The impact of financial literacy on financial preparedness for retirement among formally employed individuals in Zimbabwe

Published: May 13, 2024

Abstract:

Purpose: Changes in global retirement systems have necessitated greater personal responsibility for making retirement financial decisions. The main purpose of this study is to evaluate the effect of financial literacy on the financial preparedness for retirement among the formally employed in Zimbabwe.

Research Methodology: The study adopted a positivist philosophy and an explanatory research design. Questionnaires were used to collect data from a target population of employees in Bindura, Zimbabwe. The final sample consisted of 384 participants. The independent variable, financial literacy, was measured using knowledge of financial instruments and computational capabilities of retirement benefits. Data were analyzed by multiple regression analysis using SPSS version 25.

Results: The findings show a statistically significant relationship between knowledge of financial instruments and financial preparedness for retirement at the 5% significance level. The computational capabilities of retirement benefits are found to have no effect on financial preparedness for retirement.

Limitations: Other factors that affect financial preparedness, such as demographics and financial factors, were not included in the model.

Contribution: This study addresses retirement preparedness, which is one of the least-researched areas of personal finance in Zimbabwe. Therefore, the results are useful for policymakers to enhance the framework of retirement financial literacy.

Keywords:
1. financial literacy
2. computational capability
3. financial preparedness
4. retirement
5. formally employed
Authors:
1 . Tendai Towo
2 . Knowledge Jonasi
How to Cite
Towo, T., & Jonasi, K. (2024). The impact of financial literacy on financial preparedness for retirement among formally employed individuals in Zimbabwe. Annals of Management and Organization Research, 5(4), 285–295. https://doi.org/10.35912/amor.v5i4.2015

Downloads

Download data is not yet available.
Issue & Section
References

    Achari, D., Oduro, R., & Nyarko, F. (2020). Financial Literacy on Retirement Planning of Workers of University of Mines and Technology, Tarkwa. International Journal of Management Sciences and Business Research, 9(5), 23.

    Agnew, J. R., Bateman, H., & Thorp, S. (2012). Financial literacy and retirement planning in Australian. UNSW Australian School of Business Research Paper(2012ACTL16).

    Ahmad, G., Widyastuti, U., Susanti, S., & Mukhibad, H. (2020). Determinants of the Islamic financial literacy. Accounting, 6(6), 961-966.

    Alavinia, S. M., & Burdorf, A. (2008). Unemployment and retirement and ill-health: a cross-sectional analysis across European countries. International archives of occupational and environmental health, 82, 39-45.

    Almenberg, J., & Säve-Söderbergh, J. (2011). Financial literacy and retirement planning in Sweden. Journal of Pension Economics & Finance, 10(4), 585-598.

    Aluodi, E., Njuguna, A., & Omboi, B. (2017). Effect of financial literacy on retirement preparedness among employees in the insurance sector in Kenya. International Journal of Biometrics, 12.

    Ando, A., & Modigliani, F. (1963). The" life cycle" hypothesis of saving: Aggregate implications and tests.

    Antoni, X., Saayman, M., & Vosloo, N. (2020). The relationship between financial literacy and retirement planning, Nelson Mandela Bay. International Journal of Business and Management Studies, 12(2), 579-593.

    Bassett, W. F., Fleming, M. J., & Rodrigues, A. P. (1998). How workers use 401 (k) plans: The participation, contribution, and withdrawal decisions. National Tax Journal, 51(2), 263-289.

    Boisclair, D., Lusardi, A., & Michaud, P.-C. (2017). Financial literacy and retirement planning in Canada. Journal of Pension Economics & Finance, 16(3), 277-296.

    Brown, M., & Graf, R. (2013). Financial literacy and retirement planning in Switzerland. Numeracy, 6(2), 6.

    Bucher-Koenen, T., & Lusardi, A. (2011). Financial literacy and retirement planning in Germany. Journal of Pension Economics & Finance, 10(4), 565-584.

    Chowa, T., Mhlanga, R., & Munakamwe, M. A. (2015). Where did our money go? Answering the questions behind loss of value to pensioners in Zimbabwe after multi-currency adoption. International Open and Distance Learning Journal, 1(1).

    Clark, R., Lusardi, A., & Mitchell, O. S. (2017). Employee financial literacy and retirement plan behavior: a case study. Economic Inquiry, 55(1), 248-259.

    Dhlembeu, N. T. (2018). The relationship between retirement planning and financial literacy in South Africa: University of Pretoria (South Africa).

