Financial literacy, financial distress and socioeconomic characteristics of individuals in Ghana

Purpose: Personal financial stress-free living is desired by many, which dwells on sound financial literacy (including financial behaviour, financial knowledge and financial attitude). Many individuals do not make optimal savings and investment decisions. The realisation that these choices may well lead to low living standards has also increased economic anxiety, especially in Sub-Sahara African countries, including Ghana. Thus, this study underscores the link between financial literacy and financial distress in Ghana. It establishes whether persons that are financially literate escape financial distress in their life. Design/methodology/approach: The paper engages nationally representative survey data and adopts a positivist research approach with logistic regression analysis to establish the likelihood of financial literate persons experiencing financial distress. Findings: This study establishes that financially literate individuals are 2.4% less likely to experience financial distress. Socioeconomic characteristics greatly influence the probability of one experiencing financial hardship. It submits that policy can be directed towards improving financial habits (financial literacy) to enhance individuals' financial behaviour to lessen personal financial distress. Originality/value: Not much attention has been paid to whether financial literacy has a nexus with financial distress. Few studies (not on Sub-Saharan Africa) that have looked at this are done, neglecting a sensitivity analysis of socioeconomic characteristics in establishing the relations. However, this current study dwells on econometric analysis to establish the margin or extend to which a financially literate person may or may not escape financial distress given his/her socioeconomic characteristics.