Political think-tank the Collins Institute has called for an online course in personal finance to equip citizens to make better financial decisions.
In a new report entitled ‘Equipping Citizens to Deal with Financial Choice’, the Institute recommends that the course be carried out by an independent government agency distinct from the Central Bank and should include a module on financial questionnaires and profiling.
The report states that financial literacy is fundamental to our well-being as a society into the future, and funding for the course should come from a levy on the financial services industry.
The research paper contains a number of other suggestions on how people can best manage their financial planning more effectively, and will be launched by members of the Collins Institute Board this morning alongside the Minister for Finance and Public Expenditure and Reform, Paschal Donohoe.
Commenting on the report, Minister Donohoe said: “According to the latest S&P Global FinLit report, Irish adults score lower on financial literacy skills than many of our EU neighbours.
“A lack of financial literacy carries a very real cost. Consumers who fail to understand the concept of interest compounding tend to spend more on transaction fees, run up bigger debts, and incur higher interest rates on loans.
“Conversely, those with strong financial skills tend to do a better job planning and saving for retirement.
“The work carried out by the Collins Institute encourages us to look at how informed our citizens are about financial management and, importantly, how we can further assist them to ensure they are better equipped to look after their own financial health in the years to come.
“I thank the Institute for the work they have done and for shining a light on this important issue.”
Also speaking at the launch, Chairperson of the Collins Institute, Marion Coy said: “If you needed €500 tomorrow to deal with an unexpected bill, do you have it available?
“What is the standard interest rate charged by regulated moneylenders in Ireland? Can you calculate compound interest? Do you know what kind of pension arrangements you have? What are the implications of the apparently “good deal” you have in buying your car?
“These are the kinds of questions that threw up surprising answers and led The Collins Institute to publish a paper on Financial Literacy.
“The Collins Institute did not find a single authoritative source of personal financial information and guidance available in Ireland.”
Michael McLoughlin, CEO Amárach Research and Board Member of The Collins Institute, is the lead author of the paper on financial literacy.
Mr McLoughlin said: “We need to ensure that people have sufficient understanding of personal finance so that they can take informed decisions. We need to understand what people don’t understand about money and finances.
“This is completely different to the issue of people not having enough money. That is a separate (and very real) issue. This is about equipping and educating people so that they can take informed decisions about money.
“This paper examines the issue of financial education and literacy. In an era when individuals are faced with an ever increasing range of financial products, many of which have long-term consequences, the question arises as to whether citizens are equipped to make informed decisions.”