    Eagers, J., Franklin, R. C., Broome, K., & Yau, M. K. (2019). The experiences of work: Retirees’ perspectives and the relationship to the role of occupational therapy in the work-to-retirement transition process. Work, 64(2), 341-354.

    Fatoki, O. (2014). The Financial literacy of non-business university students in South Africa. International Journal of Educational Sciences, 7(2), 261-267.

    Gallego-Losada, R., Montero-Navarro, A., Rodríguez-Sánchez, J.-L., & González-Torres, T. (2022). Retirement planning and financial literacy, at the crossroads. A bibliometric analysis. Finance Research Letters, 44, 102109.

    GoBankingRates. (2016). 1 in 3 Americans Has Saved $0 for Retirement. Retrieved from https://money.com/retirement-savings-survey/

    Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Fed. Res. Bull., 89, 309.

    Huston, S. J. (2010). Measuring financial literacy. Journal of consumer affairs, 44(2), 296-316.

    Hutchings, K., Wilkinson, A., & Brewster, C. (2022). Ageing academics do not retire-they just give up their administration and fly away: a study of continuing employment of older academic international business travellers. The International Journal of Human Resource Management, 33(7), 1296-1325.

    Klapper, L., & Lusardi, A. (2020). Financial literacy and financial resilience: Evidence from around the world. Financial Management, 49(3), 589-614.

    Krekula, C., & Vickerstaff, S. (2020). The ‘older worker’and the ‘ideal worker’: A critical examination of concepts and categorisations in the rhetoric of extending working lives. Extended working life policies: International gender and health perspectives, 29-45.

    Lamprecht, L. (2015). Why only 6% of South Africans can Retire comfortably. Moneyweb. https://www. moneyweb. co. za/mymoney/moneyweb-financial-planning/6-south-africans-can-retire-comfortably.

    Lim, T. S., Osman, Z., A.B.U, Z., Abdul Jamal, A. A., Mohidin, R., & Mail, R. (2013). Financial Literacy in Southeast Coast of Sabah.

    Lusardi, A., & Mitchell, O. S. (2011). Financial literacy and retirement planning in the United States. Journal of Pension Economics & Finance, 10(4), 509-525.

    Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. American Economic Journal: Journal of Economic Literature, 52(1), 5-44.

    Mashizha, M., Maumbe, B., & Sibanda, M. (2019). Financial literacy among small and medium enterprises in Zimbabwe. The Southern African Journal of Entrepreneurship and Small Business Management, 11(1), 1-10.

    Mndzebele, Z. W., & Kwenda, F. (2020). The effects of financial literacy on financial preparedness for retirement among academic staff in higher learning institutions in the kingdom of Eswatini. Acta Universitatis Danubius. Œconomica, 16(5).

    Moure, N. G. (2016). Financial literacy and retirement planning in Chile. Journal of Pension Economics & Finance, 15(2), 203-223.

    Mourine, A., Ambrose, J., & Fredrick, N. (2017). Financial Literacy and Financial Preparedness for Retirement among Permanent and Pensionable Employees in State Owned Corporations in Nairobi, Kenya. International Journal of Business and Social Science, 11(8), 68-82.

    Mullock, K. (2012). Financial literacy and retirement saving.

    Murendo, C., & Mutsonziwa, K. (2017). Financial literacy and savings decisions by adult financial consumers in Zimbabwe. International Journal of Consumer Studies, 41(1), 95-103.

    Mutsawu, D. T., & Sarawoi, D. (2016). The pension fund industry experiences during hyperinflation. Economic Management in a Hyperinflationary Environment: The Political Economy of Zimbabwe, 1980-2008, 213.

    Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China. Pacific-Basin Finance Journal, 59, 101262.

    Nkoutchou, H., & Eiselen, R. (2012). Retirement saving behaviour of young adults in the financial services sector. Journal of Economic and Financial Sciences, 5(1), 31-48.

    OECD. (2011). Measuring financial literacy: Questionnaire and guidance notes for conducting an internationally comparable survey of financial literacy. Retrieved from https://www.oecd.org/finance/financial-education/49319977.pdf

    OECD. (2023). Pensions at a Glance 2023: OECD and G20 Indicators. Retrieved from https://www.oecd.org/daf/oecd-pensions-at-a-glance-19991363.htm

    Oseifuah, E. K. (2010). Financial literacy and youth entrepreneurship in South Africa. African Journal of Economic and Management Studies, 1(2), 164-182.

    Pallant, J. (2020). SPSS survival manual: A step by step guide to data analysis using IBM SPSS: Routledge.

    Pangestu, S., & Karnadi, E. B. (2020). The effects of financial literacy and materialism on the savings decision of generation Z Indonesians. Cogent Business & Management, 7(1), 1743618.

