2 weeks Ago
People with higher levels of financial literacy are more likely to use price comparison sites. Those with lower levels of financial literacy have a tendency to use “buy now, pay later” options for buying goods more frequently. These are among the findings of a new report from the Competition and Consumer Protection Commission (CCPC) that tracks Ireland’s financial wellbeing and financial literacy.
The report, which is based on surveys and quantitative analysis methods, found that one in four respondents say they do not shop around before buying a financial product. And one in five said they have been victim of some type of financial fraud. Higher financial literacy is strongly linked with increased financial wellbeing across all demographic groups.
The study also found that women, lone parents, and the unemployed demonstrate lower levels of financial literacy than the rest of the population. The report stresses that even though riskier and more complex products such as crypto are increasingly accessible, the majority of those surveyed showed a limited understanding of how those products work. For more traditional savings, investment, and retirement products, a lack of knowledge was also apparent, the CCPC said.
Less than 40pc of respondents who own such products understand compound interest. This indicates a clear need for focused educational initiatives, the CCPC said. People need to better understand how buy now, pay later products work, the CCPC said.
The use of these is associated with those with lower level of financial literacy. Consumers can easily rack up debts by using buy now, pay later services. The research found that 58pc of people were satisfied with their current financial situation, though one in seven had too much debt.
However, surveys done as part of the research found that one in three respondents were just getting by financially. One in eight could only cover their costs for a month or less in the event of an income shock. Some 86pc of households said that they save, with men more likely to engage in higher-risk saving.
One in four respondents said they did not shop around before buying a financial product. People who fail to seek out the best value for items such as motor insurance often lose out. Most respondents, including older users, use the internet for banking and financial planning, the CCPC research found.
One in five were the victim of some type of financial fraud. The survey shows a high level of financial literacy in Ireland, but gaps between key groups also exist. CCPC commissioner Kevin O’Brien said the report is a timely reminder of the varying levels of financial wellbeing and financial literacy across Ireland.
“Education, employment and gender can significantly affect people’s financial wellbeing; awareness of these disparities is crucial for developing targeted and more impactful policies.” Mr O’Brien said more and better financial education is vital, particularly in light of the uptick in fraud and scams and the accessibility of complex financial products through fintech. Knowledge is power and financial education is protection.
He said improved financial literacy is strongly associated with improved financial wellbeing, but it is not a silver bullet. It must be combined with other policy tools, such as consumer protection laws, social welfare payments and measures to help vulnerable groups like lone parents, the low-paid, and unemployed people in bridging the financial wellbeing gap. Mr O’Brien said the CCPC is hopeful that the results of the report can guide policy makers towards the groups who would most benefit from additional resources.
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