retirement planning (p=.003) and the need to seek financial expertise (p=.000). The post hoc results show

families of four seem to have started thinking more about retirement compared to others. Those workers with

more than 5 children had not thought about budgeting or saving. This would be due to the assurance that their

children will take care of them at old age.




Workers who are divorced (p= .016) and those who are single (p=.016) have started to think about their

retirement as revealed by the Tukey post hoc test. Which means the marital status of the respondents influenced

their retirement planning. These findings concur with Miller et al. (2014) that people who are married tend to

feel comfortable in the knowledge that their spouses would take care of their retirement needs.

A statistically significant difference was also recorded between income levels and retirement planning (p=.000).

indeed, those workers with higher income levels warmed up to retirement planning whereas those with minimal

revenues preferred to meet their basic needs before considering saving for retirement.

Those workers with university and tertiary level education indicated higher scores on retirement planning than

their counterparts (Post hoc p values of .016, .001, .000, .000, .013 on all indicators of retirement planning).

These multiple analysis results indicate that higher education levels positively influence retirement planning.

4.4.3 ONE-WAY ANOVA DEMOGRAPHIC FACTORS AND FINANCIAL LITERACY

Significant differences (see table 9) between numeracy levels (p=.001), interest rate compounding (p=.000),

time value of money (p=.000) and money illusion (p=.000) were reported in relation to age. Workers aged 31-

40 answered correctly to the financial literacy questions when compared with the rest. These results are similar

toLusardi and Mitchell (2007) that the young possess higher financial literacy levels than the old people.

Moreover, workers with relatively higher income levels tended to grasp the meaning of time value of money

unlike their counterparts (p=.002) while those who are single or divorced seemed to also have higher financial

literacy levels compared to the married people (p=.000). Finally, those workers with a higher education level

tended to understand the time value of money concept. This can be attributed to their basic financial skills

acquired whilst in college. Interestingly the same group had a hard time understanding the concept of interest

rate compounding and inflation respectively (p=.798 and p=.461)

Ho: There are no significant differences in demographic factors on retirement planning

Ho: There are no significant differences in demographic factors on financial literacy

Test results: Both of these hypotheses were rejected.

4.5 CORRELATIONS

4.5.1 CORRELATION BETWEEN FINANCIAL LITERACY AND RETIREMENT PLANNING

A significant correlation (see appendix table 10) exists between the workers’ numeracy levels and thinking

about retirement (r= .422**),and awareness of available pension plans (r=.222**)and possession of budgets

(r=340**). The results indicate a positive relationship between financial literacy and retirement planning.

To understand the relationship between understanding the concept of interest rate compounding and thinking

about retirement, budgeting and the use of finance experts on money management (r=.140*, r=.153*,

r=.257**respectively) a slight association was reported on one hand. On the other hand, the workers'




understanding of inflation concept seemed to have a weak association with retirement planning (r=.083). This

would be linked to a low-level understanding of inflation among the Jua Kali workers.

Time value of money has a slight relationship with thinking about retirement, and moderate association with

budgeting preparation (r=.312**) and monitoring (r=.450**). Money illusion also has a significant association

with retirement planning (r=.329**, p= .000). These findings are in line with other studies which link financial

literacy to retirement planning (Berhman et al. 2012; Akin et al. 2013; Allesse at al. 2011; Lusardi and Mitchell,

2007). A study by OECD (2005) also reported international evidence that financial levels across the world are

low citing Australia, New Zealand, German, Japan, UK, and Korea with worrisome statistics. In reality, people

who are financially literate plan their finances including saving towards their retirement. Therefore the null

hypothesis:

Ho= Financial literacy is not related to retirement planning was rejected.

