Swedbank Financial IQ test: Almost half of Latvians do not plan a budget

Although more and more people understand the importance of the need for savings and 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. IQ tests ”.

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.

“The aim of the test was to enable citizens to assess their financial planning skills and identify habits that 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’s Financial Institute.

One third of participants still see insurance as a mandatory requirement for a bank to buy a car or home, but do not link it to family budget security. 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 an offer from a lender, don’t really understand or only partially understand what it really means and how the monthly loan repayment amount is affected by a particular interest rate, not allowing a full assessment of the liabilities offered,” explains Jansons.

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 habits of saving the population for some time to come, ”Jansons is hopeful.

The average score of the participants in the “Financial IQ” test implemented by Swedbank is 133 points out of a maximum of 180 possible. Both men and women demonstrate equivalent knowledge in the test. The Swedbank Financial IQ test data was compiled for the period from 15 February to 22 March, and during this time it was filled in by more than 7,000 participants. The test can be completed here.

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