Adults across Ireland struggle with key financial concepts our new survey reveals. The findings across key areas of personal financial management including borrowing and investing as well as budgeting highlight difficulties families encounter.
- One-in-four (26%) are prepared to borrow to pay for goods and services, even in a situation where they already have savings on hand earning little or no interest.
- Almost half of respondents (47%) failed to correctly identify an appropriate use of credit where it could be used for personal advancement.
- Over six-in-ten people (64%) failed to interpret the correct situation where inflation would have the most negative impact on personal finances.
- One-in-three (31%) failed to identify the appropriate level of Life protection for specific life stages.
- One-in-five (20%) failed to correctly identify which information is available on a personal credit report.
- Half of respondents (45%) incorrectly identified the most suitable place for short-term savings.
- Four-in-ten (41%) incorrectly identified the best means of managing their money to counter periods of high inflation.
On the positive side:
- A majority of respondents (93%) correctly identified the negative impact inflation has on personal savings where the rate of inflation is greater than the rate of interest paid.
- Interestingly, an overwhelming majority (99%) of respondents correctly identified that stocks are uninsured.
- A majority of respondents (93%) correctly identified that pension contributions offer positive tax benefits even though a cohort incorrectly answered that private pensions have no tax liability whatsoever. Private pensions have various thresholds over which tax is applicable.
Why financial knowledge matters
Overall, the general level of financial literacy is below where it should be if consumers are expected to make informed financial decisions. It is imperative that consumers are aware of how they would be impacted during periods of high inflation, have an in-depth knowledge of tax thresholds on their private pensions and develop a capacity to retire with sufficient financial resources in place to sustain them. Additionally, families entering a period of high cost during their family life-cycle should ensure they have adequate financial protections in place to provide them and their loved ones with adequate financial cover if and when events arise. There are also some worrying and significant gaps in basic financial skills, and this is especially highlighted where over one-in-four would be prepared to borrow at high cost instead of using savings where they may be earning little or no interest payments.
Frank Conway, Founder of MoneyWhizz – the financial literacy initiative said: “Unfortunately, this survey reveals that many adults have important knowledge gaps across key areas of personal financial awareness which can have massively negative implications for their long-term financial well-being.”
He added: “It is vital that financial education and personal budgeting is introduced at an early level, especially in schools as an essential life skill.”
Survey Methodology: This survey was conducted between December 2015 and January 2016 from online participants. A total of 201 valid responses were completed.
About MoneyWhizz – MoneyWhizz delivers a full range of financial planning seminars across Ireland including Personal Financial Planning, Personal Investing, Retirement Planning, Protecting against Fraud and Financial Exploitation and Home Purchase. A Special Schools Financial Education curriculum has been developed which is currently being included by teachers and schools as a financial education resource. This special schools programme is aligned to OECD financial literacy specifications.
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