4.5.2 THE RELATIONSHIP BETWEEN DEMOGRAPHIC FACTORS AND RETIREMENT PLANNING

There is a significant correlation between gender and retirement planning (r=.354**,) (r=.168*, p= .007) (r=.142*,

p=.024) (r= .313**, p= .000) (r= .139*, p= .027) and (r=.160*, p= .011) in all the six aspects of planning for

retirement-See appendix table 11. These results agree with earlier comparative analysis on men saving more

than women towards retirement.

Besides that, a slight relationship was reported between workers’ education levels and their abilities to prepare

and monitor budgets (r=.142* and r=.135*). This means those workers with higher levels of education plan their

finances well compared to others. The results are in synch with (Lusardi and Mitchell, 2007; OECD, 2005;

Miller et al. 2014)’ findings. Further, workers with higher levels of income also seek financial expertise

(r=.247**) indicative that higher income workers are willing to spare some of the money towards sustaining

their future. The null hypothesis:

Ho= Demographic factors are not significantly related to retirement planning- was rejected.

4.5.3 RELATIONSHIP BETWEEN INFRASTRUCTURE AND RETIREMENT PLANNING

For planning to take place, access to information play a key role, the results show (see table 12) a significant

correlation between information channels and retirement planning (p= .000) and a strength of association of

r=.370**. Similarly, the modes of remitting funds to retirement schemes were correlated to retirementplanning

(r= .207**) while Mpesa was the most preferred mode of remitting funds (r=.536**) by the planners. Earlier

statistics pointed to Mpesa being affordable, and easily available to many Jua Kali retirement planners. This

being the case, a retirement model based on the mobile network operator is likely to be a success in the informal

sector. Consequently the hypothesis:

H0: Modes of fund remittance are not positively correlated to retirement planning- was rejected.




4.5.4 CORRELATION BETWEEN DEMOGRAPHIC FACTORS AND FINANCIAL LITERACY

Gender, income, the number of children and the business type (see appendix table 13) one is engaged in

(r=.347** r= .148* r= .141* and r=.141*) respectively are significantly related to numerical literacy. Gender,

age and the level of education (.195** .267** .154* ) are also significantly related to the understanding of interest

rates compounding., while the understanding of time value of money is also related to the level of one’ education

and income levels (.159* .219**). These findings indicate that demographic factors are significantly correlated

with financial literacy and high levels of education and incomes are positively related to higher levels of

financial literacy which translates to retirement planning.

Ho= Demographic factors are not significantly related to financial literacy- was rejected.

5. DISCUSSIONS AND POLICY RECOMMENDATIONS

The informal workers generally have low incomes, the majority are self-employed, while the rest work on a

part-time basis. Unlike the formal workers, the Jua Kali workers are not subject to any compulsory modern

pension systems. And as the results indicate, their understanding of financial products and pension plans are

limited, this complicates their access to retirement schemes. However, homegrown options are explored to have

the workers plan for retirement.

5.1 SOCIAL ASSISTANCE

The findings show even as we talk of retirement planning, there is a group of workers whose main challenge is

the ability to cover their living costs. To this group, the thought about retirement planning is far fetched. The

government should then adopt an approach, through means testing to bring these groups of workers to join a

formal pension scheme on a non- contributory basis. This program is in place in South Africa, where informal

sector workers are covered by the government in an old- age social plan while Kenya’s zero pillar program is

largely in its infancy.

5.2 MOTIVATE VOLUNTARY CONTRIBUTION

The findings indicate that some informal workers especially those with higher incomes are able to save towards

their retirement. Given the existence of MBAO plan targeting informal workers, its low uptake would be

improved by including flexible terms in the plan. Most workers would prefer a scheme that allows irregular

contributions, for the reason that their incomes also vary, while allowing for withdrawals during extreme

financial difficulties such as; illness on an assessment basis. These flexible arrangements would encourage

saving for retirement.

