Czechs have a real head for finance

Reacting to a warning issued by the Education Ministry that the financial literacy of students is on the decrease, ČSOB, together with research agency STEM/MARK, recently conducted a unique survey of 1,600 respondents over the age of 16 that revealed 61 percent of Czechs possess solid economic skills.

Twenty-two percent of the respondents demonstrated high financial literacy, and just 8 percent showed skill levels equal to "financial infants," which means they were unfamiliar with bank products and kept no records of personal income and spending.

The survey inspected six main fields of knowledge: bank accounts, payments, loan products, saving and investment products, insurance products and macroeconomics. Respondents were grouped into five typological groups according to their financial behavior: vulnerable, careless, careful, hopeful and confident. Twenty-five percent of respondents, the largest group, fell into the confident category. The second-largest group was the vulnerable category, which denotes people with low financial knowledge and income.

"We used a unique and patented methodology for population literacy surveys, which we used a few years ago when surveying information literacy," said Jan Tuček, director of STEM/MARK.

Ondřej Škorpil, ČSOB manager, said the overall knowledge of Czechs can be described as "good," adding it is far from a "catastrophe." He said, in general, Czech men possess higher financial knowledge than Czech women, but men also tend to exaggerate their skills.

"We were surprised that respondents obtained worse results in the field of savings and investment products. On the other hand, we're glad people did well in the field of loans. The best achieved results were, quite surprisingly, in the field of macroeconomics," Škorpil said.

It could be worse

Despite the relatively satisfying numbers, Jan Bureš, an economist with Poštovní spořitelna, said that, in the current economy, the situation in Czech households is less encouraging.

"The indebtedness of Czech households keeps increasing. The tempo at which people ran into debt increased 40 percent in [the period] 2007-08, which was already unbearable," he said, adding that it could be worse, but thankfully the conservative approach of Czech banks, which insist on proper verification before providing any long-term loans, has ensured better economic standing in the country when compared with Germany.

"Banks in the Czech Republic require a high degree of financial literacy on the part of their clients in order to eliminate an increase in risky loans and prevent a similar situation to that in the United States from taking place," Bureš said, adding that the Czech Republic is the only country in the Organization for Economic Co-operation and Development (OECD) where the state does not have to prop up the market.

In spite of this conservatism on the part of Czech banks, the survey showed that 24 percent of households have significant problems with debts, and 35 percent are at risk for debt problems because they have no financial reserves in the event of a loss of income.

The government has been concerned about the issue of financial literacy for some time, with both the Finance and Education ministries cooperating on the "National Financial Education Strategy" beginning in 2007. The strategy was updated in May 2010 to include websites with free financial information and seminars on financial literacy to be held around the country, among other initiatives. An additional component of the strategy is another survey, the results of which will be published in November.

What is different about this survey from that of ČSOB's is that it is part of an international OECD pilot project to compare 11 countries, including the Czech Republic.

According to Dušan Hradil, a Finance Ministry financial market analyst, the OECD has never before conducted such a project in which the same questions and method of comparison were used for all involved countries.

Klára Jiřičná can be reached at
kjiricna@praguepost.com