    Reyers, M., Van Schalkwyk, C. H., & Gouws, D. G. (2014). The rationality of retirement preservation decisions: A conceptual model.

    Sekita, S. (2011). Financial literacy and retirement planning in Japan. Journal of Pension Economics & Finance, 10(4), 637-656.

    UN. (n.d.). Ageing. Retrieved from https://www.un.org/en/global-issues/ageing

    Van Rooij, M. C., Lusardi, A., & Alessie, R. J. (2012). Financial literacy, retirement planning and household wealth. The Economic Journal, 122(560), 449-478.

  1. Achari, D., Oduro, R., & Nyarko, F. (2020). Financial Literacy on Retirement Planning of Workers of University of Mines and Technology, Tarkwa. International Journal of Management Sciences and Business Research, 9(5), 23.
  2. Agnew, J. R., Bateman, H., & Thorp, S. (2012). Financial literacy and retirement planning in Australian. UNSW Australian School of Business Research Paper(2012ACTL16).
  3. Ahmad, G., Widyastuti, U., Susanti, S., & Mukhibad, H. (2020). Determinants of the Islamic financial literacy. Accounting, 6(6), 961-966.
  4. Alavinia, S. M., & Burdorf, A. (2008). Unemployment and retirement and ill-health: a cross-sectional analysis across European countries. International archives of occupational and environmental health, 82, 39-45.
  5. Almenberg, J., & Säve-Söderbergh, J. (2011). Financial literacy and retirement planning in Sweden. Journal of Pension Economics & Finance, 10(4), 585-598.
  6. Aluodi, E., Njuguna, A., & Omboi, B. (2017). Effect of financial literacy on retirement preparedness among employees in the insurance sector in Kenya. International Journal of Biometrics, 12.
  7. Ando, A., & Modigliani, F. (1963). The" life cycle" hypothesis of saving: Aggregate implications and tests.
  8. Antoni, X., Saayman, M., & Vosloo, N. (2020). The relationship between financial literacy and retirement planning, Nelson Mandela Bay. International Journal of Business and Management Studies, 12(2), 579-593.
  9. Bassett, W. F., Fleming, M. J., & Rodrigues, A. P. (1998). How workers use 401 (k) plans: The participation, contribution, and withdrawal decisions. National Tax Journal, 51(2), 263-289.
  10. Boisclair, D., Lusardi, A., & Michaud, P.-C. (2017). Financial literacy and retirement planning in Canada. Journal of Pension Economics & Finance, 16(3), 277-296.
  11. Brown, M., & Graf, R. (2013). Financial literacy and retirement planning in Switzerland. Numeracy, 6(2), 6.
  12. Bucher-Koenen, T., & Lusardi, A. (2011). Financial literacy and retirement planning in Germany. Journal of Pension Economics & Finance, 10(4), 565-584.
  13. Chowa, T., Mhlanga, R., & Munakamwe, M. A. (2015). Where did our money go? Answering the questions behind loss of value to pensioners in Zimbabwe after multi-currency adoption. International Open and Distance Learning Journal, 1(1).
  14. Clark, R., Lusardi, A., & Mitchell, O. S. (2017). Employee financial literacy and retirement plan behavior: a case study. Economic Inquiry, 55(1), 248-259.
  15. Dhlembeu, N. T. (2018). The relationship between retirement planning and financial literacy in South Africa: University of Pretoria (South Africa).
  16. Eagers, J., Franklin, R. C., Broome, K., & Yau, M. K. (2019). The experiences of work: Retirees’ perspectives and the relationship to the role of occupational therapy in the work-to-retirement transition process. Work, 64(2), 341-354.
  17. Fatoki, O. (2014). The Financial literacy of non-business university students in South Africa. International Journal of Educational Sciences, 7(2), 261-267.
  18. Gallego-Losada, R., Montero-Navarro, A., Rodríguez-Sánchez, J.-L., & González-Torres, T. (2022). Retirement planning and financial literacy, at the crossroads. A bibliometric analysis. Finance Research Letters, 44, 102109.
  19. GoBankingRates. (2016). 1 in 3 Americans Has Saved $0 for Retirement. Retrieved from https://money.com/retirement-savings-survey/
  20. Hilgert, M. A., Hogarth, J. M., & Beverly, S. G. (2003). Household financial management: The connection between knowledge and behavior. Fed. Res. Bull., 89, 309.
  21. Huston, S. J. (2010). Measuring financial literacy. Journal of consumer affairs, 44(2), 296-316.
