The Impact of Financial Literacy on Retirement Planning among Informal Sector Workers in Kandy District, Sri Lanka

Abstract

This paper examines the impact of financial literacy on retirement planning among informal sector workers in the Kandy district, focusing on four key financial literacy components, and assesses their level of financial literacy.study used a descriptive and quantitative research design. The sample included informal sector workers in Kandy selected using simple random sampling. A 5point Likert scale structured questionnaire was used to collect primary data, from which samples were drawn from 385 informal sector workers in Kandy. In SPSS, multiple regression analysis was used to determine the impact of financial literacy on retirement planning through four key financial literacy components. Those are financial knowledge, financial behaviour, financial attitudes and awareness of financial products for retirement. And their level of financial literacy was analysed using one-sample t-tests based on the financial literacy index constructed using the weighted average method. The study found that all four financial literacy components were significantly and positively influence on informal sector workers’ retirement planning, while financial knowledge and financial behaviour had the most significant and positive influence on retirement planning decisions. Additionally, all components showed a moderate positive correlation with retirement planning. Furthermore, the study highlights that the overall level of financial literacy among informal sector workers in the Kandy district is below the benchmark value. Therefore, this study showed that financial literacy has a positive impact on retirement planning among informal sector workers. The study findings highlight the necessity of improving financial literacy among this population. Empowering those individuals with financial knowledge, behavior, attitudes, and their awareness about retirement planning-related products and resources. The paper contributes to both theoretical and practical discourses on retirement planning for informal sector workers, which has not received much attention. These results are important for government policymakers, educators, and financial institutions to design tailored financial literacy programs, products that can foster retirement security of informal sector workers.