The role of financial literacy in individuals' retirement preparations: a South African study

Veerasamy, Priyanka

The role of financial literacy in individuals' retirement preparations: a South African study

Thesis / Dissertation

2026

Publisher

University of Cape Town

Department

Department of Finance and Tax

Faculty

Faculty of Commerce

Abstract

The low savings rate in South Africa suggests that many South Africans struggle to retire comfortably. This study quantifies the extent of retirement preparations among a sample of South Africans who are members of retirement funds and examines how financial literacy and socio- demographic factors (age, gender, income, and education) influence these preparations. It goes beyond most international and South African research, which typically categorises retirement planning as simply being a planner or not. Additionally, it also explores how financial education programmes enhance retirement preparations of these members. A quantitative research design was employed, with data collected via a close-ended questionnaire from 283 respondents. Constructs for retirement preparations, financial literacy, and financial literacy programme use were developed from the responses. The internal consistency, convergent and divergent validity of the constructs were evaluated alongside the goodness of fit statistics of the model. Using structural equation modelling, the results reveal that financial literacy has a significant and positive effect on retirement preparations. Older individuals tend to prepare more for retirement, and retirement preparation levels increase with higher income and education. Additionally, men were found to prepare more for retirement compared to women and the use of financial literacy programmes was found to enhance individuals' preparations for retirement. Age and gender were found to have an insignificant impact on financial literacy, and consequently, do not indirectly affect retirement preparations through their influence on financial literacy. In contrast, income and education have a significant positive effect on financial literacy and, in turn, a significant positive indirect impact on retirement preparations. Overall, the total impact of age, gender, income, and education on retirement preparations is positive. However, this positive impact is direct for age and gender, while for income and education, it is both direct and indirect. This study contributes to the field of retirement planning in South Africa by providing evidence on the role of financial literacy among existing members of retirement funds. It emphasises the importance of considering both the direct effects of socio- demographic variables on retirement preparations and their indirect effects through financial literacy. The implications of the findings are discussed in detail. However, one of the limitations of the study is that the retirement preparations construct has low internal consistency. Therefore, the conclusions drawn must be interpreted with caution.

Keywords

retirement

financial literacy

Reference:

Collections

Masters

Full item page