posted on October 11, 2011 19:40
The results of the first national Financial Literacy Survey released by the BVI Financial Services Commission raise concerns about how people in the BVI are managing their money.
FSC’s Managing Director, Mr. Robert Mathavious, says the survey “was a crucial step in providing fundamental information needed to decipher the strengths, weaknesses, opportunities and threats to the population’s financial competence.”
Accordingly, the survey report identifies several key areas for improvement: budgeting, choosing financial products, understanding complex financial products, financial control, and financial planning.
While people say they are keeping track of their financial affairs, more than half (51%) do not have a household budget to guide their financial decisions.
The report also reveals that people don’t appear to do a lot of shopping around when choosing their financial products and services, but primarily make their decisions based on the advice and information received from people or institutions selling the financial products.
Mr. Mathavious says this shows a difference in behavior patterns among BVI financial consumers from that of financial consumers in other countries, where people turn first to family and friends for advice in making decisions on financial products.
“The potential ramifications of placing the most reliance on the sellers of financial products for advice raise serious concerns,” he adds.
“This can be detrimental if consumers end up in the hands of unscrupulous or predatory sellers. With pyramid, Ponzi schemes and other fraudulent ventures on the rise, consumers need to be informed and alert to avert being scammed,” warns the report.
The survey results show that people have high knowledge, use and understanding of basic financial products, such as savings accounts, insurance and credit cards. Concern is raised, however, about their low knowledge, use and understanding of the more complex financial products and concepts, such as investment accounts, stocks, bonds, pension funds and compound interest.
The report reveals that 41% of all respondents had problems during the last year trying to make ends meet. Those planning for their financial future and saving for a rainy day also fell short. If they lost their main source of income, less than half of individuals (48%) have enough money saved that would cover at least six months of living expenses as recommended by financial advisers.
According to the report, people who are having problems making ends meet are the same ones that have the smallest security cushions. “Losing their main source of income or having to deal with an emergency would undoubtedly push them even deeper into financial difficulties.”
In the demographic section, the survey results reveal that minority groups, such as Americans, British nationals and Whites, are faring better financially than Virgin Islanders, other Caribbean nationals, and Blacks. In some areas, men are also managing better financially than women.
As an upshot, the report concludes that most people are trying to be responsible and live within their means, no matter how difficult. When they are having problems making ends meet, people first cut their spending or do without before they use credit or borrow.
Mr. Mathavious says the results identify specific areas in the population’s financial competence that need to be addressed and will help to focus the FSC’s programme, which aims to empower and equip people to make sound financial decisions by increasing their financial literacy and capability.
The survey, conducted by the BVI Financial Services Commission in April and May, was developed by the Organisation for Economic Cooperation and Development (OECD) International Network on Financial Education to gather baseline data on financial attitudes, behaviors and knowledge.
Of a total of 1,489 phone calls made across the BVI, 535 individuals ages 18 and older completed the survey.
For the full report of the BVI Financial Literacy Survey, visit www.moneymattersbvi.org