Financial and Capital Market Commission (FCMC) has released the results of the second measurement of the financial literacy index, which demonstrate that the level of resident knowledge of financial issues has increased over the year and has reached +21.2 points (compared to+20.6 in 2014). The Latvian households have become more stable and reached the level of financial sustainability, as for the first time since 2005 they have returned to the preferable development zone. This is evidenced by the aggregated value of statistical indicators, i.e. +2.3 in 2014 in comparison with the economic recession period when it was -59.7.
FCMC Chairman Kristaps Zakulis: “Our initiative to develop a new measurement tool for resident financial literacy – Financial Literacy Index – now proves itself in life. This year, we can notice the first changes in the attitude of citizens towards financial matters – deeper awareness of e-service security, more accurate family budgeting and timely settlement of accounts, as well as creating safety cushions for emergency situations at least; all above mentioned corresponds to the financial education activities carried out by counterparties. But there are some areas where current trends are not so encouraging – long-term financial planning should be promoted specifically in the periods of the economic stability and general prosperity. This is what we are going to work on closely together with our counterparties.”
The FCMC has developed an interactive tool for easy access to the results of Financial Literacy Index broken down by years, available in Latvian at http://www.klientuskola.lv/lv/petijumi/finansu-pratibas-indekss.html
Over the period, an increase in resident financial literacy has been observed in the topics related to private financial planning or household budget planning, e-security and public awareness, as well as savings. The figures are also presented broken in five demographic groups – the youth (18-24 years), entrepreneurs and self-employed, salaried employees, rural residents and pensioners. The highest index growth is seen in the topic on public awareness and e-security – where the demographic group Pensioners has raised their financial literacy almost twice as high as before.
Nevertheless, for a second year in a row Latvia’s population has received overall negative ratings in two financial literacy topics: in the topic Loans the index even dipped to -0.4 points (compared to -0.2 points in 2014), but in the topic Pensions – remained unchanged at the low level of -0.5 points.
Financial Literacy Index
The Financial Literacy Index is the score calculated using an individual methodology for estimating seven financial literacy topics based on the annual surveys of the resident financial literacy. The average index characterizes the level of financial literacy in Latvia in a particular year. The index was created in cooperation with the marketing and public opinion research centre SKDS. Besides, FCMC has developed an aggregate analytical indicator characterizing financial stability and sustainability of Latvian households, defining the value area (in the scale from -5 to +5) that points out the further trends of stability and sustainability of Latvian households.
The second survey of financial literacy of Latvian residents and calculation of the index was commissioned by the FCMC and carried out in cooperation with the research centre SKDS in Q2 2015. In total, 1019 respondents aged 18 to 79 years were surveyed. The survey was conducted in a manner of face to face interviews in their place of residence in Latvian and Russian. The base questionnaire of the Organisation for Economic Cooperation and Development (OECD) was used allowing Latvia to compare their financial literacy level with the OECD member states already this year.
The summary of survey results in Latvian is published on the FCMC website (CLIENT SCHOOL).
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