5.3 FINANCIAL LITERACY PROGRAMS

As the Bible says “my people perish for lack of knowledge” (Hosea 4:6) one other reason why people do not

join pension programs is for lack of understanding matters financial. As noted by Hu and Stewart (2009) pension




benefits in Chinalie unclaimed, the UK – GBP 6 billion, largely due to lack of awareness. In Kenya, financial

literacy programs can be undertaken in the informal sector through a number of avenues:

Road shows- Some Jua Kali workers work under shades by the road, this would be an appropriate learning

center without taking them off their work.

Seminars and workshops- there should be concerted efforts by the government to reach out the informal

workers by organizing financial training workshops and follow-up on implementation.

Through church- Kenya is largely a Christian country and church attendance is common. Since the church

plays a key role in society in shaping behavior, financial education can be undertaken through the clergies

as part of the sermons or by way of announcements. This can also be done at the Mosques and temples.

Through ‘Mary go rounds’- Kenyans are generally social and communalistic, and for this reason, they

create informal financial groups to take care of their welfare. In some of these groups, they contribute

monies to a kitty and borrow it out at an interest rate. These activities bring them closer socially and

economically and can be used as channels of disseminating financial literacy and retirement planning

concepts amongst them.

5.4 COMPULSORY CONTRIBUTIONS

In Kenya, there have been aspects of compulsory contributions towards retirement by employers in the informal

sector. For instance, an employer with more than five workersis bound to make a Kenya Shillings.200, as

monthly contributions toward their retirement. However, from the findings, the majority of the informal workers

are self- employed and do not save for retirement. Given this state, the government should consider making

retirement contributions compulsory. This is not the optimal policy, but it is a better option where informal

workers consider saving for retirement as the least priority especially those with higher level incomes.

5.5 USE EXISTING INFRASTRUCTURE TO ENCOURAGE RETIREMENT PLANNING

The majority of Kenyans own a mobile phone and the use of Mpesa – a mobile money transfer network is

common. Most people use Mpesa to save money, send money to relatives, friends and family. Earlier results

show that the planners use prefer to use Mpesa to remit the funds to the MBAO pension plan. This is for the

reason that it is cheap and easily available to them. The government of Kenya should partner with Safaricom-

which is the Mpesa operator network to roll out retirement awareness programs aimed at the informal workers.

Certainly, some of these programs would include financial literacy text messages, retirement planning alerts,

and reminders on the importance of planning for retirement.

Given that Mpesa transactions are cheap and easily available to the Jua Kali workers, sending money to

retirement schemes would be fast and convenient. The presence of Mpesa has made business dealing in Kenya

efficient and the government should take advantage of the existing infrastructure to reach to as many informal




workers as possible to save for retirement. Besides Mpesa, the informal workers would also use nearby post

offices, microfinance institutions and banks to remit funds to retirement schemes.

5.6 MATCHING CONTRIBUTION MODEL

One other way is to encourage the Jua Kali workers to participate in pension schemes and the government to

match their contributions. Whenever a worker saves for retirement, the government matches the worker’

contributions by a particular percentage, this would excite the workers to want to save. Saving for retirement

can be foreign, for the reasons that people do not see the future and tend to live for now. For the government to

break this inertia, they will need to adopt models that make it attractive for the workers to save towards

retirement.

6. CONCLUSION

Planning for retirement can never be gainsaid; retirement which is an important phase of life when workers

retreat from active employment requires elaborate financial planning. Nevertheless, It is worrisome that

majority of the workers are not planning for retirement, a situation that is compounded by low levels of financial

literacy, demographic factors, and infrastructural models. Given that the informal sector plays a crucial role in

world economies, then policymakers need to design demographic based financial literacy programs to sensitize

workers on retirement planning. Traditionally, families in Kenya take care of old age risks of retirees, however,

this is untenable in the face of falling safety nets. With the advent of retirement reforms across the world, there

have been shifts from Defined Benefits to Defined Contributions in an effort to encourage individuals to

participate in their own process of retirement planning. And amid findings showing low financial literacy, lack

of retirement planning, and preferred modes of saving by the workers, the government should then initiate

home-grown programs as social assistance, compulsory contributions, matching model and the use of Mpesa

platform to encourage saving for retirement among the Jua Kali workers. Despite new efforts to create a model

to boost financial literacy and retirement planning among the informal workers, more research is needed to

develop models that will ensure implementation and sustainability of financial literacy programs and awareness

on retirement planning.

