Financial Literacy and Adoption of Personal Retirement Plan among Public Employees in Addis Ababa City Administration

Abstract

Individual financial status is underscored despite the fact that only a few households feel confident about adequate saving for retirement because of a lack of awareness about planning for retirement. Households having the same type of socio-economic background exhibit different saving habits and they may have different wealth. For one to save wisely and properly, acquiring financial knowledge is important. And the critical question must be whether there is a relationship between financial literacy and the adoption of a personal retirement plan. This paper examined the effects of financial literacy on the adoption of personal retirement plans among public employees in the Addis Ababa City Administration, using a descriptive design. Multistage sampling was used to select a representative sample of 386 respondents from three public bureaus named health, education, and revenue bureaus. The data were collected using a questionnaire & key informant interview and the quantitative data was analyzed using descriptive & inferential statistics of mean, standard deviation & regression analysis respectively to examine the relationship between dependent & independent variables. The study revealed that financial literacy is positively related to the adoption of a personal retirement plan. In addition, most of the elements of knowledge of financial instruments and computational capability of retirement benefits are significantly related to the adoption of a personal retirement plan. The study also found that (age, sex, education level & income level) are significantly related to the adoption of a personal retirement plan. Lastly, the financial factors (adequate monthly income & expenditure management) as moderating variables are also positively related to the adoption of a personal retirement plan.