The Relationship Between Financial Knowledge and the Personal Financial Practices of the Youth in Kenya: a Case Study of the Financial Knowledge for Africa Programme

Abstract

The general objective of the study was to determine the relationship between financial knowledge on the personal financial practices of the youth in Kenya. The study was guided by three specific objectives: to determine the relationship between financial knowledge and the money management practices of the youth in Kenya; to determine the relationship between financial knowledge and the savings and investment culture of the youth in Kenya; and to establish the relationship between financial knowledge and the financial risk management practices of the youth in Kenya. A case study design was used. The population of the study comprised of all participants who completed the Financial Knowledge for Africa (FIKA) training program. The research targeted youth who were successfully trained and graduated, estimated at 182,096 people. A convenient sample of 60 respondents was selected through snow-ball sampling technique. Recipients of the FIKA training were evaluated against a control group that did not participate in the program. Data was collected through the administration of a questionnaire whose measure of reliability yielded Cronbach’s Alpha of .827. Independent sample t-test was used to compare the mean scores of the data between the study group and the control group. Inferences were drawn using Spearman’s Rank Correlation Coefficients and multiple regression modelling techniques. The data was analyzed using SPSS and presented in figures and tables. The study established that financial knowledge explained 44.7% of the variance in the financial practices of respondents. Individual financial practices that could be explained by the FIKA program were: timely bill payment, prompt debt collection, prioritization of expenditures and exercising due diligence on loan terms. Financial knowledge had a limited effect on the savings and investment practices of the individuals as it only increased the individual’s understanding of the concept of risk. In terms of risk management, financial knowledge imparted through the FIKA training program only resulted in an increased uptake of medical insurance. The study recommended that financial literacy programs should be reinforced with initiatives that enhance the financial capability of recipients of financial training for the program to have any significant impact.