The Influence of Financial Literacy, Saving Behaviour, and Financial Management on Retirement Confidence among Women Working in the Malaysian Public Sector

By Sabri, Mohamad Fazli; Juen, Teo Tze | Asian Social Science, July 2014 | Go to article overview

The Influence of Financial Literacy, Saving Behaviour, and Financial Management on Retirement Confidence among Women Working in the Malaysian Public Sector


Sabri, Mohamad Fazli, Juen, Teo Tze, Asian Social Science


Abstract

Awareness of retirement confidence has been found to be low in many people, especially in women. Much of past research has revealed that women consistently perform a poor level of retirement confidence compared to men. This study aims to examine the influence of financial literacy, saving behaviour, and financial management on retirement confidence among women working in the Malaysian public sector. Multi-stage random sampling technique was applied as the sampling technique in this study. 708 respondents participated in this study. This study applied Pearson Correlational analysis to determine the relationship between the variables. The findings reveal that retirement confidence is positively correlated with financial literacy, saving behaviour, and financial management. Furthermore, multiple regression analysis was applied to determine the predictors of retirement confidence. This study concludes that financial literacy, saving behaviour, financial management, and financial status are significant predictors of retirement confidence among working women, with financial management as the major factor contributing towards retirement confidence. The findings of this study have practical implications for financial advisors in helping working women to be more aware of their future retirement life financial needs and to prevent financial crisis in later years.

Keywords: financial literacy, saving behaviour, financial management, retirement confidence, working women

1. Introduction

Retirement is the stage when an individual permanently leaves the workplace. This means that the income of retirees will stop immediately upon retirement. However, their expenses will continue and they will need to continue their lives depending solely on their accumulated savings. As the main source of retirement income is savings (Russell & Stramoski, 2011), proper planning during the pre-retirement stage is essential for a secure retirement life. Despite the importance of retirement planning, only less than 5% of Malaysians are well prepared for their retirement (Habib, 2007). Given the poor retirement planning among Malaysians, it is important to study how confident Malaysians are of their financial preparedness for their retirement.

Understanding that retirement planning is a protective factor for retirees, Malaysia introduced two types of pension systems for all working Malaysians, which are the Employees Provident Fund (EPF) and the Civil Service Pension. The EPF is a contribution plan for Malaysians working in the private sector, while only Malaysians working in the public sector are eligible for Civil Service Pension. However, a recent study by Park and Estrada (2013) found that the public pension scheme in Malaysia is inadequate for a comfortable retirement, mainly due to the poor replacement rate of the public pension scheme. Inadequate retirement funds can be a disaster for retirees. Thus, this study will focus on civil servants in the Malaysian public sector.

Retirement can be a tough period, especially for women. The Statistics Yearbook Malaysia 2012 published by the Department of Statistics Malaysia states that the life expectancy of women in 2012 was higher than that of men (women = 77.2 years, men = 72.3 years). As the minimum retirement age in Malaysia is 60 years, women can expect to live for 17 years after retirement. These 17 years can be traumatic if women fail to accumulate sufficient retirement funds. As such, women surely need to have an adequate retirement plan for their retirement life to avoid financial crisis. This study will thus focus on how confident women working in the public sector are regarding their financial preparedness for their retirement years.

"Retirement confidence" can be defined as an individual's attitude towards retirement and confidence towards preparation for retirement (Kim, Kwon, & Anderson, 2005). The terms "retirement confidence", "retirement planning behaviour", and "retirement attitude" have been used interchangeably in past literature (Kim et al. …

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