Financial education and its impact on the level of financial exclusion of elderly people

https://doi.org/10.63189/OZUD3967

“Economic education is the foundation of national and personal well-being”

- Władysław Grabski

Lack of knowledge as a factor of financial exclusion

There can be no doubt that having basic knowledge of economics and finance is an important factor in reducing financial exclusion. The mere awareness of available financial products, supplementing knowledge on their use in practice and the benefits and risks resulting from it – encourage people to reach for such solutions, and in the long run ensure the possibility of using them consciously and in compliance with all safety rules. Regardless of the support of the environment (e.g. family, professional advisors, employees of banks, public institutions), our own knowledge and own financial competences are able to provide us with the security of personal finance management on a daily basis. Financial decisions are not only those made occasionally and concerning, for example, loans taken or serious investments. Many elderly people affected by financial exclusion do not use the above-mentioned financing instruments or investing their funds. Financial decisions are also those related to everyday life, daily expenses, costs of living, managing the household budget and safekeeping often small savings.

A strong relationship between the knowledge in the field of finance/economics and the level of education and the degree of financial exclusion has been indicated for many years in surveys carried out using various evaluation criteria. The lack of knowledge resulting in the phenomenon of exclusion affects the elderly to a large extent and this target group is often indicated as one of those who need special and priority treatment in financial education programs (see Knowledge of financial issues in Poland. Meaning, Data and Educational Offer, OECD 2022; National Strategy for Financial Education for Poland, OECD 2023).

It should also be noted that in the era of digitization and dynamic changes in the functioning of the financial market and its individual segments, all its non-professional participants, including the elderly, need support, information and knowledge about available products and their safe use. It is also of particular importance to maintain solutions that provide continuous support in this area, especially in circumstances where older people benefit from non-formal financial and economic education.

The scale of financial exclusion of the elderly

Older people are one of the groups most at risk of financial exclusion. This is due to many factors, one of which is the above-mentioned lack of sufficient knowledge and financial competence additionally related to the technological barriers that exist. Financial exclusion is characterized by a multitude of definitions formulated in the literature on the subject. However, referring primarily to one of the elements of this definition, i.e. lack of access or limited access to basic financial services, as well as to the level of banking, attention is drawn to the greater scale of exclusion of older people compared to other age groups. In the research conducted in recent years by the National Bank of Poland, the choices of Poles in terms of the methods of making retail payment transactions, the scope and methods of using the services of financial institutions, as well as individual payment instruments were analysed. This research shows what the payment preferences of Poles are and how these preferences translate into the real behaviour of financial service recipients. The results of the research also provide information on the financial literacy of individual age groups (Payment habits in Poland in 2020, National Bank of Poland, Warsaw 2021, p. 4).

With regards to the basic results of the survey, it should be noted that while 97.2% of respondents aged 40–54 had a payment account, access to payment accounts at the age of 65 and over was much lower and amounted to 71.4% (NBP, 2021, p. 18). This means that almost 30% of people in this age group did not have a payment account. The research showed that some of the respondents (who did not have their own account) used someone else's payment account (NBP, 2021, p. 21).

The research conducted by NBP also shows that a relatively small percentage of people with payment accounts used bank branches – these are cases of using them very often or often. The need to use branches was most common among people aged 65 and over and people with less than secondary education (NBP, 2021, p. 26). This means that there is still a significant attachment to traditional forms of banking among older people, but it also testifies to the existing technological barriers related to the progressive development of online banking. The need for the elderly to use bank branches is also related to their attachment to cash turnover and access to cash. According to the NBP report, almost half of people aged 55-64 prefer cash payment methods, while in the 65-plus age group it is already 71.8% of respondents (NBP, 2021, p. 48).

The NBP report also analyses the issue of access to the Internet channel by payment account holders. Older people most often declared that they did not have such access or did not know if they had it. In the 55-64 age group, 57.6% of respondents declared no such access, while in the case of people aged 65 and over it was 67.4% of respondents. In the last of the indicated age groups, as many as 66% of respondents declared that they had never used access to an online channel (NBP, 2021, pp. 26-28).

