Financial education worsens among youngsters in 2014

According to the second edition of the Financial Education Indicator, Brazilian citizens between 16 and 24 years old scored below the average and showed a regression over 2013. Half the population of the country had a score between 0 and 6, and only 3% scored 8 or above. The 2014 index also reports that the number of people who save money dropped across all social layers. People who have bank accounts showed the highest level of financial education. Any citizen can visit Serasa website to take a test and check his/her score

In addition of being rated as the group with the poorest financial education level, youngsters aged between 16 and 24 years had worse scores as compared to last year. This was one of the conclusions of the second edition of Financial Education Indicator (IndEF) 2014, developed by Serasa Experian and IBOPE Inteligência, which is being reported today, August 7^th, at Serasa Experian’s headquarters. With this indicator, Brazil is now the only country around the world to have a methodology available that allows learning about and managing its population’s financial education levels.

“Our goal is to report the level of Brazilian’s financial education on a yearly basis in order to support measuring results in companies, in the organized civilian society, and governments, which face the strong challenge of educate our consumers in terms of finances”, says José Luiz Rossi, General Manager at Serasa Experian.

IndEF 2014, which uses a 0 to 10 scale, reported an average rate of 6 to Brazilians in general – the same rate as 2013. The higher the rate, the higher the level of financial education. This year, however, youngsters had the worstperformance. The group between 16 and 17 years old showed a drop over last year’s rate: from 5.9 to 5.5. Brazilian population between 18 and 24 years old also had a decreased rate compared to 2013: from 5.9 to 5.8.

For developing the IndEF, 2002 people were interviewed over the first quarter of 2014. These were individuals above the age of 16, living in 140 different cities of every Brazilian state, including the Federal District, capital cities, outskirts and rural areas.

This Indicator is composed by three sub-rates concerning Brazilians’ personal and familiar finances:Knowledge,Attitude, andBehavior, each one of these being assigned a different weight: Attitude (24%), Knowledge (26%), and Behavior (50%).

The Knowledge sub-rate assesses how financial concepts are understood, the Attitude sub-rate assesses how respondents see their relationship with money, and, finally, the Behavior sub-rate, which measures the actions of the respondents in their daily lives (such as, for example, if they spend more than they earn, if they save money, and if they make plans for the future).

In the IndEF 2014, as it was in 2013, the sub-rate Knowledge is the one with the highest scores, followed by Attitude, and then, by the Behavior dimension.

070820141

Only 3% of the population scored 8 or above

In addition to the general rate, IndEF established a criterion for rating each individual. Thus, taking scores up to 5 as level 1, with 18% of the population. On level 2, numbers above 5 and up to 6 were taken into account, which accounted for 32% of the Brazilian population. Level 3 accounts for 31%, with scores above 6 and up to 7. In the interval between scores 7.01 and 8 – level 4 – are included 16% of the consumers. And, then, on level 5, are only 3% of the individuals scoring 8.01 or above.

070820142

Money vs. Age Group

Age is also a factor impacting IndEF. As people grow old, an improvement in terms of financial education is noticed.

070820143

Please, see below how Brazilians responded to consumption-related questions:

070820144

Slight worsening of the indicators among men and improved Attitude among women

This year, just like in 2013, there are no significant differences between genders. Both men and women delivered almost the same results in terms of financial education. However, as compared to 2013, a slight worsening of the indicators among men and an improved Attitude among women were noticed.

070820145

The indicator also reports different results by social layer, although this variation was subtle – for all layers – compared to last year. Layer AB scored 6.2, while layers C and D/E had the same score as 2013.

070820146

The indicator also reports that the level of financial education is still higher when more people, in addition to the consumer him/herself, play a role in decision-making process involving money or credit. Spouse or other close family member’s opinions have a positive impact on financial education. But leaving financial decisions on the hands of a spouse seems to be a bad idea – this was the lowest score in that category: 5.5.

070820147

Number of people who save money decreased in all social layers

Financial education also remains connected to savings, although the rate for those who saved money in the last twelve months has been a little lower compared to last year (6.6 in 2014 vs. 6.7 in 2013). This decline on financial education in 2014 may have been caused by a reduced saving behavior, which was reported for all income layers: this year, only 57% of consumers earning above tem minimum wages have a savings account vs. 76% in 2013 (a reduction of 19 percentage points). The second lowest drop was among people earning between 5 and 10 minimum wages, from 59% in 2013 to 45% this year (14 percentage points less). There was also a reduction of one percentage point among those who earn up to one minimum wage, or 17%.

070820148

070820149

People with bank accounts have a higher level of financial education

For individuals with Elementary School-level schooling, IndEF differs significantly among those who have access to financial services, such as bank account, credit card, insurances, etc. vs. those who don’t. For people with High School or College degree, variations are noticed on financial education levels, especially concerning those who have insurances. Interestingly, the fact of an individual having access to financial services or not impacts differently the three dimensions: Attitude, Knowledge, and Behavior.

0708201410