EFFECT OF INCOME ON THE URBAN YOUTH SAVINGS. A CASE STUDY OF NAIROBI CITY COUNTY, KENYA

Economic Theory

Abstract Savings play a crucial role as they act as backstop for capital formation and economic growth. A better saving behavior is the basis of a sound economic and financial policy. Studies on savings have historically taken a central position in several economic research areas. Issues and problems related to savings among households and individuals have gained significant importance in microeconomic studies as savings stimulate larger investments and higher gross domestic product growth. Studies conducted in developing countries have shown that savings remain low particularly among the youth due to various factors such as high unemployment rates, low incomes, limited access to financial services and high dependency rates among other factors. Low savings inhibit the availability of investment funds. This paper examined the effect of income on the urban youth savings using Ordinary Least Squares estimation method. The goal was to get an understanding on the effect of income factor on the uptake of savings by the youth. A cross-sectional research design was adopted where primary data was collected from the youth in Nairobi City County. Random sampling technique was used to select the respondents in the survey where self-administered questionnaires were administered to 400 urban youth. The study’s results demonstrated a showed a positive relationship between income and the level of savings among the urban youth. Other factors such as rate of return was found positively affect savings while factors such as age, number of dependents and education effected savings negatively. The paper concluded that promoting youth incomes through quality job and through revitalizing both the formal and informal sector and offering higher rate of returns on savings would be critical in mobilization of savings.

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