Importance of Financial Literacy on Management of Personal Finances among Millennials: Case Study USIU-Africa

Abstract

The purpose of the study was to assess the importance of financial literacy on the management of personal finances among Millennials. The study was guided by the following research objectives; to establish the level of literacy among the millennials, to explore the relationship between financial literacy and good money management practices and to explore the financial strategies employed by millennials to ensure future security after retirement. A descriptive quantitative research design was adopted for this study and the data received from the questionnaire, used to interpret, with the aim of understanding the relationship of financial literacy on the management of personal finances among the Millennials. The select target population of this study consisted of USIU- Africa master’s students based in Nairobi. Determination of the sample size was made possible using the Slovin Formula, taking into consideration the confidence level and the confidence interval of the population. A sample size of 100 respondents was identified for this research study, with the response rate being 86%. The data obtained was analyzed using the statistical tools, Statistical Package for Social Science (SPSS) and Microsoft Excel. The questionnaire consisted of both open ended and closed ended questions and the results were presented in the form of tables and figures. Pearson correlation analysis was used to investigate the relationship between the independent and dependent variables and multiple linear regression analysis was also used to analyze the findings. Based on the first objective, which was to measure of the level of financial literacy among the millennials. The study has shown that most students in the master’s program havea basic understanding of financial literacy yet they engage with finance related decisions on a day to day as they manage their finances, this includes budgeting and saving, The second objective was to explore the relationship between financial literacy and good money management practices. The data analyzed shows that there is a strong correlation between financial literacy and good money management practices. The findings show that the respondents do practice some form of good management practice like saving for emergencies and budgeting. The final objective was to explore the financial strategies employed by millennials to ensure future security after retirement. The study has shown that masters students at USIU- Africa have investments, pension plans and insurance as part of their financial planning strategies, however they have a low satisfaction rating with the investments they currently hold. The study concludes that financial literacy is very important to ensure millennials are able to navigate this fast-paced financial industry. With the current economic landscape investing, saving and retirement planning has shifted from being a government or employer concern to being an individual’s responsibility, it is due to this shift that financial literacy should be taken seriously. The study therefore, recommends that education bodies should include practical financial education programs with real life simulations in the high school and university curriculum to ensure students are well equipped with financial knowledge when they enter the workplace. Employers should also offer financial planning courses as part of its training portfolio for employees to be able to take charge of their current financial situation and avoid financial distress due to lack of financial planning skills. Further studies should be carried out on individuals in the informal sector to examine what major issues they face in their financial journey, what tools they require, and analyze the impact financial literacy can have on the management of their personal finances