Financial illiteracy is recognised (1) as a social problem that has worsened with the development of financial markets, the growing complexity of financial products, services and instruments, technological development, the digitalisation/dematerialisation of the economy and demographic evolution and ageing. In contemporary society, financial illiteracy significantly inhibits the quality of life and well-being of large and numerous segments of the population, such as the senior population, leading to processes of impoverishment, segregation and social exclusion.
Citizens are increasingly confronted with and compelled to make decisions about personal, family, collective and social financial aspects, which require a deeper mastery of more complex knowledge and information in the economic and financial areas, and streamlined digital skills.
The full exercise of citizenship inevitably requires an increase in financial literacy, the ability to read, analyse, manage and communicate about personal, family and society's financial condition, improving knowledge and understanding of products and concepts, attention and awareness of risks and opportunities, knowing how to get information and help to make informed decisions between choices, plan for the future and cope competently with day-to-day demands, adopting behaviours and attitudes that improve quality of life, well-being and, consequently, social inclusion.
Reality shows that the majority of the population in Portugal has financial literacy deficits and low levels of financial and digital knowledge and skills.
The Report of the 3rd Survey on the Financial Literacy of the Portuguese Population (2020), part of the financial literacy measurement exercise organised by the OECD as part of the International Network on Financial Education, calculated the Global Financial Literacy Indicator based on the responses, which showed a value of 62 points out of 100. In the survey carried out in 2023, this indicator was similar, at 63 points, and equal to the average for OECD countries.
The low number of correct answers, compared to the self-assessment made by the interviewees, shows in both periods that the perception of one's own financial knowledge is out of line with actual knowledge, and that the respondents overestimate their own financial knowledge. Thus, knowledge of basic concepts is still at a low level and gaps in understanding are evident.
As a result, there are insufficient levels of budget planning and systematic control of personal and family finances, explained by a lack of knowledge, which, combined with low-income levels, justifies a lack of knowledge about products, risks and opportunities.
Among those interviewed in 2020 who claim not to have saved in the last year, retirees stand out (42.5 per cent). In this context, and in a scenario of needing to pay an unexpected expense equivalent to their monthly income, only 28.4 per cent say they can afford it.
The results of the survey point to a direct relationship between financial literacy and levels of education and income, with the lowest levels of financial literacy being found among the population with the least education and belonging to households with the lowest incomes.
The 2020 survey also identifies significant asymmetries in the financial literacy levels of population groups, with particular emphasis on the very low literacy levels of the senior population, especially women; the unemployed and retired; those with no schooling or up to the 2nd cycle; those with no savings habits, and those with no savings to cover unexpected expenses of an amount equivalent to their monthly income, or loss of income; and those who have no confidence in planning for their retirement, or who don't plan for it at all.
The National Council of Financial Supervisors, the organisation responsible for conducting the survey, concludes that the senior population is a priority target group in which it is crucial to combat financial illiteracy. This priority is aggravated by the demographic context of the double ageing of the population: both by the increase in population numbers and their relative weight in the total population, and by the increase in life expectancy and longevity, which means that people are living longer and are extending the need to properly safeguard their sustainability in order to ensure their well-being and quality of life.
Technological development, the dematerialisation of society and digital public services also contribute to the worsening problem of financial illiteracy, enabling a growing intensification of digital services and channels, boosting the creation and offer of increasingly complex and sophisticated financial products and services that are inaccessible to people with lower levels of literacy.
The low level of measures to encourage a culture of lifelong learning, combined with low internet penetration, and the consequent resistance to learning, mistrust and withdrawal in the use of digital services further aggravate the social problem of financial illiteracy, leading to situations of marginalisation and social exclusion.
Older people, in these circumstances, are thus weakened and subject to various vulnerabilities, reflected in the difficulty of adopting appropriate financial behaviours, with low savings rates and strong exposure to unexpected situations, poor risk assessment skills and exposure to unconsidered losses, susceptible to fraud and scam situations, taking out usurious loans or financial risk services, which compromise financial sustainability, lead to situations of isolation and social exclusion and seriously damage their wellbeing and quality of life, with family and social costs.
We can therefore conclude that tackling the social problem of financial literacy deficits among the senior population is a pressing priority that generates value and positive social impact.
Note:
(1) By institutions such as the UN, the OECD, the EU, the ECB.
