Women, unemployed with lower financial literacy

Women and the unemployed are among the groups with low levels of financial literacy, according to the report released on Thursday by the Bank of Portugal (BoP) on financial literacy, based on a survey conducted in 2020.

According to the banking regulator and supervisor, the financial inclusion survey (in which 1,502 people were surveyed in door-to-door interviews) concluded that the Portuguese have a high level of financial inclusion, with about 70% of respondents at the highest level of financial inclusion, as they regularly use a current account and hold other financial products, such as term deposits (41.6%) and credit cards (36.2%).

BoP said that a significant proportion of respondents know that the minimum bank services account exists (50.9%) and that even 23% understand that the access condition is to have a single current account in the banking system (well above the 4.9% of 2015).

As for digital financial inclusion, almost half of the respondents use digital channels (home banking or apps) to access their current accounts and other banking products and services.

Of the respondents, 60% save, the main reason being to meet unforeseen expenses (49.8% of respondents). They also save for non-regular future expenditures, such as holidays or trips (15.4%), to pay for education and help their children (14%) or for retirement (9.5%).

When taking out loans, around 75% say they read the pre-contractual and contractual information. The bankers’ advice from the institution is the source of information for 63.9% of the respondents when contracting loans. On deposits, the bank worker is the source of information for 41.4% of respondents.

There is, however, a problem in understanding financial concepts, says the BoP, indicating that respondents reveal a failure to describe the concepts of Euribor (average interest rate resulting from loans between banks in the eurozone, used in contracts such as mortgages) and spread (interest rate applied by banks in credit contracts, above the reference rate, such as Euribor, and which can be understood as the bank’s profit margin).

In the interviews, according to the report, significant differences between groups are also visible.

The overall financial literacy index (which includes financial inclusion, digital financial inclusion, savings management, choice and management of banking products and understanding of financial concepts) increases as income and education levels increase.

“Respondents with at least secondary education or living in households with gross monthly incomes above €1,000 stand out for positive results on the index,” it said.

Women have a lower overall financial literacy index (55.5) than men (61.7).

In proportion, fewer women have current accounts than men (89% of women compared to 93% of men), and also fewer women have other financial products besides this account (66% compared to 74%).

Women also have slightly lower knowledge than men about minimum banking services.

They also use digital channels less than men, justifying this with difficulties in using the technology or a preference for automatic teller machines.

In the understanding of financial concepts, women answer more incorrectly than men, the difference being greater in questions on simple and compound interest, the evaluation of the degree of risk of term deposits and the concept of spread.

By age group, 74.7% of people aged between 25 and 39 use digital channels but aged 70 or over, only 8.1% use them, with older people standing out for the low level of digital financial literacy.

On the other hand, young people stand out for digital financial inclusion but, on the other hand, have a slightly lower overall financial literacy index than the rest of the respondents.

Proportionally, respondents aged between 16 and 24 have fewer demand deposit accounts and have less knowledge about the minimum banking services account. The proportion of young people who save (around 60%) is similar to the remaining respondents. They save more regularly, but more for future expenses (such as holidays and trips) and less to meet unforeseen expenses.

Young people’s knowledge of financial concepts is relatively lower than that of the other respondents. Even so, they score above average when asked about the amount of interest to pay on a €25 loan, on reading a bank statement and on calculating simple interest.

Workers are the population group with the best financial and digital inclusion levels, making proportionally more use of banking services and saving more (68.3% compared to 50.6% of the remaining respondents).

Working people score even better on all the questions on understanding financial concepts.

In contrast, the overall financial literacy index of the unemployed (53.1) is lower than that of the remaining respondents (59.3), being the group that most often does not save and is also less able to pay an unexpected expense.

Moreover, the percentage of unemployed people with a current account (85.2%) is lower than the average of the other respondents. Only among students, this proportion is lower (84%), with the unemployed justifying more often that someone else’s account is sufficient.

However, their knowledge of the minimum banking services account is slightly above the average of the other respondents (26.1%), although lower than that of employees (28.2%).