Understanding the Determinants of Saving in Ghana: Does Financial Literacy Matter?

Abstract

Domestic savings remain low in Ghana despite several attempts to improve this situation. Whereas existing studies on private savings have identified several determinants, the role of financial literacy in saving decisions has not been explored. In this paper, we build on existing studies and provide evidence supporting our hypothesis that financial literacy is key to promoting domestic saving. The study relies mainly on primary data, and the binary probit regression model is employed as the estimation technique. Our results show that improving financial literacy among Ghanaians should be incorporated into the broad policy package aimed at increasing domestic saving which is a prerequisite for investment and subsequently sustainable economic growth. Copyright © 2018 John Wiley & Sons, Ltd.

The Relative Impact of Income and Financial Literacy on Financial Inclusion in Nigeria

“…Other factors that have strong effects on financial inclusion, according to the study, are age, rural–urban location, education and gender. In another study that examines the impact of financial literacy on domestic savings in Ghana, Baidoo, Boateng, and Amponsah () show that financial literacy level of an individual positively affects the individual's decision to save. The authors also identify income distributions, household size and the sector an individual is employed as other critical determinants of savings.…”

Impact of Financial Literacy and Parental Socialization on the Saving Behavior of University Level Students

“…The people save their money for different purposes. Saving is beneficial not only for the individuals but also for the whole country and it helps in infrastructure development and long-run investments in the country likewise saving act as a hurdle for countries against financial crisis and economic downturns (Jagadeesh, 2015;Baidoo et al, 2018). Clark and Madeleine (2008) demonstrated that financial literacy and financial plans are extremely successful in defeating the reduction in saving.…”

“…Saving is the portion of income which is not spent on current consumptions. The consumption pattern of individuals determines their savings decisions (Browning & Crossley, 2001;Baidoo, Boateng & Amponsah, 2018). Saving is considered as a major factor that affects the economic growth of developing countries (Jagadeesh, 2015).…”

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