The financially savvy is defined as households that exhibit the most financially healthy behaviours. They do the most to ensure their financial well-being, from paying down debt to making investments and saving money to having a monthly household budget.
The tough economic climate of the last few years have made it clear that people need to adopt better financial habits. Unfortunately, not enough people in T&T are interested in saving and investing.
This according to a 2011 survey carried out by the Unit Trust Corporation (UTC). More than 1,000 people over age 18 were interviewed for the survey in July 2011, the first in a series of three instalments to be published in 2012. The survey, which was conducted along with KRC Research, was done to determine the financial wellbeing of T&T nationals.
The objectives of the survey included:
• Diagnose the financial attitudes of T&T nationals;
• Identify and profile segments of the country based on drivers of financial well-being;
• Assess the level of financial trust in financial institutions among nationals;
• Provide recommendations for enhancing financial and security;
According to the survey, financial wellbeing does not equal financial comfort.
"Financial advisers should take care to address the elements of financial wellbeing, that is, budgeting, paying down debt, performing a financial check up, and the like, as good practice," according to the report.
Savings
About 71 per cent of the respondents report having a household budget. However, 39 per cent still spend what they earn and more. Only 24 per cent of respondents make it a priority to spend less than they earn and regularly save. The survey showed that a majority of T&T citizens surveyed-79 per cent-report saving with a specific goal in mind. Those who save are doing so for specific purposes, typically for an emergency fund, but also for their family's education and to buy a vehicle. Only four per cent save to pay down a debt. The majority of respondents, 88 per cent, identify making investments/savings as one of the top-ranked activities they have done to secure their financial future.
Citizens are least likely to have sought out the assistance of financial planners, with about just 24 per cent having ever met one.
Trust in financial institutions
For the average individual, the greatest factor influencing trust in financial institutions is word-of-mouth, with customer reviews topping the list at 54 per cent. People are least likely to base their trust in financial institutions on what they read in the media (15 per cent) and their physical presence, which includes "it's a local institution," (7 per cent) and "its involvement in the community (3 per cent)."
Based on the reasons that respondents place trust in financial institutions, they are more likely to turn to their bank before family for financial advice (72 per cent vs 49 per cent, respectively).About 20 per cent of people turn to newspapers/magazines for financial advice, while only 4 per cent turn to financial literature for advice.
Savvy, striving, struggling and slow
The survey found that nationals of T&T are not a homogenous group when it comes to financial wellbeing.
People were placed in four distinct groups:
• Savvy
• Striving
• Struggling
• Slow
The survey noted that the characteristics of these groups paint a picture of a financially diverse population.
"While these four segments differ by household income, it is their attitudes towards finances and the actions they have taken or plan to take to improve their financial wellbeing that clearly distinguish them," the report said.
While 56 per cent of the three segments, savvy, striving and struggling are women, the majority of those in the category of financially slow are likely to be men:
• Financially savvy: 15 per cent
• Financially striving: 26 per cent
• Financially struggling: 15 per cent
• Financially slow: 44 per cent
The financially savvy is defined as households that exhibit the most financially healthy behaviours. They do the most to ensure their financial well-being, from paying dow n debt to making investments and saving money to having a monthly household budget. This is the oldest segment and are most likely to have white-collar jobs and be the most affluent. The financially striving are similar in their attitudes and financial behaviour to the financially savvy. Strivers are set apart from the other groups because of their aspirations and entrepreneurial spirit. More than any other group, their goals are for saving for education and for investing in business. The strugglers are people who tend to view financial wellbeing as having enough to cover basic expenses. They are the most likely to worry about their finances all the time and report spending what they earn without saving.
About 85 per cent of them plan never to meet with a financial planner, pay off credit cards each month, transfer money automatically to savings, pay bills electronically or pay down credit/other debt.
However, 91 per cent did say that they turn to their banks for advice. Thirty-one per cent of these individuals identify participation in a sou sou as the top-rated means to improve their financial standing.
The financially slow tend to be unskilled men with low income jobs living in smaller households.
More Tobago respondents fall in this category than other respondents. Despite saving more than they own, their focus on saving is more likely to be for home improvements and Christmas. However, there are members of this group, though a distinct minority, who plan to take specific actions to improve their financial well-being. These include looking for a job that pays more, getting a second job, buying large ticket items in cash and doing an annual financial check up.
Recommendations
The UTC financial well-being survey suggests several recommendations for T&T financial institutions seeking to improve people's financial health:
• Offer courses to the public on how to save money
• Tailor marketing, communications and other outreach programmes for different groups of people along the financial well-being continuum
• Improve trust among key segments and leverage trust among others
• Design programmes to meet diversified needs and address barriers to well-being.