Influence of Homemakers’ Spending Practices and Consumer Credit Use on Family Welfare at Sakumono Estates, Tema
ABSTRACT
This study was conducted to assess how the spending practices and consumer credit use among homemakers at Sakumono Estates in the Tema Municipality influenced family welfare. The specific objectives were to: examine the income and expenditure patterns of homemakers, investigate the management principles applied by homemakers in the use of money, investigate the perception and consumer credit use by homemakers and identify factors that influenced homemakers’ spending practices and credit use. Five null hypotheses were stated. Ho1: There is no relationship between homemakers’ demographic characteristics (age, educational level, marital status, occupation, income status) and spending practices. Ho2: There is no relationship between homemakers’ demographic characteristics (age, educational level, marital status, occupation, income status) and consumer credit use. Ho3: There is no relationship between homemakers’ spending practices and consumer credit use. Ho4: There is no relationship between homemakers’ spending practices and family welfare. Ho5: There is no relationship between homemakers’ consumer credit usage and family welfare. A proportionate sample of two hundred and fifty-two (252) homemakers was interviewed using a structured interview schedule. The data were analysed using the Statistical Package for Social Sciences (SPSS) version 21 to generate frequency and percentage distributions. Likert scale scores were used to aggregate spending practices, consumer credit use, perception of consumer credit, family welfare and financial stress. Pearson’s Correlation Coefficient test and simple linear regression analysis were used to test the null hypotheses at 5% level of significance (p = 0.05). The findings revealed that the mean age of the homemakers was 45.5 years with an average household size of five. The majority (70%)
had attained post-secondary and tertiary levels. Homemakers earned a mean monthly income of GH¢1,100 from salaries and wages (93.7%). The mean monthly housekeeping money was GH¢600 contributed by both homemakers (98%) and husbands (70%). The top six expenditure categories with high means included education (GH¢539.26), food and non-alcoholic beverages (GH¢252.98), accommodation (GH¢152.11), transportation (GH¢130.60) children’s clothing and footwear (GH¢96.67) and utilities (GH¢82.45). The homemakers were the financial decision-makers (77%). Financial management principles applied included planning or budgeting 226 (89.7%) organizing expenditure (73%), implementing financial plans (75%) and partial evaluation of financial plans (57%). Perception of consumer credit was low (54.4%) but 72% used it for varied reasons. Spending practices were influenced mainly by personal (99.2%), economic (91.2%), social (71.4%) and business factors (63.4%). More than half (55.8%) of the homemakers assessed their spending vis-à-vis family goal attainment as very good and more than two thirds (68.7%) said they had enhanced family welfare. Simple linear regression analysis revealed that age (p=0.01), educational level (p=0.01), occupation (p=0.01) and income status (p=0.01) predicted spending practices whereas educational level (p=0.05) and occupation (p=0.01) predicted consumer credit use. Spending practices (p=0.001), on the other hand, predicted family welfare implying that homemakers who applied good spending practices had enhanced family welfare. It is concluded that to some extent, homemakers spending practices and consumer credit use did influence their family welfare both positively and negatively. It is recommended that stakeholders in the field being examined including the Ministry of Education, Extension workers, Ghana Home Economics Association (GHEA), Microfinance and Consumer Credit institutions, should
design practical educational programs for both formal and informal deliveries to provide knowledge and skills required for financial management matters, particularly good spending practices and consumer credit use, to enable both present and future homemakers make informed and effective decisions regarding the use and management of money and credit to enhance family welfare. Also, the stress experienced by homemakers as they perform the important responsibility as financial managers of the household is likely to reduce. Acquisition of such skills by as many homemakers as possible would reduce the stress experienced by homemakers as they perform these important responsibilities which are central to family welfare
CHAPTER ONE INTRODUCTION
1.1 Background Information
In the Ghanaian tradition, men are the heads of their families but women keep the homes and hold their families together (Nukunya, 2003; Udry & Woo, 2006). In the past, men played the productive role while women played the reproductive role. However, life’s demands such as the increasing economic needs of families and women’s cultural evolution have impacted the traditional role of women. Women have now assumed productive roles by joining the workforce in both the formal and informal sectors of the economy and are earning income (Nosé, 2010). Abotchie (2008) indicated that women also have the major responsibility of managing the family and household resources for the sustenance and welfare of family members.
