EFFECT OF FINANCIAL LITERACY ON PERSONAL FINANCIAL MANAGEMENT PRACTICES

Abstract

This paper examines the personal f inancial management practices that encompasses Savings practices, Expenditure practices, Debt management, Investment, Money management , retirement and unexpected practices of both employees who are financially educated verses those who are not. In this study, those who are financially literate are those perceived to have undergone some level of financial training such as bankers, accountants and auditors etc. The survey data was obtained from 192 employees using a structured questionnaire. This study focused on the effect of financial education on personal financial management practices. The results have shown that those who are financially educated do practice to an extent the standard financial behaviors. A likert’s mean score of 5 would have indicated that the financially educated perfectly understand the impact of poor money management habits caused by lack of financial education. It further observes that one can still practice financial management behaviors whether or not they are financially literate. This is as a result of other available avenues of acquiring financial knowledge. Finally, there is significant difference between those who are perceived to be f inancially educated compared to those who are perceived otherwise. We tested the overall data to determine whether the means of responses on all the aspects of personal financial management were significantly different for the finance and the nonfinance respondents. Those who were financially literate recorded a mean score of 3.753103 while those who were not had a mean of 3.364828 out of the maximum 5.0 points. The student t-test of equal means gave a p-value of 0.029086 at a 5% significance level. These results show that there is a significant difference between the personal financial management practices of the finance and the non-finance literate respondents. The financially literate had a better appreciation and application of the financial management practices. It can be concluded that financial literacy influences personal financial management practices. It is recommended that individuals should try to acquire some basic knowledge of financial management to allow them to better manage their personal finances. However, these recommendations should be applied bearing in mind the limitations of the possible lack of representativeness of the sample used in this study.