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Swedbank Financial IQ test: almost half of the Latvian population does not do budget planning – Economics, finance

The financial skills of the population have significantly improved in recent years, but the understanding of financial issues is still incomplete, according to the results of the Financial IQ test implemented by Swedbank. Although more and more people understand the importance of the need for savings, as well as make savings for a specific purpose, almost half or 46% of test participants indicate that they do not plan the budget, while insurance is still considered a mandatory requirement of the bank without linking it to family budget security.

Swedbank Financial IQ test the data are collected for the period from 15 February to 22 March and have been completed by more than 7000 participants during this period.

The aim of the test was to allow citizens both to assess their financial planning skills and to identify which habits increase their well-being but which have an adverse effect on them, as well as to provide valuable advice on how to combine knowledge and understanding with practical action. According to the results of the test, we see that a large part of the Latvian population does not carry out budget planning or does it in their head, which is considered to be a very unsafe planning method. Nowadays, you can easily plan, compare and control your budget, for example, with the help of Internet banking, where fixed income and expenses at the end of the month will allow you to accurately assess who spent the most and where you could save, allowing you to draw conclusions and improve your financial strategy.”Points out Reinis Jansons, Head of Swedbank Finance Institute.

Interestingly, one third of participants still perceive insurance as a mandatory requirement for the bank to purchase a car or home, but do not link it to the security of the family budget. On the other hand, the most challenging test question for the participants turned out to be related to the annual percentage rate of charge (APR), where only 23% of the participants gave the correct answer.

This means that a large number of people, when receiving a loan offer, do not really understand or only partially understand what it really means and how the monthly amount of loan repayment is affected by a particular interest rate, not allowing a full assessment of the offered liabilities. Insurance is also still largely considered a mandatory requirement on the part of banks, although it can protect the family budget and be an airbag in the event of an accident.”Reinis Jansons continues.

At the same time, the results of the test reveal that the population has become smarter and more aware of the importance of saving. It has become a common topic, and 9 out of 10 participants indicate that they are accumulating for one or more purposes.

Most likely, it is related to the consequences of the Covid-19 pandemic, when a large part of the Latvian population found itself in a situation where previously formed savings proved to be important. It is expected that this historical experience will have a positive effect on the savings habits of the population for some time to come,”Reinis Jansons hopes.

The average result obtained by Swedbank in the Financial IQ test is 133 points out of a maximum of 180 possible. Both men and women demonstrate equivalent knowledge in the test.

Financial IQ test can be filled in here: https://finansuiq.manasfinanses.lv/. In turn, it is possible to improve their financial skills for Latvians by applying to the Swedbank Finance Institute digital workshop: https://finansuskola.manasfinanses.lv/.

Swedbank Financial Institute

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