Irish Financial Review

Irish adults that can’t add

A third of Irish adults struggle to work out how much change they should get in a shop and two-thirds cannot read a simple financial line graph, according to a leading financial skills study.

Financial education options available from, the financial education service

The study, from Cambridge University and University College London, which was published in March found “striking weaknesses” in adults’ financial literacy skills across many countries but adults here in Ireland fared especially poorly in all key categories.

Financial literacy is broadly defined as the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. MoneyWhizz has identified six key financial pillars; Earning & Income, Credit & Debt, Saving & Spending, Protection, Investing and Financial Decision-making.

According to the UK report, researchers analysed more than 100,000 results from 16- to 65-year-olds from 31 countries (listed below) who had completed the Programme for International Assessment of Adult Competencies (PIAAC) test in 2011.

As part of this test, adults were asked four relatively simple money-related questions that could be expected as part of day-to-day living.

The UK researchers’ analysis of these results said: “A substantial number of people lack the basic skills that are needed to solve everyday financial tasks.”

The study, The financial skills of adults across the world, finds of adults across the 31 countries, Irish adults are especially poor:

  • About a third of Irish adults could not work out how much change they should receive from a shop when buying a handful of goods.
  • About four-in-ten adults here struggled to work out the price they had to pay for a product when they were given a per unit cost, for example per litre or per kilo.
  • Roughly two-thirds could not read a simple financial line graph – the type often used to convey key information about pensions, investments and the economy – this placed Ireland near the bottom of the global survey.
  • Most struggled to calculate discounts involving more complex calculations – in the example, the price of season tickets to sporting events.

Adults in Estonia, Finland and Japan performed well across all four tasks, those in Ireland, Turkey, Chile, Israel, Italy, Spain and England & Northern Ireland had among the weakest financial skills.

Examples of the sorts of questions asked

  1. If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get?
  2. If a litre of cola costs $3.15, how much will you pay for a third of a litre?
  3. Explain the information presented in a simple financial line graph.
  4. If a football club offers the same discount for all season tickets – Main Stand – $50 for single entry, $300 for a season; Stand 2 – $35 for single entry, $210 for a season; Stand 3 – $25 for single entry, $150 for a season – what would the price be for a Stand 4 season ticket, where a single entry costs $21?

The answers are $6.10, $1.05 and $126 respectively.

With more and more Irish adults living longer, the long-term need to plan one’s financial well-being from an early age is more important than ever. This is due to the combined impact of changing employer pension arrangements which have shifted from so-called ‘final salary’ or Defined Benefit pensions to Defined Contribution pensions. Under the Defined Contribution pension option, all of the investment risk is shifted to the individual. Also, many states, including Ireland have increased the qualifying age for one to receive the State Contributory Pension by several years. This has resulted in loss of income for millions of future retirees.

Consumers today have far more financial responsibility for their long-term financial well-being. Yet, few have the necessary skills to make informed financial decisions. It is important that consumers  with relevant, meaningful and timely financial education on key concepts, including investing, time-value of money, compounding and tax-relief so they are better prepared for their future financial needs” said Mr. Frank Conway, Founder of MoneyWhizz, which works with primary and secondary schools as well as leading employers across Ireland in the delivery and development of personal financial skills.

The countries covered by the research paper are:

  • Turkey
  • Korea
  • Cyprus
  • Ireland
  • United States
  • France
  • Czech Republic
  • Finland
  • Slovakia
  • Chile
  • Estonia
  • New Zealand
  • Singapore
  • Slovenia
  • Belgium
  • Norway
  • Israel
  • Canada
  • England and Northern Ireland (counted as one for the report)
  • Poland
  • Germany
  • Italy
  • Lithuania
  • Austria
  • Greece
  • Russia

What a bunch of 10-year olds taught me about money

By Frank Conway

Yesterday was money day at one Dublin primary school.

Gathered were some 30 5th class students. All of them had been provided copies of the Talking Cents  (Edition 4) Money Magazine developed by MoneyWhizz and Bank of Ireland.

Edition 4 discussed a range of topics on the Cash V’s Cashless debate that adults work through on a day-by-day basis.

So, the students were asked to give their thoughts on their own preference on whether they preferred cash or cash-less when it came to receiving money, saving money and spending money.

Overall, the preference was for cashless by about a margin of 2:1.

While talking with the students, it was clear that all had read Talking Cents Edition 4 but their personal take was very interesting. So, when it came to group discussions, all of the students were eager beavers to tell me why they preferred cashless:

“It’s far easier” said one.

“It’s quicker” said another.

“You won’t have so much change and it’s cleaner” said a third.

But it was the reaction of a fourth that was really captivating

“Some shops can’t take cashless so you’ll need cash” was her observation.

She was spot on. Some shops, or merchants don’t have the card-reader technology necessary to read contactless cards. It was a moment of clarity for me personally. A 10-year old got it. They got the paying thing and they knew where roadblocks exist from just observing their parents or even from their own experiences.

On a range of other topics, this class of 10-year olds exhibited a very strong wish to learn and peppered me with some really interesting questions, including:

“How does and employer pay your money into the right bank account?”

“Can an employer take money out of your bank account if they have your bank account details?”

“Does that money belong to the bank?”

And when it came to a class challenge that involved identifying a selection of currencies from various countries, while most of the kids got the answers right, one made a very astute observation:

“Why do so many currencies have men on them?” – it was the question of the day!

My aim for the class visit was to teach a group of 10-year old students about money.

I came away having learned a lot myself; kids are smart, they want to learn and when they are engaged in a relevant way, they want to learn.

Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz, the financial education service. 


False sense of wealth

Today’s report from the Irish Central Bank provides some bank holiday cheer; we are all wealthier!

A lot of our new-found wealth derives from rising housing value. Savings and investments also play a role but is the rise in housing value that is the big driver.

The Central Bank is not wrong in its assessment. For over a decade, I have advocated that homeowners buy their homes as a form of forced savings and wealth creation. But, it is just one of a number of key steps I recommend be taken to build, grow and protect personal wealth.

Property, especially buying ones home to live in is a very efficient form of wealth creation. Especially attractive is the tax efficiency.

But property is also a very cumbersome form of wealth creation. Once the property is fully owned – where any outstanding mortgage is fully repaid and the buyer actually owns the property, they cannot fully realise the value of that wealth except if they were to sell it or take on more debt secured against it.

This is why it is important families use other means of wealth creation which they can access in the future. For example, using tax relief to start a pension or participation in a company-sponsored pension arrangement are highly rewarding means of building a flexible form of personal wealth. This is wealth that can be liquidated quickly and tax-efficiently.

Property, when taken as a source of personal wealth is a good way of building that wealth.  But property is also a cumbersome way of accessing that wealth for those still living since it also doubles as their shelter, a basic human need.

For Irish families that fully own or are paying down mortgages on the homes they live in, the latest Central Bank report makes for interesting reading. In some cases, it may help some people feel a little more positive. But, the bottom line is that in order to build meaningful, accessible wealth, investing (not property) is the most efficient way of achieving this and the best way of achieving that is through tax-efficient pension arrangements.

Finally, when it comes to investments, the best route to long-term growth and returns will depend on the cost of management and the Ongoing Charges Figure; the lower, the better as investments stand the best chance of maximum rates of growth when fees are kept to a bare minimum.

Frank Conway is a Qualified Financial Adviser

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