Insufficient Financial Literacy: Investment Products are Underunderstood

After the lost vote on the partial abolition of the withholding tax, Federal Councilor Ueli Maurer accused the Swiss people of a lack of knowledge of economic contexts. A new study recently published by the innovation service provider Zühlke also seems to prove that much of what has to do with money does have a certain complexity and is therefore not understood everywhere. The survey "Educational Banking - With financial education against inflation?" showed that many Swiss people lack the necessary knowledge, especially when it comes to investing money. It seems that there is a backlog demand for so-called "financial literacy" in this country.

For the study, 2000 male and female bank customers aged 18 to 60 were surveyed in German-speaking Switzerland, Germany and Austria. The survey was conducted in June 2022.

Financial literacy in Switzerland lower than in neighboring countries

Compared with its German-speaking neighbors, Switzerland is characterized by a low inflation rate and a high savings rate. However, according to the study "Educational Banking - Mit Finanzbildung gegen die Inflation?" by Zühlke, Switzerland is by no means ahead when it comes to targeted capital investment or the knowledge thereof. Similar to Germany and Austria, 52 percent of the bank customers surveyed between the ages of 18 and 60 say they do not understand most investment products.

Systematic asset accumulation would also require detention. More than half of those surveyed said that they wanted to invest part of their money in a risky way. However, only 20 percent of respondents own shares. In the case of funds/ETFs, the figure is as low as 15 percent. A large proportion of the money, on the other hand, is held in savings and checking accounts. The proportion of Swiss people who have cryptocurrencies in their custody accounts is comparatively high at 17 percent.

The main reason given by respondents for deciding against shares, funds and ETFs was a lack of knowledge (40 percent). Around one in three shies away from the risk of losing money. The differences between men and women are also clear, according to the survey. For example, 33 percent of men say they do not know enough about investing in stocks and ETFs, but 46 percent of women do. Losses are balked at by 25 percent of male respondents and 34 percent of female respondents. Men are also significantly more likely to invest their money in stocks, mutual funds and even cryptocurrencies than women, according to the study. While 26 percent of men invest in stocks, only 15 percent of women do. Bitcoin or Ethereum are in the portfolios of 25 percent of men and ten percent of women.

Only 34 percent of respondents correctly estimate the effect of inflation

Fundamental gaps in financial literacy become clear in the study. According to their own assessment, around 70 percent of respondents are very well or rather well versed in the subject of financial investments. However, only just under one in two can spontaneously answer a question about the return on an investment correctly, and only 34 percent of respondents correctly estimate the effect of inflation.

The survey also shows that the Swiss save for emergencies, vacations and retirement. But it is precisely with the latter that the Lucerne University of Applied Sciences and Arts in a study on the topic of old-age pensions. recently demonstrated that many Swiss people do not take enough responsibility for their own financial retirement planning because they lack the necessary knowledge.

Only 18 percent name capital investment as a savings goal. A quarter put aside more than 500 francs a month for this purpose. However, 30 percent save less than 100 francs, and 10 out of 100 Swiss people don't even manage that. The main reason: "Saving is not financially possible." This fits in with the fact that many have long since lost track of their money and spend it according to their gut feeling - although they actually think long-term, would like to in financial matters (79 percent). With rising prices and inflationary pressure, saving and investing money is also becoming more interesting again: most strongly in the 18 to 29 age group with 77 percent of respondents. However, they are more likely to seek information from family and friends (31 percent) than from a bank advisor (26 percent). At least the latter is considered to be somewhat more competent (33 percent compared with 28 percent).

Great interest in innovative banking services

Across all age groups, around 60 percent would like their bank to play a more active role in financial management. This could be achieved by means of automated services that provide low-threshold support for saving and investing money. For example, three quarters of respondents would be interested in discount coupons that match their own shopping habits. Around 70 percent would welcome being warned when they reach a spending limit they have set themselves. 62 percent would have their spending checked for savings potential. 56 percent would use a service that automatically invests the difference to rounded-up bill amounts in funds, ETFs or crypto assets when they shop. An important tip for banks: just under 60 percent of respondents would be willing to switch to a bank that offers such so-called educational banking services, which encourage people to be more conscious with their money and start investing.

"Our survey clearly shows that Swiss banks would do well to prioritize the issue of financial literacy. This is where there is real potential for differentiation. Their different target groups expect a personalized approach as well as new services and training offers - also in combination with gamification aspects. The Metaverse also offers new opportunities in the area of financial education, which banks should already address today," says Stefan Hirzel, Head of Banking at Zühlke Switzerland, commenting on the results.

Source: Zühlke