Workshop 4 "Can Financial Education Succeed? The Limits of
Education as a Solution to Overindebtedness" "Ants and Grasshoppers" Results of an Empirical Survey by Claudia Lopez and Catarina Frade |
From the Report delivered by ECRI on the Consumer Financial Capability Workshop November 2005 (see Link)
Catarina Frade and Cláudia Lopes (Observatory of Consumers’ Indebtedness,
University of Coimbra, Portugal) based their study of the social and psychological factors
affecting consumer financial literacy on a series of face-to-face interviews with Portuguese consumers. The first aim of those interviews was for the Observatory of Consumers’ Indebtedness to analyse the relation between unemployment and overindebtedness. For the present study, the preliminary results obtained during the
interviews illustrate the theoretical framework of values developed by the authors, as well as its implications for financial literacy.
In Portugal, consumer credit is a relatively new phenomenon that took off in the favourable socio-economic climate of the 1990s and rapidly developed. Nowadays, the Portuguese household indebtedness ratio is one of the highest in Europe (117% of
disposable income in 2004), with the use of credit varying along socio-economic categories as well as from one geographic area to another. This swift evolution has challenged the local cultural values that often demonized borrowing.
Two groups of interviews were held: one with unemployed workers and the other with debtors who had sought the assistance of DECO (largest Portuguese consumer protection association). Besides the main investigation goal of clarifying the unemployment/over-indebtedness interdependence, those interviews also provided information about the interviewees’ values and attitudes towards consumption, credit
and indebtedness which provides a useful basis for the design of financial education programmes.
A recent formulation of human values system (Schwartz 1992, 1993) comprises ten core values aggregated in the following four dimensions: openness to change which opposes to conservation; and self-transcendence which opposes to self-enhancement. This system can be used to identify the determinants of financial attitudes and behaviours.
From the data collected during interviews it is possible to draw the general profile of each interviewed group, the unemployed being characterized as “the ants” and the overindebted as “the grasshoppers”. The ants were mainly factory workers, aged 40 on average, with low levels of education, low salary levels and strong informal solidarity networks.
They had a rural or semi-urban lifestyle and tended to have longstanding employment relations. The grasshoppers had more various occupations, often in services industries. They were younger (25-35 years old mostly) and presented more job
turnover. They had higher qualification and income levels. The relation to debt and consumption was very different from one group to the other: the ants had strong personal ethic regarding credit payments, while the grasshoppers, albeit intending to pay or repay, were less willing to make sacrifices and found it hard to establish financial
priorities. Their financial behaviour also varied: the ants saved money on a regular basis (although through unsophisticated products) and showed an aversion to credit while the grasshoppers almost never saved and used credit products intensively, whether for housing or consumption purposes.
Financial education is an essential component of the vast field of consumer education.
As many other types of good, financial products have become more diversified and
complex: consumers need to be equipped with the basic skills that will allow them to
make discerning choices and seek information/help appropriately. Although the results
developed here cannot be extrapolated to social groups (due to the convenience
sampling procedure used for the interviews), they give an indication of how divergent the
value systems and the socio-economic environments can be between groups of
consumers. Consumer financial education should take into account those specificities.
Given that financial behaviour is related to certain group standards and values, it should
be directed at both the individual and the whole community levels. |
| ID: |
37241 |
| Author(s): |
iff |
| Publication date: |
28/04/06 |
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Created: 20/04/06. Last changed: 20/04/06.
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