Financial Insight among the Dutch

30 October, 2008

Financial Insight among the Dutch

Research Results and Strategy

Mr. Olaf Simonse

Ministry of Finance, the Netherlands

[email protected]

Updated version

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Contents

CentiQ: a multi-sector platform for financial literacy

Research

• Goals

• Approach

• Research Model for Financial Insight

• Sample Characteristics

Results

• Strong and weak groups

• Financially unprepared

• Financial upbringing

• Financial knowledge

Strategy

• Policy implications

• Strategic starting points

• Programmes and projects

Synopsis: key issues and recommendations

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Contents


Research

• Goals

• Approach



Results





Strategy





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CentiQ: a multi-sector platform for

financial literacy

MISSION

The CentiQ partners want to increase the financial

insight and financial skills of consumers and promote

informed financial decision making among consumers.

By joining forces in the CentiQ platform partners want

to better reach, inform and help consumers to become

“wiser in money matters.”

CentiQ is a platform, in which the following parties joinforces (40 partners in total):• Government (ministries of Finance, Education and SocialAffairs) and financial regulators• Consumer organisations• Financial services providers (associations of banks, insurers, pension funds and financial advisers)

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Contents


Research

• Goals

• Approach



Results





Strategy





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Goals of the scientific research

1. To define the concept “financial insight”

2. To determine the current level of financial insight in

the Netherlands

1. Gaps in financial insight

2. Specific groups?

3. How can financial insight be improved?

3. To determine the level of financial awareness and

motivation of Dutch consumers

1. Differences between groups?

2. How can financial awareness and insight be improved?

Research (adults)

Research (young people)

Inventorisations

Strategic Action

Plan

1) Establish a baseline2) Determine how to improve awareness, motivation,

knowledge and skills for different groups

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Research Approach

Phases:

1. Qualitative research

• Literature quick scan (national and international)

• Develop a theoretical model for “financial insight”

• Focus groups

• Develop a questionnaire

2. Quantitative research

3. Scientific analysis of the research results

Organisation:

• Expert group: researchers from partner organizations

access to the best experts and their collective knowledge on the subject

• Feedback group: policy makers and communication experts

from a broad group of partner organizations

input and commitment

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Research Model Financial Insight

Attention was devoted not only to the degree to which the Dutch

possess financial knowledge and skills – expressed in

financial behaviour – but also to the factors that determine this

financial responsibility (e.g. motivation, perception)

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Sample characteristics

Sample: 4.280

• persons of 18 years or older with a Dutch nationality, that can read and write Dutch

• Cross selection stratification for sex, age, education level, region, ethnicity and internet use

Type of questions:

• Subjective (personal and household characteristics, perceptions, motivations, knowledge, behaviour, specific financial products)

• Objective (knowledge quiz)

• Questionnaire based on existing surveys (FSA, Dutch Central Bank)

Methods used for the survey

• Internet: • CASI (Computer Assisted Self Interviewing):

• 3.000 responses;

• Response percentage 85%

• Face-to-face: • CASI (Computer Assisted Self Interviewing) + CAPI (Computer Assisted Personal Interviewing)

• 1.280 responses

• Response percentage 19%

Respondents weighed for non-response

1) Representative sample of Dutch population (18+)

2) Reuse existing questionnaires

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Contents


Research

• Goals

• Approach



Results





Strategy





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Clusters of consumers, from financially

strong to financially weak

Gebaseerd op CBS (eind 2007) 12,4 miljoen Nederlanders van 18 jaar en ouder

Groups differ in terms of financial knowledge, skills, motivations,

perceptions and behaviour

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Financially unprepared

The combination of getting by and saving determines financially strength

• Getting by is not predicted by financial knowledge, but by motivation and perception

• Saving is “wise” financial behaviour based on financial knowledge and long-term horizon

• 15% is financially very strong; 20 % is (very) weak

Most Dutch people can get by with their current income, BUT:

• 10% (1.1 mln) repeatedly has no money left over at the end of the month

• 41% (5.1 mln) is not prepared for a significant decrease in income or major expenditure.

