Financial Literacy and Economic Wellbeing of Households in Nairobi City County, Kenya
Loading...
Date
2025
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
In Kenya, financial sector has undergone intensive financial reforms especially financial technology in banking on products such as automated teller machine and mobile banking. Additionally, one of the main targets of vision 2030 is to enhance financial access to all in order to improve financial literacy and allow sound decision making on financial spending which overally influences household wellbeing. The objective of this research was to assess the effect of financial literacy on economic wellbeing of households in Nairobi City County. The specific objectives were; to establish the influence of informed financial decisions on economic wellbeing of households in Nairobi City County; to evaluate the influence of financial savings on economic wellbeing of households Nairobi City County; and to evaluate the effect of financial spending behavior on economic wellbeing of households Nairobi City County. The study was based on three theories namely; prospect theory, dual process theory and life cycle theory. Both descriptive and explanatory research designs were adopted. Data was gathered from a secondary source. This study used secondary data from the data set of the 2021 FinAccess Household Survey. The unit of analysis was 625 households in Nairobi City County included in the survey. The study adopted a multiple linear regression model to examine the connection between financial literacy and the dependent variable. Diagnostic tests such as normality, Multicollinearity, heteroskedasticity and autocorrelation were conducted to ensure that the assumptions of regression analysis are not violated. The results revealed that informed financial decision did not have significant effect on the economic wellbeing. However, financial saving had significant positive effect while financial spending behaviour had significant negative effect on economic wellbeing of households Nairobi City County. The study recommends the need to design financial literacy programs that specifically target debt management. These programs should explain the Cost of Debt: Break down the true cost of debt, including interest rates, fees, and penalties so that households can make informed financial decisions. In addition, there is need to offer financial literacy workshops and seminars focused on budgeting skills and prudent spending habits to enhance financial spending behavior
Description
A Research Project Submitted to the Department of Applied Economics in the School of Business, Economics, and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Economics (Finance) of Kenyatta University, May 2025
Supervisor:
1.Francis Omondi