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8. APPENDIX

Figure 1: Conceptual framework relating financial literacy and retirement planning

Table 1: 4.2.1. Descriptive statistics on levels of financial literacy

Numeracy Interest rate

compounding Inflation

Time Value

of money

Money

Illusion

Correct answer 32.4 25.3 7.9 31.6 14.3

Incorrect answer 30.8 29.2 44.3 26.5 27.7

Do not know 36.8 44.7 47.8 41.9 57.9

http://www.nation.co.ke/business/At-least-90pc-of-Kenyans-not-planning-for-retirement/996-3100662-11mkam8z/index.html




Table 2: 4.2.2. Financial products most heard and held by the Jua Kali workers

Frequency Percent Valid Percent-

Popular product

Financial

product held

Valid

pension fund 33 12.9 13.0 12.8

bank loan 22 8.6 8.7 5.1

savings account 32 12.5 12.6 12.1

stocks/shares 1 .4 .4 .2

Mobile phone payment account 154 60.4 60.9 59.5

none of the above 11 4.3 4.3 10.3

Total 253 99.2 100.0

Missing System 2 .8

Total 255 100.0

Table 3: Sources of information for the planners

Frequency Percent Valid Percent Cumulative Percent

Valid

financial advisers/brokers 10 4.0 11.0 11.0

newspaper articles 20 7.9 22.0 33.0

my own experience 53 20.9 58.2 91.2

other sources 8 3.2 8.8 100.0

Total 91 36.0 100.0

Missing System 162 64.0

Total 253 100.0

Table 4: 4.3.3. Retirement saving schemes held


Valid

NSSF 11 4.3 12.1 12.1

MBAO Plan 62 24.5 68.1 80.2

Individual Retirement Planning 18 7.1 19.8 100.0

Total 91 36.0 100.0


Total 253 100.0

Table 5: 4.3.4. Preferred mode of remitting funds


Valid

Mpesa 80 31.6 89.9 89.9

Bank 9 3.6 10.1 100.0

Total 89 35.2 100.0


Total 253 100.0

Table 6: .3.4.1. Why it is preferred


Valid

cheaper transaction costs 63 24.9 71.6 71.6

friendly customer service 1 .4 1.1 72.7

easily available 21 8.3 23.9 96.6

easy to use 3 1.2 3.4 100.0

Total 88 34.8 100.0


Total 253 100.0

Table 7: T-test on gender and children on retirement planning

Thinking

about

retirement

Awareness of

pension

schemes

Amounts

needed for

retirement

Preparation

of budgets

I monitor

budget

Seeking

Financial

expertise

I live for

now

No need

to save

Sig. Sig. Sig. Sig. Sig. Sig. Sig. Sig.

Gender .000 .004 .021 .000 .028 .007 .388 .070

Have children .023 .012 .091 .029 .006 .622 .580 .0260




Table 8: 4.4.2. ONE-WAY ANOVA Demographic factors and Retirement planning

Sig. Sig. Sig. Sig. Sig. Sig. Sig.

Age Number of

children Income

Work status

Marital status

Education levels

Business specialization

Thinking about retirement .081 .003 .000 .226 .012 .000 .020

Awareness of pension schemes .097 .070 .000 .075 .009 .000 .000

Amounts needed for retirement .028 .233 .059 .431 .012 .018 .031

Preparation of budgets .000 .445 .000 .050 .608 .000 .001

Monitoring .099 .832 .000 .087 .184 .000 .000

Seeking Financial expertise .096 .000 .634 .281 .193 .090 .381

I live for now .055 .089 .077 .288 .031 .000 .014

No need to save .002 .076 .000 .201 .152 .000 .000

Table 9: 4.4.3. ONE-WAY ANOVA Demographic factors and Financial Literacy

Age Number of

children

Income Work

status

Marital

status

Education

levels

Business

specialization

Planners/ Non

planners

Sig. Sig. Sig. Sig. Sig. Sig. Sig. Sig.

