SLOVAKS do not excel at financial literacy generally, but seniors and pensioners are particularly vulnerable.
As a consequence, they may lose their savings or even property after making one bad financial decision; there are no easy solutions how to increase financial literacy of this group.
“Seniors spent most of their active lives in the [communist] regime, where basic economic relations often did not work,” Richard Ďurana, director of the Institute of Economic and Social Studies (INESS), told The Slovak Spectator. “This is manifested not only in low [financial] literacy, but also in nostalgia for the former regime.”
Jozef Rakús from the Association of Pensioners in Slovakia (JDS) agrees that pensioners in Slovakia are not sufficiently financially literate, with a lack of understanding making people susceptible to losing their savings as well as movable and non-movable assets. He also faults misleading information and advertisements from loan providers.
“Especially, but not only, people from socially weaker groups fail to properly read offers by various providers of loans,” Rakús told The Slovak Spectator. “They are not able to correctly calculate the interest rate, which is cleverly disguised by providers in the footnote written in small print.”
Bratislava’s Old Town municipal office confirms that in many cases, bad decisions by pensioners have exceptional impacts on their personal finances.
“According to our information, seniors are often not able to distinguish a proper offer from the offers of peddlers and swindlers, fail to check facts and read documents upon signing and also lack assertiveness,” Dorota Kráková from the Old Town office told The Slovak Spectator.
Seniors using electronic banking
Still, some seniors are shifting with the times, using bank cards as well as internet banking.
“The concept that the senior goes one time per month into a bank’s office, withdraws his or her whole pension in cash and then spends it is not true any more,” Sberbank spokeswoman Ľubomíra Chmelová told The Slovak Spectator. “Of course, there are still a portion of pensioners who do not have a bank account; but those who have launched one, are becoming more active.”
Sberbank analysed a sample of over 9,500 of its clients over 60 years of age between January and September of this year, finding out that more than one third have activated electronic banking and make online payments every month, 11 percent communicate with the bank by email, while paying by bank card in a store is the most common transaction.
The analysis shows that as senior citizens age, they take part in fewer banking activities.
“The youngest seniors, between 60 and 64 years old, are the most active,” said Chmelová, adding that they carry out as many as 11 transactions per month. People over 80 average just six transactions.
VÚB bank also confirms a positive trend with more and more seniors opening accounts and making transactions online. At VÚB they report a more than 8-percent increase in the number of accounts for seniors.
“In general seniors are conservative, as the bank book is for many of them the only known and used bank product,” VÚB spokeswoman Alena Walterová told The Slovak Spectator. “On the other hand, the number of seniors using bank cards or managing their finances via internet banking is increasing.”
Walterová pointed out that in terms of the usage of payment cards an average pensioner carries out more transactions over one month than the average young person. The difference is that while the young frequently pay by card directly, seniors mainly use it for withdrawing money from ATMs.
But while banks offer special packages of services and products to seniors, their activities to improve financial literacy are primarily focused on the young generation. According to Ďurana of INESS, there is no easy way to improve financial literacy for seniors; moreover, 90 percent of incomes for pensioners come from pensions.
“Deceiving and misleading should be punished, but seniors have to get out from under their naiveté and disinterest in information on their own or with the help of the relatives,” Ďurana said.
The JDS wants the issue of financial literacy to be addressed more comprehensively. According to Rakús, they want banks to take more of a lead in improving financial literacy for seniors within the Programme of Active Ageing 2014-2020 that was approved by the government.
Financial literacy courses for seniors
Municipalities and other organisations provide courses for seniors, during which they can learn or improve their knowledge on how to handle their money. For example, Bratislava’s Old Town municipality is organising University of the Third Age within which there are also lectures about financial literacy. The local library organises interactive lectures linked with a discussion and sample cases for seniors, according to Kráková.
The Partners Foundation has organised, in cooperation the University of the Third Age in Žilina, a two-semester course of financial literacy for seniors. Apart from the basics of financial literacy, the series of lectures also addressed financial markets and how they function.
“Financial literacy is not only about a set of financial knowledge but also the ability to effectively manage funds and provide for themselves and their families during their lives,” Juraj Juras, general director of Partners Group SK and the administrator of the Partners foundation, told the Hospodárske Noviny daily. “Enough information and the ability to translate them into the right financial decisions is a prerequisite for prosperity and financial stability.”
Disclaimer: The articles included in the “Finances” supplement were created by authors enrolled in the “Focus on business and economy” programme organised by The Slovak Spectator in cooperation with the University of Economics in Bratislava, with the support of the VÚB Foundation. The programme seeks to train journalism students on how to cover business- and economy-related issues. The articles were prepared in line with strict journalistic ethical and reporting standards.
15. Dec 2014 at 0:00 | Patrícia Krutáková and Katarína Palečková