Poll reveals “shocking” levels of financial illiteracy among Czechs
A new poll commissioned by the Czech Finance Ministry and the central bank showed that most Czechs lack basic financial knowledge, and do not understand some of the fundamental principles of borrowing. Finance Minister Miroslav Kalousek has described the results were “shocking”, and said he would push for more financial education at Czech schools.
“I don’t know what others will think of the results, but I think they are absolutely shocking. I’m not an optimist who would expect that all the consumers in the market are well informed, and know all the basics about their own money when they are making a decision. But the extent of financial illiteracy has been a huge surprise for me.”
Surprising as they might be, these poor showings have had very serious practical implications. Every year, Czech households are sinking deeper into debt. Since the year 2000, household debt has risen eight times, amounting to just over one trillion crowns, or more than 53.5 billion US dollars, by the end of October.
Czech students fared badly in a recent study by the OECD, and Eva Zamrazilová, chief executive director of the Czech National Bank, says the problem starts at schools.
“Our children’s mathematical and reading comprehension is very weak. These children then become adults who don’t understand contracts and are unable to figure out some basic things, things which aren’t difficult. That’s one part of the problem. The other is that many people take on too much risk when they take loans for all kinds of things they don’t really need.”
The alarmingly low levels of financial knowledge among Czechs prompted the finance minister to suggest possible ways of tackling the issue. Mr Kalousek said more attention needs to be paid to financial education.
“As I like to say: if I forget that Charles IV founded Charles University in 1348, it’s embarrassing but I’ll probably get by. But if I don’t read a contract or I don’t know what annual percentage rate is, I can get my whole family into serious trouble.”
Minister Kalousek said that Czechs’ financial illiteracy is partly due to four decades without a free market in the communist era. Whether or not that’s true should be clearer after a new OECD study on the matter is completed in some nine months’ time.