Numeracy .001 .543 .089 .100 .152 .022 .000 .001

Interest rate compounding .000 .077 .365 .866 .627 .037 .798 .205

Inflation .944 .679 .426 .420 .630 .102 .461 .836

Time value of money .000 .146 .002 .002 .000 .000 .000 .000

Money illusion .000 .087 .027 .501 .007 .000 .000 .002

Table 10: 4.5.1. Correlation between Financial Literacy and Retirement Planning

Thinking

about

retirement

Awareness

on pension

plans

Amount

needed for

retirement

Budgeting Monitoring

budget

Use of

Financial

experts

Do not care

about the

future

Spending is

preferred to

saving

Numeracy

Pearson

Correlation .422** .222** .024 .340** .277** .081 .012 .016

Sig. (2-tailed) .000 .000 .699 .000 .000 .200 .847 .799

N 253 253 253 253 253 253 253 253

Interest rate

compounding

Pearson Correlation

.140* .080 -.092 .153* .079 .257** .069 .084

Sig. (2-tailed) .026 .207 .144 .015 .208 .000 .273 .180

N 253 253 253 253 253 253 253 253

Inflation

Pearson

Correlation -.109 -.072 -.088 -.100 -.070 .047 .083 .102

Sig. (2-tailed) .083 .254 .162 .114 .269 .453 .191 .106

N 253 253 253 253 253 253 253 253

Time value of money

Pearson Correlation

.272** -.087 .014 .312** .450** .054 .001 .151*

Sig. (2-tailed) .000 .170 .830 .000 .000 .389 .984 .016

N 253 253 253 253 253 253 253 253

Money illusion

Pearson

Correlation .329** .287** -.035 .233** .173** .032 .060 .129*

Sig. (2-tailed) .000 .000 .577 .000 .006 .610 .343 .040

N 253 253 253 253 253 253 253 253

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

Table 11:4.5.2. The relationship between Demographic factors and retirement planning

