Financial Literacy and Investment Behavior of Salaried Individuals: A Case Study of Wolaita Sodo Town
Journal Title: International Journal of Business and Management Invention - Year 2018, Vol 7, Issue 1
Abstract
The issue of financial literacy has ever increasing its importance after the recent economic crisis and the call for enhanced financial literacy amongst consumers is a global phenomenon, driven by the growing complexity of financial markets, services and products. An important prerequisite for informed financial decision‐making is adequate financial knowledge and skills to make competent investment decisions. Financial literacy improve individual’s understanding of financial matters that enable them to make effective use of investment avenues and services by evaluating associated risks and returns and finally choosing those avenues which are best suited to them. An attempt has been made through this paper to identify the level of financial literacy and examine the relationship between financial literacy of salaried employees and their preference towards various investment avenues in Ethiopia. In order to meet these objectives, primary data were collected using covenant sampling technique from samples of 209 employees in Wolaita Sodo town, Ethiopia. Chi-square test was used to examine the relationship between financial literacy and investment preference. The results of the study concluded that financial literacy level of individuals is very low. It does not influence the investment preference of salaried employees towards various investment avenues, except for government bonds. Preference for government bonds are significantly influenced by the level of financial literacy of the respondents. In addition, participants of high as well as low financial literacy groups prefer similar investment avenues. They mainly prefer to invest in traditional and safe financial products and do not invest much in complex financial products which are comparatively more risky and can give higher return. These results highlight the need for financial education programs focusing specifically on developing investment knowledge and skills to facilitate informed investment decisions.
Authors and Affiliations
Mr. Million Assefa, Dr. Durga Rao P. V.
Keywords
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