Effect of Financial literacy on personal financial management of employees of Mumia Sugar Company Limited

Abstract

The study was guided by two objectives namely to establish the level of financial literacy of Mumias Sugar company employees; and Effect of financial literacy on saving practices and social security planning of Mumias Sugar Company employees. To achieve this objective the study used descriptive survey design to explore the relationship between the different variables. The study used primary data collected from semi-structured questionnaires. Data collected was edited to ensure that it was correct and complete thus reducing biases, increasing the precision and achieving consistency. Data was then analyzed by using regression analysis and descriptive statistics which was presented using mean, correlation, standard deviation and percentages. The study findings revealed that majority of the employees of Mumias Sugar Company had a good background on financial knowledge and skills. With regard to their retirement plans, it was revealed that most of the respondents agreed to a moderate extent that they had set stable retirement plans. The study further revealed that even though most of the respondents fully understood the concept of estate planning and its significance in financial management, most of the employees did not have a will. The findings also showed that most respondents moderately applied their financial knowledge in relation to managing credit and other liabilities. In general, it was observed that the employees implemented their financial knowledge and skills in personal financial management. The results of the regression showed that there was a positive relationship between financial literacy and personal financial planning of employees in Mumias Sugar Company. This is explained by the by the level of significance of the independent variables whose level of significance was below 5%. It was concluded that that most of the employees of Mumias Sugar Company were financially literate and this highly contributed to better personal financial planning, saving practices and social security planning. The challenge faced by the researcher was that there was no control over the data collection; some of the respondents gave out incomplete questionnaires while others failed to fill the questionnaires. Most of the respondents agreed to participate on condition that the information was only for academic purposes only and therefore would not be divulged to any other party. The study recommends that a study should be conducted on the effect of financial literacy on personal financial management on small and medium enterprises to find out whether the owners of small businesses understand the concepts of financial management and its effect on personal financial management then, conclusions and recommendations can be drawn in accordance to the findings of the study