Financial literacy and personal retirement planning: a socioeconomic approach

Abstract

PurposeThe purpose of this study was to investigate the effect of financial literacy on personal retirement planning in Bukavu city in the Democratic Republic of the Congo (DRC), which is a Sub-Saharan underdeveloped country with a weak pension and social security system.Design/methodology/approachThis study used a structural equation modeling and a sample of 361 public sector employees selected in Bukavu city in the DRC. The data were collected through a survey questionnaire, and the data were analyzed using SPSS and SMART PLS software.FindingsThe results from the study revealed that financial literacy has a significant impact on personal retirement planning. Two constructs of financial literacy, respectively, computation capability and financial knowledge were found to have a significant impact on personal retirement planning, while financial education and attitudes toward financial products were found not significant in explaining personal retirement planning.Practical implicationsThe findings from this study can be used by policy makers in the DRC to design socioeconomic programs, aiming to increase the level of financial literacy in the country and awareness on personal retirement planning.Originality/valueThe reviewed studies were based mostly on developed countries, and countries were the social security system works effectively. We have not found a study on financial literacy and retirement planning that has been conducted in the DRC, which is a country with specific characteristics compared to developed countries.

“Retired and Free?” A Focus Group Discussion on Financial Preparation for Retirement among Private Sector Employees in Klang Valley, Malaysia

“…Informants of this study verbalised that lack of financial literacy forbids them from performing retirement saving. Financial literacy is important as it is a cognitive skill required to plan and save for retirement (Hershey et al, 2007;Safari et al, 2021). Past studies proved that financial knowledge is associated with private retirement savings engagement and retirement planning (Chou et al, 2014;Kumar, Shukla, & Sharma, 2019).…”

“…Van Rooij, Lusardi, & Alessie (2011) explained that financial preparedness is indicated by having proper financial planning and adequate retirement savings. Recent study has proved that individual with higher levels of financial literacy is associated with a better financial preparedness for retirement (Safari et al, 2021). According to Dulebohn (2002), financial preparedness for retirement begins with the retirement intention and savings made in the early life cycle, which would be the resources for later retirement years.…”

Linear and non-linear ARDL estimation of financial innovation and economic growth in Ghana

“…Distinct hypotheses explain the impact of FI on economic growth. The supply-side view argues that the effect of FI on economic growth depends on how it improves capital accumulation and the general efficiency of the financial intermediation process (Beck and Frame, 2018;Safari et al, 2021;Derbali, 2021). Shittu (2012) confirms that efficiency in the financial intermediation process significantly influences economic growth (using a Nigerian dataset), and hence FI can improve economic growth.…”

“…Distinct hypotheses explain the impact of FI on economic growth. The supply-side view argues that the effect of FI on economic growth depends on how it improves capital accumulation and the general efficiency of the financial intermediation process (Beck and Frame, 2018; Safari et al. , 2021; Derbali, 2021).…”

Impact of Financial Literacy on Finance and Economy: A Literature Review

“…From the study, it is concluded that financial literacy and future orientation show a positive influence on family retirement planning. Whereas Safari et al (2021) investigate the impact of financial literacy indicated by financial knowledge and computation capability on personal retirement planning amongst public sector employees in Congo. Results from the investigation revealed that both of the financial literacy components have significant impacts on personal retirement planning, indicating the significant role financial literacy plays as a determinant of personal retirement planning.…”