As far as access to the mobile channel is concerned among people with payment accounts, NBP research shows that the percentage of people with access to these services is starting to fall in the 40–54 age group (66.9%) and is even lower in the case of people aged 55-64 (33.6%). Access to the mobile channel for people aged 65 and over is only 16%. Research shows that the level of formal education also has an important factor influencing the level of exclusion in this area (NBP, 2021, p. 29). The analysis of the frequency of use of the mobile channel also shows a significant difference in this area, where this frequency significantly decreases in the case of older people. People aged 65 and above use the mobile channel by far the least often (only 7% indicate that they use it often or very often), while as many as 86% have not used it at all (NBP, 2021, p. 29). Also in this case, research shows that the level of education is important for the frequency of mobile banking use – the higher the education of the respondents, the greater the frequency of using this type of service (NBP, 2021, pp. 29-30).

Similarly, in the case of access to the telephone channel for payment account holders, there is a significant variation, depending primarily on the age and education of the respondents. It should be noted that 37.2% of people aged 55–64 and 41.1% of people aged 65 and over did not have access to this type of services. In the case of the last of the indicated age groups, 62% of respondents did not use this solution at all (NBP, 2021, pp. 31-32).

The most frequently indicated objective factors causing the respondents not to use the Internet, mobile or telephone channel are the lack of access to the Internet, the lack of ability to use such a solution and the lack of a device that would enable such access. However, it should be noted that the reason for not using the solutions mentioned above is also quite often personal preferences and beliefs, including, for example, lack of such a need, preference for personal contact or lack of trust.

An important element of the NBP survey is also the structure of payment card ownership. In the case of people aged 55-64, 73.6% of respondents declare having at least one payment card. In the age group of 65 years and above, 52.5% of respondents had a payment card (NBP, 2021, p. 33).

Despite the fact that the level of banking of older people in Poland is increasing, research shows that this process is the slowest in this age group. The reasons for this are very diverse and result from both objective factors and personal beliefs of seniors, with education and knowledge having a significant impact on shaping the attitudes of older people. At the same time, it should be noted that the research results discussed above – due to the framework of the study – concern only a narrow section of issues and only a few aspects in which the degree of financial exclusion of the elderly is currently examined.

Financial education as an important tool to combat financial exclusion

Financial education is one of the key factors that can reduce the level of financial exclusion – also in the group of older people. In this case, it is important to combine various forms of education (formal and non-formal) and to adopt permanent solutions adapted to the rapid development of the financial market and products offered by financial institutions. Increasing awareness and knowledge about individual financial services has a fundamental impact on the way personal finances are managed, their planning in the long term, trust in financial institutions, but also greater protection against financial fraud.

A significant role should be assigned in this case to public institutions, which have an impact on the process of shaping solutions at the legislative level and the use of permanent forms of support for the elderly (e.g. financial education programs implemented from public funds, clarification of information obligations of financial institutions related to providing seniors with understandable information about the products offered). Pointing to the special role of public institutions in the creation of assumptions and implementation of the financial education program, it should be noted that the process of inclusion of older people will not develop as expected without the participation of banks and other financial institutions.

Nowadays, more and more attention is also paid to the problem of an aging society, as a consequence of which countries are struggling with economic and social problems. The answer to this phenomenon is the idea of the so-called silver economy, aimed at equalizing opportunities for older people at risk of exclusion, including financial exclusion. Its assumption is also to promote products and services tailored to the needs of seniors.

The importance of financial education is also emphasized by the fact that as part of the celebration of the Year of Economic Education, the National Strategy for Financial Education was adopted (see Resolution No. 71 of the Council of Ministers of 25 June 2024 on the adoption of public policy “National Strategy for Financial Education. Policy for the development of financial literacy”). It is the result of extensive consultations with entities involved in financial education and is to be the basis for creating a coordinated approach to financial education in Poland.