Think Forward Initiative - Financial Literacy | Deloitte


Personal finance choices that pay

Think Forward Initiative | Financial Literacy

Think Forward Initiative is a multi-year movement that brings together a range of experts and researches to find out how and why we make financial choices. One of these researches focuses on 'Financial Literacy'. Nowadays, nearly a third of young people in Europe feel their finances are in a poor condition. An international survey on financial behaviour for the Think Forward Initiative explores the reasons why.

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“The condition of people’s personal finances can have a profound impact on everyday life, no matter what age you are. However, many feel that young people in Europe are facing tougher financial challenges today than their grandparents or parents ever faced” - Ian Bright, ING Senior Economist.

Just 1 in 3 feels finances are under control

Feeling out of control with your personal finances can make you feel out of control of your life. In the full data sets supporting this survey, 27% of those who feel their finances are barely or not under control say they regularly argue with their partner, friends or family about money. The good news is many feel their finances are under reasonable control. Across Europe, slightly more than one in three (35%) feel their finances to be completely or largely in good condition. About another third (34%) consider their finances to be somewhat under control. This leaves three in ten (30%) who feel their finances are barely or not at all in control. But, there are differences between countries. People in Italy, Poland, Spain, Romania and Turkey are least likely to feel their finances are completely or largely under control. Lower incomes combined with slow growth since the global financial crisis may be part of the reason.  

Download the full survey results

Four in ten in Europe out of pocket in emergencies

Respondents were asked to imagine a situation where three of their household appliances, such as a washing machine, computer and television, broke down at the same time – a possible but unlikely series of events that could strain personal finances. At the European level, more (41%) indicate they have enough money set aside to replace these three appliances than feel their finances are in good condition (35%). Yet when comparing country responses, Italy and Spain stand out. More than 40% in these countries think they certainly or probably can meet the cost of replacing three appliances at the same time.

Decisions on non-essential spend harder to make

Confidence that finances are under control may be affected by the perceived difficulty of decisions about spending and saving. Respondents were asked to consider how difficult they found it to take decisions about their essential and discretionary spending. About one in eight (13%) across Europe find making decisions about their essential spending difficult. However, this nearly doubles to one in four (23%) when deciding about discretionary spending. This pattern was repeated to a greater or lesser extent in all 15 countries. In the Netherlands, fewer than one in ten find it difficult making decisions about spending, whether the spending is essential or discretionary. That compares with Austria and Italy, where the “difficulty gap” between essential and discretionary spending decisions is larger than 10%.  

Retirement saving choices give people less today

Taking decisions about retirement savings and financial wealth is more difficult than for spending. In many countries, deciding about financial wealth is considered to be roughly as difficult as making decisions about discretionary spending. However, making decisions about retirement saving is considered more difficult in every country surveyed. The “difficulty gap” is widest in France (16%), Germany (14%), and the Netherlands (13%). This is even though Germany and the Netherlands reputedly have well-organised retirement saving systems, which should make decisions about saving for retirement easier. Making choices about financial wealth and retirement saving may be more difficult than taking spending decisions because they are typically made less often and involve more money. As a result, there are fewer opportunities to learn from previous mistakes.  

Managing wealth is less pleasant than budgeting

All aspects of managing wealth can be difficult. Respondents were asked how easy or difficult they find decisions about essential spending, discretionary spending, financial wealth and retirement saving. And they were also asked whether they feel these items are under control and also how enjoyable they find the decision-making process. People are more likely to consider wealth management more difficult than spending decisions. And wealth issues are more likely to be considered out of control and unpleasant.  

Actual financial decisions more difficult than thought

It can be harder to actually make a major financial decision than to simply think about how it feels to manage spending and wealth. Respondents were asked to recall a major financial decision they made in the past. Then they were asked how difficult they had actually found this decision. When prompted this way, nearly four in ten (38%) in Europe report that the decision was difficult or very difficult. This is higher than the perceived difficulty level that people report for any single aspect of managing personal finances. Prompting people to think about a major financial decision may help them remember the difficulties they faced. This may alter their confidence in their financial decision-making ability.  

Decision making difficulty varies between countries

The percentage of respondents who find actually making a major financial decision difficult varies between countries. For 12 of the 15 countries surveyed, actually making a major financial decision is considered harder than any aspect of managing personal finances. The three exceptions are France, Germany and Italy, where people feel saving for retirement is more difficult. The countries where actually making a major financial decision is most difficult tend to be those with lower incomes and that suffered significant falls in income in the global financial crisis.  

Want to know more about the Think Forward Initiative?

Would you like to stay up-to-date and informed on the Think Forward Initiative? Please join the network via the Think Forward website or contact Peter van Loon at Join the discussion @ThinkForward.

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