Patil (2012) pointed out that family upkeep does not require the use of available family resources only but also the knowledge and managerial skills of the homemaker to effectively use these resources to meet family goals. Resources available to the family include material goods such as money and credit (Patil, 2012). Hilgert, Hogart & Beverly, (2003) described money as an important family resource because it represents the purchasing power of families and hence determines the frequency and pattern of flow of goods and services to the family within a given period. Schlater (2007) cautioned that money is a scarce and indispensable resource that has to be spent wisely for the attainment of family welfare. However, besides the limitation of money, poor spending
practices could hinder the enhancement of family welfare. Leskinen & Raijas (2005) stressed that the choices and decisions made in the financial domain have remarkable consequences for the financial well-being and welfare of family members.
Financial management has to do with the day-to-day financial activities necessary to effectively utilize money, and the central objective is to improve family welfare (Balance, 2011; Hasting et al., 2013). Chatzky (2012) emphasized that money management skills are a vital element in disciplining homemakers to achieve a quality family life because their spending practices will go a long way to influence the way they manage family income throughout the family lifespan.
Spending practices involve decisions and actions that individuals and families take concerning the use of money. It includes decisions about what money is spent on, how much is spent, the order and sequence of spending, set time for spending, and the satisfaction derived from the use of money (Kirchler, 2008; Chatzky, 2012). Spending practices are influenced by socio-demographic characteristics such as occupation, level of income, as well as personal characteristics such as ambitions, values, likes and dislikes (Pine, 2009; Giles, 2011).
Good spending practices focus on managerial principles and processes such as planning, organizing, implementation and evaluation of spending plans. (Freeman, 2006; Anyakoha et al., 2008; Pantil, 2012). Good spending practices could significantly enhance family welfare especially when family income is limited (Giles, 2011; Hasting et al., 2013). Greve, (2008) described family welfare as the overall state of wellbeing of family members in terms of fulfilling essential needs such as food, clothing, healthcare, education, transportation as well as satisfaction derived from money spent. Finlay (2009)
explained that at the macro level, money can be used as an instrument for achieving family welfare. This implies that family welfare can change over time, and to a certain degree is dependent on the level of income. Giles, (2011) and Hasting et al., (2013) hold the view that the ability of homemakers to efficiently utilize family income to get the welfare status they desire, involves the application of knowledge in financial management, good decision-making and taking actions directed towards meeting family needs. On the contrary, it is argued that regardless of homemakers’ knowledge in spending, certain situations could negate their decisions and create financial gaps which could be filled with consumer credit use (Finlay, 2009; Van Praag & Frijters, 2009).
Consumer credit is a financial resource that enables the transfer of money, goods and services to individuals for personal, family or household use for which payments are made in the future. (Hartarska & Gonzalez-Vega, 2006; Finlay, 2009). It is considered “elastic income” because its use expands purchasing power at any given time and thus makes possible the provision of more goods and services than cash on hand would allow. Muske and Winter, (2010) stipulated that consumer credit use has been in existence for decades; however, in the past five decades, many people emphasized the importance of living within their means and frowned upon the use of credit but in present time, the influx of consumer credit and its use suggest that many consumers are losing the essential value of living “within their means” in their spending.
Ahmed (2009) attributed the increased use of consumer credit by Ghanaian homemakers to factors such as the high cost of living, unemployment, low salaries and impact of aggressive advertisements and increased availability of credit facilities. Finlay (2009)
also observed that in developed countries the widespread increase in consumer credit use could be attributed to families losing interest in budgeting.
Consumer credit use and management are critical in family welfare (Hartarska & Gonzalez-Vega, 2006). It is however cautioned that despite the benefits, when misused, credit can cause serious financial problems and hardships such as over-indebtedness, inability to budget, save or invest, despair and crisis, insolvency, and bankruptcy. But the question that arises is: are Ghanaian homemakers aware of how their spending practices and consumer credit use influence their family welfare?