• The chances are reasonably high (divorce, job loss, change of job, accident, illness)

It is important that consumers are able to adapt better and more quickly to new financial situation through:

• Financial management is the most important determinant for strong financial behaviour. This applies for high and low income groups. Financial management can be learned

• Financial management = organise financial affairs properly, refrain from impulse purchases, pay bills on time and save rather than borrow

• Building a financial buffer

1) Like people all over the world, the Dutch are not sufficiently

financially prepared

2) Financial management and building a financial buffer are the

key predictors of sound financial behaviour

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Financial upbringing is extremely

important

Financial upbringing

• Learning to deal with money:

• Learning to deal with money from parents

• Learning the value of money from parents/teachers

• Household spending kept to a tight budget

• Parents deal with money properly

• Encouraged to take a part time job and receiving pocket money

What‟s learnt in the cradle lasts till the tomb

• People with a good financial upbringing, are financially stronger as adults: better financial management, better able to get by, more saving

The facts

• 22% (2.7 mln) did not learn to deal with money form parents

• 30% (3.7 mln) was not stimulated to take a part time job

• 38% (4.7 mln) did not get pocket money

Special attention for

• Children with lower education levels

• Children of parents from weak groups

People who learn to deal with money at an early age diplay

better financial behaviour later in life.

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Too little knowledge of financial products

Consumers say that they have too little knowledge about financial products (38%, 4.7 mln), specifically:

• pensions (47%, 5.8 mln)

• shares, investing (47-53%)

• lack of knowledge decreases with financial strength

Knowledge quiz (interest rate, inflation, stocks, return)

• 13% answered all 4 questions correctly; 58% answered fewer than three questions correctly

Very limited interest

• Only 20% of the respondents has a need for additional information or knowledge

Issues

• Not always wel-considered decision; not always long term orientation unpleasant surprises

Information problem

• 30% has difficulty finding good and relevant financial information

• Problems: information is too much, too difficult and unclarity about reliability

• Low involvement of consumers in financial products

1) People over-estimate their own financial knowledge

2) People say that they need additional information /

knowledge, but are not motivated to acquire it

3) When they are motivated, information is too much, too

difficult and there is unclarity about reliability

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Contents


Research

• Goals

• Approach



Results





Strategy





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Types of Policy Measures

Agenda setting

• Popularise dealing with money (“put it on the agenda”) in a smart way

as a desirable and wise behaviour for consumers to achieve their goals

Education, training (courses) and raising consumers‟ awareness

• Curricula for schools and adult education

• Give information and teach skills that lead to better financial behaviour

Market transparency

• Relevant, clear and comparable information when purchasing and using

financial products

Develop resources and tools

• intelligent agents

• decision support systems

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Strategic Starting Points

1. Household finances are the basis for all CentiQ programmes,

projects and activities.

2. The platform centres on the consumer.

3. Prevention is better than correction. That means: much attention

to youth, strong emphasis on good financial management and timely

coverage of risks that a consumer cannot cope with on his own.

4. Action is undertaken where efforts are already taking place.

The platform does not want to reinvent the wheel. Systematic

evaluation of activities provides insight into their effectiveness.

5. Easily accessible and practical resources which consumers can use

to easily gain an overview of and insight into their finances.

6. Basic facilities (financial helpdesk, a „body of knowledge‟, and

„translating‟ complex information to a simple level)

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Programmes and projects

0. Basic Facilities

• Agenda setting

• Financial helpdesk, a „body of knowledge‟, and „translating‟ complex information to a simple level)

1. Programme “Finances in order”

• Good financial management is the basis

• Special attention for saving and borrowing

• Examples: insight in income/expenditure, migrant workshop, website, …

2. Programme „Learning to deal with money early on‟

• Three tracks: child-rearing, education and youth communication

• Examples: give “dealing with money” a structural place in schools, support parents in financial upbringing, youth communication, …

3. Programme „Providing for the future‟

• Being prepared for (un)expected events

• Examples: financial education in the work place, allign with life events, …

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Contents


Research

• Goals

• Approach



Results





Strategy





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Synopsis:

key issues and recommendations (1)

1. A multi-sector platform works• Gives access to the best expertise in the field

• Generates commitment for research results and activities/projects

2. Include psychological and motivational factors

in the research model• It‟s not only about knowledge

• Psychological and motivational factors play an important role in

the ability to manage your financial affairs

3. Focus on “life events”• They have an important impact on people‟s ability to get by

• At life events, people are more open for financial information

4. Challenge: extracting target groups• Involve policy and communication experts early in the research

project

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Synopsis:

key issues and recommendations (2)

5. Reuse existing knowledge

• Questionnaires, et cetera

6. Research is important, but it is not a silver

bullet

• Many outcomes confirm what you already know, some are new

and surprising

• Research can help to increase the sense of urgency

www.centiq.nl

[email protected]

http://www.centiq.nl/

mailto:[email protected]



Documents

Financial Insight among the Dutch