The latest international comparative report by the Organisation for Economic Co-operation and Development (OECD) has been published, examining the financial awareness of 26 countries, including Hungary.

The figures indicate that the level of financial awareness requires further development in all of the examined countries, in view of the fact that a significant proportion of the population does not have the required financial knowledge to deal with their everyday financial affairs in a successful manner.

In Hungary, the value of the complex index measuring financial knowledge is very close to the OECD average, and some improvement in Hungary’s relative position is also evident when examining the latest international rankings, compared to 2015. Despite the improving results, there remains a significant need for the targeted development of financial awareness.
Following 2010 and 2015, 2018 was the third time that Hungary took part in the international comparative study examining the financial awareness of the adult population (aged 18-79) with the involvement of the Pénziránytű Alapítvány (“Money Compass Foundation”), which operates with the professional and financial support of the Hungarian National Bank. In the study, which is coordinated by the OECD, the unified methodology and almost simultaneous recording of data provides an opportunity for the international comparison of figures from various countries, and for tracking changes with relation to individual countries. The complex index that measures financial knowledge is divided into three elements: level of financial knowledge, the capability to apply that knowledge, i.e. financial behaviour, and financial attitude.

In December 2017, Hungary’s government adopted a comprehensive, mid-term national strategy aimed at developing the population’s financial awareness, which determines the main tasks and directions for action. The implementation of the strategy has been ongoing since 2018 with the involvement of relative organisations, and under the supervision of the Ministry of Finance.

Closely linked to this was the 1000-person representative Hungarian financial culture survey performed in 2018, which aimed to map the starting position for the strategy. Hungary joined the international collection of data coordinated by the OECD in 2019 with its 2018 figures, while in the majority of countries the survey was performed in 2019. The results of the international research now published are based on replies from 125 thousand adults from 26 countries aged between 18 and 79.

In Hungary’s case, the complex index measuring the level of financial awareness was 12.3, some 60 percent of the maximum 21 points (average of all countries: 12.7, OECD average: 13). This places Hungary in the mid-range among the 26 participant countries, in 14th place. It is evident from a more detailed evaluation of the research results that in recent years Hungary’s best results have always been in the financial knowledge category. With relation to knowledge of fundamental financial concepts (e.g. inflation, simple interest, compound interest, risk, currency conversion), the latest Hungarian results are only slightly lower than the OECD average and put Hungary in joint 9th place with South Korea. It is also worth noting that only about half of all adults answered correctly with relation to questions on simple interest, and only 18.3 percent to practical questions and everyday examples concerning compound interest, despite the fact that these are key concepts that have an effect on fundamental financial management, as well as on savings and loan-related decisions. Compared to the previous survey, the ratio of people who answered correctly to questions relation to the concept of inflation fell significantly compared to the previous survey, which could be related to the low inflation environment of the recent period.

While Hungary’s population is not significantly behind that of other countries with relation to financial knowledge, the adult Hungarian population continues to underperform with relation to their attitude and actual behaviour (financial decisions) with relation to finances. This clearly indicates that the practical application of existing knowledge remains the area that requires the most development. Financial behaviour is assessed based on questions concerning, for instance, the preparation of a budget, the timely payment of bills, or decisions relating to financial planning, savings and taking on loans.
From among these, we only achieved significant progress with relation to the timely payment of bills, which is also being influenced by the improving financial position of families (here, we moved up to 10th place, from our previous position in the lower third of countries). The many behavioural forms included in the financial behaviour score are closely related to the financial stability and financial stress-bearing capability of households.

In Hungary’s case, the ratio of people who prepare a household budget showed a decreasing tendency. In 2018, only every fifth family prepared a budget, compared to 32 percent in 2010, and 25 percent in 2015. A positive change is that the willingness to save of Hungarians has increased to 51 percent from the previous 27 percent, but this figure is still in the lower third of results (the international average is 70.2 percent). With relation to the question on tracking and monitoring financial affairs, we finished in last place with a value of 46.9 percent, while Austria finished in first place with 85 percent (the average score was 67 percent).
With relation to financial attitude, Hungary performed better than the average of the participant countries (59.2 percent) with a value of 65.1 percent. In this part, it is also reassuring that Hungarians fall victim to financial fraud to a much lesser extent (0.9 percent) than the international average (1.8 percent). The research also filtered the results separately based on age, gender and digital skills. According to these figures, it is generally true that people in the 30-59 age group have the highest level of financial knowledge. The international survey clearly confirms the fact that men generally have a higher level of financial knowledge, meaning that in the vast majority of participant countries women performed less successfully, with the exception of Hungary, Poland and Russia. The researchers also found a significant link between digital skills and their application, in view of the fact that people who achieved a higher score with relation to financial questions usually make their financial decisions using digital channels.

The latest research results draw attention to the fact that, similarly to other countries, the financial knowledge and behaviour of Hungarian households is still not capable of suitably curbing the effects of economic cycles, as a result of which households are highly vulnerable to changes in macroeconomic indices (prosperity, employment, loan conditions, etc.). This is particularly timely information at a time of crisis developing as a result of the coronavirus pandemic.

These results clearly confirm the importance of further Hungarian efforts and coordinated measures aimed at developing financial awareness. Financial awareness and responsible, informed individual financial decisions could reinforce the position of families and family businesses and improve their financial security, contribute to the prosperity of families, and strengthen the economy, as well as the stability and growth of the financial intermediation system.

(Ministry of Finance/MTI)