I have started

thinking

about my

retirement

I am aware

of the

MBAO

pension plan

in Kenya

understands

how much I

will need for

my retirement

Have a

budget on

saving and

spending

Monitoring the

budget to meet

the financial

needs

I seek the help of

financial experts

in planning my

finances

I live for

now and

tomorrow

will take care

of itself

its more

satisfying to

spend now

than save for

the long-term

What is your

gender

Pearson

Correlation .354** .168** .142* .313** .139* .160* .050 .100

Sig. (2-

tailed) .000 .007 .024 .000 .027 .011 .430 .111

N 253 253 253 253 253 253 253 253

What is you

age range

Pearson

Correlation -.030 .127* .074 .035 .029 -.006 .071 .121

Sig. (2-

tailed) .638 .044 .240 .582 .646 .926 .262 .055

N 253 253 253 253 253 253 253 253

Pearson

Correlation -.070 .019 .091 .142* .135* -.105 -.060 -.093




What is your

highest level

of education

Sig. (2-

tailed) .264 .766 .151 .024 .031 .095 .339 .138

N 253 253 253 253 253 253 253 253

How much

money do

you make in

a month

Pearson

Correlation .116 .109 -.018 .100 .062 . 247** .045 .028

Sig. (2-

tailed) .065 .084 .779 .112 .328 .000 .474 .659

N 253 253 253 253 253 253 253 253

Do you have

children

Pearson

Correlation -.048 .095 .022 .049 .062 -.060 -.030 -.087

Sig. (2-

tailed) .451 .134 .726 .438 .333 .345 .636 .173

N 249 249 249 249 249 249 249 249

How many

children

Pearson

Correlation -.002 .070 .044 .115 .065 .080 .014 .005

Sig. (2-

tailed) .982 .334 .544 .111 .371 .269 .845 .942

N 194 194 194 194 194 194 194 194

Which is

your current

marital status

Pearson

Correlation -.077 .031 .115 .061 .026 .132* -.108 -.116

Sig. (2-

tailed) .222 .626 .068 .333 .677 .035 .086 .065

N 253 253 253 253 253 253 253 253

which is

your work

status

Pearson

Correlation .104 .097 .003 .163** .023 -.111 -.023 .001

Sig. (2-

tailed) .098 .126 .958 .010 .720 .079 .721 .985

N 252 252 252 252 252 252 252 252

which is

your

business type

Pearson

Correlation .041 -080 -.059 -.102 .146* .002 -.022 .100

Sig. (2-

tailed) .519 .205 .353 .105 .020 .972 .730 .114

N 253 253 253 253 253 253 253 253



Table 12: 4.5.3. Relationship between infrastructure and retirement planning

I have started

thinking about

my retirement

I am aware of the

MBAO pension

plan in Kenya

understands how

much I will need

for my retirement

Have a

budget on

saving and

spending

Monitoring the

budget to meet

the financial

needs

I seek the help of

financial experts in

planning my finances

I live for now and

tomorrow will

take care of itself

its more satisfying

to spend now than

save for the long-

term

information channel that

influenced you to save for

retirement

Pearson

Correlation .370** .294** .093 .246* .304** .258* .095 .167

Sig. (2-tailed) .000 .005 .379 .019 .003 .013 .372 .114

N 91 91 91 91 91 91 91 91

which scheme do you

save in

Pearson

Correlation .162 .207* .146 .072 .040 .110 .202 .185

Sig. (2-tailed) .124 .049 .168 .498 .708 .298 .054 .079

N 91 91 91 91 91 91 91 91

preferred mode of

remitting funds

Pearson

Correlation .510** .536** .027 .220* .309** .017 .133 .199

Sig. (2-tailed) .000 .000 .804 .038 .003 .876 .215 .062

N 89 89 89 89 89 89 89 89

why it is preferred

Pearson

Correlation .014 .044 .176 .325** .407** .289** .313** .212*

Sig. (2-tailed) .894 .683 .101 .002 .000 .006 .003 .047

N 88 88 88 88 88 88 88 88



Table 13: 4.5.4. Correlation between Demographic factors and Financial Literacy

What is your

gender

What is you

age range

What is your

highest level of

education

How much money

do you make in a

month

How many

children

Which is your

current marital

status

which is your

work status

which is your

business type

Numeracy

Pearson Correlation .347** .079 .026 .148* .141* .087 .109 .141*

Sig. (2-tailed) .000 .213 .682 .018 .049 .169 .083 .025

N 253 253 253 253 194 253 252 253

Interest rate

compounding

Pearson Correlation .195** .267** .154* .102 .085 .062 .058 .081

Sig. (2-tailed) .002 .000 .014 .106 .239 .328 .358 .199

N 253 253 253 253 194 253 252 253

Inflation

Pearson Correlation .077 .002 .019 -.063 .094 .082 .111 .015

Sig. (2-tailed) .225 .981 .767 .318 .195 .194 .077 .816

N 253 253 253 253 194 253 252 253

Time value of

money

Pearson Correlation .023 .122 .159* .163** .219** .126* .139* .144*

Sig. (2-tailed) .715 .053 .011 .010 .002 .045 .028 .022

N 253 253 253 253 194 253 252 253

Money illusion

Pearson Correlation .292** .177** .105 .015 .215** .217** .052 .115

Sig. (2-tailed) .000 .005 .094 .807 .003 .001 .410 .069

N 253 253 253 253 194 253 252 253



Documents

Financial Literacy And Retirement Planning In Kenya