A study on the effects of financial literacy on retirement planning: a case study of civil servants under PSPF
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Financial literacy is an important component in financial planning and retirement planning. It gives an individual the ability to process economic information and make informed decisions about financial planning and wealth accumulation. Despite the importance of financial literacy; surveys around the world consistently indicate that financial literacy levels are low in high-income countries and if this is the case then it begs the question of the likely situation in the middle and low-income countries like Zambia. Furthermore, there is scanty data available for middle and low-income countries. Therefore, the study sought to establish the influence of financial literacy on retirement planning. To achieve the study objectives, the study employed descriptive and causal research designs, the study carried a survey of 150 respondents who are Zambian Civil Servants. The study used spearman correlation analysis to statistically determine the effect of financial literacy on retirement planning. From the results, the study found that financial literacy level was low among the civil servants in terms of understanding interest rates, investments, and investing in various options. The results further showed that majority of the civil servants are not saving enough in preparation for retirement. From the spearman correlation analysis, the study found a strong positive relationship between financial literacy and cash saving in a bank; investment in stocks, investment in livestock; having insurance scheme; investment in buildings; and acquiring financial assets. These results imply that improvement in financial literacy will result in improvement in cash saving, investment and acquiring of assets; and this will adequately prepare civil servants for retirement. The study further obtained a strong positive relationship between financial planning knowledge and retirement preparedness. The study therefore recommended that Public Service Pension Fund and other stakeholders should come up with effective programs of providing financial literacy to civil servants in terms of financial savings and investment for retirement preparation. The government should also come up with an effective saving plan for civil servants that can encourage saving with a certain interest. Key words: Financial literacy, financial planning, financial preparedness, investment.
The University of Zambia