THE INFLUENCE OF FINANCIAL LITERACY ON ENHANCING FINANCIAL STABILITY OF AN INDIVIDUAL IN NGOR-OKPALA L.G.A IMO STATE

CHAPTER ONE

INTRODUCTION

1. Background of the Study

Financial literacy remains an interesting issue in both developed and developing economies, and has elicited much interest in the recent past with the rapid change in the finance landscape. Financial literacy has become a crucial aspect of personal finance, enabling individuals to make informed decisions about their financial resources (OECD, 2019).Financial literacy helps in empowering and educating individuals so that they are knowledgeable about finance in a way that is relevant to their lives and enables them to use this knowledge to evaluate products and make informed decisions. It is widely expected that greater financial knowledge would help overcome recent difficulties in advanced credit markets.

Financial literacy prepares individuals for tough financial times, through strategies that mitigate risk such as accumulating savings, diversifying assets, and purchasing insurance. Financial literacy facilitates the decision making processes such as payment of bills on time, proper debt management which improve the credit worthiness of potential borrowers to support livelihoods, economic growth, sound financial systems, and poverty reduction. It also provides greater control of one’s financial future, more effective use of financial products and services, and reduced vulnerability to overzealous retailers or fraudulent schemes. Facing an educated lot, financial regulators are forced to improve the efficiency and quality of financial services. This is because financially literate consumers create competitive pressures on financial institutions to offer more appropriately priced and transparent services, by comparing options, asking the right questions, and negotiating more effectively. Consumers on their part are able to evaluate and compare financial products, such as bank accounts, saving products, credit and loan options, payment instruments, investments, insurance coverage, so as to make optimal decisions. The Organisation for Economic Co-operation and Development (OECD) aptly defines financial literacy as not only the knowledge and understanding of financial concepts and risks but also the skills, motivation, and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life. . Thus, financial literacy (or lake thereof) has played a key role in the success and failure of our nation’s business for the past centuries.

1.2. Statement of Problem

The problem addressed in this study relates to the complexity of the financial literacy phenomenon to act as a mechanism in enhancing the financial stability of an individual in Ngor Okpala local government Imo state. This phenomenon can be conceptualised in the following dimensions: firstly, it involves the haphazard use of the term ‘financial literacy, financial stability’; secondly, it relates to the perception that financial literacy involves two separate systems (the financial system and the human behaviour system), which means that it is not regarded as a single encompassing process; and thirdly, the gap between complex financial and economic information, on the one hand, and the decision-makers’ mental processes, on the other. The study problem focuses specifically on the complexity of the financial literacy construct with regard to its role in enhancing the financial stability of individual in the studied area (Ngor Okpala L.G.A Imo state). The problem is further exacerbated by the fact that the majority of existing financial literacy programmes focus on financial literacy at consumer level rather than in relation to the economy and individuals businesses.

The impact of financial illiteracy is a particularly pronounced among vulnerable populations, this includes the low-income earners, young adults, and minority groups. These individuals may face challenges in understanding complex financial system, and planning for their financial future. Furthermore, the lack of financial literacy can contribute to wider societal issues, such as economic instability, wealth inequality, and financial dependence. Without adequate financial knowledge and skills, individuals may struggle to achieve financial stability, build wealth, and secure their long term financial well-being.

1.3. Purpose of Study

The main purpose of this study is to empirically examine the influence of financial literacy on enhancing financial stability of an individual in Ngor Okpala L.G.A Imo state, The purpose of the study are as follows:

Evaluate the contribution of financial literacy on enhancing the financial stability of individuals.
Examine factors that has hinder financial literacy in Ngor Opala local government Imo state.
Make policy conclusions and recommendations based on the results of the study.
How effective are existing financial literacy programs and initiative in improving financial knowledge and skills among individuals.
Investigate the current level of financial literacy among individuals and assess the impact of financial literacy on their financial decision-making processes and its outcomes.

By addressing these research purposes, the study aims to contribute to existing literature on financial literacy and its implications for financial stability. Through a comprehensive analysis of the factors influencing financial literacy, the effectiveness of financial education programs, as well as the relationship between financial literacy and financial stability, the study seeks to inform policy-making and practice in promoting financial literacy and improving financial outcomes for individuals.

1.4. Research Problem

The research questions, which would guide this study are as follows:

Is there a significant relationship between financial literacy and financial stability?
Has financial literacy increased financial stability of individuals in Ngor Okpala local government Imo state over time?
What are the factors that hinder appropriate financial literacy programmes for the enhancement of individuals financial stability in Ngor Okpala local government Imo state?

1.5. Research Hypothesis

Based on the research questions and the literature on financial literacy and financial stability in various areas, the following hypotheses guide the study:

H0: Financial literacy does not have significant relationship with financial stability of an individual in Ngor-Okpala Local Government Area (L.G.A) Imo state.

H1: Financial literacy has significant relationship with financial stability of an individual in Ngor-Okpala Local Government Area (L.G.A) Imo state.

1.6 Significant of Study

The quality of the study work lies on the relevance to the society being studied (Ngor Okpala L.G.A Imo state). The importance is the ability to draw a relationship between the influence of financial literacy on enhancing financial stability of individual in Ngor-Okpala Local Government Area (L.G.A) Imo state, whether financial literacy has significant impact on individuals financial stability.

This study on the influence of financial literacy on enhancing financial stability of individual holds significant importance for both academics and practitioners in the field of personal finance and financial education. By exploring what is the relationship between financial literacy and financial stability, this study can provide insights that can inform policies, programs, and interventions which is aimed at improving individuals’ financial well-being.

This study contributes to existing body of knowledge of the impact of financial on financial outcomes and behaviors. Through many empirical research and analysis, this study can provide evidence-based insights into the roles of financial literacy in enhancing financial stability, thereby advancing academic discourse in the field of personal finance and financial education.

In conclusion, the study would be of immense help to the government, monetary authority, individuals, economists, students, planners, financial analysts, stock brokers and others who might be interested in researching into the field in the future, by shedding more light into the widely held view about the influence of financial literacy on enhancing financial stability of an individual in Ngor-Okpala Local Government Area L.G.A Imo state

1. Scope of Study

The scope of study on the influence of financial literacy on enhancing financial stability of an individual will focus on examining the relationship between financial literacy levels and financial stability outcomes among individuals. This study will involve assessing the financial knowledge, behaviors, and decision-making of participant to evaluate how financial literacy contributes to their overall financial well-being.

This study will consider various factors that may influence financial literacy and financial stability, including demographical variables, educational background, and socio-economic status. By analyzing these factors, the study aims to explore the impact of financial literacy on various aspect of financial stability, such as saving behavior, debt management, investment decisions, and financial management. By analyzing the link between financial literacy and financial stability indicators, the study seeks to uncover key factors that influence individuals’ financial well-being.

The study will encompass a diverse participant sample to capture a range of demographic profiles and socio-economic backgrounds. By considering various demographic and socio-economic factors this study aims to provide a comprehensive analysis of how financial literacy affects financial stability across different population groups.

Research methodologies may include surveys, interviews, and data analysis to collect and analysis information on individuals financial literacy levels, financial behaviors, and financial stability measure.

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