  22. Hutchings, K., Wilkinson, A., & Brewster, C. (2022). Ageing academics do not retire-they just give up their administration and fly away: a study of continuing employment of older academic international business travellers. The International Journal of Human Resource Management, 33(7), 1296-1325.
  23. Klapper, L., & Lusardi, A. (2020). Financial literacy and financial resilience: Evidence from around the world. Financial Management, 49(3), 589-614.
  24. Krekula, C., & Vickerstaff, S. (2020). The ‘older worker’and the ‘ideal worker’: A critical examination of concepts and categorisations in the rhetoric of extending working lives. Extended working life policies: International gender and health perspectives, 29-45.
  25. Lamprecht, L. (2015). Why only 6% of South Africans can Retire comfortably. Moneyweb. https://www. moneyweb. co. za/mymoney/moneyweb-financial-planning/6-south-africans-can-retire-comfortably.
  26. Lim, T. S., Osman, Z., A.B.U, Z., Abdul Jamal, A. A., Mohidin, R., & Mail, R. (2013). Financial Literacy in Southeast Coast of Sabah.
  27. Lusardi, A., & Mitchell, O. S. (2011). Financial literacy and retirement planning in the United States. Journal of Pension Economics & Finance, 10(4), 509-525.
  28. Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. American Economic Journal: Journal of Economic Literature, 52(1), 5-44.
  29. Mashizha, M., Maumbe, B., & Sibanda, M. (2019). Financial literacy among small and medium enterprises in Zimbabwe. The Southern African Journal of Entrepreneurship and Small Business Management, 11(1), 1-10.
  30. Mndzebele, Z. W., & Kwenda, F. (2020). The effects of financial literacy on financial preparedness for retirement among academic staff in higher learning institutions in the kingdom of Eswatini. Acta Universitatis Danubius. Œconomica, 16(5).
  31. Moure, N. G. (2016). Financial literacy and retirement planning in Chile. Journal of Pension Economics & Finance, 15(2), 203-223.
  32. Mourine, A., Ambrose, J., & Fredrick, N. (2017). Financial Literacy and Financial Preparedness for Retirement among Permanent and Pensionable Employees in State Owned Corporations in Nairobi, Kenya. International Journal of Business and Social Science, 11(8), 68-82.
  33. Mullock, K. (2012). Financial literacy and retirement saving.
  34. Murendo, C., & Mutsonziwa, K. (2017). Financial literacy and savings decisions by adult financial consumers in Zimbabwe. International Journal of Consumer Studies, 41(1), 95-103.
  35. Mutsawu, D. T., & Sarawoi, D. (2016). The pension fund industry experiences during hyperinflation. Economic Management in a Hyperinflationary Environment: The Political Economy of Zimbabwe, 1980-2008, 213.
  36. Niu, G., Zhou, Y., & Gan, H. (2020). Financial literacy and retirement preparation in China. Pacific-Basin Finance Journal, 59, 101262.
  37. Nkoutchou, H., & Eiselen, R. (2012). Retirement saving behaviour of young adults in the financial services sector. Journal of Economic and Financial Sciences, 5(1), 31-48.
  38. OECD. (2011). Measuring financial literacy: Questionnaire and guidance notes for conducting an internationally comparable survey of financial literacy. Retrieved from https://www.oecd.org/finance/financial-education/49319977.pdf
  39. OECD. (2023). Pensions at a Glance 2023: OECD and G20 Indicators. Retrieved from https://www.oecd.org/daf/oecd-pensions-at-a-glance-19991363.htm
  40. Oseifuah, E. K. (2010). Financial literacy and youth entrepreneurship in South Africa. African Journal of Economic and Management Studies, 1(2), 164-182.
  41. Pallant, J. (2020). SPSS survival manual: A step by step guide to data analysis using IBM SPSS: Routledge.
  42. Pangestu, S., & Karnadi, E. B. (2020). The effects of financial literacy and materialism on the savings decision of generation Z Indonesians. Cogent Business & Management, 7(1), 1743618.
  43. Reyers, M., Van Schalkwyk, C. H., & Gouws, D. G. (2014). The rationality of retirement preservation decisions: A conceptual model.
  44. Sekita, S. (2011). Financial literacy and retirement planning in Japan. Journal of Pension Economics & Finance, 10(4), 637-656.
  45. UN. (n.d.). Ageing. Retrieved from https://www.un.org/en/global-issues/ageing
  46. Van Rooij, M. C., Lusardi, A., & Alessie, R. J. (2012). Financial literacy, retirement planning and household wealth. The Economic Journal, 122(560), 449-478.