1.2 Statement of the Problem
A major responsibility of Ghanaian homemakers is the management of family finances to meet family goals. The ability to do this successfully depends not only on the amount of money available but also on the homemaker’s knowledge and skills in money management. Money management skills are a vital element in disciplining homemakers to achieve quality family life because their spending practices will influence the way they manage family income through the family’s lifespan. Homemakers are faced with a daunting task of allocating the limited family income to enhance family welfare. Evidence from literature shows that good spending practices could significantly enhance family welfare especially when family income is limited. However, the influx of consumer credit and its use suggest that some Ghanaian homemakers are living beyond their means in their spending. Most information on spending practices especially budgeting is from developed countries, while very little is known about the practice in developing countries including Ghana. Studies on consumer credit use in Ghana focus on
micro-finance or consumer loans. Again, studies relating to the influence of consumers’ socio-demographic characteristics on consumer credit use are not available, neither has the influence of spending practices and consumer credit use by Ghanaian homemakers on family welfare been explored nor understood. Information from this study is crucial in Ghana today and in the future, because it will enable both present and future homemakers make informed and effective decisions regarding the use and management of money and credit. The information would also reduce the stress experienced by homemakers as they perform their financial responsibilities which are central to family welfare. The study was therefore conducted to address some of the gaps exposed.
1.3 Aim of the Study
The aim of the study was to assess how the spending practices and consumer credit use among homemakers at Sakumono Estates influenced their family welfare.
1.4 Specific Objectives
The specific objectives of the study were to:
- Examine the income and expenditure patterns of
- Investigate the management principles applied by homemakers in the use of
- Assess homemakers’ perception of consumer credit and consumer credit
- Identify factors that influenced homemakers’ spending practices and consumer credit use.
- Assess homemakers’ family welfare
1.5 Hypotheses
Based on the conceptual framework, five hypotheses were formulated.
Ho1: Homemakers’ socio-demographic characteristics (age, educational level, marital status, and occupation) and spending practices are not related?
Ho2: There is no relationship between homemakers’ socio-demographic characteristics (age, educational level, marital status, occupation) and consumer credit use?
Ho3: Homemakers’ spending practices and consumer credit use do not have any relationship?
Ho4: There is no relationship between homemakers’ spending practices and family welfare?
Ho5: Homemakers’ consumer credit usage and family welfare are not dependent on each other?
1.6 Significance of the Study
- No known study of this nature has been conducted in Ghana. It is therefore envisaged that the results have contributed important primary data to the rather limited information on “the influence of homemakers’ spending practices and consumer credit use on family welfare” particularly in Ghana. The results when published will also provide updates to the literature on the roles and responsibilities of homemakers as financial managers of
- The findings threw light specifically on the strengths and weaknesses of homemakers’ spending practices and consumer credit use which could be beneficial to stakeholders including family and consumer scientists, extension workers, the ministry of
education and microfinance in designing suitable programmes to address emerging issues. Such empowerment would enable homemakers to make informed and effective decisions regarding the use and management of money and credit to enhance family welfare. Also, the stress experienced by homemakers as they perform the important responsibility as financial managers of households is likely to reduce.
- Understanding the factors that influence spending practices and consumer credit use would enable financial counsellors and educators identify areas to stress in devising programmes in family financial management. This could enlighten families particularly homemakers to adopt good spending practices and effective consumer credit use that would enhance family
1.7 Operational Definition of Terms
For this study the following terms were defined as follows:
Homemakers: Women who keep their homes and manage the available household resources to sustain their families.
Spending practices: Decisions and actions taken by individuals or families concerning the use of money. These include decisions about what money is spent on, how much is spent, prioritisation of spending, set time for spending, where to spend and the satisfaction derived from the use of money. Spending practices also include the frequency
of compliance with fifteen financial management principles adapted from Hayhoe et al.
(2000).
Family upkeep: Organisation of the day-to-day household activities and the provision of basic needs for food, shelter, clothing, education, good health, home maintenance as well as meeting the social, emotional, moral and psychological needs of family members.
Family welfare: The overall state of wellbeing of members of a family in terms of their food intake, clothing, healthcare, education, transportation, entertainment, economic security, ownership of property and satisfaction derived from money spent.
Consumer credit use: this covers the use of any form of consumer credit such as cash loans, sales credit, credit cards, as well as service credit (payment for services rendered).
Family: a group of blood-related or unrelated people who live together and share common resources. This includes husband, wife or wives, their children and extended family members living with them.
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